Insights Daily Current Events, 22 September 2015
Insights Daily Current Events, 22 September 2015
Paper 3 Topic: environmental pollution
CNG on highways soon
The union government is planning to build green highway zones with compressed natural gas (CNG) stations along some routes.
- The zones would be built along Delhi-Agra, Delhi-Chandigarh, Delhi-Haridwar and Mumbai-Pune highways.
What is CNG?
Compressed natural gas, or CNG, is natural gas under pressure that remains clear, odorless, and non-corrosive.
- CNG may be found above oil deposits, or may be collected from landfills or wastewater treatment plants where it is known as biogas.
- CNG is made by compressing natural gas (which is mainly composed of methane, CH4), to less than 1 percent of the volume it occupies at standard atmospheric pressure. It is stored and distributed in hard containers at a pressure of 20–25 MPa (2,900–3,600 psi), usually in cylindrical or spherical shapes.
Advantages of CNG:
- Natural gas is cleaner than gasoline or diesel fuel. Natural gas vehicles show an average reduction in ozone-forming emissions of 80% compared to gasoline vehicles.
- CNG does not contain any lead, thereby eliminating fouling of spark plugs.
- CNG-powered vehicles have lower maintenance costs than other hydrocarbon-fuel-powered vehicles.
- CNG fuel systems are sealed, preventing fuel losses from spills or evaporation.
- Increased life of lubricating oils, as CNG does not contaminate and dilute the crankcase oil.
- Being a gaseous fuel, CNG mixes easily and evenly in air.
- CNG is less likely to ignite on hot surfaces, since it has a high auto-ignition temperature.
- Less pollution and more efficiency: CNG emits significantly fewer pollutants (e.g., carbon dioxide (CO2), unburned hydrocarbons (UHC), carbon monoxide (CO), nitrogen oxides (NOx), sulfur oxides (SOx) and PM (particulate matter) than petrol.
- CNG-powered vehicles are considered to be safer than gasoline-powered vehicles.
Although vehicles can use natural gas as either a liquid or a gas, most vehicles use the gaseous form compressed to pressures above 3,100 pounds per square inch.
Compressed natural gas vehicles require a greater amount of space for fuel storage than conventional gasoline powered vehicles.
Sources: The Hindu, Wiki.
Paper 2 Topic: Important International institutions, agencies and fora, their structure, mandate.
IFC has stakes in more than half the small finance banks
The World Bank’s investment arm International Finance Corporation (IFC) has invested $145 million (around Rs 950 crores) in six of the 10 companies that have been granted small finance bank licenses with a collective client base of nine million.
- According to the IFC, small finance banks are a major step to promote financial inclusion and such initiatives are part of concerted policy efforts to meet the needs of small businesses, the unorganised sector, low income households, farmers, and the migrant workforce.
- The Reserve Bank of India (RBI) had recently granted ‘in-principle’ approval for 10 companies to set up small finance banks.
About the International Finance Corporation (IFC):
The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset management services to encourage private sector development in developing countries.
- It is a member of the World Bank Group and is headquartered in Washington, D.C., United States.
- It was established in 1956 as the private sector arm of the World Bank Group to advance economic development by investing in strictly for-profit and commercial projects that purport to reduce poverty and promote development.
- The IFC is owned and governed by its member countries, but has its own executive leadership and staff that conduct its normal business operations.
- It is a corporation whose shareholders are member governments that provide paid-in capital and which have the right to vote on its matters.
- It offers an array of debt and equity financing services and helps companies face their risk exposures, while refraining from participating in a management capacity.
- The corporation also offers advice to companies on making decisions, evaluating their impact on the environment and society, and being responsible.
- It advises governments on building infrastructure and partnerships to further support private sector development.
The Reserve Bank of India (RBI) had recently granted ‘in-principle’ approval for 10 companies to set up small finance banks. The approval will be valid for 18 months to enable the applicants to comply with the requirements.
Quick note on small finance banks:
- They aim to provide basic banking services to small farmers and micro industries.
- With an objective to promote financial inclusion, these banks will focus on small borrowers, low-ticket savings and serve rural areas.
- They provide basic banking services like accepting deposits and lending to the unbanked sections such as small farmers, micro business enterprises, micro and small industries and unorganised sector entities.
- These entities can operate across the country as there is no area of restriction. However, at least 50% of its loan portfolio should constitute loans and advances of up to Rs 25 lakh.
- These banks will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks, including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- These banks would not enjoy any forbearance from complying with the statutory provisions. They have to follow the norms for scheduled commercial banks.
Challenges to these small finance banks:
These new banks are likely to face challenges in deposit mobilisation initially as they compete with existing banks. Besides, bank lending to microfinance institutions, driven partly by banks’ priority sector lending requirements, might dry up for the new banks because the rules may not permit it. Over the next 18 months, small finance banks will need large amounts of capital to comply with regulatory requirements.
Paper 2 Topic: Bodies constituted for the protection and betterment of these vulnerable sections.
Irdai issues guidelines for social, rural sector obligations
The Insurance Regulatory and Development Authority of India (Irdai) has issued a new set of guidelines according to which all insurers from the life, non-life and health segments operating for 10 years should have at least five per cent of their total policies from the social sector.
- Social sector includes the unorganised sector, informal sector and economically vulnerable or backward classes both in rural and urban areas.
- In the first year of operations, insurers should ensure 0.5% coverage from social sector segment. Every insurer should mandatorily do business in these segments.
- For the rural sector – the places or areas classified as rural in the Census – life insurers have to write at least seven per cent of total number of policies from these areas in the first year of operation. This goes up to 20% from the 10th year onwards.
- For general insurers, 2% of gross premium income should be in the rural segment in the first year, which goes up to seven per cent from the ninth year onwards. In respect of stand-alone health insurers, it is 50% of the obligations prescribed for non-life insurers.
- Micro insurance policies issued are eligible to be reckoned for social-sector obligations. Where a micro insurance policy is issued in a rural area, it can be reckoned for both rural and social sector obligations separately.
- Insurance Regulatory and Development Authority of India (IRDAI) is an apex statutory body which regulates and develops the insurance industry in India.
- It was constituted by an act of parliament called Insurance Regulatory and Development Authority Act, 1999.
- The IRDA Act allows private players to enter the insurance sector in India.
Sources: BS, irdai.