What’s in today’s article?

• Background (Context, FSI’s Report, How is Data computed, etc.)
• Forest Land Encroachment (Meaning, Causes, Loss of Old Forests, Suggestions, etc.)

Background:

• India is one of the few countries to have a scientific system of periodic forest cover assessment in the form of India State of Forest Report.
• India State of Forest Report is an assessment of India’s forest and tree cover.
  • It is published every two years by the Forest Survey of India (FSI) under the Ministry of Environment, Forests and Climate Change.
  • The first survey was published in 1987.

How is data computed for the Report?

• Data is computed through wall-to-wall mapping of India’s forest cover through remote sensing satellites.
• Three categories of forests are surveyed –
  • Very Dense Forests (canopy density over 70%),
  • Moderately Dense Forests (40-70%) and Open Forests (10-40%),
  • Scrubs (canopy density less than 10%)
• Forest Cover is defined as –
  • “An area more than 1 ha in extent and having tree canopy density of 10 percent and above”.
• Tree Cover is defined as –
  • “Tree patches outside recorded forest areas exclusive of forest cover and less than the minimum mappable area of one hectare”.

• The data is used in planning and formulation of policies in forest management as well as forestry and agroforestry sectors.
• Since 19.53% in the early 1980s, India’s forest cover has increased to 21.71% in 2021.
• Adding to this a notional 2.91% tree cover estimated in 2021, the country’s total green cover now stands at 24.62%, on paper.

Forest Land Encroachment:

• Encroachment is a term used to describe the advancement of structures, roads, railroads, improved paths, utilities, and other development, into natural areas.
• The National Remote Sensing Agency (NRSA) under the Department of Space estimated India’s forest cover using satellite imagery for periods 1971-1975 and 1980-1982 to report a loss of 2.79%. It declined from 16.89% to 14.10% — in just seven years.
• While reliable data on encroachment is unavailable, government records show that 42,380 sq km — nearly the size of Haryana— of forest land was diverted for non-forest use between 1951 and 1980.

Loss of Old Forests:

• In India, land recorded as forest in revenue records or proclaimed as forest under a forest law is described as Recorded Forest Area.
• Over time, some of these Recorded Forest Areas lost forest cover due to encroachment, diversion, forest fire etc.
  • Meanwhile, tree cover improved in many places outside the Recorded Forest Areas due to agro-forestry, orchards etc.
• In 2011, when the FSI furnished data on India’s forest cover inside and outside Recorded Forest Areas, it came to light that nearly one-third of Recorded Forest Areas had no forest at all.
• In other words, almost one-third of India’s old natural forests — over 2.44 lakh sq. km (larger than Uttar Pradesh) or 7.43% of India — were already gone.

Shrinking of Natural Forests:

• Even after extensive plantation by the forest department since the 1990s, dense forests within Recorded Forest Areas added up to cover only 9.96% of India in 2021.
• This loss remains invisible due to the inclusion of commercial plantations, orchards, village homesteads, urban housings etc as dense forests outside Recorded Forest Areas.
• The steady replacement of natural forests with plantations are worrisome for the following reasons –
  • First, natural forests have evolved naturally to be diverse and, therefore, support a lot more biodiversity.
  • Secondly, plantation forests have trees of the same age, are more susceptible to fire, pests and epidemics, and often act as a barrier to natural forest regeneration.
  • Thirdly, natural forests are old and therefore stock a lot more carbon in their body and in the soil.

How to Expand India’s Forest Cover?

• As mentioned earlier, India’s forest cover has increased to 21.71% in 2021.
  • Soon after its independence from Britain in 1947, India came out with its first national forest policy in 1952, which had a target of bringing 33 percent of India’s land under forest cover and since then, the target has remained as it is.
• In the present scenario, the possibility of a sizeable increase in forest cover is limited due to the inelasticity of forest land.
• However, the balance of 9 percent can be achieved through taking up plantation/afforestation outside the forests and restocking/plantation in degraded and scrub forests.
• This can be done by –
  • Substantially increasing the tree cover outside forests by incentivising and promoting agro-forestry and farm forestry;
  • Managing and expanding green spaces in urban and peri-urban areas to enhance citizens’ well-being;
  • Plantation of trees outside forests in partnership with local communities, land-owning agencies, and private enterprises;
  • Creation, sustainable management and promotion of urban forests (woodlands, gardens, avenue plantations, herbal gardens, etc.) as an integral component of urban habitat planning and development;
  • Afforestation/reforestation in public-private partnership (PPP) mode;
  • Promotion of urban forests, which include woodlands, wetlands, parks, tree groves, tree garden, plantations in institutional areas, on avenues and around water bodies, etc.

• The Reserve Bank of India (RBI) is preparing a pilot project on QR code-based Coin Vending Machine (QCVM) in collaboration with a few leading banks.
• The pilot will be launched in 12 cities in the country.
• This move is aimed at improving the distribution of coins among the public.

What’s in today’s article?

• News Summary

News Summary: QR code-based Coin Vending Machine

• In February 2023, after announcing the sixth consecutive repo rate hike, RBI governor also put forth RBI’s new pilot project-QR Code based Coin Vending Machine.

What is the project about?

• The vending machines would dispense coins with the requisite amount being debited from the customer’s account using United Payments Interface (UPI) instead of physical tendering of banknotes.
• Customers would be endowed the option of withdrawing coins in required quantities and denominations. The central idea here is to ease the accessibility to coins.

How different is the proposed mechanism for existing conventional machines?

• The conventional machines relied on banknotes for facilitating coin exchanges.
• Further, the proposed machine would eliminate the need for physical tendering of banknotes and their authentication.

What is the rationale behind this move?

• To improve the distribution of coins among the public
  • Unlike cash-based traditional Coin Vending Machine, the QCVM would eliminate the need for physical tendering of banknotes and their authentication.
  • Customers will also have the option to withdraw coins in the required quantity and denominations.
  • This will improve ease of accessibility of coin among public.
• Issue of fake currency in cash-based traditional Coin Vending Machine
  • Getting fake currency notes in cash-based traditional Coin vending machines led the Reserve Bank to announce the UPI-based alternative.
• To address the issue of storage place for coins
  • The RBI is saddled with a peculiar problem wherein the supply of coins is very high and it takes a lot of storage space.
  • However, despite huge demands, these coins are not properly distributed and many places are in the lurch of the coins.

Are coins significant in India’s payment ecosystem?

• Coins in India are issued in denominations of 50 paise, one rupee, two rupees, five rupees, ten rupees and twenty rupees.
• Coins of up to 50 paise are called ‘small coins’ while those of one rupee and above are called rupee coins.
• As per the latest RBI bulletin, the total value of circulation of rupee coins stood at ₹28,857 crore as of December 30, 2022.
  • The figure is an increase of 7.2% from the year-ago period.
• Circulation of small coins remained unchanged at ₹743 crore.

Why critics are opposing this move?

• Many critics have opposed the recent decision of RBI to launch QR code-based Coin Vending Machine. They claim that this move is against the digital push of the government.
• At a time, when the government is urging citizens to opt for digital payments, the current step is retrospective in nature.
• However, RBI has defended its move saying that the proposal should not be viewed as a zero-sum game of digital versus cash. The two can easily supplement each other.
• If digitalisation is not solving a particular problem at this given point of time, then it is very much within RBI’s purview to use other means available to achieve its ultimate objective that is to operate the currency system of the country.

Why in news?

• Recently, the National Stock Exchange of India received the final approval from the markets regulator Securities and Exchange Board of India (SEBI) to set up a Social Stock Exchange (SSE).

What’s in today’s article?

• Zero Coupon Zero Principal (ZCZP) Instruments
• News Summary

Zero Coupon Zero Principal (ZCZP) Instruments

• ZCZP are financial instruments that do not pay periodic interest, but are issued at a discount to their face value and mature at par.
• With its zero-coupon, zero-principal structure, it resembles a debt security like a bond.
• When an entity takes a loan by issuing regular debt security like a bond, it has to make interest payments and the principal when the bond matures.
• But with ZCZP instrument, when an entity issues these securities and raises money, it is not a loan but a donation.
• So, the borrowing entity does not have to pay interest—therefore zero coupon—and it does not have to pay the principal (zero principal) either.

News Summary: Social Stock Exchange (SSE)

What is a Social Stock Exchange?

• Background:
  • Finance Minister Nirmala Sitharaman, presenting the Union Budget back in 2019, had proposed to initiate steps for creating a stock exchange under the market regulator’s ambit.
  • She had argued that it was time to take our capital markets closer to the masses and meet various social welfare objectives to inclusive growth and financial inclusion.
  • The proposal was cleared in September 2021.
• About:
  • The SSE would function as a separate segment within the existing stock exchange and help social enterprises raise funds from the public through its mechanism.
  • It would serve as a medium for enterprises to seek finance for their social initiatives, acquire visibility and provide increased transparency about fund mobilisation and utilisation.
  • Retail investors can only invest in securities offered by for-profit social enterprises (SEs) under the Main Board.
  • In all other cases, only institutional investors and non-institutional investors can invest in securities issued by SEs.

Who will be eligible to be registered or listed on the SSE?

• Any non-profit organisation (NPO) or for-profit social enterprise (FPSEs) that establishes the primacy of social intent would be recognised as a social enterprise (SE).
• Recognition of social enterprise would make the entity eligible to be registered or listed on the SSE.
• As per the SEBI’s regulation, the enterprises must be serving to:
  • eradicate either hunger, poverty, malnutrition and inequality;
  • promoting education, employability, equality, empowerment of women and LGBTQIA+ communities; working towards environmental sustainability;
  • protection of national heritage and art or bridging the digital divide, among other things.
• At least 67% of their activities must be directed towards attaining the stated objective.
• This is to be established by enumerating that, in the immediately preceding three-year period:
  • either 67% of its average revenue came from the eligible activities;
  • expenditure (in the same proportion) was incurred towards attaining the objective; or
  • the target population constitute 67% of the overall beneficiary base.
• Corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure and housing companies (except affordable housing) would not be identified as an SE.
• Additionally, non-profit organisations (NPOs) would be deemed ineligible should it be dependent on corporates for more than 50% of its funding.

How do non-profit organisations (NPOs) as well as For-Profit Enterprises (FPEs) raise money?

• NPOs
  • NPOs can raise money either through issuance of Zero Coupon Zero Principal (ZCZP) Instruments from private placement or public issue, or donations from mutual funds.
    • SEBI had earlier recognised that NPOs by their very nature have primacy of social impact and are non-revenue generating.
    • Thus, there was a need to provide NPOs a direct access to securities market for raising funds. Hence, ZCZP instruments were launched.
  • Another structured finance product available for NPOs is the Development Impact Bonds.
    • Upon the completion of a project and having delivered on pre-agreed social metrices at pre-agreed costs/rates, a grant is made to the NPO.
    • The donor who makes the grant upon achieving the social metrics would be referred to as ‘Outcome Funders’.
    • Since the payment above is on post facto basis, the NPOs would have to also raise money to finance their operations. This is done by a ‘Risk Funder’.
  • It is mandatory that the NPO is registered with the SSE for facilitating the issuance.
• FPEs
  • It can raise money through:
    • issue of equity shares (on main board, SME platform or innovators growth platform of the stock exchange) or
    • issuing equity shares to an Alternative Investment Fund including Social Impact Fund or issue of debt instruments.
  • For-Profit Enterprises (FPEs) need not register with social stock exchanges before it raises funds through SSE.
  • However, it must comply with all provisions of the ICDR Regulations (Issue of Capital and Disclosure Requirements) when raising through the SSE.