Daily Current Affairs

Prelims Prominence - October 3, 2018

Economy

Govt. puts Uday Kotak in charge to stem IL&FS crisis

What

  • The government finally intervened in the IL&FS crisis superseding its board and appointing new members, with banker Uday Kotak as chairman.

Why

  • After a report from the Ministry of Corporate Affairs concluded that the affairs of the IL&FS holding company and its group companies were being conducted in a manner that was prejudicial to public interest, the government moved the National Company Law Tribunal(NCLT) for superseding the Board, which was granted with immediate effect.

Approval by NCLT

  • The NCLT also approved the induction of six directors recommended by the government.

Role of the government

  • To ensure that needed liquidity is arranged for the ILFS from the financial system so that no more defaults take place and the infrastructure projects are implemented smoothly

Connect to IL&FS

  • Infrastructure Leasing & Financial Services Ltd. (IL&FS) was set up in 1987 by the legendary M.J. Pherwani (former chairman of Unit Trust of India, National Housing Bank, etc.) to finance and promote infrastructure projects in the country.
  • It is now a financial behemoth with assets of over ₹1,15,000 crore — and debt of ₹91,000 crore.
  • IL&FS is a holding company that operates through 169 other companies that are either subsidiaries, group companies or joint ventures with others.
  • It is/has been associated with landmark projects such as the tunnel under the Zoji La Pass, Delhi-Noida toll bridge, Gujarat International Finance Tec-City (GIFT) and a host of road, power, water and port projects.
  • It was originally promoted by the Central Bank of India, Unit Trust of India and HDFC. Orix Corporation of Japan, Abu Dhabi Investment Authority, LIC and SBI joined in as co-promoters later.

Connect to the controversy

  • IL&FS Finance, a group company, defaulted in late August on a commercial paper repayment.
  • This was followed by a default by IL&FS on repayment of a ₹1,000 crore deposit to Small Industries Development Bank of India (SIDBI).
  • A series of defaults by the holding company and group outfits followed in the ensuing weeks running up to the annual general meeting of IL&FS on September 29.
  • That the group was over-leveraged and facing liquidity issues was well known in the market over the last few months leading to ratings downgrades by CARE and ICRA of IL&FS paper to junk status.

How did IL&FS land in this mess

  • The company borrowed many times its equity (rumoured to be between 10-18 times its equity) to fund its infrastructure projects, most of which bring in returns over 20-25 years.
  • Making things worse, IL&FS’s borrowings were all repayable in the short to medium-term of roughly 8-10 years.
  • Usually, these would be rolled over at the end of the term. Where IL&FS ran into trouble was in its projects stalling and not being completed due to various reasons ranging from statutory approvals not coming in, problems of land acquisition and projects simply becoming unviable as it happened in the case of power plants.
  • With returns from these projects not coming in, IL&FS was forced to borrow more. Lenders pulled the plug leading to trouble for IL&FS.

Other allegations on IL&FS

  • Assets and receivables were exaggerated in the financial statements and the top managers took home large pay-outs and continued to pay dividends to shareholders despite the financial situation.
  • An investigation has been ordered by the Serious Fraud Investigation Office.

Government intervention

  • The government made clear its commitment to ensuring that the ailing Infrastructure Leasing & Financial Services (IL&FS) receives the liquidity it needs from the financial system, and that no further defaults take place, terming the company a large Systemically Important Non-Deposit Accepting Core Investment Company.

State Specific

Odisha starts its own food scheme

What

  • The Odisha government will launch its own State Food Security Scheme (SFSS) from Gandhi Jayanti on October 2
  • Over 18 lakh poor and eligible people left out under the National Food Security Act, 2013, (NFSA) will receive their quota of 5 kg of rice at the rate of ₹1 per kg
  • The SFSS is totally funded by the State government.
  • The State government decided to launch its own food security scheme after the Centre did not respond to the Odisha government’s request to add additional 25 lakh poor people under the NFSA, they said.
  • The State government maintained that the number of eligible families has increased during the last five years.

Nobel Prize

U.S.-Japanese pair win Nobel Medicine Prize Lauded for their path-breaking research on cancer therapy

What

  • Two immunologists, James Allison of the U.S. and Tasuku Honjo of Japan, won the 2018 Nobel Medicine Prize for research into how the body’s natural defences can fight cancer

Connect to the therapy

  • Unlike more traditional forms of cancer treatment that directly target cancer cells, Dr. Allison and Dr. Honjo figured out how to help the patient’s own immune system tackle the cancer more quickly.
  • The award-winning discovery led to treatments targeting proteins made by some immune system cells that act as a “brake” on the body’s natural defences killing cancer cells.
  • The Nobel Assembly, after announcing the prize in Stockholm, said that the therapy “has now revolutionised cancer treatment and has fundamentally changed the way we view how cancer can be managed”.
  • In 1995, Dr. Allison was one of two scientists to identify the CTLA-4 molecule as an inhibitory receptor on T-cells.
  • T-cells are a type of white blood cell that play a central role in the body’s natural immunity to disease.
  • Around the same time, Dr. Honjo discovered a protein on immune cells, the ligand PD-1, and eventually realised that it also worked as a brake, but acted in a different way.

International

U.S., Canada agree on free trade pact The agreement replaces the 25-year-old NAFTA, which Trump had threatened to cancel

What

  • Canada and the U.S. reached a deadline deal on a new free trade pact that will include Mexico
  • The U.S.-Mexico-Canada Agreement (USMCA) updates and replaces the nearly 25-year-old North American Free Trade Agreement (NAFTA), which Trump had threatened to cancel.
  • The rewrite “will result in freer markets, fairer trade and robust economic growth
  • Canada and the U.S. overcame their differences after both sides conceded some ground, hailing an agreement that covers a region of 500 million residents and conducts about $1 trillion in trade a year.

Banking Sector

Recent write-off of loans by public sector banks (PSBs) Loan write-ff v/s Loan waiver

  • A loan write-off does not constitute a loan waiver
  • The recovery of loans continued in the case of write-offs.

What’s the difference

  • Technical write-offs are resorted [to] by banks as per Reserve Bank of India (RBI) guidelines.
  • However, this does not lead to any loan waiver.
  • Recovery of loans continues rigorously by banks. In fact, the defaulting management of most Insolvent companies has been removed under the IBC.
  • Writing-off of non-performing assets (NPAs) is a regular exercise conducted by banks to clean up their balance sheet, and achieving taxation efficiency
  • Writing off of loans is done, inter-alia, for tax benefit and capital optimisation.
  • Borrowers of such written off loans continue to be liable for repayment.
  • Recovery of dues takes place on ongoing basis under legal mechanisms, which include, inter-alia, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) and Debts Recovery Tribunals (DRTs).

National

Venkaiah Naidu inaugurates ‘World Peace’ monument

What

  • Vice-President M. Venkaiah Naidu inaugurated the world’s largest dome at the Maharashtra Institute of Technology (MIT)’s World Peace University (MIT-WPU) campus at Loni Kalbhor on the 150th birth anniversary of Mahatma Gandhi.

Connect to the monument

  • The structure, called the ‘World Peace Monument’ dome, took nearly 13 years to be build. At 160 ft. in diameter and 263 ft tall, it is larger in area than the dome at St. Peter’s Basilica in Vatican City (which is 136 ft. in diameter and 448 ft. in height).
  • The dome is built atop the MIT World Peace Library and the World Peace Prayer Hall, which are named after the 13th century poet-saint and philosopher Dnyaneshwar — a pivotal figure of the Bhakti movement in Maharashtra.
  • Each of the 24 massive columns in the dome stands 63 feet tall. The prayer hall can accommodate 3,500 people and is embellished with portraits of more than 50 accomplished men globally.

Environment

Toilet-for-all: WHO calls for more investment First global guidelines on sanitation and health released by WHO

What

  • The world will not reach the goal of universal sanitation coverage – where every person has access to toilets – by 2030 unless countries make comprehensive policy shifts and invest more funds

Connect to the guidelines

  • In a release, the WHO said that by adopting its new guidelines, countries can significantly reduce diarrhoeal deaths due to unsafe water and poor sanitation and hygiene.
  • For every US $1 invested in sanitation, the WHO estimates a nearly six-fold return as measured by lower health costs, increased productivity and fewer premature deaths.
  • Worldwide, 2.3 billion people lack basic sanitation (with almost half of them forced to defecate in the open).
  • They are among the 4.5 billion without access to safely managed sanitation services – in other words a toilet connected to a sewer or pit or septic tank that treats human waste.
  • Sanitation is a fundamental foundation of human health and development and underpins the core mission of WHO and ministries of health worldwide. WHO’s Sanitation and Health Guidelines are essential to securing health and well being for everyone, everywhere

Nobel prize - Physics

Laser pioneers win Physics Nobel

What

  • Three scientists won the Nobel Physics Prize, including the first woman to receive the prestigious award in 55 years, for inventing optical lasers that have paved the way for advanced precision instruments used in corrective eye surgery.

Who

  • Arthur Ashkin of the U.S. won one half of the nine million Swedish kronor (about $1.01 million) prize, while Gerard Mourou of France and Donna Strickland of Canada shared the other half.
  • Mr. Ashkin, 96, was honoured for his invention of “optical tweezers” that grab particles, atoms, viruses and other living cells with their laser beam fingers.

Oldest Nobel winner

  • Mr. Ashkin, who made his discovery while working at AT&T Bell Laboratories from 1952 to 1991, is the oldest winner of a Nobel prize, beating out American Leonid Hurwicz who was 90 when he won the 2007 Economics Prize.
  • Meanwhile Mr. Mourou, 74, and Ms. Strickland ,59, — only the third woman to win the Physics Prize — won for helping develop a method to generate ultra-short optical pulses, “the shortest and most intense laser pulses ever created by mankind,” the j
  • Their technique is now used in corrective eye surgery.

Sources – the hindu , livemint