GS Analyst
Daily Current Affairs

The European Union (EU) has joined the United States and the United Kingdom in banning imports of Russian diesel and other refined oil products. 

• The price cap on Russian refined fuel.
• The ban on refined fuels — in particular, diesel with its wide industrial and domestic usage — has pushed the market into uncertainty amid historically low diesel stocks in Europe.
• Background:
• The oil products embargo comes two months after a similar ban on Russian crude oil brought in by sea — both announced in June 2022 as part of the EU’s sixth sanctions package against Russia in response to Russia invasion of Ukraine.
• The crude oil embargo and the oil price cap which came into effect on December 5 passed off without any major disruption.

Impact on diesel prices:

• The sanction could lead to major disruptions in diesel-reliant industries such as transportation and agriculture, with fuel price rises further undermining the fight against inflation.
• The perceived disruption is already driving up diesel prices.
• While the situation has improved in recent months due to a mild winter, diesel stocks remained Low.
• An increase in shipping costs as supplies would now need to come from regions further afield, higher production costs in countries such as the

Demand-supply mismatches:

• The ban has left the EU with a void of about 600,000 barrels of diesel and related oil products per day,
• This gap that the EU intends to plug with increased supplies from the Middle East, Asia and the US.
• The large refineries such as the Al-Zour plant in Kuwait and the Jazan refinery in Saudi Arabia has increased its production and dependence over them by EU.
• Additionally, Germany has inked a deal with UAE’s Abu Dhabi National Oil Co that would see the oil firm provide 250,000 tons of diesel a month in 2023.

Impact on India:

• Increase in diesel exports: India’s diesel exports to Europe have soared since the invasion as refiners take advantage of low feedstock costs thanks to steeply discounted Russian crude and high diesel prices.

What would be the impact of the diesel price cap?

• The European Union (EU) and the Group of Seven (G7) industrialized countries, agreed to set a $100 (€91) per barrel price cap on Russian diesel and a $45 per barrel cap on discounted products like fuel oil.
• The price cap is meant to ensure that Russian diesel and other oil products can still be sold to third countries and prevent any massive spike in prices following the EU ban.
• The mechanism would allow European insurance and shipping firms to continue offering their services to shippers carrying Russian oil products to other regions as long as the fuel is purchased at or below an agreed cap level.
• The oil products price cap would have minimal impact on Russian refining crude runs and distillate exports.

Major Oil reserves around the world:

India, France and the United Arab Emirates declared their common intent to formalise a “Trilateral Cooperative initiative” to collaborate on nuclear energy and explore opportunities in the Indian Ocean region.

• Background: The trilateral was first discussed when the three foreign Ministers had met on the sidelines of the UN General Assembly in New York in September 2022.
• All the three countries agreed to work together in the field of solar and nuclear energy, climate change and biodiversity.
• Objective: It will serve as a forum to promote the design and execution of cooperation projects in the fields of energy, with a focus on solar and nuclear energy, as well as in the fight against climate change and the protection of biodiversity, particularly in the Indian Ocean region.
• The countries have also agreed to cooperate in defence preparation and in countering infectious diseases.
• Following the alliance, multilateral organizations such as World Health Organization (WHO), Gavi-the Vaccine Alliance, the Global Fund, and Unitaid will be encouraged.
• The three countries will also attempt to identify tangible cooperation on implementing the “One Health” approach, and support the development of local capacities in biomedical innovation and production within developing countries.

India-UAE relations:

• India and UAE have entered into a Free Trade Agreement (FTA) by signing the CEPA in February, 2022.
• This agreement will boost bilateral trade between the two countries and benefit both the economies.

Significance of UAE:

• UAE is the third largest trading partnerof India after China and USA.
• The UAE has established itself as a major economic hubnot just in the Middle East/West Asia region, but also globally.
• As a part of Gulf Cooperation Council,UAE can help in finalising the FTA between Indian and the GCC.
• India-UAE relations have become a focal point of India's Extended Neighbourhood and Look West policies in the region.This deal will further boost the relation between the two countries.

India-France relations:

• India and France share a dynamic and multifaceted relationship.
• Both countries signed a strategic partnership agreement in 1998.
• Frequent interactions at the highest political levels, comprehensive defence cooperation and dynamic cultural linkages have further contributed to maturing the partnership.
• Convergence of their views on multi-polar world order and their belief in multilateralism for addressing international challenges help them in developing greater political synergy at the global level.
• India and France have been expanding their relationship amid changing regional and global dynamics.
• France has been termed by India as its “Gateway to Europe”.

Significance:

• Defence cooperation is a crucial aspect of India-France strategic partnership. 
• There has been regular exchange of visits at the level of Services Chiefs between India and France. 
• Both countries have regular defence exercises such as Shakti - Army, Varuna - Navy and Garuda -Air Force. 
• India and France signed the Joint Strategic Vision of India-France Cooperation in the Indian Ocean Region.
• France has also been supplier to India’s armoury. This includes India buying 36 Rafale fighters from France.
• India and France are also participants of Project-75 which would help India acquire Scorpene class submarines.

Amid the rejection of four states on new pension system, there are discussions about a new model, which has been proposed by the YSR Jagan Mohan Reddy in Andhra Pradesh named as Guaranteed Pension scheme (GPS).

• Under GPS, employees can get a guaranteed pension of 33% of their last drawn salary if they contribute 10% of their basic salary every month which is matched by a 10% contribution by the state government.
• And if, they can get a guaranteed pension of 40 per cent of their last drawn salary, if they are willing to contribute a higher 14 per cent of their salary every month, which will be matched by 14 per cent government contribution.
• It combines the elements of both the Old Pension System (defined benefit) and the New Pension Scheme (defined contribution). In doing so, it seeks ‘defined contribution’ from employees every month and offers two options of ‘defined benefit’.

How does the Pension system work in India?

• All pension plans in India provide guaranteed maturity benefits. This is the reason why pension plans in India are also known as guaranteed pension plans.
• The maturity benefits are generally the fund value or 101% of the Premium paid, whichever is higher.

What are the issues associated with NPS?

• The NPS is a corpusfrom which you can draw a pension after retirement. Its value is determined by the market prices in which the corpus is invested.
• One of the issues with the NPS is the amount of monthly pension you would draw (for the same contribution during service) with three hypothetical market rates of return is significantly lower for NPS.
• Secondly, it is dependent on the vagaries of the market prices of equity/bonds in which the corpus is invested. To be sure, the markets do not crash often and in the long run, they go up rather than down.
• If there is a crash, the downside has to be absorbed by the retirees.

Pakistan’s former President General Pervez Musharraf visited India at Agra Summit held in 2001 during the Atal Bihari Vajpayee government, was considered one of the most important meetings between Indian and Pakistani leaders in recent history.

• Musharraf travelled to Agra for the summit with Prime Minister Atal Bihari Vajpayee.
• There was some forward movement on the first day.
• At a 90-minute one-on-one session, the two leaders discussed the Kashmir issue, cross-border terrorism, nuclear risk reduction, the release of prisoners of war, and commercial ties.
• Musharraf proposed a “four-point solution” for the Kashmir dispute.
• Recently, it has been reported that, he died in Dubai.
  
  

What was the Four-point formula for Kashmir issue?

• Demilitarisation or phased withdrawal of troops:
  • Millions of troops, on both sides of the Line of Control (LoC), are stationed in Kashmir.
  • According to Musharraf, both India and Pakistan would have scaled back its troops in the region for a lasting peace.
  • Whether this would be gradual, phased withdrawal or not had to be worked out by the two sides.
• There will be no change of borders of Kashmir: However, people of Jammu & Kashmir will be allowed to move freely across the Line of Control (LoC).
  • The LoC is effectively a ceasefire line, which both sides accepted in the Shimla Agreement of 1972.
  • However, neither India nor Pakistan accepts it as the International Border. Both nations claim all of Kashmir.
  • If Musharraf’s plan were to be accepted, India would have to accept Pakistan’s sovereignty over Pakistan Occupied Kashmir (which Pakistan refers to as its province of Azad Kashmir) and in return, Pakistan would accept Indian suzerainty over the part of Jammu and Kashmir on India’s side of the LoC.
  • The ceasefire line would then become the International Border and both sides would give up claims over the other half of Kashmir.
  • However, the people of Jammu and Kashmir would be allowed to move freely to the other half of the region.
• Self-governance without independence:
  • Pakistan has long been an advocate of what it calls ‘Kashmiri self-determination’ but Musharraf was willing to give that up in favour of a greater measure of autonomy.
  • Vajpayee would likely not have too many objections with this clause of the agreement because the Indian Constitution already allows autonomy for J&K under Article 370.
• A joint supervision mechanism in Jammu and Kashmir involving India, Pakistan and Kashmir:
  • Musharraf’s decision to include local Kashmiri leadership in the supervision mechanism would have given him a greater chance at selling a potential Musharraf-Vajpayee accord to the people back home in Pakistan.

India’s response to the idea:

• There aroused certain differences to 4 point formula on part of India.
• India Prime Minister Manmohan Singh, however, excluded any consideration of such proposals by emphasizing that the state of Jammu and Kashmir is an integral part of India and there would be no redrawing of the international boundaries or rearrangement of regions that would blow of communal dimensions.
• The Indian claim over the whole area of Jammu and Kashmir, including Pakistani administered Kashmir, was repeated in March 2006 by the Indian government s official protest over the proposed construction of the Bhasha dam in the territory which comes under the Pakistani controlled part of Kashmir.
• The doctrine of open borders or soft borders was explained by Manmohan Singh as” making LoC a porous border so that there could be free flow of ideas and people between the two parts of Kashmir which will, according to him, one day make LoC irrelevant.”
• Demilitarization is also not agreeable for India because they consider it as their domestic security related issue.
• Apart from differences over demilitarization, major obstacle in making LoC beside the point is that India considers this decision should be the eventual solution of the Kashmir dispute whereas Pakistan considers this as one of the very important confidence-building measure.
• Accepting LoC as ultimate solution to the issue means Pakistan completely gives up its case on Kashmir.

 After South Africa, Indonesia, and Vietnam, India is considered the next candidate for a JET-Partnership. India’s G-20 presidency could potentially be an opportune moment to forge a deal.

• The partnership has taken on particular significance following the insertion of the phrase ‘phase-down’ of coal in the Glasgow Pact.
• However, India must develop a coherent domestic just energy transition (JET) strategy in order to negotiate a financing deal that addresses its unique set of socio-economic challenges.

Energy transitions and developing countries:

• Energy transitions could give rise to intra-generational, intergenerational, and spatial equity concerns.
• Transitions affect near-term fossil-dependent jobs, disrupt forms of future energy access, shrink state’s capacity to spend on welfare programmes, and thus exacerbate existing economic inequities between coal and other regions.
• Existing JET-P deals pay limited attention to intra-generational inequity, such as job losses resulting from a coal phase-down.
• However, among the three JET-P deals signed so far, only South Africa’s deal mentions a ‘just’ component — funding reskilling and alternative employment opportunities in the coal mining regions to be financed as part of the initial $8.5 billion mobilisation.

India and energy transition:

• India’s transition requires significant simultaneous growth in energy demand.
• The Central Electricity Authority projects a near doubling of electricity demand by 2030.
• A country that is likely to multiply its energy demand requires adequate supply from a diverse mix of sources. India cannot afford to put its development on hold while decarbonising.

India’s commitments:

• India has signalled a commitment to clean energy with ambitious targets like 500GW of non-fossil, including 450 GW renewable energy (RE) capacity addition and 43% RE purchase obligation by 2030.
• These targets are supported through complementary policy and legislative mandates (Energy Conservation (Amendment) Act), missions (National Green Hydrogen Mission), fiscal incentives (production-linked incentives) and market mechanisms (upcoming national carbon market).
• These interventions show India’s serious efforts at energy transition, but additional supplementary measures are needed for a coherent JET strategy.