CURRENT AFFAIRS – 24/05/2023

Prime Minister Narendra Modi on Tuesday said the foundation of India-Australia relations lies in mutual trust and respect, as he along with his Australian counterpart Anthony Albanese addressed the Indian diaspora at a mega event here.

During the event, a suburb in Australia — Harris Park — was renamed “Little India”, reflecting the strong bond between the two strategic partners.

Mr. Modi also announced that India would open a consulate in Brisbane to fulfil a long-pending demand by the diaspora. The Prime Minister was given a rousing welcome by thousands of Indians who thronged the Qudos Bank Arena.

Mr. Albanese described India as a “force of global good” and a “bright spot” in the world economy.

Mysterious are the ways in which multilateral groupings prosper and wither away. The Non-Aligned Movement (NAM) and G-77 had their heyday in the Cold War era. Later they lost their relevance, but they still exist. The South Asian Association for Regional Cooperation (SAARC) summits ended in 2014, but the Secretariat somehow keeps itself busy. Despite serious policy divergences on China and Myanmar, the Association of Southeast Asian Nations (ASEAN) continues to function, consuming reams of paper to issue long communiqués.

The case of BRICS is truly remarkable. Despite several achievements, it began to lose its sparkle. COVID-19, the Galwan clash, and the Ukraine conflict resulted in increased global economic stress, damaged India-China ties, and turned Russia into a diminishing power. The group may have lost its mojo, but numerous nations want to be admitted, thus showing the paradox of BRICS.

Jim O’Neil’s conception of BRIC, a grouping of four emerging economies (Brazil, Russia, India, and China), may not have gone far but it was a popular acronym over two decades ago. However, two of its components joined hands with South Africa to form IBSA (India, Brazil, South Africa) in 2003. China was keen to join it in the century’s first decade and managed to enlist South Africa’s support. But Brazil and India would not go along, maintaining that the forum was open to democracies only. Rebuffed, China played a trump card, and decided to bring South Africa into BRIC, thus turning it into BRICS. Soon, the new club overshadowed the old one. IBSA has been unable to hold its summit since 2011. But BRICS has held 14 summits in the past 13 years.

BRICS focused its attention on both geopolitical and economic dimensions. By articulating a common view on key global and regional issues, it projected a non-western view. This strengthened the world’s march towards multipolarity, thus helping to curb the dominating influence of the West. On the economic front, it launched new initiatives: the New Development Bank which has committed $32.8 billion in 96 projects; the Contingent Reserve Arrangement (CRA), a financial mechanism to protect against global liquidity pressures; and a comprehensive programme to expand trade and investment cooperation among the five-member countries. However, negative tendencies soon asserted themselves. If the IBSA trio within the BRICS expected that China and Russia would fully back their bid to secure membership of the UN Security Council, they were disappointed. A formulation, frozen in time, patronisingly supporting ‘the aspiration’ of Brazil, India and South Africa to play a greater role in the UN, figures in every BRICS communiqué, showing the grouping’s utter diplomatic bankruptcy.

The century’s second decade was also the era of China’s dramatic economic rise and, more importantly, military assertiveness. This disturbed the group’s inner balance. The post-Ukraine consolidation of Russia-China cooperation, economic malaise in South Africa that accelerates dependence on China, and Brazil’s long fling with rightist policies followed by the return of a tired Lula da Silva as the President, have generated new tensions. Beijing’s push for a common currency for intra-BRICS trade is also symptomatic of the group’s inner troubles.

Yet, 19 countries now stand in line, eager to join BRICS. The regional breakup is as follows: Latin America (four) – Argentina, Nicaragua, Mexico and Uruguay; Africa (five) – Nigeria, Algeria, Egypt, Senegal and Morocco; and Asia (10) – Saudi Arabia, the United Arab Emirates (UAE), Türkiye, Syria, Iran, Afghanistan, Indonesia, Thailand, Kazakhstan and Bangladesh.

Several explanations may be offered. First, China is pushing the expansion as a strategic device to extend its global influence. Second, the demand to join BRICS stems from FOMO or ‘fear of missing out’ on the membership of a club that has some visibility. Third, many realize that the doors of other groupings are closed to them. Finally, the clamour reflects prevailing anti-western sentiments and a pervasive desire to create a sizeable forum of the Global South.

The next BRICS summit will be hosted by South Africa on August 23-24. It could take decisions on expansion and its criteria. Preparatory meetings of the Foreign Ministers and the National Security Advisers are certain to deliberate on this subject. Three options are available: a mega expansion that raises the membership from five to 21, thus surpassing the G-20; limited admission of 10 new members, two each supported by an existing member; and admission of only five new members, one each supported by an existing member, with none of the other four using their veto. India favours expansion if it is based on agreed criteria and moves gradually. Should the third option win consensus, Argentina, Egypt, Indonesia, UAE and Bangladesh are the most likely states to make the cut.

Will the BRICS leaders meet physically? Fairly unlikely. Because of its legal obligations relating to the ICC, South Africa as the host may be compelled to arrest an honoured guest — the President of Russia. Therefore, chances are that a digital summit will take place. When the leaders talk, they should reflect on strengthening BRICS and redressing the internal imbalance. They should also know that once new members are admitted, they will certainly seek to change the group’s name. Perhaps then the grouping’s future will be better than its past.

The story so far:

The nagging dispute over the water share of the Krishna river between Andhra Pradesh (A.P.) and Telangana remains unresolved, even nine years after the bifurcation of the combined State.

The dispute dates back to the formation of Andhra Pradesh in November, 1956. Before the formation of Andhra Pradesh, four senior leaders each from different regions of Andhra, including the Rayalaseema Region and the Telangana region, signed a Gentlemen’s Agreement on February 20, 1956. Among others, one of the provisions of the agreement was the protection of Telangana’s interests and needs with respect to the utilisation of water resources with equitable distribution based on treaties followed globally. However, the focus of the combined dispensation with respect to irrigation facilities was on Andhra, which already had systems developed by the British at the cost of in-basin drought-prone areas in Telangana — a fact which was argued by the leaders of the latter region from the beginning.

Further on, in 1969, the Bachawat Tribunal (KWDT-I) was constituted to settle the dispute around water share among the riparian States of Maharashtra, Karnataka and Andhra Pradesh (before bifurcation). The Tribunal allocated 811 tmcft dependable water to Andhra Pradesh. The A.P. government later apportioned it in the 512:299 tmcft ratio between Andhra (including parts of Rayalaseema which comprise the Krishna Basin) and Telangana, respectively, based on the command area developed or utilisation mechanism established by then. The Tribunal had also recommended taking the Tungabhadra Dam ( a part of the Krishna Basin) water to the drought-prone Mahabubnagar area of Telangana. However, this was not followed through, giving birth to discontent among the people. Telangana had time and again reiterated how it had been meted out with injustice in Andhra Pradesh when it came to the matter of distributing water resources.

There is no mention of water shares in the Andhra Pradesh Reorganisation Act, 2014, since the KWDT-I Award, which was still in force, had not made any region-wise allocation. At a meeting convened by the then Ministry of Water Resources in 2015, the two States had agreed for sharing water in the 34:66 (Telangana:A.P.) ratio as an ad hoc arrangement with the minutes clearly specifying that it has to be reviewed every year. The arrangement in the Act was only for the management of water resources by setting up two Boards, the Krishna River Management Board (KRMB) and the Godavari River Management Board (GRMB).

The KRMB, however, continued the same ratio year after year in spite of the opposition by Telangana. In October 2020, Telangana raised its voice for an equal share, till water shares are finalised. At a Board meeting held earlier this month, Telangana put its foot down for an equal share and refused to continue the existing arrangement. Unable to convince the member States, the river Board has referred the matter to the Ministry of Jal Shakti (MoJS).

Telangana has been asking the Centre to finalise water shares from day one of its formation. Citing treaties and agreements followed globally in sharing river waters, Telangana has been arguing that as per the basin parameters, it is entitled for at least a 70% share in the allocation of the 811 tmcft. Besides, it has been highlighting how A.P. has been diverting about 300 tmcft water to the areas outside the basin from fluoride-affected and drought-prone areas within the basin in Telangana.

On the other hand, A.P. has also been staking claim for a higher share of water to protect the interests of command areas already developed.

The Centre has convened two meetings of the Apex Council comprising the Union Minister and Chief Ministers of Telangana and A.P. in 2016 and 2020 without making any attempt to deal with the issue. Following a suggestion made by the MoJS in 2020, Telangana has withdrawn its petition over the issue in the Supreme Court as the Ministry had assured to refer the matter of water shares to a Tribunal. However, the Centre has been sitting over the issue for over two years now even as the two States continue to spar over the matter day in and day out.

The story so far:

On May 10, co-legislators at the European Commission signed the Carbon Border Adjustment Mechanism (CBAM). It has been described as a “landmark tool” to put a “fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.”

Its primary objective is to avert ‘carbon leakage’. It refers to a phenomenon where a EU manufacturer moves carbon-intensive production to countries outside the region with less stringent climate policies. In other words, replace EU-manufactured products with more carbon-intensive imports.

From 2026, once the CBAM is fully implemented, importers in the EU would have to buy carbon certificates corresponding to the payable carbon price of the import had the product been produced in the continent, under its carbon pricing rules. Conversely, if a non-EU producer is paying a price (or tax) for carbon used to produce the imported goods, back home or in some other country, the corresponding cost would be deducted for the EU importer. The Commission, in coordination with relevant authorities of the member states, would be responsible for reviewing and verifying declarations as well as managing the central platform for the sale of CBAM certificates. Importers would have to annually declare by May-end the quantity and embedded emissions in the goods imported into the region in the preceding year.

The idea here is to avert the possibility of carbon leakage alongside encouraging producers in non-EU countries to green their manufacturing processes. Moreover, it will ensure a level playing field between imports and EU products. This would also form part of the continent’s broader European Green Deal which endeavours to achieve 55% reduction in carbon emissions compared to 1990 levels by 2030 and become a climate neutral continent by 2050.

CBAM would initially apply to imports of certain goods and selected precursors, whose production is carbon-intensive and are at risk of ‘leakage’ such as the cement, iron and steel, aluminium, fertilizers, electricity and hydrogen sectors.

In 2021, the United Nations Conference on Trade and Development (UNCTAD) had concluded that Russia, China and Turkey were most exposed to the mechanism. Considering the level of exports to the union in these sectors, it stated India, Brazil and South Africa would be most affected among the developing countries. Mozambique would be the most exposed least-developing country. Important to note, countries in the EU combined represent about 14% of India’s export mix for all products, steel and aluminium included.

Mannat Jaspal, Associate Fellow at the Observer Research Foundation (ORF) notes that India’s exports in the five segments represented less than 2% of the total exports to the EU between 2019 and 2021. However, according to Ms. Jaspal, while the impact of the regulation may appear limiting, its long-term effects can be severe for multiple factors. First, EU being India’s third largest trade partner and given the latter’s projected growth trajectories, the size of exports (including in the CBAM sectors) will invariably rise. Secondly, CBAM’s scope would expand beyond its current ambit to include other sectors as well. “Given India’s products have a higher carbon intensity than its European counterparts, the carbon tariffs imposed will be proportionally higher making Indian exports substantially uncompetitive,” she told The Hindu. And finally, international climate policies (including CBAM) will compel other countries to impose similar regulation eventually translating to “a significant impact” on India’s trading relationships and balance of payments.

It was informed, earlier this month. in a joint statement during the inaugural EU-India Trade and Technology Council, that “the two sides have also agreed to intensify their engagement on carbon border measures.”