Daily Current Affairs including static notes - 1 JUNE

The Hindu -

No bids for Air India stake sale ( Eco)

  • The government’s effort to privatize Air India came to an abrupt halt as it received zero bids from potential players until Thursday, the last day to submit expression of interest in the national carrier.
  • The government will now revise some of the key terms of its stake sale.
Details:
 The government had aimed at completing the transaction by the end of the calendar year, which it is set to miss. The group of ministers, or the Air India Specific Alternate Mechanism, constituted to prepare a strategy for disinvestment of the national carrier is expected to meet within a couple of weeks to chalk out the future course of action.
This is being done because no response has been received for the Expression of Interest floated for the strategic disinvestment of Air India.
In March, the government made public the broad contours of Air India’s disinvestment and invited bids. It proposed to sell 76% of Air India along with low-cost subsidiary Air India Express and a 50% stake in AISATS, a ground-handling joint venture with Singapore Airport Terminal Services, as a single entity.
The new owner will have to take the debt and current liabilities of 33,392 crore, while the government will park nearly 25,000 crore in a special purpose vehicle.
Disinvestment: 
“Investment refers to the conversion of money or cash into securities, debentures, bonds or any other claims on money. As follows, disinvestment involves the conversion of money claims or securities into money or cash.”
Disinvestment can also be defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary. It is also referred to as ‘divestment’ or ‘divestiture.’
In most contexts, disinvestment typically refers to sale from the government, partly or fully, of a government-owned enterprise. A company or a government organisation will typically disinvest an asset either as a strategic move for the company, or for raising resources to meet general/specific needs.
Disinvestment of Air India: 
The Cabinet decided to go for Air India’s strategic disinvestment, which means the government is willing to shed a substantial portion of its stake and hand over the management of the ailing airline to the private sector. The Cabinet also approved strategic disinvestment in five of Air India’s subsidiaries — its MRO unit Air India Engineering Services (AIESL), ground handling arm Air India Transport Services, Air India Charters which operates Air India Express and Airline Allied Services which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels), along with a joint venture AISATS.
The government think-tank NITI Aayog’s recommendation on strategic disinvestment of Central public sector units, including Air India, was the immediate trigger for its stake sale. In its report earlier this year, the NITI Aayog recommended an outright sale of Air India. The proposal was then sent for consideration of a core group of secretaries on disinvestment, chaired by the Cabinet Secretary. The recommendations given by the Cabinet Secretary-led group were forwarded to the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, which gave its ‘in-principle’ nod for the national carrier’s strategic sale. Air India’s privatization was first proposed in 2000 when the previous National Democratic Alliance (NDA) government decided to sell 51% of equity of the erstwhile domestic airline Indian Airlines, with 26% stake to a strategic partner.
It also decided to allow disinvestment of 60% of Air India, which was running international operations, with 26% foreign entity stake.
The government’s efforts to turn around the finances of Air India seem to have failed with the national carrier’s eroding market share, continuous losses and a mountain of debts. Air India has not registered profit since over a decade after the merger of the erstwhile Indian Airlines (domestic operations) with Air India (international operations) in 2007. However, the primary reason for Air India’s disinvestment was the government’s inability to cope with its debt of 52,000 crore. Around 22,000 crore of the total debt accounts for aircraft acquisition loan and the rest is related to debt for meeting its daily and operational expenses.
Important Facts: 
Private entities should have a net worth of Rs. 5,000 crore to be eligible to send in their Expressions of Interest, it noted. The entity is also required to have reported a positive profit after tax in at least three of the five preceding financial years.
However, if the member of the consortium is a scheduled airline operator in the country, the condition to meet minimum share of net worth/ACI requirement shall not apply to such member provided equity shareholding of such member is restricted to maximum of 51 per cent of paid up equity share capital of the consortium.
Currently, the combined entity of AI and AIXL has an extensive network connecting around 43 international destinations and around 54 domestic destinations. The entity operated a fleet of 138 aircraft as of December 31, 2017 comprises 69 Airbus and 69 Boeing plans.

Sharp drop in tobacco smoking in India

  • The report projected the prevalence to drop down further to 9.8% by 2020 and 8.5% by 2025.
Details: 
The prevalence of tobacco use has decreased more slowly in low and middle-income countries than in high-income countries, because the introduction of strong tobacco control policies by low and middle-income countries is impeded by relentless lobbying from the tobacco industry.
While the report only covered tobacco usage in the form of smoking, India has a large population of chewing tobacco users, thus posing additional burden.
The drop in smoking prevalence is in sync with the Global Adult Tobacco Survey (GATS) outcome. However, India has a unique problem of chewing tobacco. More than 3/4th tobacco users have it in the chewing form. Therefore, we need policies that address this form of tobacco rigorously.
Most people know that using tobacco causes cancer and lung disease, but many people are not aware that it also causes heart disease and stroke — the world’s leading killers.
It also noted that while tobacco use has declined markedly since 2000, the reduction is insufficient to meet globally agreed targets aimed at protecting people from death and suffering from cardiovascular and other diseases (NCDs).
Tobacco use and secondhand smoke exposure were major causes of cardiovascular diseases, including heart attacks and stroke, contributing to approximately three million deaths a year.
But evidence revealed a serious lack of knowledge of the multiple health risks associated with tobacco. In China, over 60% people were unaware that smoking could cause heart attacks.

Settling disputes out of court (Gov)

  • Mandatory pre-litigation mediation in commercial disputes has been introduced by the recent Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018.
  • This amends the Commercial Courts Act of 2015.
Details:
 This amendment is expected to alter parties’ sense of responsibility in resolving disputes. Mandatory pre-litigation mediation puts the ball in the court of the parties involved, rather than looking at external agencies like courts, and urges them to engage with and resolve disputes.
The Commercial Courts Act was legislated to improve the enforcement of contracts, as part of improving the ease of doing business. The law defines “commercial disputes” to include regular commercial and business contracts, construction contracts, shareholder agreements, licensing agreements, etc. The law makes changes for reduction of timelines, tightening processes and designating special commercial courts and commercial divisions to deal with these disputes, among others. The ordinance stipulates that no suits concerning commercial disputes will be filed under this Act unless the person filing the suit exhausts the remedy of pre-litigation mediation.
If an urgent interim relief is required, this pre-litigation mediation can be dispensed with. However, in all other cases, the mediation is mandatory and will be conducted within a period of three months (extendable by another two months with the consent of the parties). Any settlement arrived at through mediation will have the status of an arbitral award on agreed terms and be enforceable like a decree of court.
Importantly, the time limits for filing cases will pause during the time the pre-litigation mediation is underway. Mediation is a process of resolution of disputes by the parties to them. It involves discussion of the conflicts, moving out of the loop of allegations and counter-allegations, and assessing where interests lie in resolving the disputes.
Options for settlement are explored and a settlement is worked out through joint evaluation. The process is managed by a neutral person called the mediator, who may evaluate the disputes and weigh in on options for settlement (a variant called conciliation) but has no authority to impose a settlement. The participation of the disputants is voluntary. The terms of settlement, if the parties do settle, are decided by the parties. The discussions are confidential.
Mediation and mandatory mediation specifically, is not new in India. The Arbitration and Conciliation Act, 1996, makes a settlement arrived at through conciliation enforceable like a court decree. Under the Code of Civil Procedure, judges can refer cases to mediation. The Micro, Small and Medium Enterprises (MSME) Development Act, 2006, mandates conciliation when disputes arise on payments to MSMEs.
Mediation in other countries:
 Mediation policies in other countries mandate mediations through various mechanisms, with good effect. They show that mandatory mediation does not mean a compulsion to mediate and offer policy choices under the amendment.
Italy, which faces a high rate of pendency of cases, has adopted what is referred to as ‘opt out’ mandatory mediation. In 2010 and 2013, it introduced a law for pre-litigation mediation. Attempts to mediate were made mandatory for certain disputes (like partition and joint ownership of property) before a case was filed in court. This law reconciles the voluntary nature of the process, while mandating mediation. All disputants are required to attend, with their lawyers, one session of mediation. After this session, any or all the disputants can choose to opt out of mediation and the disputants can proceed with their case in court. Parties who mediate and settle get tax credits.
The outcome of this policy is encouraging. Disputants have found mediation worthwhile and continued with the process towards resolution. This has resulted from the opportunity of understanding the process in the mandatory first session. Italy has seen almost 200,000 cases going in for mediation until 2017. After trying out one session of mediation, when parties continued with the mediation, almost 50% of those cases were settled. More strikingly, Italy has seen a drop of 30-60% in the filings of certain categories of cases covered for mandatory mediation.
Another approach to mediation policy has been to impose costs on disputants refusing to mediate, as is done in the U.K.

PM’s Singapore and Malaysia Visit ( IR)

Malaysia: 
Prime Minister Narendra Modi on Thursday met his newly elected Malaysian counterpart Mahathir Mohammad and the two leaders had a productive exchange of views on strengthening the strategic partnership.
The two leaders discussed ways to boost economic and cultural relations between India and Malaysia. Mr. Modi is among the first world leaders to meet Mr. Mahathir after he became the world’s oldest elected leader when his opposition alliance registered a stunning victory over the Barisan Nasional (BN) coalition, which had ruled Malaysia since 1957. Dr. Mahathir was sworn in as Malaysia’s Prime Minister on May 10.
This is the first meeting between the two leaders. Mr. Modi last visited Malaysia in November 2015.
Singapore:
 PM Modi arrived in Singapore on the last leg of his three-nation tour and said that the defense relations between the two countries are among the strongest and the two sides are building a “partnership of our age.” He was quoted saying “Political relations between India and Singapore are among the warmest and closest. There are no contests or claims, no irritants or doubts. It is a natural partnership from a shared vision”
India was one of the first countries to recognize Singapore in 1965. India’s economic reforms in 1990s and the Look East Policy provided opportunities to recreate a new framework for cooperation, which included the Comprehensive Economic Cooperation Agreement (CECA) of 2005. This robust relationship was elevated to a Strategic Partnership during the visit of Prime Minister Modi in November 2015 who signed a Joint Declaration on a Strategic Partnership with Singapore Prime Minister Lee Hsien Loong on the occasion of the 50th anniversary of the establishment of diplomatic relations.


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