Tuesday, October 13, 2015

Will the Climate change at The city of lights ?!


By Sanjay Menon*

How many of you will agree with me if I state that the changes in climatic patterns had made the Syrian drought(2002) two or three times more likely, leading to the migration crisis ? The statement can be more convincing if you could recollect the Russian heat wave in 2010, that destroyed the country's wheat crop. It lead to the ban on grain exports, shooting up world food prices, pushing 44 million people below the poverty line across 28 countries. Scientists have proved that Climate change has indeed displaced people from their land, relinquishing stability.

The loss of mesic trees in the Sudan-Sahel zone, switching off of Northern seas from polar to more temperate species, the       "water war" in Bolivia have all been similarly authenticated. The most recent being the finding of 2014 as the 'hottest year' since modern records began, around 1850. However, future climatic changes can be described only within a range of uncertainty.

To be precise, as the definition goes, Climate change is the statistical distribution of weather patterns when that change lasts for an extended period of time. Rising global temperature,extreme heat waves,frequent droughts,heavy rainfalls are the end results. Enough and more evidences of catastrophes have added thrust to the definition over the years across the globe. It is an undeniable theory that the effects of climate change are more inclined towards anthropogenic activities- Greenhouse gas(GHG) emissions.

The greenhouse effect is not a new phenomenon. But it has turned into a growing problem over the years. Carbon dioxide (CO2), the main greenhouse gas has boosted economies of richer countries, since the advent of industrialisation.With the rising emissions since then, our annual CO2 emissions are now at an all-time record level of nearly 40 billion tonnes per year.

The alarm bells started ringing by the beginning of the 1960s. It was duly heard by the United Nations, which promptly formed the Inter- Governmental Panel on Climate Change(IPCC). The subsequent Earth Summit held at Rio reflected the reports and views of around 400 scientists about global warming. Since then, countries have resorted to tackling climate change to avoid dangerous consequences in the future. An agreement, United Nations Framework Convention on Climate Change(UNFCC,1992) was signed incorporating all major economies and polluters.

If Montreal Protocol (1987) urged nations to act against the depletion of ozone layer, Kyoto Protocol(KP), the brainchild of UNFCC, in 1997, formulated an international legal binding on emission reduction targets on member countries. KP was weighed on the premise that global warming exists and that man-made CO2 emissions have caused it. The protocol worked on the principal of  "Common but differentiated responsibilities", entrusting more obligations upon developed nations( Annex I Parties).KP's first commitment period started in 2008 and ended in 2012. However, it did not acquire enough wings as the US relentlessly seemed to kill the Kyoto, which it never ratified.

Also, the Conference of Parties(COP) which met every year to discuss Climate Tackling soon turned into "Climate Tourists”  (as put by Richard Black, BBC Reporter,2006). While countries are leisurely talking about climate action, GHG emissions have been rising steadily with industries emitting about 600 billion tonnes of CO2,thanks to fossil fuels(1992-2013). As a result, the level of greenhouse gases in the atmosphere have risen dramatically, by more than two- fifths. That is, our planet is now absorbing more energy from the sun than is escaping back into space.

The global pondering on Climate change has eventually  transformed into a North-South face-off. If the current consequences of climate changes can be attributed to the imperialistic 'North’ countries, then the future implications will be surely on the shoulders of the emerging 'South’ economies. As it is evident from the fact, carbon emissions per capita in the developed world were about five times those in developing countries.On the contrary, figures are now pointing right in the face of the developing nations where the emissions have doubled, especially in China where it tripled!!.The target that has been set since the KP, is to limit the rise of global temperature by 2C. It was an achievable target until few years back when due time was on our side. Much of the time has been wasted deliberating the agendas of the two blocs. While the North advocates for an Environmental Justice - ‘minimise overall cost and maximising total welfare’, South pitches for an Compensatory Justice systems with an emphasis on historic distributive inequities.However, the advanced nations have agreed to bear more of the burden with a sense of charity, brushing aside historic culpability. Emission pledges of South will be at the cost of providing decent standards of living that contemporary technology can offer to its citizens. Rich countries have to shift their focus from Gross Domestic Product (GDP) to internal redistribution and changing lifestyles, which could in fact improve the quality of its citizens. In tandem, Developing world has to reorient its growth in cleaner, efficient and greener directions. Fortunately, the stand-off is been facilitated, reaching a point where centrist disposition is  giving way to potential new articulations ahead of the Paris meet in November this year.

Per Capita emissions of 2.1 tonnes is a meagre figure for India, comparatively.As the nation is striving to achieve prosperity;alleviating poverty and furnish its people with the basic necessities,climatic aberrations have been the evolving problem.The country has often felt the hapless effects of global warming, not to mention the series of droughts and floods.Therefore, it cannot rely on the actions of developed nations and it is high time the government and the leaders ‘walk the talk’ on emission cuts. The fact about rising CO2 emission is out in the broad daylight.It is nothing but poorer,age-old technology and inefficient mechanisms in place.Mr.Modi, an aspiring to-be global leader,urged nations to eradicate poverty to attain sustainable development at the recently held United Nations Sustainable Development Goal(UNSDG) conference at its headquarters.The speech was culturally and organically oriented as he related earth to mother. But the PM’s dilemma begins with growth and ends with environment. If he chooses the latter, a generation of people will miss the bus to prosperity.He can definitely make a breakthrough by broadening the renewable energy scheme that he implemented in his territory when he was the CM.

As Paris is gearing up for a ‘globally warming’ mediation, nations (both north and south) have acted swiftly, rather proactively, by pledging future emission targets and climate aids. Intended Nationally Determined Contributions (INDC) acted as the pathbreaking principle to keep every nations on board in the run up to the Paris conference. It calls for an amicable voluntary contributions(Bottom-Top approach) in contrast to legal binding and strict emission targets(Top-Bottom approach). Switzerland was the first country to formally communicate its pledging ( 50% GHG by 2030) followed by the European Union (EU) with 40% reduction.The capitalistic and the communistic power came to the fray when Mr.Obama and Mr.Keqiang declared unconditional ‘War on Coal and War on Pollution ‘ respectively. The US, refuter of KP, pledged a reduction cut of 26-28% by 2025 while China, World’s largest greenhouse gas emitter promised a reduction rate of 60-62%/GDP.India, too has pledged a reduction averaging 35-40%, which is a prospective approach.
May the city of lights showers its hope on all of us and sustain our Mother Earth !.


* Author is Research Intern at CPPR. Views are personal.

Wednesday, October 07, 2015

Nepal Political Tussle : Another Humanitarian crisis in the Offing?

By Ms Vinny Davis*
The tiny Himalayan kingdom of Nepal has not seen peace after it became a federal democratic Republic. At a time when, adopting a constitution is cheered as a gateway to the peaceful transition of the democratic process all over, the Nepali experience was little too bitter.
Sharing a 1751 Km border with Nepal, India has all reasons to be apprehensive over the political crisis that is spreading its tentacles across Nepal to Indian territories. On September 20, 2015, Nepal  promulgated its secular and democratic constitution, dividing the Himalayan landmass into seven federal provinces for administrative purposes. The 65-year quest for a democratic development from the monarchical rule was finally fructified. Needless to say, it did not go well with the Madhesi tribe who inhabited the Southern Nepal (or the Terai region). Incidentally the same region houses half of the country's population, in spite of it constituting only 1/5 of the total landmass. Drawing support from Tharus( another tribe from the same region), the Madhesis are in arms against the long-sought political development of the country.
Undoubtedly, the aforementioned are internal affairs of a nation, to which no external power possess a right to intervene. However, given the volatile situation in the Terai region, a direct implication on its closest neighbour- state of Bihar, in India cannot be cast into oblivion. Bihar is the new eye-candy for the power-brokers for India. Both the ruling and the opposing sides (Nitish Kumar's Janata Dal (United), BJP and Congress) are in no mood to cede a defeat on any grounds. Slated for polls this month, the prolonged political impasse in Nepal is a natural cause to worry.
This leaves us to ponder about the role of Madhesis, in the present political stalemate. They have been demanding for equal representation/participation within the revised political structure of Nepal. Ironically the modernity embraced by the new constitution is immaterial to them. Interestingly, Nepali constitution is the first in Asia to protect the rights of the Lesbians, Gays, Bisexuals and Transgender communities. Intriguingly, the religious /cultural freedom enshrined in the constitution which also safeguards the ancient religious/cultural practices or one which considers proselytizing illegal will find fewer takers in a kingdom which was officially labelled under the garb of religion for centuries. The latter is reflective of the fears of widespread conversions to Christianity amongst the low caste groups. The discrepancies related to citizenship rights of women are another bone of contention.
India will seek for a peaceful resolution of the political disputes. At the same time, an institutionalized acceptance of the new constitution is imminent for the political future of Nepal. Adding oil to the fire, the fuel crisis that has presently evolved in Nepal is pointing its fingers towards a covert Indian scheme to impose a trade blockade. Over 6000 trucks are stranded in the Indo-Nepalese borders carrying essentials like petroleum products, cooking gas, and several other food and non-food items. Though the topography poses a hurdle for Nepal to re- route its supplies via China, the opportunity cannot be wholly disregarded. The Chinese maneuvers to ride along with an enemy's enemy (Nepal holds India responsible for the trade blockade, and anti- India slogans are also rampant in Nepal) will prove detrimental to Indo-Nepalese relations. Another alternative route is the Sunauli border in Uttar Pradesh (India) for trade in essentials to offset the blockade. Rationing of commodities has already begun, however it will be difficult to meet the desired demands of the people.
Imposing a trade blockade is not new amongst nations, especially if a political crisis is engulfing the nation a under question. The Indian case is ironic here. Speculations are rife over the protracted Indian role in this regard, even when the political elite are calling for a peaceful resolution of the crisis. If this blockade is a scheme implemented keeping in mind the Bihar elections, then it is a serious aberration of our foreign policy that violates undue interference in the internal affairs of another country. The official statements are also questioning the inclusivity of the new constitution. In the name of border security, and by capitalizing the fears of the Indian owned/run freight operators, it looks like some vested parties in India are also adding fire to the political imbroglio in Nepal.
The spillover effects of the crisis has already resonated itself in the aviation sector, with major international flights bound from Nepal being cancelled. Nepal is yet to stabilize the conditions post the devastating earthquake of April 2015. The people are in dire need of a political transformation to start anew. Surely, the opposing sides getting itself embroiled in a dirty game. A feudal re-structuring as demanded by the Madhesis and the Tharus will not be easy. It remains to be seen how the 14- day old constitution will attempt to ensure a proportionally based representation and a population-based delineation of electoral constituencies as demanded by the opposing factions. A minority is putting the majority to ransom here. The Communist party of Nepal - Unified Marxist Leninist (UML), and its votes will decide the fate of the constitutional amendments. Being a nascent democracy, the political factions across Nepal should abstain from manipulating the fragile atmosphere to stall the long sought democratic development in the country.
Any build-up of an anti-India fervour in Nepal will affect the cordial ties between the two nations. History and geography have reinforced this indomitable connection between the countries. The effigies of the Prime Minister, Shri. Narendra Modi is now being burnt publicly. Nepal being reliant on India for 60% of its imports is on the verge of another humanitarian crisis. Being a major trading partner with Nepal, the Indian political elite need to do the needful to recover the lost image of a faithful ally. 

* The Author is Managing Associate of CPPR Centre for Strategic Studies (CSS). Views are personal

Monday, October 05, 2015

Oil Price Crash – What’s in store for India?

By Archana Mavnur*

Oil as a commodity has come to run the world for a long time now. It influences other commodity pricing and world power. The OPEC member countries have had the power over oil production, with Saudi Arabia contributing the maximum to the production and exports. However, the ever increasing oil prices have received a jolt several times in the past with the prices falling, causing an impact on the oil exporting countries. Oil prices have dropped to $ 50 a barrel since mid-2014 from $ 105 per barrel. Though quite a few parallels could be drawn from the 1986- 87 fall in prices, few other independent causes also lead to the fall of oil prices.

The shale oil production in the US which increased about 70% since 2008 decreased the dependency for the US to import oil from the OPEC nations, causing a drop in oil prices. During the period of 1986-87 also the world witnessed an increase in the supply of oil from oil tanks in North Sea and Mexico because of which oil dropped from $24 per barrel to $9.62 per barrel.  
Second, the increase in supply on both the occasions did not induce Saudi Arabia to reduce it’s supply of oil, with an intent to keep up the market share for oil, Saudi Arabia continued to supply the same amount of oil which pulled the prices down.
The third reason for the fall in oil prices is the slowdown in China’s economy which is the largest consumer of oil with a manufacturing driven economy. Also, the oil production in Libya and Israel continued even amidst the political crisis. The EIA thus estimates that by early 2016, the world oil supply could supersede the world demand.

Taking a quick look at the gainers and losers because of the fall in oil prices, it could be well noted that the oil exporting countries would be the largest losers because of the fall. The oil exporting countries make 80% of their total revenue by exporting oil. If the prices continue to fall then these oil exporting countries would make low returns on their investments, which is not profitable. On the flip side, the oil importing countries could make benefit of this low price with oil now costing less and reducing the budget deficit for the Government.  Additionally the low oil prices could drive as a factor to control inflation, with the prices of other commodities falling. This will ideally give the Central Bank of the oil importing country an inch over policy accommodations.

India, the fourth largest oil importing country could save a fortune because of the fall in prices, 51% from August 2014. Analysing the trends of CAD, inflation and policy rates by RBI could well substantiate whether India is able to gain benefit from this short time fall.

1.       Current Account Deficit – As an oil importing country, the fall in oil prices gives us an opportunity to reduce the Current Account deficit. Evidently, the deficit has narrowed to 6200 USD Million in the second quarter of 2015 from 8200 USD Million earlier this year. The major reason for this fall in deficit could be directly proportionate to the fall in oil prices. In context, a 1$ fall in oil prices from January 2015 to July 2015, decreased the Government deficit by 24% in 7 months.

2.       Inflation – The slump in oil prices has been able to reduce CPI inflation rate for India. Fuel which has over 7% weightage in the CPI has been able to contribute to lower the CPI inflation. The CPI inflation fell to a record low of 3.66 % in August 2015, which is much lower than the forecasts. Inflation rate is a major criteria for the RBI to set the interest rates. A steady inflation for a medium term will provide room for policy accommodations by RBI to assist the borrowers and spur the economic growth.

3.      Policy rate cuts – Taking into account the continuous fall in the oil prices which is leading to the fall in inflation and CAD, RBI has been able to reduce the policy rates being able to pass on the benefits to the investors. From January of this year, RBI has cut repo rate by 125 bps. In the Monthly review in September, RBI lowered the interest rate by 50 bps which was more than expected. The current interest rate of 6.75% has made it possible for a few banks to pass on the benefits to the consumer by reducing the lending rates.

4.       Oil refineries – The fall in oil prices gives India an opportunity to store oil for the future use. India has nearly finished construction of the first phase of Strategic Petroleum Reserves (SPR) to store crude oil in Vishakapatnam, Mangalore and Padur. The three crude reserves can have the storage up to 5.33 million which would last for 13 days, however the International Energy Agency recommends 90 days of storage facility. Keeping in mind the current phase of low oil prices, this is the opportune time for India to proceed with the strategic oil reserve (Phase 2 is being planned at Bikaner in Rajasthan, Rajkot in Gujarat, Chandikhol in Odisha). This will help India to battle the supply shocks of high price shocks in the future.

To summarize, India import 80% of the total oil it consumes and it is predicted by the IEA that by 2020 India would be the largest importer of oil. This fall in oil prices could benefit India to reduce the burden on inflation and the import bill. Both the Central Bank and the Government are looking out for this continuous fall in oil prices and trying to pass on the benefit to the public. The oil exporting countries on the other hand are encountering losses due to the steady fall in oil prices, in fact any further fall in oil prices leaves no incentive for the oil exporting companies to go ahead with their production. The oil price could be easily determined by simple market forces, but the world economies carry a market sentiment to mark their status which has made the price determination a complicated process.

* Author is Research Intern at CPPR. Views are personal.