News Analysis 18 Aug, 2022

18 Aug, 2022


1. The Ethanol Blending Target.
2. Need of an organized Police Force.
3. Financial Stability Report.



Prime Minister Narendra Modi announced that India has achieved its target of blending 10% sugarcane-extracted ethanol in petrol, ahead of schedule.



What Is Ethanol Blending ?

  • Blending ethanol with petrol to burn less fossil fuel while running vehicles.
  • Ethanol is an agricultural by-product which is obtained from the processing of sugar from sugarcane, rice husk or maize.
  • The Government of India has advanced the target for 20% ethanol blending in petrol (also called E20) to 2025 from 2030.


Significance Of Ethanol Blending 

  • Reducing the country’s dependence on crude oil imports (almost 85%)
  • According to the NITI Aayog report of June 2021, a successful ethanol blending programme  can save the country $4 billion per annum as we spend a considerable amount of our precious foreign exchange on crude oil imports.
  • It will further bring down carbon emissions
  • More ethanol output would help increase farmers’ incomes.
  • By using the left-over residue from rice harvests to make ethanol, stubble burning will also  reduce, thus reducing air pollution.

1st and 2nd Generation Ethanols

First generation ethanol or 1G: Ethanol extracted from crops directly from the fields, such as cereals, maize, sugar beet and cane, and rapeseed.
Second generation ethanol or 2G: Ethanol extracted from residual and waste products such as rice straw, wheat straw, corn cobs, corn stover, bagasse, bamboo and woody biomass.

Global Practices

  •  Countries like the U.S., China, Canada and Brazil all have ethanol blending programmes
  •  Brazil had legislated that the ethanol content in petrol should be in the 18-27.5% range, and it finally touched the 27% target in 2021.


Challenges and Issues 

  • E20 Compliant Vehicles:
    The Niti Aayog report points out that optimisation of engines for higher ethanol blends and the conduct of durability studies on engines and field trials need to be done.
  • Storage :
    If E10 supply has to continue in tandem with E20 supply, storage would have to be separate which then raises costs.
  • Water footprint:
    Water needed to grow crops for ethanol. On average, a tonne of sugarcane can produce 100 kg of sugar and 70 liters of ethanol — meaning, a liter of ethanol from sugar requires 2,860 liters of water.
  • Inefficient land use:
    The Institute for Energy Economics and Financial Analysis (IEEFA) reports land use could be far more efficient by generating renewable power for EV batteries.
  • Food security:
    ugar and cane production that end up in the petrol tank cannot also appear on the dinner plate, in animal fodder, be stored in warehouses, or be exported.

Advantages Of Ethanol Blending

  • Ethanol burns completely emitting nil carbon dioxide.
  • By using the left-over residue from rice harvests to make ethanol, stubble burning will also reduce.
  • The 2G ethanol project in Haryana will reduce greenhouse gas equivalent to about three lakh tonnes of CO2 emissions per annum, which is the same as replacing almost 63,000 cars annually on our roads.



India’s existing police system suffers a series of deficiencies from problems relating to a police organization, environment, and infrastructure even after 75 years of Independence.



Background Of Police Force In India

a)The process of drafting the IPC had begun much earlier in 1834, the revolt of 1857 gave a fillip to the drafting of the Police Act and laid the foundation for an organized police force.

b)The main objective then was to use the police as a weapon of repression and strengthen the hold the British had over India.

  • The prevention (and detection) of crime was never their priority. 
  • Most of the constabulary was illiterate and not paid even a ‘living wage’.


Constitutions Provisions Related to Police Forces

  • Police is an exclusive subject under the State List (List II, Schedule 7 of the Constitution).
  • However, the center is also allowed to maintain its own police forces to assist the states with ensuring law and order
  • The present Indian police system is largely based on the Police Act of 1861.



Deficiencies In The Police Structure

  • Understaffed and overburdened police force.
  • Understaffing in turn results in overburdening of work that not only reduces the effectiveness and efficiency of the police personnel.
  • Pendency
  • Decreased Expenditure on police in recent years is adding to the resource crunch.

  • The Second Administrative Reforms Commission has noted that police-public relations is in an unsatisfactory state because people view the police as corrupt, inefficient, politically partisan and unresponsive.

  • Improper implementation of police reforms could be attributed to lack of political will, which in turn could be linked to the growing criminalization of politics.



  • There had been attempts  to blend some elements of the inquisitorial system into the (prevalent) adversarial system by making judicial inquiry into custodial death and custodial rape mandatory and dig out the truth to punish the guilty.
  • However, the police continue to be haunted by allegations of being a brute force. 
  • The trust deficit does not appear to have bridged despite the power to arrest having been curtailed, the use of handcuffs restrained, the presence of a lawyer permitted during interrogation, CCTV cameras installed in the police stations, and human rights bodies allowed to keep a constant eye. 
  • Lawmakers are still reluctant and the judiciary apprehensive about making voluntary confessions before a police officer.
  • The District Superintendent of Police is unable to transfer his Station House Officers without the approval of the District Magistrate in U.P.; the performance appraisal report of a Superintendent of Police is still written by the District Magistrate in some States (including Chhattisgarh) despite the Supreme Court’s directions to the contrary.
  • Despite ‘Police’ being a State subject, no State government has given due attention to police reforms so far. 

Criminal Law In India
The Criminal law in India is contained in a number of sources – The Indian Penal Code of 1860,The Protection of Civil Rights Act 1955, Dowry Prohibition Act of 1961 and The SC and ST (Prevention of Atrocities)Act,1989

  • The Criminal Justice System can impose penalties on those who violate the established laws.
  • The criminal law and criminal procedure are in the concurrent list of the seventh schedule of the constitution.
  • Lord Thomas Babington Macaulay is said to be the chief architect of codifications of criminal laws in India.




Reserve of Bank of India (RBI) released Financial Stability Report (FSR)




What Is Financial Stability Report 

The Financial Stability Report (FSR) is published biannually and includes contributions from all the financial sector regulators. Accordingly, it reflects the collective assessment of the Sub Committee of the Financial Stability and Development Council (FSDC-SC) on risks to financial stability.


Points To Be Noted In The Report 

  1.  Outlook for the global economy:
    It is shrouded by considerable uncertainty because of the war in Europe, front-loaded monetary policy normalization by central banks in response to persistently high inflation and multiple waves of the COVID-19 pandemic.

  2. Path of recovery:
    Notwithstanding the challenges from global spillovers, the Indian economy remains on the path of recovery, though inflationary pressures, external spillovers and geopolitical risks warrant careful handling and close monitoring.

  3. Capital buffers :
    a)Banks as well as non-banking financial institutions have sufficient capital buffers to withstand shocks.
    b)The capital to risk weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) rose to a new high of 16.7 percent, while their gross non-performing asset (GNPA) ratio fell to a six-year low of 5.9 per cent in March 2022.
    Successive waves of recapitalisation have given banks enough resources to write off most of their bad loans. 
    NPAs for industrial credit have been reduced even more dramatically, from 23 per cent to 8.4 per cent. 
    Even after these large write-offs, most banks retain comfortable levels of capital.

Major Risks To The Financial Stability

  • Volatility in capital flows and exchange rates
  • De-globalisation
  • Faltering of economic recovery
  • Aggressive monetary policy tightening by AEs
  • De-anchoring of inflation expectations
  • Disruptions in global supply chains
  • Climate change risk to the asset side exposure of the financial sector



  • The broad aggregates conceal a worrisome picture, raising questions about the role bank credit will play in supporting GDP growth. 
  • The problem is that very little of this credit is going to large-scale industry or for financing investment.
  • Decline of Bank credit 
    a)Over the last decade, banks have increasingly shifted away from providing credit to industry, favoring instead lending to consumers. 
    b)Consequently, the share of industry in total banking credit has declined from 43 per cent in 2010 to 30 per cent in 2020, while that of consumer loans has increased from 19 per cent to 29 per cent. 
  • High levels of NPAs
    a)Credit doubled within the span of a few years, primarily on the back of lending to large infrastructure projects.
    b)Subsequently, many of those loans turned bad, leading to high levels of NPAs on bank balance sheets. 
  • Other fundamental problems 
  • There is still no framework that will reduce the risk of private sector investment in infrastructure, certainly not in the critical and highly troubled power sector. 


 Way Forword

  1. Balance Sheet Stress:
    Banks need to reinforce their capital and liquidity positions to fortify themselves against potential balance sheet stress.
  2. Policy Support:
    Sustained policy support and simultaneous increased fortification of capital and liquidity buffers by financial entities is important.
  3. Financial Needs:
    Stronger capital positions, good governance and efficiency in financial intermediation can be the touchstones.