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Table of Contents Polity & Governance ...... 1 1. Death of Baby Sherin: Adoption process, who’s eligible, what safeguards are in place for the child (Relevant for GS Prelims and Mains Paper II) ...... 1 2. Regional connectivity scheme Phase II: Massive ramp-up in air links to North East, J-K (Relevant for GS Prelims and GS Mains Paper II) ...... 2 3. Triple talaq: Govt plans to make practice a punishable offence, likely to table Bill in winter session (Relevant for GS Mains Paper II) ...... 4 4. NK Singh appointed chairman of 15th Finance Commission (Relevant for GS Prelims, Mains Paper II) ...... 5 5. All you need to know on Supreme Court ruling eased bail in money laundering charge (Relevant for GS Prelims, Mains Paper II) ...... 6

International Organizations and Relations ...... 9 1. and interconnectivity explained (Relevant for GS Prelims, GS Mains Paper II)...... 9 2. Greater Nagalim claims: As NSCN(IM) deal nears fruition, why three Northeastern states are agitated (Relevant for GS Prelims, GS mains Paper II) ...... 11 3. Shaktikanta Das appointed as India s G 20 Sherpa (Relevant for GS Prelims, Mains Paper II) ...... 12

Economics ...... 14 1. Why Paradise Papers matter: they lift the veil for regulators to peek in (Relevant for GS Prelims and Mains Paper III) ...... 14

Environment ...... 19 1. Delhi air pollution: A (crop) burning issue, and the way out (Relevant for GS Prelims, GS Mains Paper III) ...... 19 2. Punjab: Smog delays wheat sowing, but farmers reluctant to blame straw burning (Relevant for GS Prelims and GS Mains Paper III) ...... 22 3. How a dust storm from 3,000 km away smothered Delhi this month (Relevant for GS Prelims, GS Mains Paper I) ...... 22 4. BS-VI emission norms for vehicles: So near and yet so far, here is why (Relevant for GS Prelims, GS Mains Paper III) ...... 24

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Polity and Governance

1. Death of Baby Sherin: Adoption process, who’s eligible, what safeguards are in place for the child (Relevant for GS Prelims and Mains Paper II)

About Sherin Mathews After the body of three-year-old Sherin Mathews was found in a culvert in suburban Dallas in Texas the child s adoptive father said she had choked on milk that he had tried to physically assist her in drinking. — The child was adopted two years ago from Mother Teresa Anath Seva Sansthan orphanage by Wesley and Sini Mathews, an Indian-American couple living in the US. The baby was called Saraswati; they named her Sherin.

Who can adopt an Indian child? According to adoption guidelines notified in January this year, prospective adoptive parents have to be physically, mentally and emotionally stable, financially capable and should not have a life-threatening medical condition. Singles are eligible, but a single male cannot adopt a girl child. A couple must be married at least two years and their cumulative age at the time of adoption cannot exceed 110 years (55 in case of a single parent). The minimum age difference between the child and either adoptive parent should not be less than 25 years. Preference shall be given to place the child in adoption with Indian citizens and with due regard to the principle of placement of the child in his own socio-cultural environment, as far as possible, say the Fundamental Principles of Adoption.

What formalities must prospective parents’ resident outside India fulfil? All prospective parents irrespective of nationality have to register with the Central Adoption Resource Authority (CARA). After registration, children are assigned by turn, and foreign couples are treated at par with Indian ones. Any Non-Resident Indian, Overseas Citizen of India or foreign prospective adoptive parents, living in a country which is a signatory to The Hague Adoption Convention and wishing to adopt an Indian child, can approach the authorised foreign adoption agency or the central authority for preparation of their home study report, and for registration in the Child Adoption Resource Information and Guidance System. Alternatively, they can approach the government department or Indian diplomatic mission concerned in that country.

Shirin Mathews The home study report, which looks at the couple s family, circumstances, etc., is prepared by the adoption agency. It remains valid for two years and is the basis of any adoption attempts that the couple make during that period. Parents are given a chance to adopt on a first registered, first served basis. They are shown photographs, child study reports and

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2 medical examination reports of up to six children in their preferred category. The process of matching must be completed in 15 days.

When is a child eligible to be adopted? A child has to be declared legally free to be adopted before being shown to a couple for adoption. When a missing child is found, the District Child Protection Unit has to advertise the particulars and photograph in a state-level newspaper with wide circulation within 72 hours of receiving the child. Local police have to submit a report about the child s parents or any living family. The Child Welfare Committee declares the child legally free for adoption as per laid down procedures.

What legal process has to be followed? The adoption petition is filed in court by the adoption agency. Adoption proceedings have to be completed within two hearings and the petition has to be disposed of within two months of its filing. The certified copy of the order has to be obtained by the agency within 10 days. It must also obtain the birth certificate of the child with the names of the adoptive parents.

How many children are adopted in India every year? Figures available with CARA show that between 2010 and 2017, adoptions have gone down drastically in the case of in-country adoptions, and by a smaller factor in the case of inter- country adoptions. In 2010, 5,693 children were adopted within India and 628 outside the country. In 2016-17 (until March 31, 2017) these figures were 3,210 and 578 respectively. The fall is because norms have been tightened to protect the children. Despite the safeguards though, not all adoptive children stay safe, as Sherin s death shows.

(Adapted from The Indian Express)

2. Regional connectivity scheme Phase II: Massive ramp-up in air links to North East, J-K (Relevant for GS Prelims and GS Mains Paper II)

IInd Phase of Regional Connectivity Moving to step up air connectivity to remote and strategic locations in the North-East and Jammu & Kashmir, the government has identified 24 airports and helipads, including nine in Arunachal Pradesh, which borders China, for the second phase of the Regional Connectivity Scheme (RCS).

24 Airports & Helipads under the scheme Of the 24 airports and helipads identified by the Ministry of Civil Aviation, nine are in Arunachal Pradesh, five each in Assam and Manipur, two in Jammu & Kashmir and one each in Meghalaya, Tripura and Sikkim.

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A total of 88 unserved and underserved airports and helipads were involved in the initial round of RCS second phase.

Aim of IInd Phase It aims to provide air connectivity to the hinterland to provide an impetus to the economic growth of regional centres, including unconnected towns and cities, the government decided to keep the focus on priority areas including the North-East, Jammu & Kashmir and other hilly regions of the country.

About Ist Phase In the list of routes awarded in the first phase of the scheme, announced in March, only six airports in the North-East Shillong, Dimapur, Imphal, Silchar, Aizawl and Agartala were connected. The first round did not involve routes to Jammu & Kashmir. — —

Airports under various authorities Several airports identified under the RCS are currently being used by the Indian Air Force. These include Daporijo, Yinghong, Ziro, Pasighat, Along, Tuting and Walong in Arunachal Pradesh, and Kishtwar and Kargil in Jammu & Kashmir. The aerodromes at Tezpur, Jorhat and Lilabari in Assam are also operated by the IAF but will have separate civilian enclaves under the Airports Authority of India (AAI). The other airports are under the aegis of either the AAI, or respective state governments.

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Aim The infrastructure expansion being undertaken at these strategic locations is primarily being done with the objective of improving connectivity. He played down the defence angle to the air connectivity ramp-up.

(Adapted from The Indian Express)

3. Triple talaq: Govt plans to make practice a punishable offence, likely to table Bill in winter session (Relevant for GS Mains Paper II)

Plan of government Three months after the Supreme Court set aside the centuries-old practice of instant triple talaq or talaq-e-biddat in which Muslim men divorce their wives by uttering talaq three times in quick succession, the government has taken the first step to consider a legislation that will make triple talaq a criminal offence. A Bill to this effect is likely to be tabled in the winter session of Parliament.

Judgement of Supreme Court On August 22, in a landmark 3-2 verdict, three of five judges on a Constitution Bench Justices Rohinton F Nariman, Uday U Lalit and Kurian Joseph called the practice un- Islamic and arbitrary and disagreed with the view that triple talaq was an integral part —of religious practice. —

Need for law to punish triple talaq A source in the government said: There have been reports of a number of divorces by way of talaq-e-biddat happening even after the Supreme Court verdict. This could be because of lack of knowledge among Muslim husbands of the the apex court decision.

It could also be because of lack of deterrent punishment for the act of talaq-e-biddat. In spite of advisories to members of the community against this archaic practice, there seems to be no decline in the practice of divorce via talaq-e-biddat.

The government suspects there may be many such unreported instances of instant triple talaq elsewhere in the country.

Once a law is in place, the Muslim clergy will have no role in cases of talaq-e-biddat and women can directly approach police for redressal. As of now, police are helpless because no action can be taken against the husband in the absence of punitive provisions in law.

(Adapted from The Indian Express)

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4. NK Singh appointed chairman of 15th Finance Commission (Relevant for GS Prelims, Mains Paper II)

N.K Singh-Chairman of 15th Finance Commission: The government announced that former revenue secretary NK Singh will be the chairman of the 15th Finance Commission (FC) that will recommend distribution of taxes between the Centre and the states.

Other Members: Shaktikanta Das (Former Economic Affairs Secretary) Ashok Lahiri (Former Chief Economic Adviser) Ramesh Chand (Niti Aayog member) Anoop Singh (Georgetown University Adjunct Professor)

What is Finance Commission? Finance Commission is a body set up under Article 280(1) of the Constitution. Its primary job is to recommend measures and methods on how revenues need to be distributed between the Centre and states.

The FC is formed every five years to recommend principles governing the allocation of tax revenue between the Centre, states and local bodies.

Role of Finance Commission: The Commission will work on the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under Article 275 of the Constitution.

The Commission will also suggest measures to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities.

Additional issues that are likely to be taken up by the Commission: The panel has been asked to take into account the impact of the GST, including payment of compensation for possible loss of revenues for 5 years, and abolition of a number of cesses, earmarking thereof for compensation and other structural reforms programme, on the finances of Centre and States.

The government has further tasked the Commission to suggest a fiscal consolidation roadmap for the Centre and the states.

The Commission may consider proposing measurable performance-based incentives for States, at the appropriate level of government in areas in following areas including expansion and deepening of tax net under GST, progress in moving towards replacement

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6 rate of population growth, increase in capital expenditure, eliminating losses of power sector, promoting digital transactions, ease of doing business, among others.

Constitution of 15th Finance Commission: The Cabinet Committee on Economic Affairs had last week set up the 15th Finance Commission and its terms of reference. Given that the commission will take around two years to complete the exercise, the government has decided to set up the Commission. The recommendations of the 15th FC will have to come into effect from April 1, 2020.

Timeline/Duration: The recommendations of the previous 14th Finance Commission, chaired by former Reserve Bank of India (RBI) Governor Y V Reddy, are valid from 2015 to 2020. The recommendations of the 15th Finance Commission will be implemented for the period starting 1 April 2020 to 31 March 2025.

Recommendations of 14th Finance Commission: The 14th FC had suggested sharp 10 percentage points rise in tax devolution to states to 42 per cent of the divisible pool of the tax revenue between FY16 and FY20, compared with the previous five-year period. This recommendation was accepted by the government.

(Adapted from The Indian Express)

5. All you need to know on Supreme Court ruling eased bail in money laundering charge (Relevant for GS Prelims, Mains Paper II)

SC relaxed the provision of PMLA, 2002 Act in favor of the accused: The Supreme Court struck down a stringent provision of the Prevention of Money Laundering Act (PMLA), 2002 that denied bail to an accused unless the court was convinced that he was not guilty.

The apex court also ordered a fresh trial in all cases where bail under such provisions had been denied to the accused.

Implications: The ruling could have widespread ramifications for those accused under the Act and for cases under investigation by the Enforcement Directorate (ED), the agency responsible for probing money laundering offences. —

Ruling opposed by the Attorney General: The ruling, opposed by Attorney General K.K. Venugopal in court, is also being seen by the government as a setback in the fight against black money.

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How PMLA, 2002 came in existence? In many ways, the PMLA was a result of the opening of the Indian economy in the early 1990s. As the economy opened to foreign investment and forex reserves began to rise, the government felt a need for an easing of forex regulations in the country.

A Bill was thus brought to remove the draconian provisions of the Foreign Exchange Regulation Act (FERA), which made even spending freely abroad difficult for an Indian. Thus, the Foreign Exchange Management Act (FEMA) was born in 2002. The most important change was that a forex violation was turned into a civil offence from a criminal one, allowing for compounding of the offence by way of a fine. This did not require the arrest of an offender.

But, as FEMA was being drafted, agencies enforcing forex regulations pressed for a new law, FEMA turning the anti-money laundering apparatus in the country almost toothless. This was also when internationally, there was a thrust on choking terror financing and the free movement of illicit money across borders.

The Financial Action Task Force (FATF) was created in 1989 to coordinate anti-money laundering efforts across the world as a member, India was under pressure to do its bit. The PMLA was also created as a response to the political declaration adopted by the special session of the United Nations General— Assembly (UNGA) held on June 8 and 10, 1998, calling on member states to adopt anti-money laundering legislations.

But, since its origin, the Act has been a matter of debate because of its provisions at times, it has also been called draconian. — The Prevention of Money Laundering Act was finally passed in 2002. It, however, came into force only on July 1, 2005. The Act was further amended in 2009 and 2013, increasing its ambit.

Other Acts/Enactments endorsing tough course of Bail: The tough bail condition now applied to offences under the Wildlife (Protection) Act, the Immoral Traffic (Prevention) Act, the Prevention of Corruption Act, 1988, the Antiquities and Arts Treasures Act, the Transplantation of Human Organs Act 1994, the Passports Act, the, Information Technology Act and other laws.

Why there was a need of relaxation in it? Those accused under the PMLA rarely got bail before an incarceration that could last anywhere between two to three years. Given that money laundering offences attract between three to seven years of punishment in jail, this was considered practically like serving the sentence. Almost no one got bail until a charge sheet in the case was filed.

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Of the over 120 persons accused by the ED and arrested under the PMLA since 2005, no more than two to three people have secured bail in a matter of months.

Notably, the ED has had painfully slow progress in its cases and has, till date, been able to secure conviction in only two of the over 2,300 cases it has registered.

Supreme Court view behind the ruling: However, the Supreme Court has now said that the Section stood in violation of Article 21 (the right to life, liberty and security of a person) and Article 14 (the right to equality). Yet, the PMLA in totality is a very stringent Act.

Apart from bail, the Act has very tough provisions on the attachment of property, the recording of statements and arrest and prosecution.

Notable facts about PMLA, 2002: The PMLA is among very few Acts in the country wherein a statement recorded by an authorised agency officer is admissible as evidence in court. Such powers are not available to the police under the Criminal Procedure Code (CrPC).

The Director, ED, can pass orders to provisionally attach a property belonging to an accused if she/he is convinced that this has been purchased with the proceeds of a crime under a scheduled offence.

The PMLA also puts the burden of proof on the accused as it presumes intent. Response from the ED with respect to this ruling:

Interestingly though, despite the SC s decision, ED sources say the order would not directly impact on its cases as these are largely based on documentary evidence where financial trails have been established. As far as bail is concerned, the agency will invoke existing provisions.

(Adapted from The Indian Express)

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International Organisations & Relations

1. India and Bangladesh interconnectivity explained (Relevant for GS Prelims, GS Mains Paper II)

Prime Ministers Narendra Modi and , flagged off the - Bandhan Express, to follow in the tracks of the erstwhile Barisal Express, which was stopped during the 1965 war with Pakistan. The weekly train service will cross the international border at Petrapol outside Bongaon in North 24-Parganas district and will be the second train to Bangladesh after the Kolkata-Dhaka .

The two countries, and especially India s Northeast, stand to gain enormously from closer road and rail links. Efforts have, however, progressed slowly.

Bus Service 1. Agartala-Dhaka-Kolkata, 910 km Service on the 490 km Agartala-Dhaka route began in September 2003, and ran irregularly until January 2015, when it was stopped for security reasons. Service was restarted in May 2015 on an extended Agartala-Dhaka-Kolkata route (910 km). But this service, too, has become irregular.

2. -Shillong-Dhaka, 450 km Formally inaugurated in December 2015, but service did not continue.

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Train Service 1. Kolkata-Dhaka Maitree Express In 2008, rail links disrupted by hostility with erstwhile East Pakistan were reestablished, the 375-km route crossing the border at Gede on the Indian side and Darshana on the Bangladesh side.

The Maitree Express runs six days a week, and was, until the November 9 inauguration of the Bandhan Express, the only rail link with Bangladesh.

2. Agartala-Dhaka service A 15-km line between Agartala and Akhaura being built by the is set for completion by the end of 2018. Agartala has recently got a direct train to Sealdah (Kolkata) via Badarpur, Haflong, Lumding, Guwahati and New Jalpaiguri, a 37-hour journey that an Agartala-Dhaka-Kolkata train can cover in less than a third of this time.

3. Siliguri-Parbatipur link A line links Siliguri in North Bengal to Parbatipur in northern Bangladesh, by which India sent a 42-wagon consignment of high speed diesel manufactured by Numaligarh Refinery in Assam in March 2017. But there is no regular goods train movement on this route, and passenger services are unlikely soon, given trans-border crimes and infiltration in the North Bengal sector.

Boat Service Kolkata- waterway through Dhaka and Guwahati, started in 1844 by the East India Company and shut after the 1965 war, was recently reopened. Cargo vessels have been occasionally plying through Bangladesh under a Protocol on Inland Water Transit and Trade. Heavy machinery and equipment for the Numaligarh refinery and Lower Subansiri hydroelectric project in Arunachal Pradesh have been transported by this route.

In 2011, heavy over-dimensional consignments of turbines and other machinery for the Palatana power project in Tripura were shipped through Ashuganj port in Bangladesh. When the Lumding-Badarpur railway was shut for gauge conversion last year, India moved foodgrains to Tripura by waterways through Bangladesh, saving on both time and transportation costs.

Road Transport Kolkata-Dhaka-Northeast seamless cargo In November 2015, seamless road cargo transport between Kolkata and Agartala through Bangladesh was tried out successfully under the Bangladesh, Bhutan, India, Nepal (BBIN)

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Motor Vehicles Agreement (MVA) for Regulation of Passenger, Personnel and Cargo Vehicular Traffic, signed by these countries in June.

Regular services are yet to start. Northeast, the biggest beneficiary The creation of East Pakistan and subsequently, Bangladesh significantly increased the distance between the Northeast and the Indian mainland. — — Earlier and Now Until 1947, a train to Guwahati from Kolkata took hardly 12 hours. Today, despite increased speeds, the journey takes at least 18 hours by the fastest train, while a normal train such as the Kamrup Express takes almost 24 hours through Siliguri or New Jalpaiguri. — — Before Partition, people travelled from Guwahati to Kolkata via Lalmonirhat, in the Bangladesh district close to where the Brahmaputra crosses the border. Trains between Assam and Kolkata through East Pakistan stopped in 1947; trains between and East Pakistan stopped after the 1965 war.

(Adapted from The Indian Express)

2. Greater Nagalim claims: As NSCN(IM) deal nears fruition, why three Northeastern states are agitated (Relevant for GS Prelims, GS mains Paper II)

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The map of Greater Nagalim on the NSCN(IM) website comprising all Naga-inhabited areas shows a 1,20,000 sq km sprawl across the Northeast and Myanmar. It covers a sizeable portion of 1. Assam s Tinsukia, Charaideo, Sivasagar, Jorhat, Golaghat, Karbi Anglong and Dima Hasao districts; 2. all of Longding, Tirap, Changlang, Lohit and Namsai districts in Arunachal; and 3. large parts of Manipur s Ukhrul, Senapati, Chandel and Tamenglong districts.

The area of Nagaland state is only 16,527 sq km, a fraction of the NSCN(IM) s Greater Nagalim. NSCN(IM) general secretary Thuingaleng Muivah said a few months ago that the historic Framework Agreement signed with the government of India in August 2015 recognises the legitimate right of the Nagas to integration of all Naga territories. However, central government does not agree to the point that areas of nearby states will be merged into nagali,.

NSCN (IM) is an insurgent organisation negotiating with central government on behalf of nagas.

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(Adapted from The Indian Express)

3. Shaktikanta Das appointed as India s G 20 Sherpa (Relevant for GS Prelims, Mains Paper II)

The government appointed former economic affairs secretary Shaktikanta Das as India s G20 Sherpa till December 31, 2018 for the Development Track of the G20.

Details: There are two tracks in G20 Finance Track and Development Track. Finance Track is managed by the secretary (economic affairs) as India s deputy to G20 and the Development Track is coordinated by the Sherpa.—

What is a Sherpa? A Sherpa is a personal representative of the leader of a member country at international summits like G8 and G20. The Sherpa engages in planning, negotiation and implementation tasks. They coordinate the agenda, seek consensus at the highest political levels, and participate in a series of pre-Summit consultations to help negotiate their leaders positions. NITI Aayog s former vice-chairman Arvind Panagariya was India s last Sherpa at the G20 Summit. ENS

(Adapted from The Indian Express)

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Economics

1. Why Paradise Papers matter: they lift the veil for regulators to peek in (Relevant for GS Prelims and Mains Paper III)

What are the Paradise Papers? A trove of 13.4 million corporate records, primarily from Bermuda firm Appleby, as well as from Singapore-based Asiaciti Trust and corporate registries maintained by governments in 19 secrecy jurisdictions, often referred to as tax paradises.

The leaks which constitute the most detailed revelations ever of such records were obtained by the German newspaper Süddeutsche Zeitung and shared with the International Consortium— of Investigative Journalists (ICIJ). —

How are Paradise Papers different from Offshore Leaks (2013), Swiss Leaks (2015) and Panama Papers (2016)?

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Like the three major global financial leaks in the Paradise Papers also reveal tracks of veiled offshore financial activities. Like Mossack Fonseca (of Panama Papers, 2016), Appleby helps set up companies and bank accounts overseas, provides nominee office- bearers, and facilitates bank loans or transfer of shares, in multiple secrecy jurisdictions.

But unlike in the previous leaks, the latest revelations are more about mega corporate than individual players and how they took advantage of and, in many cases, misused offshore jurisdictions.

What Are Paradise Papers? What do the Paradise Papers show? They reveal offshore footprints of some of India s major corporate players as well as of a few high-value individuals the astounding scale of incorporating shell overseas companies to various ends. Internal communications show how a majority of these companies with offshore residency— was wholly controlled from India.

Appleby itself red-flagged round tripping on occasion by questioning if offshore funds meant for investing in India were sourced from India. There are instances of the assets of Indian companies being used to guarantee loans raised by offshore companies without disclosing it to Indian regulators. Changing ownership of offshore companies to actually change the ownership of shares held by them in Indian companies without paying taxes in India turns out to be another common malpractice.

Is it illegal to set up offshore companies? Not necessarily. India has double-taxation avoidance agreements (DTAAs) with several countries with lower tax rates than its own, and companies overseas corporate bodies (OCBs) incorporated in such countries can use their tax residency certificates (TRC) to enjoy the tax benefits available legally. — — So, what is the excitement about? The revelations help regulators overcome the obstacle of secrecy. After the Panama Papers, for example, regulators everywhere were able to investigate several instances of financial malpractices hidden in the records of Mossack Fonseca. The sheer size of the Paradise Papers trove, and the corporate-centric leads they provide, marks a big step forward.

How tax evasion is happening? Normally, a company is entitled to arrange its financial affairs in whichever way it wishes to reduce its tax liability. Merely the fact that the motive for a particular transaction is to avoid tax does not invalidate the transaction unless the law of the land specifically says so. There is a corporate army engaged in imaginative bookkeeping to discover and exploit legal loopholes and evade tax under the corporate veil.

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According to the Westminster principle, if a document or transaction is genuine, courts or the regulator cannot go behind it to look for any supposed underlying substance.

How paradise papers are a treasure? Only if a fraud is established can a court or regulator pierce the corporate structure, since fraud unravels everything even a law, if it is a stumbling block because no legislature intends to guard fraud. In such cases, the principle of lifting the corporate veil or the doctrine of (economic) substance— over (legal) form can be applied.—

The Paradise Papers are a treasure trove of such leads and evidence.

For example, in its bouquet of services, Appleby provides proxy directors for companies set up in tax havens.

These directors, either persons or shell companies, obviously have no real authority to decide the fate of the millions of dollars they move in the directions of their clients holding companies or beneficiaries, or their representatives. — Many offshore companies, the Papers reveal, are sham entities engaged in tax evasion/avoidance, manipulation of the market, money laundering, round tripping (taking untaxed money out of the country through inflated invoices and then bringing it back as an investment), parking black money, bribing, etc. Such insight into corporate ingenuity allows regulators to step in, besides strengthening the case for better laws and global tax reforms.

What constitutes a fraud, and what are the remedies in Indian law? The obvious malpractices, as evidenced by the Paradise Papers, are tax fraud, money laundering, round tripping, parking black money, bribing, etc.

Also, treaty shopping, by which a resident of a third country can take advantage of the provisions of DTAA.

If an entity without any commercial/business substance, that is, a shell company that exists only on paper, is placed in a holding structure only to avoid tax, the test of fiscal nullity substance over form is applied.

If the decision-making powers of an offshore subsidiary s directors are fully subordinate to the holding company (or beneficiary) such that they are mere puppets, the offshore subsidiary, irrespective of its legal residency, may for all practical purposes be considered a resident of the same jurisdiction to which its holding company (or beneficiary) belongs.

Section 6 (3) of Income Tax Act, 1961

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With effect from April 2017, Section 6(3) of the Income Tax Act 1961 provides that if the place of effective management of a company is in India, the company will be considered resident in India.

The clause explains place of effective management as the place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are in substance made .

What about companies set up in countries that have a DTAA with India? A DTAA does not stop the I-T Department from denying tax treaty benefits, if it is established that a company has been inserted as the owner of the shares in India, at the time of disposal of the shares to a third party, solely with a view to avoid tax. I-T, in such a situation, is entitled to look at the entire transaction as a whole and may take into consideration the real transaction between the parties.

Part of Paradise Papers The corporate registries of 19 secrecy jurisdictions are part of the Paradise Papers. These are Antigua & Barbuda, Aruba, Bahamas, Barbados, Bermuda, Cayman Islands, Cook

Islands, Dominica, Grenada, Labuan, Lebanon, Malta, Marshall Islands, St Kitts & Nevis, St Lucia, St Vincent, Samoa, Trinidad & Tobago and Vanuatu. Of these, India has DTAA with only Malta and Trinidad & Tobago.

Why is it important to have better tax laws and global tax reforms? Tax avoidance is a global problem. Recently, global corporations such as Google, Amazon and Starbucks have faced strong regulatory intervention and public backlash for allegedly manipulating legal loopholes to avoid paying tax.

In the wake of the Panama Papers, then US President Barack Obama had called for international tax reform to curb the huge problem of global tax avoidance and make sure everyone pays their fair share . What has been the progress so far? Laws specifying general anti-avoidance rule (GAAR) are in force in countries like the UK, Canada, Australia, New Zealand, South Africa and Hong Kong. There is FATCA in the US. In Europe, anti-tax avoidance measures in the pipeline include a blacklist of offshore tax havens and a common consolidated corporate tax base (CCCTB) for the EU, meant to block transfer of profit to low-tax jurisdictions.

Lack of clarity and absence of appropriate provisions in the statute and/or the treaty regarding the circumstances in which judicial anti-avoidance rules would apply, has led to litigation in India.

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About GAAR India s Direct Taxes Code Bill, 2010 envisages creation of an economically efficient, effective direct tax system, proposing GAAR to prevent tax avoidance.

Introduced by the then finance minister Pranab Mukherjee in 2012, GAAR came into effect from April 1, 2017. India introduced this retrospective clarification to the I-T Act to ensure that cross-border transactions of assets would be taxable if they derive, directly or indirectly, their value substantially from assets located in India.

(Adapted from The Indian Express)

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Environment

1. Delhi air pollution: A (crop) burning issue, and the way out (Relevant for GS Prelims, GS Mains Paper III)

The current smog and poor air quality in the National Capital Region has been blamed in part on stubble burning by farmers, especially in neighbouring Punjab and Haryana. What is the genesis of the problem? What are its potential solutions?

How widespread is crop stubble burning? It is mainly confined to Punjab, Haryana and parts of western Uttar Pradesh and Uttarakhand, where farmers grow paddy and wheat, and harvest these using combine harvesters. This belt produces an estimated 34 million tonnes (mt) of paddy straw every season, of which some 23 mt is from combine-harvested fields and burned within less than a month s span between mid-October and around November 10.

But why does this happen only with combine harvesting? In manual harvesting using sickles, the crop is cut close to the ground. The resultant paddy straw after threshing i.e. separation of grain, can be used as fodder or packaging material. As against this, combines machines that harvest, thresh and clean the separated grain at one go operate at 50-60 cm above the ground. Assuming the average paddy plant is one metre (100 cm) tall, it would— generate 40-50 cm of loose straw and 50-60 cm of standing stubble.— Disposal of this residue isn t easy. Normal paddy straw, as it is, fetches very low rates, as it cannot be finely cut or made into chaff (bhusa) like wheat straw. Leftover straw is practically useless. For farmers in North India who have the option of feeding their animals wheat bhusa, sugarcane tops, jowar, bajra and other superior fodder it is only worthy of burning. — — Aren t combines used to harvest paddy in other states as well such as Andhra Pradesh, Tamil Nadu and Karnataka? Why don t we hear of farmers there resorting to stubble burning? —

They, to begin with, don t have as many alternatives to paddy straw as their Northwestern Indian counterparts. But a more important reason has to do with wheat. In the Punjab- Haryana-Western UP belt, this is usually a 140-150-day crop maturing towards mid-April when maximum temperatures are just about to cross 35 degrees Celsius. For achieving maximum yields, which requires growing for the full duration, farmers have to plant before November 15. That, however, isn t possible without harvesting of paddy and field preparation happening well in time for the sowing of wheat.

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Normally, paddy itself is not ready for harvesting before October 15. In the case of long- duration varieties like Pusa-44 which takes 160 days to mature from the time of sowing seeds in the nursery this could extend for even longer. Narrowing the window further for farmers in Punjab is a water-saving— law the Punjab Preservation of Subsoil Water Act, 2009 which bars— nursery sowing and transplanting of paddy before May 15 and June 15, respectively. Given the small turnaround— window of hardly 20 days between rice harvesting — and the optimal sowing of wheat, the flexibility to clear the field of leftover straw, whether by manual removal or in situ incorporation, is limited. The least-cost and most time-saving option is to simply burn.

Can t there be any technological fixes to this problem, which addresses concerns of environmental pollution from burning and also does not impose costs on the farmer? One way out is to reduce the paddy crop s duration, which, in turn, increases the farmer s time to prepare for the sowing of the next wheat crop. Such breeding for shorter durations is already happening.

According to G S Mangat, head of the department of plant breeding and genetics at Punjab Agricultural University (PAU) in Ludhiana, Pusa-44 covered almost 40% of the state s total non-basmati paddy area five years ago. This year, its share was only 18%, and that of PR- 121, a variety that matures in 140 days, was 28%. PAU has recently released an even shorter-duration (125-day) variety, PR-126. It gives an average 30 quintals of paddy per acre, which is close to the corresponding yields of PR-121 (30.5 quintals) and Pusa-44 (32 quintals).

Breeding for a reduced duration can help extend the planting window for wheat. But it still does not eliminate the stubble problem for the farmer, burning remains the least-cost method for getting useless straw off his field. Alternatives such as residue incorporation, while attractive in theory, entail costs by— way of 2-3 extra tillage operations and use of

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21 chopper-shredder machines for reducing the size of straws. Farmers may well continue setting their fields on fire, even after planting short-duration paddy varieties.

So, is there a cost-less, win-win solution at all? The most viable technology seems to be what is called Turbo Happy Seeder (THS). This is a tractor-mounted machine that basically cuts and lifts the standing stubble, drills the wheat seeds into the bare soil, and deposits the straw over the sown area as a mulch cover. The THS not only dispenses with the need for burning residue, but actually allows wheat to be planted even on fields containing straw.

Moreover, the time savings are huge. Stubble burning causes moisture loss. So, the farmer has to give one irrigation and wait for seven or eight days until the field has the right amount of moisture. After that, he has to undertake ploughing through two rounds of disc harrow, cultivator and planking operations. Only on this finely-prepared seedbed can wheat sowing take place. But with THS, you can harvest paddy and sow wheat the same day, says Harminder Singh Sidhu, senior research engineer at the Ludhiana-based Borlaug Institute for South Asia, who was involved in the development of the machine while he was with PAU.

The THS, however, had a problem because it couldn t take care of the loose straw harvested by the combine. This residue as opposed to the standing stubble has to be uniformly spread on the field to enable efficient sowing of wheat. For this, PAU has developed a Super-Straw Management System— (S-SMS), which is an attachment that— can be fitted on any combine harvester. The S-SMS ensures that the loose straw thrown by the combine is also cut and spread evenly on the field. The concurrent use of THS and S-SMS technology appears to be the best bet for the moment.

But these surely wouldn’t be coming for free, right? A THS costs roughly Rs 1.3 lakh, while the S-SMS adds another Rs 1.2 lakh to the Rs 18 lakh-plus price for a combine. But these machines needn t be owned by farmers. They can be used on a custom-hiring basis, just as combines are today. For the farmer, there is real gain from both time and cost savings on account of not having to do any field preparation for planting wheat. There could be further gains if the central and state governments were to subsidise the purchase of these machines by combine operators/service providers.

The Happy Seeder Planting Wheat on A Field The good news is that there is some progress already on the ground. Kahan Singh Pannu, chairman of the Punjab Pollution Control Board, claims that the state has this year reported only 39,686 incidents of crop burning so far, compared with 67,969 for the same period in 2016. Also, sales of THS machines have crossed 1,200 units in the current season, which is indicative of their increasing acceptance among farmers.

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(Adapted from The Indian Express)

2. Punjab: Smog delays wheat sowing, but farmers reluctant to blame straw burning (Relevant for GS Prelims and GS Mains Paper III)

According to the agriculture department, the best time to sow wheat in Punjab is from October-end to November 15.

Period for Sowing the Wheat Crop The best period for sowing the wheat crop is about to end in Punjab. But Farmers have not been able to sow a single acre yet. Now, they are worried that late sowing will affect the yield adversely, but they have no option but to wait for some more days. The reason: there s too much moisture in the fields, and the dense smog from crop stubble burning have prevented the sun from breaking through. Effects of late sowing of wheat Sowing after November 15 means less yield. Late sowing could decrease yield by two quintals. Timely sowing gives us 22 to 24 quintal wheats per acre. According to the Agriculture department the best wheat sowing time in the state is from October-end till November 15 (after this period yield gets affected). Officials confirmed that wheat sowing was set back because of the dense smog due to stubble burning by farmers.

Still not ready to Accept the mistake Most farmers and Kisan unions are still reluctant to link stubble burning to the smog that has delayed wheat sowing.

Farmers Unions, meanwhile, continue to assert that the smog was not created by the paddy stubble burning, and that farmers were being unfairly targeted. According to them, there could be other reasons such as industrial pollution.

Meanwhile, those who said they stopped burning paddy stubble said they were suffering for no fault of theirs.

Everyone is now waiting eagerly for sunshine. Now, it has rained and hence it will no doubt give some relief from smoggy weather, but wheat sowing will be delayed further as fields will be wet. A number of farmers are still to get rid of their paddy stubble, for them the sowing will be delayed by nearly a month.

(Adapted from The Indian Express)

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3. How a dust storm from 3,000 km away smothered Delhi this month (Relevant for GS Prelims, GS Mains Paper I)

Where did the storm began? It began as a giant swirl over Iraq, Kuwait and Saudi Arabia in the last week of October, grounding aircraft and halting the war against the IS and was then propelled eastward by a set of peculiar atmospheric conditions, covering all towns and cities in its path by a choking, blinding haze. —

Reasons for smog in Delhi: Two Extreme events On November 16, the System of Air Quality and Weather Forecasting and Research (SAFAR) under the Ministry of Earth Sciences published a Scientific Assessment of Delhi Winter Air Quality Crisis for the period November 6-16, which listed two Extreme events behind the smog in Delhi and its neighbourhood.

Extreme 2 was the stubble burning in Punjab, Haryana and Uttar Pradesh; Extreme 1 , the SAFAR report said, was a large multi-day dust storm that emerged at Iraq, Kuwait and Saudi Arabia in the last week of October 2017 and continued up to November 3-4.

Which extreme event was more harmful? Surprisingly for many, the report blamed this storm much more than the burning of stubble for Delhi s air quality crisis during that period the pollution contribution of Gulf dust storm on peak day (November 8) was around 40% and from stubble burning was 25% . Storms Getting Worse —

While dust storms are normal in Iran, Saudi Arabia, Kuwait and Iraq, there has been an increase in their frequency, especially in Iraq, over the past decade. Scarce rain and advancing desertification are the key reasons, and Iraq s Prime Minister Haider al-Abadi is in discussions with the UN Environment Programme (UNEP) for a regional solution. UNEP had predicted last year that within the next decade, Iraq could witness 300 dust events per year.

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24

(Adapted from The Indian Express)

4. BS-VI emission norms for vehicles: So near and yet so far, here is why (Relevant for GS Prelims, GS Mains Paper III)

Govt now wants super clean fuel in Delhi by April next year. Can automakers supply the cars? What are the practical, financial and technological hurdles to meeting the deadlines on govt s clean fuel roadmap?

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On the face of it, the November 15 decision by the union Petroleum Ministry to advance the introduction of BS-VI grade petrol and diesel in Delhi by two years to April 2018 appears to be a logical step in fighting air pollution.

Delve deeper, and doubts emerge over possible implementation impracticalities.

First, it took as many as seven years for the entire country to shift to BS-IV. The attempt this time is to leapfrog one stage BS-V altogether, and that makes the switch to BS-VI that much more difficult for both the oil companies and automobile makers. This is the second time that the government— has shifted— the goalposts in January 2016, it had decided to skip BS-V and go directly to BS-VI, but only by 2020. — Second, the introduction of higher grade fuel will be beneficial only if it is done in tandem with the rollout of BS-VI compliant vehicles. Using BS-VI fuel in the current BS-IV engines or, conversely, running BS-VI engines on the current-grade fuel, may be ineffective in curbing vehicular pollution, and may damage the engine in the long run.

Third, even if automakers were to bring forward their manufacturing schedules, it doesn t make practical sense for them to build BS-VI compliant vehicles for just one city. Also, carmakers give technical reasons (explained below) for why the first lot of BS-VI vehicles is likely to miss the government s April 1, 2018 deadline. The full migration to manufacturing only BS-VI vehicles nationwide can happen only by April 1, 2020, automakers say.

Sulphur Content The main difference between BS-IV and BS-VI (which is comparable to Euro 6) is in the amount of sulphur in the fuel. BS-VI fuel is estimated to bring around an 80% reduction in sulphur content from 50 parts per million (ppm) to 10 ppm. Also, according to analysts, NOx emissions from diesel cars are expected to come down by nearly 70% and, from cars with petrol engines,— by 25%.

For automakers, the big hurdle in jumping directly from BS-IV to BS-VI norms lies in equipping cars with two key fitments and road-testing them within the time schedule. Implementation of the intermediate BS-V standard was originally scheduled for 2019. While this stage has been bypassed, the BS-VI standard, originally set to come in by 2024, was advanced by four years, in line with India s promises at the 2015 Paris Climate Change Conference, and the broad public sentiment against the air pollution in major Indian cities. Automakers insist that BS-VI norms may not bring perceptible change in air quality but may increase the prices of vehicles by Rs 20,000-Rs 2 lakh, and that it will be a challenge to upgrade technologies to meet the higher norms in the time available.

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About the BS Norms The BS Bharat Stage emission standards are norms instituted by the government to regulate the output of air pollutants from internal combustion engine equipment, including — — Website: www.prepmate.in Telegram Channel: @upscprepmate Prepmate Cengage Books Preview: https://prepmate.in/books/ Youtube channel: PrepMate Edutech For updates on WhatsApp, share your name & city on WhatsApp No. 75972-40000

27 motor vehicles. India has been following European (Euro) emission norms, although with a time lag of five years.

India introduced emission norms first in 1991, and tightened them in 1996, when most vehicle manufacturers had to incorporate technology upgrades like catalytic converters to cut exhaust emissions. Fuel specifications based on environmental considerations were notified first in April 1996 to be implemented by 2000 and incorporated in BIS 2000 standards. Following the landmark Supreme Court order of — April 1999, the Centre notified Bharat Stage-I (BIS 2000) and Bharat Stage-II norms, broadly equivalent to Euro I and Euro II respectively. BS-II was for the National Capital Region and other metros; BS-I for the rest of India.

From April 2005, in line with the Auto Fuel Policy of 2003, BS-III and BS-II fuel quality norms came into existence for 13 major cities, and for the rest of the country respectively. From April 2010, BS-IV and BS-III norms were put in place in 13 major cities and the rest of India respectively.

As per the Policy roadmap, BS-V and BS-VI norms were to be implemented from April 1, 2022, and April 1, 2024, respectively. But in November 2015, the Road Transport Ministry issued a draft notification advancing the implementation of BS-V norms for new four-wheel vehicle models to April 1, 2019, and for existing models to April 1, 2020. The corresponding dates for BS-VI norms were brought forward to April 1, 2021, and April 1, 2022, respectively. Soon afterward, however, Road Transport Minister Nitin Gadkari announced that the government had decided to leapfrog to BS-VI from April 1, 2020, skipping BS-V all together.

Question Marks While the Petroleum Ministry s November 15 announcement asserted that the fuel upgradation was on schedule, questions have been raised about the ability of the oil marketing companies to deliver on the claim. The upgradation to BS-VI is likely to cost well over Rs 40,000 crore this, however, is still a lesser challenge than getting the auto companies to make the leap. Carmakers have said there isn t enough time to carry out design changes that will— include adapting two critical components diesel particulate filter and selective catalytic reduction module to conditions specific to Indian driving, where running speeds are much lower than in Europe or the US. — — Also, rolling out higher grade fuel and vehicles first in the cities has inherent drawbacks, as was evident in the BS-IV implementation. Just outside the peripheries of designated BS-IV cities, BS-III vehicles could be registered; BS-IV vehicles (especially heavy vehicles) were more expensive, and BS-III fuel was cheaper than the BS-IV equivalent. Interstate trucks

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28 and buses, the biggest polluters, were forced to stay on with BS-III engines simply because the fuel outside cities did not conform to BS-IV norms.

Investment Needs The full transition to BS-IV took from 2010 to April 2017, because refiners were unable to produce the superior fuel in required quantities. Broadly, BS-IV petrol and diesel have 50 ppm of sulphur, as compared to 150 ppm for petrol and 350 ppm for diesel under BS-III standards. Oil companies are learnt to have put in Rs 30,000 crore between 2005 and 2010 to upgrade; the auto industry claims to have made a similar investment. Oil firms will have to invest another about Rs 40,000 crore to upgrade to BS-VI; additional investments by automakers will inevitably raise the prices of vehicles.

The auto industry argues that the huge improvements in vehicular technology since 2000 have had little impact in India due to driving, road and ambient conditions. The technology that will be used in future BS-VI vehicles, though, will have considerable impact, they claim. BS-V diesel vehicles were to have engine upgrades, particulate filters, lots of sensors, and electronic control. Petrols were to have catalyst and electronic control upgrades.

Industry estimates of required investment to upgrade from BS-IV to BS-V were to the tune of Rs 50,000 crore. DPFs (diesel particulate filters) have specific problems in the Indian context and would have to be optimised for these conditions. Low driving speeds would make it difficult to achieve temperatures of 600 degrees Celsius required to burn the soot in DPF, and equipment manufacturers would have to work with temperatures of 400 degrees. Usually, diesel is injected to increase temperatures, but excess fuel in the compartment can cause a fire. The integrity of the vehicle too has to be considered this would require validation tests over 6-7 lakh km, which may take up to four years. BS-VI vehicles, too, require DPFs; in addition, they have to be equipped with an— SCR (selective catalytic reduction) module the optimisation and fitment of which, too, could take an estimated three-four year. — At every stage, the technology is increasingly more complex. To attain the specified super low emissions, all reactions have to be precise, and controlled by microprocessors. Since BS-V is to be skipped entirely, both DPF and SCR would need to be fitted together for testing, which, auto firms say, would make it extremely difficult to detect which of the technologies is at fault in case of errors in the system. Ideally, the technologies must be introduced in series, and then synergised. It s no surprise that auto firms are not too enthusiastic about the shift. (Adapted from The Indian Express)

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