Kaladan Multi-Modal Transit Transport, Extended Fund Facility and Civil Nuclear Sector

In nuclear energy push, Govt to allow private operators, limit their liability

Syllabus:

Preliminary Examination: Current events of national and international importance and General Science

Mains Examination: General Studies III: Science and Technology- developments and their applications and effects in everyday life.

What’s the ongoing story: IN WHAT could set the stage for an unprecedented opening up of the civil nuclear sector, the government is likely to move two crucial amendments in the laws governing the country’s atomic energy sector in the upcoming monsoon session of Parliament, according to sources aware of the developments.

Key Points to Ponder:

• What is the civil nuclear sector?

• Can a private company open a nuclear power plant?

• Are there any private nuclear power plants in India?

• What are the initiatives and steps taken by the GOI to allow private players in the nuclear sector?

• What are the salient features of the Atomic Energy Act 1962?

• Why amendments to the Atomic Energy Act, 1962 are being initiated?

• What is the civil liability of nuclear damage?

• What is Nuclear Energy?

• Why do we need nuclear energy?

• What are the types of nuclear reactor?

• What is the current Status of Nuclear Energy and Nuclear power plants in India?

• Map Work-Mark Nuclear power plants

Key Takeaways:

• The first relates to the easing of provisions in the nuclear liability law, which would effectively cap the liability of equipment vendors in the event of an accident, both in terms of limiting the monetary exposure to the original value of the contract, and a possible time frame limitation on when this liability would apply.

• The second amendment is aimed at enabling private companies to enter nuclear power plant operations in the country, and this could also entail foreign companies potentially taking a minority equity exposure in upcoming nuclear power projects.

• Hitherto, atomic energy has been one of India’s most closed sectors. The twin legal amendments are being seen as a reform push that could help leverage the commercial potential of the Indo-US civil nuclear deal nearly two decades after it was inked. New Delhi is also keen to package this as part of a broader trade and investment outreach with Washington DC, which could eventually culminate with a trade pact that is currently under negotiation.

• The two amendments are expected to take care of niggling legal bottlenecks which are seen to have stymied foreign investments in the atomic energy sector. The Civil Liability for Nuclear Damage Act, 2010, which sought to create a mechanism for compensating victims from damage caused by a nuclear accident, and allocating liability and specifying procedures for compensation, has been cited as an impediment by foreign players such as GE-Hitachi, Westinghouse and French nuclear company Areva (now Framatome).

• Amendments to the Atomic Energy Act, 1962 are being initiated to enable private companies, and possibly even foreign players at a later stage, to enter nuclear generation as operators. Currently, this is restricted to state-owned companies such as NPCIL or NTPC Ltd.

• The government has committed to getting both these legislations passed. An explicit assurance to this effect was made in the Union Budget presented earlier this year, even though the legislative route for at least one of the two proposed bills would be an arduous one.

• All this comes less than two months after the US Department of Energy (DoE) accorded an unprecedented regulatory clearance to Camden, New Jersey-based Holtec International, that potentially sets it on course to leverage the commercial potential of the Indo-US civil nuclear deal.

• The March 26 approval from DoE effectively cleared Holtec International’s application for specific authorisation with respect to the DoE’s restrictive regulation that is referred to as ‘10CFR810’. This specific authorisation (SA IN2023-001) now permitted Holtec to conditionally transfer “unclassified small modular reactor technology” to its regional subsidiary Holtec Asia, as well as Tata Consulting Engineers Ltd, and Larsen & Toubro Ltd in India.

Do You Know:

• The issue of getting a specific ‘10CFR810’ authorisation [Part 810 of Title 10, Code of Federal Regulations of the US Atomic Energy Act of 1954] had been a big regulatory hurdle for New Delhi. This is because the regulation, while giving American companies such as Holtec the ability to export equipment to countries such as India under some strict safeguards, explicitly barred them from manufacturing any nuclear equipment or performing any nuclear design work in India. This provision was a non-starter from New Delhi’s perspective, which wanted to participate in manufacturing the SMRs and co-produce the nuclear components for its domestic needs.

• The Union Budget 2025-26 outlines a significant push towards nuclear energy as part of India’s long-term energy transition strategy. The government has set an ambitious target of 100 GW nuclear power capacity by 2047, positioning nuclear energy as a major pillar in India’s energy mix. This development aligns with the broader objectives of Viksit Bharat, ensuring energy reliability and reducing dependency on fossil fuels. To achieve this goal, strategic policy interventions and infrastructure investments are being undertaken, with an emphasis on indigenous nuclear technology and public-private collaborations.

• Recognizing nuclear power as a critical component for achieving energy security and sustainability, the government has introduced the Nuclear Energy Mission for Viksit Bharat. This initiative aims to enhance domestic nuclear capabilities, promote private sector participation, and accelerate the deployment of advanced nuclear technologies such as Small Modular Reactors (SMRs).

• To facilitate the implementation of the Nuclear Energy Mission, amendments to the Atomic Energy Act and Civil Liability for Nuclear Damage Act will be taken up by the parliament. These amendments are expected to encourage private sector investments in nuclear power projects.

Other Important Articles Covering the same topic:

📍Key nuclear deal breakthrough: US clears firm to build and design n-reactors in India

Previous year UPSC Prelims Question Covering similar theme:
1. In India, why are some nuclear reactors kept under “IAEA safeguards” while others are not? (2020)
(a) Some use uranium and others use thorium
(b) Some use imported uranium and others use domestic supplies
(c) Some are operated by foreign enterprises and others are operated by domestic enterprises
(d) Some are State-owned and others are privately owned

Previous year UPSC Mains Question Covering similar theme:
📍With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy. (2018)

Risk of reputation from ‘perceived misuse’ of Fund money: IMF on Pak

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Important International institutions, agencies and fora- their structure, mandate.

What’s the ongoing story: JUST TWO DAYS before its board met on May 9 in Washington DC to approve a $2.4 billion facility to Pakistan, the International Monetary Fund (IMF) staff had flagged “reputational risks” over perceived misuse of its lending and the increase in “enterprise risks” due to rising tensions with India.

Key Points to Ponder:

• What do you understand by reputational risk?

• What do you understand by “enterprise risks”?

• Why the International Monetary Fund (IMF) staff had flagged “reputational risks” and “enterprise risks”?

• Why the International Monetary Fund (IMF) is facing sharp criticism for approving a $1 billion disbursement to Pakistan?

• What is extended fund facility (EFF)?

• What is IMF bailout?

• Has India been bailed out by the IMF?

• What is the IMF bailout deal with Pakistan?

• What is the name of the IMF program under which Pakistan is currently receiving financial assistance?

• What is the primary concern India has regarding IMF funds being provided to Pakistan?

• Know the implications of repeated IMF bailouts to Pakistan on regional security.

• Analyse the role of international financial aid in perpetuating or mitigating state-sponsored terrorism, using Pakistan as a case study.

• What is the International Monetary Fund (IMF)?

• What does the IMF do?

• How does the IMF give policy advice?

• What kind of financial assistance does the IMF offer?

Key Takeaways:

• In the Supplementary Information docket prepared on May 7 for the IMF board, the Fund’s Middle East and Central Asia department said, “The rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten enterprise risks to the fiscal, external and reform goals of the program.”

• It said that “reputational risks” could come from any “perceived lack of even-handed” or “perceived misuse of Fund disbursements”. “Careful Fund communication will be essential to underscore the Fund’s neutral role and avoid misperceptions about its lending activities,” the docket on Supplementary Information said.

• India had abstained from voting in the board meeting as it raised concerns over the efficacy of IMF programs for Pakistan given its “poor track record” and also on the possibility of “misuse of debt financing funds for state-sponsored cross-border terrorism”, according to the May 9 official statement by the Ministry of Finance. Before the meeting, India’s Foreign Secretary Vikram Misri had said that the Fund’s Board should look “deep within” and take into account the facts before generously bailing out the country.

• The IMF released the report, including the Supplementary Information docket, a day after Defence Minister Rajnath Singh had said that in current times, any financial assistance to Pakistan is no less than terror funding.

Do You Know:

• According to IMF Website, The Extended Fund Facility (EFF) provides financial assistance to countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address. To help countries implement medium-term structural reforms, the EFF offers longer program engagement and a longer repayment period.

• The IMF assists countries hit by crises by providing them financial support to create breathing room as they implement adjustment policies to restore economic stability and growth. It also provides precautionary financing to help prevent and insure against crises. The IMF’s lending toolkit is continuously refined to meet countries’ changing needs.

• Unlike development banks, the IMF does not lend for specific projects. Instead, the IMF provides financial support to countries hit by crises to create breathing room as they implement policies that restore economic stability and growth. It also provides precautionary financing to help prevent crises. IMF lending is continuously refined to meet countries’ changing needs.

• The causes of crises are varied and complex. They can be domestic, external, or both.
Domestic factors include inappropriate fiscal and monetary policies, which can lead to large current account and fiscal deficits and high public debt levels; an exchange rate fixed at an inappropriate level, which can erode competitiveness and result in the loss of official reserves, and a weak financial system, which can create economic booms and busts. Political instability and weak institutions also can trigger crises.

• External factors include shocks ranging from natural disasters to large swings in commodity prices. Both are common causes of crises, especially for low-income countries. With globalization, sudden changes in market sentiment can result in capital flow volatility. Even countries with sound fundamentals can be severely affected by economic crises and policies elsewhere.

Other Important Articles Covering the same topic:

📍IMF loan to Pakistan: why the latest tranche was passed

Previous year UPSC Mains Question Covering similar theme:
📍The World Bank and the IMF, collectively known as the Bretton Woods Institutions, are the two inter-governmental pillars supporting the structure of the world’s economic and financial order. Superficially, the World Bank and the IMF exhibit many common characteristics, yet their role, functions and mandate are distinctly different. Elucidate. (2013)

ISRO’s 101st mission fails as PSLV develops snag minutes after lift-off

Syllabus:

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies III: Awareness in the fields of IT, Space, Computers, robotics, nano-technology, biotechnology and issues relating to intellectual property rights.

What’s the ongoing story: In a rare failure, India’s main rocket PSLV developed problems a few minutes after take-off and failed to place earth observation satellite EOS-09 into the intended orbit in an early morning launch on Sunday.

Key Points to Ponder:

• What is PSLV-C61 mission?

• What are Earth observation satellites?

• What is the significance of a Sun-Synchronous Orbit for Earth observation satellites?

• What are the implications of the PSLV-C61 mission failure on India’s space program?

• What is the polar orbit of the Earth?

• Why are satellites placed in Polar Orbits?

• What is the difference between geostationary and polar orbit?

• What are the three types of orbits?

• Do you know about Low Earth Orbit (LEO), Medium Earth Orbit (MEO), and Geostationary Earth Orbit (GEO) (also known as High Earth Orbit)?

Key Takeaways:

• This was the 101st mission launched by ISRO, and the 63rd one using the PSLV rocket, which is the most successful launch vehicle developed by India’s space agency. PSLV has failed on only two earlier occasions, the first time during its inaugural flight in 1993 and then in 2017 when the C-39 mission had been unsuccessful.

• Sunday’s launch involved the XL-version of PSLV which was on its 27th flight. This rocket has four stages. Around six minutes after the lift-off, after the third stage of the rocket took over, the launch trajectory started deviating from the calculated trajectory. The altitude of the vehicle was lower than what it should be.

• After the first signs of trouble, the graphics and sound for the live video was cut-off. It was later announced that the outcome of the mission will be communicated by the space agency later.

• Members of the parliamentary committee on science and technology were present at Sriharikota for the launch.

• This is the second back-to-back failure for the space agency after its GSLV could not place NVS-02 satellite in the correct orbit during the space agency’s 100th mission. After being placed in an incorrect elliptical orbit, the space agency started looking for alternative ways to utilise NVS-02 that has a mission life of 15 years. Both failures took place in the term of the new ISRO chief V Narayanan.

• This was also the second mission, after December’s Spadex launch, where the PSLV was integrated at the newly built Payload Integration Facility (PIF) instead of the launch pad. The facility was designed to free-up launch pad while a mission was being put together in order to increase the frequency of launches.

• The space agency was to put the 1,700-kg earth observation satellite at an altitude of about 597 km in a sun-synchronous polar orbit — meaning the satellite was to pass over a given place at the same time every day. The EOS-09 satellite carried a Synthetic Aperture Radar (SAR) payload, capable of providing images of the earth in all weather conditions. The satellite was meant to work in tandem with the EOS-04 satellite launched in 2022, ensuring seamless continuity and increasing the observation frequency.

Do You Know:

• This was the 63rd PSLV launch. Since their introduction in the 1990s, PSLVs have only failed twice – the first during the inaugural flight in 1993 and in 2017, when the C-39 mission was unsuccessful. Here is why PSLVs have become reliable for India’s Space agency and what happened during the two failed missions.

• Satellites deployed for navigation, mapping, or other purposes must be carried to Space by launch vehicles, or rockets, like the PSLV. The rockets have powerful propulsion systems that generate a huge amount of energy, required to lift heavy objects like satellites into Space, overcoming the Earth’s gravitational pull.

• Satellites, or payloads as they are often called, sit inside the rocket and are ejected once they reach near their intended orbit in Space.

• ISRO has three main types of launchers: the PSLV, the Geosynchronous Satellite Launch Vehicle (GSLV), and the Geosynchronous Satellite Launch Vehicle Mk-III (LVM3). Variants are chosen based on the payload weights and the orbit they are to reach.

• The ISRO website notes that PSLV has been a “versatile launch vehicle deployed for launching all the three types of payloads viz. Earth Observation, Geo-stationary and Navigation. It has got highest success rate and considered as work horse of ISRO.” Further, it has launched two spacecraft, Chandrayaan-1 in 2008 and Mars Orbiter Spacecraft in 2013.

• The PSLV has four parts — PS1, a solid rocket motor augmented by 6 solid strap-on boosters; PS2, a storable liquid rocket engine, known as the Vikas engine; PS3, a solid rocket motor that provides the upper stages high thrust after the atmospheric phase of the launch; and PS4, the uppermost stage consisting of two Earth storable liquid engines.

• ISRO planned to put the 1,700-kg Earth observation satellite at an altitude of about 597 km in a sun-synchronous polar orbit — meaning the satellite was to pass over a given place at the same time every day.

• The EOS-09 satellite carried a Synthetic Aperture Radar (SAR) payload, capable of providing images of the Earth in all weather conditions. This was the second consecutive failure for the Space agency after its GSLV could not place the NVS-02 satellite in the correct orbit during ISRO’s 100th mission in February this year.

Other Important Articles Covering the same topic:

📍ISRO’s 101st satellite launch fails: Recalling the only two other instances when ‘workhorse’ PSLV failed

Previous year UPSC Prelims Question Covering similar theme:
2. With reference to India’s satellite launch vehicles, consider the following statements: (2018)
1. PSLVs launch the satellites useful for Earth resources monitoring whereas GSLVs are designed mainly to launch communication satellites.
2. Satellites launched by PSLV appear to remain permanently fixed in the same position in the sky, as viewed from a particular location on Earth.
3. GSLV Mk III is a four-staged launch vehicle with the first and third stages using solid rocket motors, and the second and fourth stages using liquid rocket engines.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 and 3
(c) 1 and 2
(d) 3 only

THE EDITORIAL PAGE

The Court’s bind

Syllabus:

Preliminary Examination: Indian Polity and Governance – Constitution, Political System, Panchayati Raj, Public Policy, Rights Issues

Mains Examination: General Studies II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein

What’s the ongoing story: Alok Prasanna Kumar Writes: Court can uphold its directions (however modified) and risk being accused of overreach, or allow a fundamental breakdown of constitutional order.

Key Points to Ponder:

• What is the advisory jurisdiction of the Supreme Court?

• What is article 143(1) of the Constitution?

• Under Article 143(1) of the Constitution, the President may refer a “question of law or fact” to the Supreme Court for its opinion—is the opinion given by the Supreme Court of India is binding?

• Can the SC decline to answer a presidential reference?

• Can the SC overturn its April 8 decision through the presidential reference?

• What was the April 8 decision given by the Supreme Court?

• In the Tamil Nadu v. Governor case, what specifically has the Supreme Court said about the president’s power?

• What is Article 142 of the Constitution?

• Why Supreme Court invoked Article 142 in this case?

• Do you think that Supreme Court can undermined the President’s powers?

• What is Judicial encroachment and Judicial overreach?

• Judicial encroachment and Judicial overreach—Compare and Contrast

• ‘The recent Supreme Court orders involving the Tamil Nadu Governor is an example of Judicial encroachment’—How far you agree?

Key Takeaways:

• Article 143 relates to the Supreme Court’s “advisory” jurisdiction. An advisory cannot overturn a verdict that has attained finality.

• The Supreme Court also said as much in its judgment In re Natural Resources Allocation (2012) — this was the last time a Presidential Reference was made. Then President Pratibha Patil made such a reference after the apex court had set aside the 2G spectrum allocation process and ruled that auctions were the only way to distribute telecom spectrum.

• Like in State of Tamil Nadu vs Governor of Tamil Nadu, this reference, too, was perceived as bench-hunting by the United Progressive Alliance (UPA) government in a bid to overturn the 2G spectrum verdict. However, the five-judge Bench hearing the reference held that while the 2G spectrum verdict had attained finality, the finding of law could be made clearer: Auctions were not the only way to distribute scarce natural resources, provided there was a good justification for not doing so.

• Therefore, while the judgment of the two-judge bench of the SC in the Tamil Nadu Governor case is final, its findings on the law may still be tweaked by the five-judge Bench hearing the Presidential Reference.

• The Natural Resources Allocation case is one instance where the five-judge Bench subtly changed the legal position laid down by an earlier bench.

• In 1998, another Presidential Reference was used to modify the ruling of a previous Bench on judicial appointments. While upholding the collegium system of judicial appointment (first laid down in the Supreme Court Advocates on Record case in 1993), the SC modified the composition of the collegium and other elements of the process.

• Should the Supreme Court modify the law laid down in the TN Governor case, merely because it can do so? The Court could very well refuse to answer the questions posed to it (as it did in the Ismail Faruqui case in the context of the Babri Masjid dispute). It could ask whether it is necessary to re-examine the guidelines (for the Governor and the President), as they have not yet led to any problem.

Do You Know:

• On April 8, the Supreme Court had set a timeline for Governors to act on pending Bills, and for the first time, prescribed that the President should take a decision on the Bills reserved for consideration by the Governor within three months from the date on which such reference is received. Under Article 201 of the Constitution, no timeframe has been set for a Presidential decision.

• Under Article 143(1) of the Constitution, the President may refer a “question of law or fact” to the Supreme Court for its opinion. The opinion, unlike a ruling, is not binding.

• The Constitution extended the provision in the Government of India Act, 1935 to seek the opinion of the Federal Court on questions of law to questions of fact as well, including certain hypotheticals.

• A question under Article 143 may be referred if it “has arisen, or is likely to arise”, and “which is of such a nature and of such
public importance that it is expedient to obtain the opinion of the Supreme Court”.

• Article 145(3) requires any such reference to be heard by five judges, after which the SC returns the reference to the President with the majority opinion.

• Under the Constitution, the President acts on the aid and advice of the Cabinet. The advisory jurisdiction allows her the means to seek independent advice to act on certain constitutional matters. It is a power that the President has invoked on at least 15 occasions since 1950.

Other Important Articles Covering the same topic:

📍The President’s reference

Previous year UPSC Prelims Question Covering similar theme:
3. Consider the following statements: (2010)
1. In appellate jurisdiction, the Supreme Court has exclusive power to adjudicate upon disputes involving elections of the President and the Vice President.
2. In advisory jurisdiction, the President has the power to seek an opinion from the apex court under Article 143 of the Constitution
3. In original jurisdiction, the Supreme Court hears appeals from lower courts.
Which of the statement(s) given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 2 and 3 only

ECONOMY

As trade ties with India fray, Bangladesh pivots & China gains ground

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: India and its neighbourhood- relations.

What’s the ongoing story: With Bangladesh set to graduate from the United Nations’ Least Developed Country (LDC) category in November 2026 — a move that will end its duty-free access to export markets such as the European Union, posing fresh challenges — the country has begun a sharp economic pivot away from New Delhi towards Beijing, thereby straining trade ties with India.

Key Points to Ponder:

• Discuss the recent developments in India–Bangladesh trade relations.

• How China’s growing influence in Bangladesh is impacting India’s strategic interests in the region?

• Evaluate the implications of India’s import restrictions on Bangladeshi goods for the economies of both countries.

• What are the role of non-tariff barriers in international trade?

Key Takeaways:

• Political and economic tensions between India and its largest trade partner in South Asia are growing, as the union government on Saturday decided to impose a number of import restrictions on goods from Bangladesh — particularly ready-made garments, the country’s largest export item and a key source of foreign exchange.

• This follows early signs of deteriorating ties between two countries, when New Delhi in April decided to terminate the five-year-old transhipment facility for Bangladesh’s export cargo — a mechanism that helped Dhaka smoothly ship its goods to several Western countries using Indian land routes and airports.

• While government sources say that Saturday’s import restrictions and the termination of the transhipment facility are a result of similar restrictions imposed by Dhaka and port congestion caused by goods from Dhaka respectively, Bangladesh’s Chief Adviser Muhammad Yunus — an economist and Nobel laureate who has suggested expanding the influence of the Chinese economy around India’s strategically important Northeast region — has contributed to worsening India–Bangladesh trade relations.

• However, this fits squarely into China’s broader strategy to limit India’s influence, as India chose not to join the China-led Regional Comprehensive Economic Partnership (RCEP) agreement and is positioning itself as an alternative manufacturing destination by pursuing closer economic integration with the US, UK, EU, and the European Free Trade Association (EFTA) region.

• New Delhi has decided to restrict garment imports from Bangladesh as it is looking to attract labour-intensive jobs in the sector. This comes as India’s textile sector could see a push due to the free trade agreements. India has already received duty-free access to the UK market for its garment exports and has sought similar access in its trade deals with the EU and US.

• Think tank Global Trade Research Initiative (GTRI) said that Indian textile firms have long protested the competitive edge enjoyed by Bangladeshi exporters — who benefit from duty-free Chinese fabric imports and export subsidies — giving them a 10–15 per cent price advantage in the Indian market.

Do You Know:

• A government official said that Bangladesh has recently imposed port restrictions on exports of Indian yarn via land ports, allowing Indian yarn exports only via seaports. This has ostensibly been done in response to demand by Bangladeshi textile mills, even though the land route offers the quickest and cheapest yarn supply to the ready-made garments industry in Bangladesh, the official said.

• China has been rapidly increasing its influence on South Asian countries, particularly Bangladesh. For instance, China has allowed 97 per cent of Bangladeshi goods duty-free access to its domestic market since June 2020. More importantly, it is helping the country diversify its export base and move its industry up the value chain.

• According to the Carnegie Endowment for International Peace, the largest number of infrastructure projects developed with Chinese help in South Asia are in Bangladesh. Bangladesh is China’s second-largest buyer of military hardware globally, accounting for almost one-fifth of China’s total exports between 2016 and 2020. Chinese arms make up over 70 per cent of Bangladesh’s major arms purchases, according to a 2020 report by the Stockholm International Peace Research Institute.

Other Important Articles Covering the same topic:

📍Bangladesh is drawing closer to Pakistan and China. What should India do?

Suez Canal offers 15% discount to cargo ships: Will vessels return to the Red Sea route?

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Effect of policies and politics of developed and developing countries on India’s interests

What’s the ongoing story: Egypt’s Suez Canal Authority (SCA) is offering a 15 per cent discount from May 15 on transit fee to cargo ships of minimum 130,000 mt capacity, underscoring the impact that the Red Sea security crisis has had on the waterway critical to the shortest maritime route to the Mediterranean Sea and beyond from the Arab Peninsula, North-East Africa, and the Arabian Sea.

Key Points to Ponder:

• Why Egypt’s Suez Canal Authority (SCA) is offering a 15 per cent discount?

• What is the Suez Canal known for?

• Who owns Suez Canal today?

• Map Work-Suez Canal

• What are the economic and strategic implications of the Suez Canal Authority’s decision to offer a 15% discount on transit fees for large container ships?

• Know the impact of the US-Houthi ceasefire on maritime security in the Red Sea.

• What are the challenges faced by the Suez Canal in maintaining its position as a vital global trade route amidst security threats and alternative shipping paths?

• What are the role of regional diplomacy, particularly Oman’s mediation, in resolving conflicts that affect international trade routes?

Key Takeaways:

• “The SCA has issued incentives and reductions of 15 per cent on the transit tolls of container ships of 130 thousand tonnes or more in net tonnage (loaded or in ballast) for 90 days,” said Admiral Ossama Rabiee, SCA chairman and MD after a meeting with the Italian Ambassador to Egypt, Michele Quaroni.

• Earlier, Rabiee also reached out to 25 major shipping line operators and maritime agencies, urging them to gradually return their vessels to the Suez Canal citing the positive development “towards the return of navigation in the Red Sea”. This came three days after US President Donald Trump announced that Iran-backed Houthi militia had agreed to a ceasefire in the Red Sea. The Houthis maintained that Israel-flagged and -linked ships are not part of the agreement with the US, and they will continue to be targeted .

• In November 2023, Yemen-based Houthi rebels, backed by Iran, began targeting commercial vessels that they believed were linked to Israel and its key allies in response to its military offensive in Gaza. This crisis prompted the world’s major container lines to divert their ships from the Red Sea route and navigate around the Cape of Good Hope. With much of the cargo movement rerouting away from the Suez Canal, its revenue crashed to around $4 billion in 2024 from $10.3 billion in 2023.

Do You Know:

• The Suez Canal accounts for nearly 12-15 per cent of global trade, according to IMF data. Nearly 30 per cent of global container traffic flowed through the Suez Canal before the Houthi attacks began. It is also a key passage for 8-9 per cent of global energy flows.

• As of May 11, 2025, Suez Canal’s daily transit trade volume (TTV) stood at 484,137 mt, compared with 1,349,086 mt a year ago, shows data from PortWatch, a live conflict tracker maintained by the IMF and Oxford University. TTV denotes the total volume of goods transported through a shipping route. Daily TTV stood at 11,052,600 mt as of May 11, 2025 at the Bab el-Mandeb Strait, compared with 1,192,116 mt a year ago, according to PortWatch data.

• According to an analysis by the Federal Reserve Bank of St Louis, ports in East Asia and the Pacific, Europe and Central Asia, the
Middle East and North Africa witnessed a decline in the amount of trade between October 20, 2023 and January 28, 2024 compared to the year-ago period.

• While the Red Sea security crisis hit traffic and revenue for the Suez Canal, it also led to higher shipping costs as vessels go around Africa, extending voyage durations—by 10-14 days—and fuel burn significantly, leading to higher freight rates. The longer voyages also made vessel availability tighter, again having an inflationary impact on freight rates. And for vessels still looking to transit the Red Sea, war risk insurance premiums skyrocketed, making the route unviable for most.

• The Red Sea crisis has also hit liquefied natural gas (LNG) flows via Suez Canal which plummeted to 4.15 million tonnes in 2024 from 32.36 million tonnes in 2023 and 34.94 million tonnes in 2022 according to Kpler data. Meanwhile, LNG volumes going via the Cape of Good Hope increased by a little over five-fold from 11. 76 million tonnes in 2022 to 59.37 million tonnes in 2024.

Other Important Articles Covering the same topic:

📍Explained: History of Suez Canal, its economic importance

EXPLAINED

The Northeast-Kolkata route via Myanmar, not Bangladesh

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: India and its neighbourhood- relations.

What’s the ongoing story: Amid a downturn in India’s relationship with Bangladesh, the long-delayed Kaladan Multi Modal Transit Transport Project (KMMTTP) linking Mizoram to Kolkata via Myanmar has grown in importance.

Key Points to Ponder:

• What do you know about Kaladan multi-modal transit transport?

• Map Work-Kaladan multi-modal transit transport

• Which port in Myanmar is being developed under the Kaladan project to facilitate connectivity with India’s Northeast?

• Discuss the strategic and economic significance of the Kaladan Multi-Modal Transit Transport Project for India’s Northeast region.

• What are the reasons behind India’s decision to develop connectivity to its Northeast region via Myanmar instead of Bangladesh?

• Know the role of the Kaladan project in India’s Act East Policy.

Key Takeaways:

• The Ministry of Road Transport and Highways (MoRTH) has now okayed a 166.8-km four-lane highway from Shillong to Silchar, which will eventually be extended to Zorinpui, Mizoram, and connect the KMMTTP with a high-speed road corridor that runs through the heart of the Northeast, The Indian Express reported.

• “With the help of the Kaladan project, cargo will reach from Vizag and Kolkata to the Northeast, without being dependent on Bangladesh,” a senior official from National Highways & Infrastructure Development Corporation Limited (NHIDCL) told The Indian Express.

• Ties between New Delhi and Dhaka have taken a nosedive since the ouster of former Bangladesh Prime Minister Sheikh Hasina, an all-weather ally to India, last August.

• The MoRTH sanctioned the Shillong-Silchar highway about a month after Muhammad Yunus, the head of Bangladesh’s interim government, called Northeast India “landlocked”, and referred to Bangladesh as the “only guardian of the ocean” during a visit to China.

• Currently, rest of India’s only access to the seven Northeastern states is through the narrow Siliguri Corridor, which goes by the apt moniker of “Chicken’s Neck”. Straddled between Nepal and Bangladesh, and only 20 km at its narrowest, this corridor has long posed an economic and a strategic challenge to New Delhi — one that has prompted some experts to call it “an Achilles heel for India”.

• Over the last decade-and-a-half, an important element of New Delhi’s engagement with the Hasina government in Dhaka was to open pathways to the Northeast via Bangladesh — as would have been the case pre-Partition. (Note that Agartala, the capital of Tripura, lies less than 200 km from the port of Chattogram in Bangladesh.)

• This, experts argue, would boost economic activity across the Northeast as well as in Bangladesh. But with a new, seemingly “anti-India” dispensation in place in Dhaka, these plans have fallen by the wayside, prompting India to “Look [further] East”.

Do You Know:

• After feasibility studies were conducted in the late 1990s and early 2000s, the KMMTTP framework was signed by India and Myanmar in 2008. This was set to be a major development in India’s strategically vital Look East Policy. (Act East Policy under the Narendra Modi
government).

• The idea behind the project was straightforward. To create a transit corridor from the port of Sittwe in the Rakhine State in Myanmar to Mizoram, and eventually the rest of Northeast India. This would allow goods to be shipped from India’s eastern ports — primarily Kolkata — to Sittwe and then taken to Mizoram and beyond.

• Upon completion, the KMMTTP would effectively shave off 1,000 km in distance between Kolkata and Mizoram, and save a journey time of three-to-four days.

• As the term “multi-modal” suggests, the project combines several modes of transport.
—Kolkata to Sittwe: This 539 km stretch between the two seaports will be covered by ship via the Bay of Bengal. Although this route has technically been operational for decades, India has invested significant resources to upgrade the Sittwe port to increase its capacity. This part of the project has been completed.
—Sittwe to Paletwa: This 158 km stretch on the Kaladan river in Myanmar will be covered by boat. The MEA has invested in dredging the river, and constructing requisite jetty facilities at Paletwa to handle 300-tonne barges. The river is navigable and all work has bee completed on this part of the project.
—Paletwa to Zorinpui: This 108 km four-lane road will be the last leg of the corridor in Myanmar. Myanmar has granted all approvals for this part of the project, and the Integrated Customs & Immigration Checkpost at Zochawchhuah-Zorinpui has been operational since 2017. But the last 50-odd-km of this highway (from Kaletwa, Myanmar to Zorinpui) is yet to be completed.
—Zorinpui to Aizwal & beyond: While Zorinpui is connected to Aizwal and the rest of the Northeast by road, the NHIDCL plans to eventually extend the high-speed corridor from Shillong all the way to the border town, The Indian Express reported.

Express Graphic

Other Important Articles Covering the same topic:

📍Slicing off 1,000 km, to bring Mizoram closer to the world

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