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Current Affairs – 24 May 2021

Current Affairs (24th May 2021)

Semiconductor chips shortage

Context:

  • A protracted shortage of inputs, especially semiconductor chips, has made India-based car manufactures and premium bike makers curtail production across categories.
  • Carmakers in India are facing this chip famine by constraining production, and their global counterparts have got more creative in addressing the shortage.

Why did the chip famine occur?

  • Beginning of the COVID-19 pandemic and the subsequent lockdowns across the world shut crucial chip-making facilities in countries including Japan, South Korea, China, and the US.
  • Chip shortage causes cascading effects, given that the first one creates pent-up demand that becomes the cause for the follow-up famine.

Impact of the chip famine:

  • Consumers of semiconductor chips, which are mainly car manufacturers and consumer electronics manufactures, have not been receiving enough of this crucial input to continue production.
  • Chip shortage is measured in chip lead time, which is the gap between when a chip is ordered and when it is delivered.
  • The increase in chip consumption over the last decade is also partly attributable to the rising contribution of electronic components in a car’s bill of materials.
  • Electronic parts and components today account for 40% of the cost of a new internal combustion engine car, up from less than 20% two decades ago. Chips account for a bulk of this increase.

Response of vehicle makers:

  • Companies are flagging concerns over seamless availability of raw materials, especially semiconductors. Supply constraints are learnt to have caused some output issues in companies.
  • In addition to delaying vehicle deliveries, some companies have reportedly started discarding features and high-end electronic capabilities on a temporary basis to deal with the chip shortage.

What is next?

  • Companies would build a buffer and not let it affect their production. IHS Markit estimates that the demand for semiconductors in the final quarter of 2020 increased at a stronger-than-expected rate.
  • There are also indications that semiconductor suppliers should be able to absorb the demand based on the light vehicle production forecast over the course of 2021, especially the second half.

 

Tropical cyclones naming

Context:

  • Recently,Tauktae hit the western coast of India. The cyclone, which was named by Myanmar, means “gecko” — a highly vocal lizard — in Burmese dialect.
  • Similarly, Yaas, the cyclonic storm that is expected to hit the coasts of Odisha and West Bengal, has been named by Oman. Yaas refers to a tree that has a good fragrance and in English, the word is like Jasmine.

How are the cyclones named?

  • In 2000, a group of nations called WMO/ESCAP (World Meteorological Organisation/United Nations Economic and Social Commission for Asia and the Pacific), which comprised Bangladesh, India, the Maldives, Myanmar, Oman, Pakistan, Sri Lanka and Thailand, decided to start naming cyclones in the region.
  • After each country sent in suggestions, the WMO/ESCAP Panel on Tropical Cyclones (PTC) finalised the list.
  • The WMO/ESCAP expanded to include five more countries in 2018 — Iran, Qatar, Saudi Arabia, United Arab Emirates and Yemen.
  • The list of 169 cyclone names released by IMD in April 2020 were provided by these countries — 13 suggestions from each of the 13 countries.

Importance to name cyclones:

  • Adopting names for cyclones makes it easier for people to remember, as opposed to numbers and technical terms.
  • Apart from the public, it also helps the scientific community, the media, disaster managers etc.
  • With a name, it is easy to identify individual cyclones, create awareness of its development, rapidly disseminate warnings to increased community preparedness and remove confusion where there are multiple cyclonic systems over a region.

Guidelines to adopt names of cyclones:

  • The proposed name should be neutral to (a) politics and political figures (b) religious believes, (c) cultures and (d) gender.
  • Name should be chosen in such a way that it does not hurt the sentiments of any group of population over the globe.
  • It should not be very rude and cruel in nature.
  • It should be short, easy to pronounce and should not be offensive to any member.
  • The maximum length of the name will be eight letters.
  • The proposed name should be provided with its pronunciation and voice over.
  • The names of tropical cyclones over the north Indian Ocean will not be repeated. Once used, it will cease to be used again. Thus, the name should be new.

 

High-level expert panel ‘One Health’

Context:

  • Recently, World Health Organization (WHO) formed a High-Level Expert Panel ‘One Health’ to investigate rise in zoonotic diseases.
  • Zoonotic diseases are pathogenic infections that transmit from animals to humans. 75% infectious diseases are caused by zoonosis.

Mandates of the panel ‘One Health’

  • To study the emergence and spread of zoonotic diseases like H5N1, avian influenza, MERS, Ebola, Zika and possibly the novel coronavirus disease.
  • Advise several international organisations for averting future outbreaks.
  • Develop a surveillance framework and global action plan.
  • Study various human activities (food production, distribution, urbanisation etc.) which disturb the natural wildlife and environment.
  • These mandates are in pursuance with the ‘One Health’ approach for tackling and preventing the outbreak of zoonotic diseases.

About ‘One Health’:

  • This concept recognises that the health of human beings is connected to the health of animals and environment and is relevant for Food safety, controlling zoonosis and antibiotic resistance.
  • This term was first used in 2003–2004 and it was associated with the emergence of severe acute respiratory disease (SARS) and avian influenza H5N1.
  • In April, 2021 the WHO has issued guidelines to reduce the risk of transmission of zoonotic pathogens to humans in food production and marketing chains.

 

 

Global Health Summit

Context:

  • Global Health Summit was organized by European Commission and Italy, as chair of the G20.

About:

  • It is one of the most notable global gatherings to date to address the pandemic.
  • At the summit, G20 countries agreed to the Rome Declaration which sets out principles and guiding commitments to overcome the challenges posed by Covid-19.
  • These principles will help in promoting sustained financing with creation of an effective health system capabilities and capacities for Universal Health Coverage. Improve preparedness through early warning and coordinated response with resilience against current pandemic and future potential public health emergencies.

Key features of Rome Declaration

  • Support and enhance the existing multilateral health architecture for better preparedness, prevention, detection and response.
  • Appropriate and sustainable funding for collaborative global response efforts, especially the Access to COVID-19 Tools (ACT) Accelerator.
  • Foster all-of-society and health-in-all policies approaches.
  • Invest in the worldwide health and care workforce.
  • Promote the multilateral trading system and open, resilient, diversified, secure, efficient and reliable global supply chains related to health emergencies.
  • Increase the effectiveness of preparedness and response measures by supporting and promoting meaningful and inclusive dialogue.

 

SC ruling on creditors invoking personal guarantees

Context:

  • Recently, the Supreme Court has ruled that creditors can proceed against promoters of defaulting companies to recover debt if such promoters have given personal guarantees to secure funds.
  • The top court has also said that lenders can also proceed against the promoters of a defaulting company even when the corporate insolvency resolution process of the firm itself has not been completed.

SC stand on personal insolvency under IBC:

  • Mere approval of a resolution plan for a debt-laden company does not automatically discharge a promoter from their liability in lieu of the personal guarantee they had given to secure the funding for the company.
  • Since personal guarantees from promoters are a kind of assurance to lenders that the monies being borrowed will be returned, the apex court has said that under the contract of guarantee, the liability of the promoter will be over and above the liabilities of the company. This ruling allows them to pursue promoters for additional recovery of debt.

About personal guarantee:

  • A personal guarantee is most likely to be furnished by a promoter or promoter entity when the banks demand for collateral which equals the risk they are taking by lending to the firm, which may not be doing so well.
  • It is different from the collateral that firms give to banks to take loans, as Indian corporate laws say that individuals such as promoters are different from businesses and the two are very separate entities.
  • A personal guarantee, therefore, is an assurance from the promoters or promoter group that if the lender allows them the fund, they will be able to turn around the loss-making unit and repay the said loan on time.

Stand of government

  • Bad loans have been a major problem for banks and financial creditors over the past decade. Promoters had been able to secure funds from banks without the due diligence in most cases because of their past transaction history.
  • Government, in December 2019, introduced the provision which gave banks the power to move application for initiation of insolvency against personal guarantors to corporate debtors.
  • Finance ministry nudged banks to also pursue personal insolvency cases against promoters who had furnished personal guarantees for the loans taken by their firms, which later was not re-payed as per the agreed schedule.
  • Both these steps were taken to make promoters more liable for their actions and to check the practice of securing monies for a particular project but then diverting it to other projects or works.

Impact on promoters:

  • In December 2019, when the government came out with the notification on personal insolvency, the provisions were challenged initially by as many as 19 promoters before different high courts.
  • They claimed that it was always a management board that ran the company and therefore the promoters alone should not be held liable for the default on debt repayment.
  • By the time the Supreme Court transferred all the cases to itself in December 2020, as many as 75 promoters and guarantors had challenged the personal insolvency provisions.
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