Any attempt by an institution to withhold information from its stakeholders should invite strict censure. Do you agree?

No, I do not completely agree. There may be situations where information would
need to be withheld for larger public interest. Such circumstances can arise when the matter concerns:

i. Preserving national security e.g. it would be wrong for the media to relay live
coverage of a terror attack while the operation is still in progress, as happened in Mumbai in 2008.
ii. Matters that are sensitive in the socio-political context and likely to arouse
negative public sentiment e.g. if a political leader is assassinated by a person
from a different religion, disclosing the assassin’s religion could lead to communal
violence.
iii. Protecting the privacy of an individual e.g. the personal details of a rape victim.
iv. Policies and programs that are still under consideration e.g. the master plan for an upcoming project which is likely to lead to a spurt in land prices.
v. Privileged and sensitive information that few people have access to e.g. writing a
book that chronicles the private functioning and inter-personal relations of a highranking functionary.
vi. Privileged information that is confidential and can be misused for speculative gains e.g. Insider trading.

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What is dynamic pricing? Examine the ethical issues involved in dynamic pricing by a private firm and by a govt. organization. (150 words – 10 marks)

Dynamic pricing is a pricing strategy wherein the price is not firmly set; instead it changes based on changing circumstances, such as increases in demand at certain times, type of customer being targeted or changing marketing conditions.
The fundamental concern w.r.t. dynamic pricing strategies is the availability of
viable alternatives. This ensures that any such mechanism provides benefits to
the organization but not at the expense of customer welfare.
Therefore, dynamic pricing by the private sector poses relatively fewer risks since
the risk of customer exploitation is offset by the presence of competition and
impartial regulation by the govt. offset. As such, the customer now pays willingly
to get access to a service that has limited supply and perceives this as a
convenience/premium.
However, since the govt. functions as a monopoly in many services, such actions
can be perceived as exploiting the citizen’s helplessness. The concerns that arise
include:
i) The perception that it is an attempt to compensate for the govt’s inefficiencies
by imposing a burden on the citizens.
ii) Concerns about a conflict of interest since the govt is the service provider as
well as the regulator.
iii) For vital services, there is no value addition for the customer. Yet, he is
compelled to pay the additional charge that is levied.

FASTags:

  • FASTag is a device that employs Radio Frequency Identification (RFID) technology for making toll payments directly from the prepaid or savings account linked to it.
  • It is affixed on the windscreen of the vehicle and enables to drive through toll plazas, without stopping for cash transactions.
  • The tag can be purchased from Tag issuers and if it is linked to the prepaid account, then recharge/ top up can be made as per the requirement.
  • Benefits of using FASTag:
    • Cashless payment
    • Faster transit
    • Online recharge
    • SMS alerts

Global Entrepreneurship Summit (GES):

Global Entrepreneurship Summit (GES):

  • It is the preeminent annual entrepreneurship gathering that convenes emerging entrepreneurs, investors and supporters from around the world.
  • It was started by U.S. government in 2010.
  • It serves as a vital link between governments and the private sector, and convenes global participants to showcase projects, network, exchange ideas, and champion new opportunities for investment.
  • Its aims to highlight entrepreneurship as means to address some of the most intractable global challenges.

GES-2017, Hyderabad:

  • It will be the eighth annual GES summit.
  • It will be the first GES summit to be held in South Asia.
  • Since 2010, it has been hosted by Kenya, Morocco, Turkey, the United Arab Emirates, Malaysia and last year it was held in Silicon Valley in the US.
  • The Theme of GES-2017 is ‘Women First, Prosperity for All’, the main focus will be on supporting women entrepreneurs and fostering economic growth globally.

Areas of main focus:

The GES 2017 will focus on four key industry sectors:

  1. Energy and Infrastructure.
  2. Healthcare and Life Sciences.
  3. Financial Technology and Digital Economy.
  4. Media and Entertainment

India’s new role:

  • The event will highlight India’s enabling environment for innovation and entrepreneurship.
  • Through two and half days of training and mentoring sessions, networking, and investment matchmaking, the United States and India will forge new collaborations and launch new initiatives, while reducing the barriers inhibiting international growth and innovation.

What is ‘Swiss challenge’ approach?

Swiss challenge method is a process of giving contracts. Any person with credentials can submit a development proposal to the government. That proposal will be made online and a second person can give suggestions to improve and beat that proposal.

  • It is a method where third parties make offers (challenges) for a project within a designated period to avoid exaggerated project costs.

Swiss model: 

The government plans to adopt the ‘Swiss Challenge’ mode to invite bids for redeveloping the stations.

How Swiss model operates? 

  • First, the government will invite developers to submit their master plans.
  • After evaluating the proposals, the selected design will be uploaded over the Ministry of Railways website.
  • Financial bids will be invited and the developer quoting the highest upfront premium to be paid to the government will win the bid.
  • However, the project developer, who had originally submitted the plan, will be given an opportunity to match the bid amount.

The government will also ensure that the developer has prior experience in the field of passenger transportation such as railway stations, airports or ports or construction experience in the core sector.

Commodity and Exchanges

What is a commodity?

  • Commodities are products that can be bought, sold or traded in different kinds of markets.
  • Commodities are the raw materials that are used to create products which are consumed in everyday life around the world, from food products in India to building new homes in Europe or to running cars in the US.

There are two main types of commodities:

  • Soft commodities  agricultural products such as corn, wheat, coffee, cocoa, sugar and soybean; and livestock.
  • Hard commodities  natural resources that need to be mined or processed such as crude oil, gold, silver and rubber.

What are the main differences between commodity spot and derivatives markets?

  • There are two types of commodity markets: spot (physical) and derivatives (such as futures, options and swaps).
  • In a spot market, a physical commodity is sold or bought at a price negotiated between the buyer and the seller.
  • The spot market involves buying and selling of commodities in cash with immediate delivery.
  • There are spot markets for individual consumers (retail market) and the business-to-business (wholesale market) category.
  • Spot markets also include traditional markets such as Delhi’s Azadpur Mandi that deal in fruits and vegetables.
  • On the other hand, a commodity can be sold or bought via derivatives contract as well.
  • A futures contract is a pre-determined and standardized contract to buy or sell commodities for a particular price and for a certain date in the future.
  • For instance, if one wants to buy 10 tonne of rice today, one can buy it in the spot market.
  • But if one wants to buy or sell 10 tonne of rice at a future date, (say, after two months), one can buy or sell rice futures contracts at a commodity futures exchange.
  • The futures contracts provide for the delivery or receipt of a physical commodity of a specified amount at some future date.
  • Under the physically settled contract, the full purchase price is paid by the buyer and the actual commodity is delivered by the seller.
  • But in a futures contract, actual delivery takes place later.
  • In practice, most futures contracts do not involve delivery of physical commodity as contracts are settled in cash through an exchange.
  • The financial investors prefer cash settlement because of no interest in buying or selling the underlying commodity, and lower transaction costs.
  • Nowadays, the entire process of futures trading in commodities is carried out electronically throughout the world.
  • For instance, a farmer enters into a futures contract to sell 10 tonne of rice at $100 per tonne to a miller on a future date. On that date, the miller will pay the full purchase price ($1,000) to the farmer and in exchange will receive the 10 tonne of rice.
  • However, under the cash-settled futures contract, the farmer and the miller would simply exchange the difference between the spot price of rice on the settlement date and the agreed upon price as mentioned in the futures contract and there would be no actual delivery of rice.
  • Following the above example, if on the settlement date the price of rice was $80 per tonne, while the agreed upon price of futures contract was $100 a tonne, the miller will pay $20 to the farmer in cash and there will be no delivery of rice to the miller.
  • If, on the settlement date, the price of rice was $120 a tonne, the farmer will pay $20 to the miller in cash and no delivery of rice will take place.

Commodity Market in India:

  • The first milestone in the 125 years rich history of organized trading in commodities in India was the constitution of the Bombay Cotton Trade Association in the year 1875.
  • India had a vibrant futures market in commodities till it was discontinued in the mid 1960’s, due to war, natural calamities and the consequent shortages.
  • In 2002, the Government of India allowed the re-introduction of commodity futures in India.
  • Together with this, three screen based, nation-wide multi-commodity exchanges were also permitted to be set up with the approval of the Forward Markets Commission. These are:
  • National Commodity & Derivative Exchange:
  • This exchange was originally promoted by ICICI Bank, National Stock Exchange (NSE), National Bank for Agriculture and Rural Development (NABARD) and Life Insurance Corporation of India (LIC). Subsequently other institutional shareholders have been added on.
  • NCDEX is popular for trading in agricultural commodities.
  • Multi Commodity Exchange:
  • This exchange was originally promoted by Financial Technologies Limited, a software company in the capital markets space.
  • Subsequently other institutional shareholders have been added on.
  • MCX is popular for trading in metals and energy contracts.
  • National Multi Commodity Exchange of India:
  • This exchange was originally promoted by Kailash Gupta, an Ahmedabad based trader, and Central Warehousing Corporation (CWC).
  • Subsequently other institutional shareholders have been added on.
  • NMCE is popular for trading in spices and plantation crops, especially from Kerala, a southern state of India.

Smart Cities

what are Smart Cities?

  • A ‘smart city’ is an urban region that is highly advanced in terms of overall infrastructure, sustainable real estate, communications and market viability.
  • It is a city where information technology is the principal infrastructure and the basis for providing essential services to residents.
  • There are many technological platforms involved, including but not limited to automated sensor networks and data centres.
  • In a smart city, economic development and activity is sustainable and rationally incremental by virtue of being based on success-oriented market drivers such as supply and demand.
  • They benefit everybody, including citizens, businesses, the government and the environment.

What are the core infrastructure in a Smart City?

  • According to the documents released on the Smart Cities website, the core infrastructure in a smart city would include:
  • Adequate water supply
  • Assured electricity supply
  • Sanitation, including solid waste management
  • Efficient urban mobility and public transport
  • Affordable housing, especially for the poor
  • Robust IT connectivity and digitalisation
  • Good governance, especially e-Governance and citizen participation
  • Sustainable environment
  • Safety and security of citizens, particularly women, children and the elderly
  • Health and education