Inflation - WPI Vs CPI

NOTE: Please download the spreadsheet and then read it. I have observed that google viewer does not show all comments on spreadsheet.

Inflation - WPI Vs CPI 

I have prepared a document on this. I have assumed that you know the basic details about inflation, so I have directly explained WPI and CPI.

Please access the document here: 

https://docs.google.com/file/d/0ByZddIiTbiBCLTFzMU9aNExJNVE/edit?usp=sharing

Should you have any further queries, please leave your comments and I will try to answer them as soon as possible. 

Thanks

Monetisation of Fiscal Deficit !

Someone on Orkut asked me about Monetisation of Fiscal Deficit !! My two cents !! 

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1. Monetary and fiscal policies in any country are two macroeconomic stabilisation tools. 

2. These two policies can be used in different directions as is the case in India. So while monetary policy is often pursued to achieve the objective of low inflation and thereby stabilise the economy from output and price shocks, fiscal policy is often biased towards high growth and employment even at the cost of higher inflation, as these are in the hands of govt. and they want to win elections. 

3. For achieving an optimal mix of macroeconomic objectives of growth and price stability, it is necessary that the two policies complement each other. Sovereign debt crisis in Europe has emphasised the need for monetary and fiscal policies coordination. 

4. How much can these two policies complement each other will vary according to the stage of development of the country’s financial markets and institutions.

5. However in the context of developing economies, it is often seen that the fiscal policy dominates the monetary policy and the central bank is subordinate to the fiscal authority i.e. the govt. Hence the question of co-ordination may not arise since the two institutions are NOT independent. 

6. Background:

6.1. The Reserve Bank of India was placed on the statute book in 1934 through the RBI Act, 1934. 

6.2. The RBI Act provides for RBI to manage the public debt of the Central and the State Govt. and also acts as a banker to them. This developed the much needed interface b/w the monetary and fiscal policy. 

6.3. In the pre-independent days the British govt. adopted a stance of fiscal neutrality (i.e. net of tax and govt. spending which led to no growth in aggregate demand). 

6.4. The fiscal-monetary interaction evolved post 1947. The low level of savings of citizens and poor investment climate, gave fiscal policy an upper hand in the development process under the 5YPs beginning 1950s.  Fiscal policy was increasingly used to gain adequate command over the resources of the economy, which the monetary policy provide. 

6.5. Very soon the govt. began resorting to deficit financing to bridge the resource gap (Revenue - expenses). Thus the functioning of monetary policy came to be influenced by the size and mode of financing the fiscal deficit !! Thus resorting to cash mgmt provisions(mentioned as one of the function of RBI in the  in the RBI Act 1934), govt. misused RBI's role. Budget deficit financing became a permanent feature. So, now whenever government’s balances with the RBI fell below the minimum stipulation, it was replenished through automatic creation of ad hoc T-Bills. Though these were temporary, but repayment of 1 led to creation of 2 and to refund it 3 was created. So a cycle had been established and monetisation of deficit of the Government became a permanent feature, leading to loss of control over base money creation by the RBI !! Things didn't stop here. RBI also subscribed to govt. securities !! Why? Large govt. borrowings to finance plans (5YPs) and markets alone could not finance it. 

6.6. All these however, constrained the operation of monetary policy as it led to creation of primary liquidity in the system and involved postponing any increase in bank rates by RBI to control govt. borrowings. The RBI Act was amended to empower RBI to vary CRR to enable control of credit boom in the private sector emanating from reserve money creation through deficit financing. Likewise SLR, which essentialy is a prudential norm to ensure banks have a certain % of liquid fund w.r.t liabilities, was used essentially to secure an increasing captive investor base for govt. securities, which will ultimately finance the increasing fiscal deficit of gov.t especially after the nationalisation of banks in 1969.

6.7. So you see how monetary policy is working essentially to approve the fiscal policy. Those days(pre-1991) fiscal policy laid greater emphasis on social justice and poverty alleviation (DPSP ne govt. ki le li), the monetary policy and thereby RBI's focus shifted from playing with the interest rates to essentialy debt mgmt for the govt. This changed the relationship b/w RBI and govt. and RBI played a limited role in the structure of the financial system and use of the interest rate as a monetary policy instrument. Reserve money created through monetisation was riding high and it was the single most imp factor influencing monetary policy in 1970s and 80s. With little room for manipulation, RBI was left with no choice but to have high CRR and SLR to curtail liquidity.

6.8. Single most constructive work done in supporting monetary policy in pre-1991 time was the movement to establishing a market based public-debt market. So, t-bills were now auctioned enabling a better control of reserve money by the Reserve Bank.

6.9. 1991 - CRISIS !! You know what happened ... don't you ?? We airlifted gold to pledge with IMF in return for SDRs(Special Drawing Rights) to buy us imports !! 

The elephant(read Indian govt.) finally woke up .. and came to terms with fiscal prudence !! 

6.10. Phasing out of the automatic monetisation of fiscal deficits through the significant agreements between the govt. and RBI. One such agreement was that issuance of ad-hoc t-bills which enabled automatic monetisation of govt. deficit, which I talked about above, was reduced to minimum and was to be ultimately phased out. This enabled the Reserve Bank to bring down the CRR and the SLR, thereby freeing resources of the banking system for the commercial sector. Remember, it was at this time that Mr. MMS and NSR promised to IMF that they would open up their sector to private and foreign players.

6.11. Then came the major step towards phasing out the monetisation of debt, through the FRBM Act, 2003 that barred the RBI from subscribing to the primary issuances of the  government from April 1, 2006. (Remember earlier the RBI used to subscribe for govt. securities to finance govt. deficits).

7. So, has the monetisation been completely phased out in India now that the RBI no longer subscribes to the primary issuances in government auctions?

Prima facie, monetisation of fiscal deficit has been considerably phased out, but not completely !! Why? 

As long as fiscal deficits remain large, the size of market borrowings would also remain large and influence the conduct of monetary policy, no matter how the debt management is conducted. How? Through its impact on aggregate demand and inflation. 

So nowadays RBI uses something called Open Market Operations(OMO), in which it sells/purchases govt. securities to/ from the market, as a monetary/liquidity adjustment tool. Also, a new innovative technique called Special Market Operations (SMOs) are conducted by the RBI. The 

SMOs enabled PSU oil companies to sell oil bonds to the RBI to raise foreign exchange. These SMOs essentially weakened the FRBM Act as it indirectly monetised government deficits. How? 

- The govt. by issuing oil bonds understated the true fiscal deficit. 

- If the govt. had to fund it through its own securities, the RBI could not have subscribed to it as it would have been against the FRBM act. 

However since the oil bonds lacked liquidity, RBI stepped in to provide the same while resolving the $$ funding requirement of the oil companies. This creative instrument helped minimise the pressure on interest rates as well as exchange rates. 

So, we see that monetisation of fiscal deficit has not been completely done away with !!

Wetlands, Chilika Lake & Ecosystem Health Report Card

Wetlands are those areas where water table are very near to the surface of the land and/or where land is covered by shallow water.  

Features of Wetlands:

• Wetlands can be freshwater, brackish or salt water. It can natural or man-made. It can static or flowing. 
• Type of wetlands - lakes, mangroves, bogs, freshwater swamps
• 2nd Feb - World Wetland Day
• Benefits from Wetlands:
• food, water and fuel
• carbon storage
• ground water table
• pollution control
• protection from natural hazards - floods and storms
• Some famous Wetland sites in India
• Wular Lake - J&K 
• Kolleru Lake - East Godavari - AP
• Chilika Lake - Odisha

Ramsar Convention on Wetlands

"Ramsar Convention on Wetlands", was signed by countries in the coastal city of Ramsar, Iran in 1971. It is an intergovernmental treaty which provides the framework for national action and international cooperation for the conservation and wise use of wetlands and their resources. India is signatory of this treaty.

Major obligations of countries which are party to the Convention are:

• Designate wetlands for inclusion in the "List of Wetlands of International Importance"
• Promote, as far as possible, "the wise use of wetlands in their territory"
• Promote "international cooperation" especially with regard to trans-boundary wetlands, shared water systems, and shared species.
• Create "wetland reserves"

Monreux Record 

It was created under the Ramsar Convention and is a register of wetland sites on the List of Wetlands of International Importance where some ecological degradation has occurred, occurring or are likely to occur as a result of technological developments, pollution or other human interference. This is to draw positive national and international conservation attention. Wetlands gets added to and removed from Montreux Record, based on their ecological health. 

From India, till now, three(3) wetlands have been added to Montreux Record. 

• Chilika Lake, Odisha - added in 1993 and removed in 2002(due to excellent conservation effort)
• Keoladeo National Park, Rajasthan - added in 1990; not removed as yet
• Loktak Lake, Manipur - added in 1993; not removed as yet

Chilika Lake & Ecosystem Health Report Card

Chilika Lake is a salt water coastal wetland system in Odisha state. This lake is known for its rich biodiversity of bird species, has the largest Irrawaddy Dolphin population, several fish species and supports millions of fisherman in their livelihood. 

Hydrological setup of Chilika Lake

[Note: Observe the Rushikulya River/Estuary - Nesting ground for Olive Ridely Turtles. Odisha state holds 50% of world's sea turtle population and 90% of India's. It has been covered in Hindu, so better know about it .. :)]

Chilika Lake may become the first lake from Asia to adopt the “Ecosystem Health Report Card” – an effective means of tracking and reporting the health of a waterway at both local and regional scales.

Other waterbodies with such Ecological health Card are: 

• Mississippi River, USA
• Great Barrier Reef, Australia 
• Chesapeake Bay, USA
• Gulf of Mexico, Mexico

What is Ecological Health Report Card?

As you can see from the Hydrological setup of Chilika Lake in above picture, you see that several rivers are ending in Chilika Lake. These rivers carry with them several pollutants, nitrogen compounds etc. These give rise to several ecological pressure on the wetland. This health report card is a tool for managing nutrient loads into coastal waters. 

The objective of this tool inter alia is to:

• ascertain health of the water body 
• role of river-catchment and river nutrient and nitrogen input and its associated impact on river health - like growth of algal blooms, decrease in dissolved oxygen level etc. 

[Note: How do rivers carry nitrogen? Its because on its way it carries along animal manure, fertilisers washed away from land, domestic effluents, atmospheric deposition and soil nitrogen. These nitrogenous nutrients leads to algal blooms, which finally decreases dissolved oxygen contents in river, thereby affecting aquatic life. A question had come on this topic in CSE 2011 Prelims exams.]

This report card consists of six(6) indicators that are combined into a single overarching index of health of the water body.

• Water Quality Index has following parameters - (1) Water Quality, (2) Chlorophyll a, (3) Dissolved Oxygen

• Biotioc Index has following parameters - (4) Benthic Community, (5) Aquatic Grasses, (6) Phytoplankton Community 

[Note: 

(1) Chlorophyll a and Chlorophyll b are two pigments which impart green colour to the plan and are responsible for photosynthesis. Chlorophyll a is the most abundant pigment found in plants. Main constituent is Magnesium element(Mg). 

(2) Benthic Community - organisms that live on the bottom of the ocean floor - worms, clams, crabs, lobsters, sponges]

PARAM YUVA II SUPERCOMPUTER !!!

On 8th Feb 2013, India unveiled its fastest supercomputer PARAM YUVA II. This post is all about it. 

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Ever since India was denied CRAY supercomputer, we took upon to give ourselves a Supercomputer. That is how the first indigenously build supercomputer, PARAM 8000 was born(1991). 

See the whole evolution of PARAM Series in India, here.

In recent years, India had set a vision:

In 12th five year plan:

(1) "To identify 200 scientists and 2000 researchers dedicated to Fourth(4th) research paradigm i.e. Data Intensive Discovery. To create an ecosystem where 25% of the ecosystem of the country would be connected  by supercomputer activity. For this purpose a proposal has been received for establishing 200 centres across the country connected over the National Knowledge  Network." 

(2) "To have indigenous efforts to build Peta-scale supercomputer capacities and capabilities for the country’s requirements that will place India among the top five supercomputing power in the world." 

(3) To set up a top-tier of around six(6) supercomputers with about 3-6 Petaflops computing power in different locations, followed by 12-20 zonal supercomputers of 200-500 Teraflops. The third rung would involve 20-50 machines with 10-Teraflop speed and finally, 50-100 regional supercomputers of one Teraflops.

The Science, Technology and Innovation Policy 2013:

(1) lays lot of emphasis on R&D and talks about increasing India's expenditure in this area. 

[Note:  (1) 4th Research Paradigm - Data Intensive Discovery 

First Paradigm of Scientific Research - 1000s of yrs ago we had – Experimental Science - desc. of natural phenomena 

Second Paradigm of Scientific Research - Last few centuries ago we had – Theoretical Science – Newton’s Laws of Motion, Albert Einstein's Theory of Relativity etc. 

Third Paradigm of Scientific Research - Last few decades we had – Computational Science – Simulation of complex phenomena, constructing mathematical models to solve complex problems, linear programming etc 

Fourth Paradigm of Scientific Research - Current date we have – Data-Intensive Science, where scientists are overwhelmed with lots of data.

Data from many different sources

- Data captured by instruments

- Data generated by simulations

- Data generated by sensor networks 

which then needs to be data mined, analysed, visualized and exploration, draw meaningful information and finally communicated to wider audience. 

National Knowledge Network(NKN) is trying to do cater to this form of distributed research.   

(2) FLOPS - Floating Point Operations per second. 

It is the unit for measuring performance of a computer, just like we measure the performance of a car(mileage -Kms/litre or acceleration time) or performance of a printer toner(no. of pages to be printed).

So, the nominal speed will be some number of FLOPS and then we have the higher units.

MEGAflops - Millions - 10^6

GIGAflops - Billions - 10^9

TERAflops - Trillions - 10^12

PETAflops - Quadrillions - 10^15

EXAflops - Quintillion - 10^18 

Note: You're going up by a factor of 1000(10^3) each time. :)  

Flop measurement of a computer is always its peak performance size. So when I say a computer can scale or work at 500 Teraflops, that is its peak calculation performance. Marketing people or even by other people for normal information purposes, use flops measurement system to tell about computer performance, but this can at times, be a misnomer.

REMEMBER, HIGHER FLOP NUMBER, DOES NOT NECESSARILY MEAN IT IS A BETTER COMPUTER !!!!

While we talk about the peak performance of machine(in flops), but what we are really bothered about is how fast the science is delivered on the machine, or how fast the weather model runs on the computer. This is called the Time to Solution. Flops and Time to solution are related but they are not the same thing.

Note: Today a typical personal computer has a computing power in the order of GIGAflops. Samsung Galaxy S2 is ~ 85 Gigaflops !! :)  

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1. PARAM YUVA II supercomputer is developed by CDAC Pune. 

Remember: CDAC is R&D arm of Department of Electronics and Information Technology (DeitY), Ministry of Communications & Information Technology (MCIT).

Also, CDAC is not the only organization which develops super computers. ISRO, CSIR, BARC also develops super computers. 

2. PARAM YUVA II is the seventh(7th) in the PARAM series. At ~ 500 Tera Flops, its the fastest supercomputer in India, which is being indigenously developed. 

3. This supercomputer uses Hybrid Technology - which is network of high performance computers. This hybrid technology has enabled the up-gradation of existing 54 Teraflops to 500 Teraflops peak computing power of Indian Supercomputers. 

This up-gradation of computing power was taken up as part of National Supercomputing Mission which was part of National Policy on Information Technology (NPIT) - 2012.

4. As mentioned above, India has a vision of creating an ecosystem of High Performance Computers in the country with tiered architecture. PARAM YUVA II will be incorporated in the National Knowledge Network (NKN) which will help majority of research institutes and scientific community to leverage the high computing powers of this computers for their work.

5. Param Yuva II has high storage capacity(200 TB), it supports parallel computing(infact all Supercomputers must support this feature). 

Typically most of the data centers (places where large mainframe or super computers are located) requires a lot of cooling devices, as it generates a lot of heat due to high number of processors running. So these data centers are in a way primary sources of Green House Gases. In this respect Param Yuva II is made energy efficient and consumes around 35% less power.

6. Param Yuva II is purported to be used in areas like weather forecasting, Monsoon Mission(I have covered monsoon mission of GoI here), seismic data analysis, Cancer Bioinformatics, Genome Sequencing, Discovery & Extraction of new energy sources like oil and natural gas etc. Apart from this, even pharmaceutical companies can use it for drug discovery (Open Source Drug Discovery is an important candidate here). So the scientific institutes, research laboratories and universities will be benefited a lot from this supercomputer. 

E.g. - 

(i) The increase in peak computing power in Param Yuva II will help reduce the time required for weather predictions. 

(ii) Also, if supposedly the current system was used to predict weather conditions in a 6 km area, Param Yuva II would help in predicting weather conditions for a 10km area etc. 

(iii) Also, I remember reading somewhere that for things like Indian Forests Survey or say Coral Reef Study etc where complex remote sensing data is sent back to Earth through the G-SAT or G-SLV satellites(BTW the one to go up soon will be the SARAL - Argos/Altika, read about it) will require a high performance computers to churn GBs of data and use complex models to draw scientific understanding from it. 

Remember accelerating a nation’s R&D programs by increasing the productivity of scientists and researchers will in turn lead to both scientific advancement and economic competitiveness of a nation !!! 

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Some mock questions on Supercomputers for Civil Services Prelims Exam 2013. 

All The Best !! :) 

Question I : Consider the following statements:

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1. PARAM series of high performance computers were the first supercomputers India had developed. 

2. Basic principle behind any PARAM computers is that calculations are broken up into segments and solved parallel to one another.

3. PARAM YUVA II ranks in top 50 fastest supercomputers in the world.

4. In order to boost domestic supercomputing manufacturing facility, Govt. of India, in its National Information Technology Policy 2012, has identified, Centre for Development of Advanced Computing(CDAC), as the nodal government agency authorised to develop supercomputers for all government departments in India. They are also authorised to export supercomputer to other countries in the World. 

   

Which one of the above statements are not incorrect?

(A) Only 1, 3 and 4

(B) Only 1 & 2

(C) Only 2 and 3

(D) Only 2 and 4  

Question II: Consider the following statements:

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1. India's supercomputing development has seen an evolution from the one driven by weather forecasting in 1990s to currently being involved in Data Intensive Discovery and distributed computing. 

2. The 12th Five Year Plan earmarks Rs 5,000 crore, which would ensure that at least 25% of the scientific population of the country has access to a supercomputer.

3. The supercomputing demand in India is primarily driven by the Private Industries need for mainstream supercomputing, involving 2-10 Teraflops machines, as is also seen in US, China and Japan.

Which one of the options below are correct?

(A) Only 1 and 3

(B) All 1, 2 and 3

(C) Only 1 and 2 

(D) Only 3 

(E) None of the options (A), (B), (C) or (D) are correct 

2007-08 Credit Crisis - The Phenomenon

Hello All, 

For this post I have prepared a document because pasting pictures and doing other graphical work was severely limited on blogger. 

Please click on this link to open the document. 

Document Link

At the end of studying you will be able to some idea on the following:
1. Sub-Prime Mortgages 
2. Collateralized Debt Obligation
3. Credit Default Swaps
4. Frozen Credit Markets 

Happy Studying ! 

Enjoy 

Kaveri/Cauvery River

Important points about Kaveri/Cauvery River as it flows through the Deccan Plateau from the Western to the Eastern part of Peninsular India.

1. -----------------Karnataka State --------------
2. Talakaveri, Brahmagiri mountain in Kodagu - Source in western ghat in Karnataka
• Kaveri river originates from here 
• Here river Kanaka river joins Kaveri
3. Krishna Raja Sagar Dam 
• This is a crucial dam determining flow to Mettur Dam in TN in the Cauvery water dispute
• Brindavan Garden is attached to this dam - Botanical Park
4. Srirangapatnam
• Cauvery river forms island city called Srirangapatnam, because of its splitting and afterwards it joins again
• It was capital city of Tipu Sultan 
• Nearby is Ranganthittu Bird Sanctuary 
• Bangara Doddi Nala is an aqueduct constructed in 17th Century by Ruler of Mysore
5. Desert of Talakad in Karnataka - Desert like city in Cauvery Basin 
6. Sivasamudram Falls 
• Second biggest waterfall in India
• This waterfall was the first in India to be harnessed into electrical power in 1902 by British as they needed electricity for Kolar gold field which is 100 miles away. 
7. -----------------Tamilnadu State ------------- 
8. Hoggenakkal Waterfalls 
• This water fall is in Melagiri Hills
• Here Chinnar River meets Cauvery River
• This was erstwhile Verappan Dacoit's territory
9. Stanley Reservoir
• Largest fishing reservoir in South India
• This reservoir is created by Mettur Dam 
10. Mettur Dam 
• In news recently due to CWD, as it did not receive much water during lean season due to dams in Karnataka.
11. Thanjavur
• Ruled by Cholas, Nayaks and Marathas
• Its called the "Rice Bowl of Tamil Nadu" due to rich alluvial deposits of Cauvery river.
12. Poompuhar
• Cauvery/Kaveri river meets Bay of Bengal here.

Google Map for easy reference of locations mentioned above:

Kaveri river flow on google map 

(Please check the link above to know where each of them lie on the map)

Human Blood Groups & Civil Services :D !!

With advancement in modern medical interventions, where blood transfusion has become very important. Hence knowing a persons blood type is very important. 

There are more than 30 different blood typing, but we will learn the one most commonly used namely ABO Typing. There is another one called Rh factor but we will not cover it in this post. 

This system of blood typing classifies human blood into four types as shown above. These blood types basically differentiates different proteins on the top of Red Blood Cells(RBCs), so a person with A blood group will have a certain protein on its RBC and likewise. Remember O-blood group people do not have any proteins.  

Now if you observe that corresponding column shows the different genotypes. 

- IA and IB indicates dominant factor 

- i indicates submissive(called recessive) factor

These IA, IB and i are called alleles and they code for a certain trait in human body like eye colour, hair colour etc. In this case, these alleles are coding for the trait "Proteins on RBCs", which will ultimately determine which type of blood that human being will have. 

So, IA/IA says to have proteins type A on RBC, thereby meaning that person will have type A blood. IA/i also says the same i.e "to have protein A on RBC", as IA is the dominant one !! Same goes for other types of blood groups viz; B, AB and O. 

So, if question comes, if father has A type blood group and mother has B, what will the offspring blood group be? 

Let's draw the table to understand it. So seeing the genotype column above, we draw the following two possibilities.

So, we see that Father with A and Mother with B or vice-versa, can have offspring of all four types of blood groups viz; A, B, AB and O.  

So, lets solve this CSE 2011 Prelims Paper I question with above understanding. 

Q. A married couple adopted a male child. A few years later, twin boys were born to them. The blood group of the couple is AB positive and O negative. The blood group of the three sons is A positive, B positive, and O positive. The blood group of the adopted son is 

(a)  O positive 

(b)  A positive 

(c)  B positive 

(d)  Cannot be determined on the basis of the given data

 Ans: So using the genotype column from from above, we draw the following possibility.

In above table we have assumed father has AB and Mother has O. Even if you consider vice-versa, the answer would remain the same. 
So, above table shows that offsprings can have either blood group A or B. Hence the O+ has to be the adopted son. 

So you see remembering the genotype table above solves such blood type questions easily. 

Not just Civil Services, even CPF(AC) exam of 2011 has a question on blood type. 

Q. Father and mother having A and B blood group respectively
a) Cannot give birth to child with AB blood group
b) cannot give birth to child with O blood group
c) can give birth to child with O blood group
d) cannot give birth to twin child with B blood group  

We have solved this question above, with two possibilities, which certainly negates option A, C and D. 
So the right answer is option B

Human Development Indices

Human Poverty Index - 1 (HPI-1)

Human Poverty Index - 2(HPI-2)

Gender Related Development Index (GDI)

Gender Empowerment Measure (GEM)

Human Development Index (HDI)

Natural Gas - item in Union or State List ?

In 2001 Gujarat legislature passed a law regulating the supply, transmission and distribution of Natural Gas. It was aimed at promoting the use of gas in the state, by both industry and domestic consumers. This Act was sent to president for his assent to convert it into law. 

President did not give his assent, instead on 8th Oct 2001, he referred it to Hon'l Supreme Court under Clause 1 of Article 143 of the Constitution of India, which states that:

Article 143 (1) 

If at any time it appears to the President that a question of law or fact has arisen, or is likely to arise, which is of such a nature and of such public importance that it is expedient to obtain the opinion of the Supreme Court upon it, he may refer the question to that Court for consideration and the Court may, after such hearing as it thinks fit, report to the President its opinion thereon.

[Note: 

(i) There have been 15 presidential references so far to SC, out of which only 1 have NOT been answered so far, which was regarding a question on whether Ram temple was there in disputed area in Ayodhya. SC declined to answer this presidential reference.  

(ii) Recently Smt. Pratibha Patil had sent presidential reference to Supreme Court, regarding clarifying on distribution policy w.r.t Natural Resources. 

(iii) An Advisory Jurisdiction is an opinion which the Supreme Court expresses and hence not binding on President. Nevertheless, it is entitled to due weight and highest amount of respect by all courts and the Executive as well as the Legislature. The whole purpose of advisory jurisdiction is to be able to avoid problems rather than being confronted with problem and then the Court being brought in to adjudicate the issue. So this preventive power which has been vested in the President and the jurisdiction which has been vested in the SC is to avoid problems in the future which are clearly foreseeable.] 

A question had therefore arisen whether "Natural Gas" is a Union subject or State subject and whether the State of Gujarat and the other States have the legislative competence to make laws on the subject of "Natural Gas." 

Questions asked in the reference are as follows:

Q1. Whether Natural Gas in whatever physical form including Liquefied Natural Gas (LNG) is a Union subject covered by Entry 53 of the List I and the Union has exclusive legislative competence to enact?

Q2. Whether States have legislative competence to make laws on the subject of natural gas and liquefied natural gas under Entry 25 of List II of the Seventh Schedule to the Constitution?

Q3. Whether the State of Gujarat had legislative competence to enact the Gujarat Gas (Regulation of Transmission, Supply & Distribution) Act, 2001?

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What's there in Constitution?

Seventh Schedule of the Constitution of India has details as under:

Union List I - Entry 53 : Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable.

State List II - Entry 25: Gas and gas-works 

Court Proceedings:

There was intense debate on both sides(Union and State) explaining why "Natural Gas" should be considered as a subject enumerated in their list. 

Arguments by State:

The learned Counsel for the State brought to the attention the Hon'l SC of various publications and research papers on the subject to show as to what is 'natural gas' and its derivative forms. Elaborate arguments were made to this respect:

• Expression "gas" used in Entry 25 of List II would include all types of gases and, therefore, any legislation related to "gas and gas works" is perfectly within the legislative competence of the State.
• It was submitted that in previous judgement by SC held that the field of entire industry, dealing with "gas and gas works" would fall under Entry 25 of List II. 
• It was further submitted that the entries in the three Lists(Union, State and Concurrent) were only legislative heads or fields of legislation and they only set boundary limit on the area over which the appropriate Legislature could operate. Widest amplitude should be therefore be given to the interpretation of the language of the entries.
• When there is a conflict between two entries(Union Vs State list), the Court should reconcile the entries and attempt should be made to harmonise the apparently conflicting entries and the State should not be denuded of its power to legislate on the subject.
• It was further contended that "gas" as defined in the Gujarat Act means matter in gaseous state which predominantly consists of methane and it will not come within the ambit of 'petroleum and petroleum products.'
• It was argued that "gas" could be extracted from the bowl of the earth without there being any petrol or petroleum products and according to the learned counsel, it would fall within the domain of State legislation under Entry 25 of List II.

Arguments by Union:

• The learned Attorney General argued that the various definitions in different enactments(in past) indicate that there is uniform and consistent legislative practice and it is evident that 'petroleum and petroleum product' include 'natural gas' and hence 'natural gas' is a Union subject covered by Entry 53 of List I.
• The Entry 25 under List II of the Seventh Schedule deals with "gas and gas works" and it relates to manufacture gas like acetylene, oxygen, carbon dioxide, which are locally manufactured and used in industries e.g welding purposes, hospitals, preparing aerated drinks etc. and hence enables the State Govt to regulate and control the manufacture and distribution of these gases by the local industry.
• Union govt. then tried to establish that Natural Gas is a Petroleum product:
• "Petroleum" means naturally occurring hydrocarbons in a free state, whether in the form of natural gas or in a liquid viscous or solid form, but does not include helium occurring in association with petroleum, or coal, or shale, or any substance which may be extracted from coal, shale, or other rock by the application of heat or by a chemical process.
• "Natural gas' is defined as a naturally occurring mixture of hydro-carbon and non-hydrocarbon gases found in the porous geologic formations beneath the earth's surface, often in association with petroleum.
• In Cauvery Water Dispute Tribunal, the right to flowing water of rivers was described as a right 'publici juris', i.e. a right of public. So also the people of the entire country has a stake in the natural gas and its benefit has to be shared by the whole country. There should be just and reasonable use of natural gas for national development. If one State alone is allowed to extract and use natural gas, then other States will be deprived of its equitable share. This position goes on to fortify the stand adopted by the Union and will be a pointer to the conclusion that "natural gas' is included in Entry 53 of List I. Thus, the legislative history and the definition of 'petroleum', 'petroleum products' and 'mineral oil resources' contained in various legislations and books and the national interest involved in the equitable distribution of natural gas amongst the States - all these factors lead to the inescapable conclusion that "natural gas" in raw and liquefied form is petroleum product and part of mineral oil resource, which needs to be regulated by the Union.

Conclusion:

• Natural gas being a petroleum product, the court was of the view that under Entry 53 List I, Union Govt. alone has got legislative competence.
• Entry 25 of List II, as suggested for the States, will have to be read as a whole. The expressions therein cannot be compartmentally interpreted. The word 'gas' in the Entry will have to be read along with other word 'gasworks'. In Ballantine's Law Dictionary 'Gas Works' is defined as "a plant for the manufacture of artificial gas". Similarly in Webster's New 20th Century dictionary, it is defined as "an establishment in which gas for heating and lighting is manufactured". The meaning of the term 'gas works' is well understood in the sense that the place where the gas is manufactured. So it is difficult to accept the proposition that 'gas' in Entry 25 of List II includes Natural Gas, which is fundamentally different from manufactured gas in gas works. Therefore, Entry 25 of List II could only cover manufactured gas and does not cover Natural Gas within its ambit. 
• In view of this specific Entry 53, for any petroleum and petroleum products, the State Legislature has no legislative competence to pass any legislation in respect of natural gas. To that extent, the provisions-contained in the Gujarat Act are lacking legislative competence.

In the result, the Reference is answered in the following terms :

Q.1. Whether Natural Gas in whatever physical form including Liquefied Natural Gas (LNG) is a Union subject covered by Entry 53 of the List I and the Union has exclusive legislative competence to enact.

A .1. Natural Gas including Liquefied Natural Gas (LNG) is a Union subject covered by Entry 53 of List I and the Union has exclusive legislative competence to enact laws on natural gas.

Q. 2. Whether States have legislative competence to make laws on the subject of natural gas and liquefied natural gas under Entry 25 of List II of the Seventh Schedule to the Constitution.

A. 2. The States have no legislative competence to make Saws on the subject of natural gas and liquefied natural gas under Entry 25 of List II of the Seventh Schedule to the Constitution.

Q. 3. Whether the State of Gujarat had legislative competence to enact the Gujarat Gas (Regulation of Transmission, Supply & Distribution) Act, 2001.

A.3. The Gujarat Gas (Regulation of Transmission, Supply & Distribution) Act, 2001, so far as the provisions contained therein relating to the natural gas or liquefied natural gas (LNG) are concerned, is without any legislative competence and the Act is to that extent ultra vires of the Constitution.

ORDER

In the light, of the opinion rendered in Special Reference No. 1/2001 under Article 143(1) of the Constitution of India, the Writ Petition and the Civil Appeals was dismissed.

Palestine's Non Member Observer Status in UN

On 29th November 2012, in a historic session of the United Nations, exactly 65 years after passing the Partition Plan for Palestine(in 1947), the General Assembly voted by a huge majority to recognize Palestine within the 1967 borders as a non-member state with observer status in the organization.
[Note: With this vote, UN General Assembly has accepted Palestine as a state, though as "non-member".] 

Some 138 countries voted in favour of the resolution, 41 abstained and 9 voted against: Canada, Czech Republic, Israel, U.S., Panama, The Marshall Islands, Palau, Nauru, and Micronesia. 

[Note: Germany, UK among others abstained from voting]

So how is this new status for Palestine going to help its case?

1. Palestine can now participate as an observer in the various sessions and the work of the General Assembly and voice its concerns against Israel. However Palestine cannot vote.
2. Till now Palestine was not recognized as a state, hence it was unable to bring cases against Israel at the International Criminal Court of Justice(ICC), for the various supposed war crimes Israel committed against Palestinians. Now that the UN vote gives Palestine the status of a state(though "non-member"), they can go to the ICC and pursue its case. 
3. Countries that till now did not accord full diplomatic status to Palestine can now think of doing so. 
[Note: Majority of African, Asian and East European countries have diplomatic mission established with Palestine, including India, where we have its Embassy]

What is the background and what are Palestinians asking for?

The Palestinian-Israel conflict has dragged on for more than 115 years, where both claim historic and religious ties to the land. The geopolitical disputed area lies between the Mediterranean Sea and the Jordan river. 

Timeline - See how Palestine land has declined over the years

Click on the picture to expand

The Palestinians now want that an independent, sovereign state be established in the West Bank, including East Jerusalem, and the Gaza Strip - occupied by Israel during the 1967 Six Day War. The 1993 Oslo Accord between the Palestine Liberation Organisation (PLO) and Israel led to mutual recognition. However, two decades of on-off peace talks have since failed to produce a permanent settlement and the latest round of direct negotiations broke down in 2010.