Maruti Gujarat Plant issue – corporate governance

Maruti Suzuki announced in January end that its Japanese parent Suzuki Motor Corporation (SMC) would invest $485 million in a wholly owned manufacturing facility in Gujarat to make cars and other vehicles on contract for sale by its listed Indian subsidiary. This move created discomfort with its minority investors and initiated a chain reaction which is now seen as a milestone event in domain of corporate governance in India.

Case facts:

The Japanese automobile company Suzuki owns 56 per cent in Maruti Suzuki India, i.e. it owns majority shares.

The plant would be established under a new 100 percent owned subsidiary called Suzuki Motors Gujarat Private Limited.

Maruti Suzuki had acquired 1,190 acre of land in Mehsana district in 2011 for its expansion plans that would now be transferred to the parent Japanese company in lieu of an annual rental fee.

As per the deal worked out between the SMC and Maruti, the latter would buy cars made by its parent at cost price that includes royalty fees embedded into it.

Maruti generates a third of Suzuki’s global profits and its annual 11.5 million-unit production contributes around 40 per cent to the worldwide volumes of the parent company.

Maruti currently operates six in-house plants – three each in Gurgaon and Manesar – with an installed capacity of 1.75 million units.

In recent past, there have been cases of extraordinary violence and obstruction at both locations of Maruti plants in Haryana.

What is the case about (in simple, layman’s terms)

Suzuki holds majority shares in maruti suzuki company. So technically it does not require permission for taking critical decisions regarding the company. This is where corporate governance comes in. Corporate governance is all about ethics and transparency and small investor protection and such stuff. A point about maruti, or for that matter most major indian companies’ shareholding pattern is that promoters own majority shares but there are other significant investors called institutional investors. These investors include mutual funds, insurance companies, finance companies, banks, etc. Their holdings often run in hundreds of crores or 5 to 50+ percent in some cases. However, their say in company decision making in India, has been dismal. But, in the maruti case they have shown unprecedented initiative. They joined together, all 17 of them if i remember correctly, and wrote to the board of directors expressing deep displeasure. The company had to relent because this meant lot of bad publicity and also these investors were powerful to impact maruti’s debt raising capabilities and stock market performance.

What are the issues raised?

the creation of a wholly owned subsidiary when a partly owned one exists can lead to conflict of interest

tricky transfer pricing issues – now, it is being said that transfer at cost prices but who is to say they won’t jack up royalty fee in 100 percent subsidiary or fudge costing or for that matter , stick to their cost price transfer policy. As the company is not listed, this will hinder transparency.

in course of time the company will be reduced to a marketing unit selling cars produced by the wholly owned subsidiary. Investors feared that suzuki wanted to do this in all its future plants and hence turn maruti into just a middleman of sorts. This would mean that maruti loses its profitability and value slowly.

SMC interests are not at stake here. Any transfer of value, whether small or big, gradual or quick, would impact only the minor shareholders, largest being LIC,with 6.93 per cent stake.

Who wins – Maruti or Suzuki or both or none?

Maruti’s argument in favour of the deal – “Maruti would financially benefit from the interest earnings resulting from not investing its money in this project directly and have no risk involved. While the Suzuki subsidiary would sell vehicles only to Maruti at the lowest cost possible.”

Suzuki has major cash pile which earns measly (near zero) interest in Japan. By investing it here would mean a much better rate of return.

Maruti itself has Rs.7,500 crore of free cash idling on its balance-sheet, earning about half of what the company earns as return on its capital employed.

Suzuki appears to be going down the same route as many of the other multinational corporate in India. Several MNCs in India have parked their most profitable businesses lines in 100 percent subsidiaries (ex – hyundai or even toyota, where kirloskar holds nere 11 percent and toyota 89): the listed companies either house the less profitable businesses or operate as marketing arms of the 100 per cent subsidiary.

The long-term plan (post fiscal year 2017) is to expand to up to 1.5 million units a year, which is about the current size of Maruti.

what happened after series of negative media articles and angry letters from investors

SMC has now watered down the proposal and also said it will seek the consent of the minority shareholders as envisaged under Section 188 of the new Companies Act.

Should the contract-manufacturing agreement between the two end, the plant will be transferred to Maruti at book value and not fair market value, as was first decided.

some terms explanation in layman friendly language –

Fair value is a value determined by each party as per their utility and then agreed upon by both or all parties. In maruti case, this would have essentially meant getting as much price for the plant Suzuki could extract from maruti as suzuki is majority owner but only a part owner. also company is Indian, so it makes sense to divert profits towards suzuki from maruti.

Book value is based on actual cost incurred minus depreciation. There are prescribed rules for determining this and major manipulation cannot be done easily.

Transfer pricing is the price charged by one part of organisation to other part of organisation. Ex – this is imaginary scenario – tata manufactures steel which is used in its cars, if the steel unit gives this for free also, there would ultimately be no overall loss for the tata group. But in reality these companies are separate entities. So must charge for the steel. Now if ratan ji or now, cyrus ji wants to decrease profits of tata motors he can simply charge very high for steel and if he wants lower profit for tata steel, charge super low for steel to motors whose profits would then shoot up. This kind of disgusting manipualtion is legally possible and rampantly done in power sector to dupe consumers. Reliance in delhiis doing this.

Some FAQs

1. You said that fair value is the agreed price between parties. In the present case, then how come Suzuki gets the authority to dictate price on Maruti? If Maruti didn’t accept that price, the fair value (as per the definition mentioned by you) stands nullified. Even if SMC mandated it in a clause, it cannot then be called fair value…

2. A small doubt in your transfer pricing example. Even if Tata steel inflates or deflates the price of steel while supplying it to another Tata firm in the same country, the profit/loss in its balance sheet will be reflected as loss/profit in the other’s balance sheet. The overall profit/loss of the entire group (Tata Sons) would be the same. Isn’t it? So what is the use of it? Unless transfer pricing is done to divert profit to a daughter company in some other country where tax rates are negligible, there isn’t any real profit… pls. clarify in the present context.

3. I also read that after the opposition, SMC will take consent of minority shareholders before establishing the plant. Does that mean that if minority shareholders are opposed to the move, the plan will be dropped? Despite SMC being a majority shareholder?

4. How would MSIL lose its value over time… can you please elaborate?

5. Is it because of labour issue ? Are the working labour norms more relaxed in gujrat than in hayana?

Answers 

1. Suzuki has majority control of maruti, so in effect any price dictated by parent will be accepted without question by maruti.

2. Yes you are correct, profits are flowed to companies with lower tax obligations, in many cases to several shell companies where they inflate expenses to neutralize the profits.
In maruti’s case i have mentioned the reason for keeping profits with parent company. Firstly, since it is only a partial owner in maruti , it would have to share those profits with others. But more importantly, they cant plough back profits from maruti to parent company easily but from suzuki, its pretty easy. In short, itna samajh lo agar maruti kamaegi to kharbuza katega aur sabme batega aur agar suzuki kamaegi to sirf wo company ke investors sitting offshore.

3. The statement clearly says that ” even though legally not obligated to do so, they will stop if minority shareholders
oppose”. another major point here is the new companies act which has a provision for asking minority shareholders opinion but since it has not yet come into force, the decision was taken by the company in a hurry. Now, it seems they are, for all practical purposes, bound to the clause.

4. Msil loses value slowly as profits will reduce as they would be cornered by suzuki as they keep increasing production of gujarat plant, with all new models coming out from there. One expert i talked to told that they will even close shop in gurgaon in next 10 years or so.The long-term plan (post fiscal year 2017) is to expand to up to 1.5 million units a year, which is about the current size of Maruti. A Barclays Research report says that post-Gujarat, there would be a structural change in the earnings profile of the company towards higher proportion of distribution margin. Note that in fiscal year 2010, Japanese parent Suzuki Motor Corp. had raised royalty from 3% to 5% of sales.

5. Though on the face of it, it may seem the move is mainly due to labour issues but in reality it goes much deep.
It is not about law as such, cuz law is pretty much same level in guj but the admin here cares far less. Most workers in guj are not very well organized, less unions, not considered large united vote bank. Many come from other states like bihar, up, rajasthan, maha, mp, etc.
Believe me, if all goes as per plan for suzuki, and their market share remains above 50 percent, they will reduce maruti to the marketer/distributor status. Similar to what happens with consumer goods giants like lg, samsung etc and their regional distributors.

sources – my own views (as mentioned in one forumias discussion and otherwise), prominent newspapers like ET, Mint, Hindu.

Meerut sedition incident – a case study

A major incident happened in Meerut last week when some students of a private university cheered for the Pakistan cricket team during a closely fought one-day match against India and celebrated Pakistan’s victory. Meerut police booked a group of students from Jammu and Kashmir on a charge of sedition (under Section 124A of the Indian Penal Code) and also other charges - promoting enmity between different groups, under Section 153-A of the IPC and causing mischief (Section 427). The major cause for outrage was the decision to slap the sedition charge. Sedition means “Conduct or language inciting rebellion against the authority of a state”.

Whether the decision was aptly taken by the administration or what else could have been done, both by the police and college, presents a case study for deeper analysis. It could be useful from UPSC interview and mains perspective too.

I have generously used opinions from this forumias thread - http://forumias.com/discussion/3651/what-would-be-your-reaction-as-dmsp-in-meerut-scenario-on-the-eve-of-indo-pak-match  and various news articles from The Hindu.

Typical questions could be –

1).Do you agree with the steps taken by UP police and govt regarding this incident? Justify.
2).what would be your reaction as DM/SP of the particular district when the said incident is brought to your notice?

Answer 1:

Legal aspects - The Supreme Court has made it clear that the charge of sedition cannot be invoked unless there is actual incitement to violence and intention to cause disorder, and that merely using words that indicate disaffection against the government cannot be termed sedition.

The Supreme Court’s ruling has, however, been largely ignored by administrators when it comes to enforcement. Every person whose inconvenient view sparks outrage ends up being charged under this section or Sections 153A and 295A. However, most of these prosecutions are withdrawn or fail when faced with strict legal scrutiny from a superior court.

Binayak Sen’s possession of Naxal literature was the basis of his conviction and life sentence under this section by a Chhattisgarh sessions court. Cartoonist Aseem Trivedi’s innocuous cartoons during the Anna agitation saw the Maharashtra government invoke this section to curb dissent.

First PM Nehru, during introduction of the first amendment to India’s constitution which imposed restrictions on free speech, he said that this section itself be deleted from IPC. He said that this particular Section is highly objectionable and obnoxious and it should have no place both for practical and historical reasons.

By above argument, it seems clear that the steps taken by the university authorities and the police/govt. were excessively severe.

However, it can also be argued that these students were grown adults, they knew what are consequences of their act. For this fiasco they were equally responsible.

Cheering for Pak in a place like UP where there have been more than hundred riots and a major one recently, is a deliberate act of provocation, especially during a time so close to the election.

Answer 2:

If I was the DM or SP, before a criminal complaint was filed, I would have first met the students personally and assigned a fact finding team to ascertain the matter. I would then counsel the university authorities to reprimand the students rather than filing charges as the long term solution is creating a spirit of oneness and equality. Punishing under any law is just a temporary fix.

I would have recommended that all of them undergo counseling to avoid legal action. I would have told them clearly to be careful in the future and remind them that the reason why they've been let off is because of the rights they enjoy as Indian citizens. Do our neighbours extend such understanding towards dissenters? I also would've asked the college to arrange for a PTA meeting.

i would suggest that these Kashmiri students have to be counseled and not booked under any law because force will generate more resistance not love. It will push them towards anti-social and anti-indian elements which leave no stone unturned in instigating young Muslims against their own countrymen.

In the end, a big vote of thanks to all contributors to the opinions, equally the hindu editors as well as ss36, anic21, arindam, uzma and others.

detailed solution to test number 3 of prelims - mock

I have provided a detailed solution to test number 3 that appeared on preprelims site - http://preprelims.blogspot.in/2014/02/Solution-Test-III.html

The credit to the original question paper and solution belongs to them. I have just provided the solutions in details. I have tried to keep the explanation simple for beginners. This will save considerable time and effort for first timers.

1. If the earth's direction of rotation is reversed, what would be the IST (Indian Standard Time) when it is noon (12:00 P.M.) according to UTC (Coordinated Universal Time) or GMT (Greenwich Mean Time)?

a. 05:30 A.M.

b. 06:30 A.M.

c. 05:30 P.M.

d. 06:30 P.M.

Soln.: when the direction of rotation is reversed the sun rises from the west i.e. from Hawaii(US) to Japan and not the other way around. in the actual rotation, we add 5.30 hours to UTC to get IST, ex- 5 pm UTC football match starts at 10.30 pm IST. now, since it is reversed, we subtract 5.30 hours i.e. -  12 pm UTC - 5.30 hours = 6.30 am IST

2. Consider the following statements with reference to the 'partial decontrol' of sugar in 2013:

I. Sugar mills don't have to sell 10% of their produce to the government at concessional rates any longer.

II. Sugar is not procured by the state governments for Public Distribution System any longer.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: in 2013,  govt. removed two key controls on sugar sector (there are many still in place, to read more visit mrunals site - http://mrunal.org/2013/01/economy-sugar-pricing-decontrol-rangarajan-committee-frp-sap-meaning-issues-explained.html ). the regulated release mechanism, under which sugar quantity for open market sale was fixed by government, was abolished. also, mills were freed from mandatory supply of 10% of their production to the government at cheaper rate to meet ration shop (PDS) demand. The sugar to be supplied through ration shops(pds) would be purchased by the state governments and the centre will bear (by paying state govt.) the entire subsidy cost. hence, I is true but II is false, as state still procures. although at market price.

3. Consider the following statements about the passage of bills in Parliament?

I. Members of the opposition parties can introduce ordinary bills in the Parliament.

II. Members of the opposition parties can introduce money bills in the Parliament.

III. Members of the opposition parties can introduce constitutional amendment bills in the Parliament.

Which of the above statements is/are true?

a. None of them

b. Only I

c. I and II

d. I and III

soln.:  The designation "private member's bill" is bill which a "private member" who is a member of parliament (MP) and not a member of the cabinet (executive). such private member bills can be ordinary as well as constitutional amendment bill but not money bill (or financial bill, which is type of  money bill). hence, this instrument is available to opposition parties and options I and III are true.

4. Consider the following statements about 'generic drugs'?

I. Generic drugs have the same chemical composition as the respective original patents.

II. Generic drugs need to have lower prices than their branded counterparts as per TRIPS.

III. Even before patent period expires, generic version can be allowed under compulsory licensing.

Which of the above statements is/are true?

a. I and II

b. I and III

c. II and III

d. All of them

Soln.: III is true as we have seen in very famous Nexavar (Bayer) case in Intellectual Property Appellate Board (IPAB). The company was forced to give compulsory licence on cancer drug nexavar to natc0 pharma. I is also true (see defintion here - a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use. It has also been defined as a term referring to any drug marketed under its chemical name without advertising. A generic drug must contain the same active ingredients as the original formulation.) as per TRIPS (Trade Related Aspects of Intellectual Property Rights) there is no such compulsion on pricing.

5. The Mathura and Gandhara schools refer to which of the following:

a. Architectural styles

b. Drama forms

c. Hindustani music gharanas

d. Painting schools

* Although 'a' and 'd' are both correct options, 'a' is more correct.

Soln.: Mathura and Gandhara schools of art were the two major contemporary sculpture styles in ancient India. the interaction of Greek and Buddhist culture flourished in the area of Gandhara, in today’s northern Pakistan, before spreading further into India, influencing the art of Mathura, and then the Hindu art of the Gupta empire, which was to extend to the rest of South-East Asia.

6. Consider the following cases:

I. Foreign company setting up its wholly owned subsidiary in India

II. Indian company partnering with a foreign company to set up a joint venture outside India

III. Foreign company buying shares of a company listed in India

IV. Indian company buying shares of a company listed outside India

Which of the above is/are examples of FII (Foreign Institutional Investment)?

a. I and II

b. I and III

c. II and IV

d. III and IV

Soln.: options I and II fall under FDI while III and IV under FII. FDI (Foreign Direct Investment) is when a foreign company invests in India directly by setting up a wholly owned subsidiary or getting into a joint venture, and conducting their business in India. FII is when foreign investors invest in the shares of a company that is listed in India, or in bonds offered by an Indian company. though in complex business investments, the lines blur as difficult to determine whether control over company is present or not. last year Finance minister announced that government will follow international standards in this regard. broadly, it means that where an investor has a stake of 10 per cent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 per cent, it will be treated as FDI.

7. Consider the following statements:

I. The duration of the monsoon decreases from southern India to northern India.

II. The amount of annual rainfall in northern India decreases from east to west

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: though one can always refer to extensive data available, the simplistic way to solve would be - south west monsoon enters from south in june and moves towards north starting and ends by september, then northeast monsoon or retreating monsoon starts from north in september. hence, due to the time taken to reach north (usually not until late july) and then passage of retreating monsoon in quick succession, the monsoon duration is considerably lower in northern parts. The higher rainfall in east can be attributed to himalayas in north and north-eastern regions while western region states like rajasthan, gujarat, etc. don't have such mountains to block moisture laden winds which pass these areas without shedding much moisture.

8. An ordinance proclaimed by President before his election is declared void by the Supreme court:

a. becomes invalid automatically

b. remains valid without any conditions

c. remains valid but the ordinance has to be proclaimed by the acting President

d. remains valid but the ordinance has to be reconsidered by the Cabinet

Soln.: If election of President is declared void by the Supreme court ordinances promulgated/passed by him remain effective/valid without any conditions. it is up to next president to invalidate or modify such ordinances if need be.

9. Consider the following:

I. Money Bill II. Ordinary Bill III. Executive action

Which of the above ways can be used by the Union government to raise the rates of Income Tax?

a. Only I

b. I and II

c. I and III

d. All of them

Soln.: article 110 - imposition, abolition, remission, alteration or regulation of any tax can be done through money bills only

10. Consider the following:

I. Fungus II. Oxygen III. Plankton IV. Solar light

Which of the above are biotic components of an ecosystem?

a. Only III

b. I and III

c. II, III and IV

d. All of them

Soln.: biotic components are living parts while abiotic components are non-living parts of ecosystem. hence, II and IV are abiotic and I and III are biotic.

11. Which of the following was the primary purpose of the SNDP (Sri Narayan Dharma Paripalana) movement in present-day Kerala?

a. Betterment of lower castes

b. Freedom from British rule

c. Propagation of new religious sect

d. Protest against the princely states

Soln.: the name "narayan" is biggest hint here. named after famous Narayana Guru, the chief architect behind the social renaissance in Kerala, the SNDP works for Betterment of lower castes. hence, answer is a.

12. Consider the following:

I. The manner of choosing representatives of Union Territories in Lok Sabha

II. Length of term of Rajya Sabha members

III. Lower age limit for adult franchise

Which of the above was/were NOT specified in the Constitution and instead Parliament was empowered by the Constitution to prescribe them?

a. Only I

b. Only II

c. I and II

d. I and III

Soln.: I and II are not mentioned in constitution. representative selection process varies for different UTs as seen in case of Delhi, Chandigarh, Pondicherry, Lakshadweep etc. as for III, The Sixty-first Amendment of the Constitution in 1988, lowered the voting age of elections to the Lok Sabha and to the Legislative Assemblies of States from 21 years to 18 years. This was done by amending Article 326 of the Constitution, which related to elections to the Lok Sabha and the Assemblies. Therefore, this is specifically mentioned.

13. Which of the following climate types is characterized by dry summers and rainy winters?

a. Dry mid-altitude climate

b. Mediterranean climate

c. Moist subtropical climate

d. Tundra climate

Soln.: Mediterranean climate is found in coastal regions of Mediterranean sea,  i.e. southern European countries. They witness dry summers and rainy winters. During summer, these regions are dominated by subtropical high pressure cells, with dry sinking air above surface marine layer of varying humidity and making rainfall unlikely, while during winter the polar jet stream and associated periodic storms reach the Mediterranean zones, bringing rain (and snow at higher elevations). As a result, areas with this climate receive almost all of their precipitation during their winter season.

14. Consider the following statements regarding the Andhra Pradesh Reorganisation Act, 2014:

I. The resultant states will be known as Telangana and Seemandhra.

II. The Act amended First and Fourth Schedules to the Constitution of India.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: the bill does not have a mention of the word "Seemandhra", the residual state would continue to be called andhra pradesh.

schedule 1 contains list of states and territories and schedule 4 contains rajya sabha seat allocations. both need to be modified in case of new state creation.

15. Consider the following statements about Backward Regions Grant Fund (BRGF) programme:

I. The scheme covers 50 most backward districts of India.

II. The nodal ministry for this scheme is Planning Commission.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: scheme covers 250 districts.  nodal ministry for this scheme is panchayati raj.

16. Consider the following statements about 'fast breeder reactors':

I. Fast breeder reactors are capable of producing more nuclear fuel than they consume.

II. Fast breeder reactors do not use coolant.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: A breeder reactor is a nuclear reactor capable of generating more fissile material than it consumes. Fast breeder reactor or FBR uses fast (unmoderated) neutrons to breed fissile plutonium and possibly higher transuranics from fertile uranium-238. these reactors are key part of our country's 3 stage nuclear power program. fast breeder's use liquid metal, mostly liquid sodium as coolant as opposed to more popular light water reactor (LWR) - type of thermal-neutron reactor that uses normal water and heavy water reactor (HWR) is a type of thermal-neutron reactor that uses heavy water.

17. Which of the following was the purpose of the 'Vernacular Press Act' of 1878?

a. Additional tax on non-English newspapers

b. Complete ban on non-English newspapers

c. Controlling seditious material in non-English newspapers

d. Encouragement of non-English newspapers

Soln.: vernacular means "The language or dialect spoken by the ordinary people in a particular country or region." the act was passed to control the printing and circulation of seditious material published in regional languages, specifically that which could produce disaffection against the British Government in India in the minds of the masses. it was later repealed by lord ripon.

18. Consider the following statements about 'sovereign bonds':

I. Sovereign bonds have to be issued by the national governments in their respective local currencies.

II. Higher the credit rating of government, lower the yield interest rate offered on the sovereign bonds.

III. Sovereign bonds can not be traded by the original buyer in the secondary market.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Only III

d. II and III

Soln.: Definition of 'Sovereign Bond' - A debt security issued by a national government within a given country and denominated in a foreign currency. The government of a country with an unstable economy will tend to denominate its bonds in the currency of a country with a stable economy. Because of default risk, sovereign bonds tend to be offered at a discount. lower the credit rating (i.e. higher the risk for bond buyer) of government, higher the yield (interest rate) offered on the sovereign bonds. similarly, Higher the credit rating of government, lower the yield interest rate offered on the sovereign bonds. these bonds are tradable in secondary market, just like stocks, derivative products, etc.

19. Which of the following types of industries produces raw materials for other industries?

a. Basic industries

b. Cottage industries

c. Footloose industries

d. Small-scale industries

Soln.: cottage and small scale industries produce ready to use or end products usually, also for other industries in certain cases. they require some pre processed raw materials. Footloose industry is a general term for an industry that can be placed and located at any location without effect from factors such as resources like labour, raw material or transport. basic industries are those which don't depend on other industries, they take raw materials from natural resources like forestry, agriculture, etc.

20. The visit of Japanese Prime Minister Shinzo Abe to 'Yasukuni Shrine' was highly controversial because:

a. It is located in the Senkaku islands which is the subject of territorial dispute between Japan and China.

b. It commemorates many war criminals from World War II.

c. It is in memory of the victims of Hiroshima and Nagasaki nuclear attacks by the US, its current ally.

d. It is usually visited on that particular day by the Emperor of Japan, not the Prime Minister.

Soln.: build to commemorate individuals who had died in service of the Empire of Japan during the Meiji Restoration, it became controversial due to inclusion of war criminals from world war 2. china is the most vocal among those raising objections over it.

21. Consider the following statements:

I. Division of a state does not need a constitutional amendment bill.

II. Settlement of a boundary dispute with another country does not need a constitutional amendment.

III. Ceding territory to a foreign country does not need a constitutional amendment.

Which of the above statements is/are true?

a. Only I

b. I and II

c. I and III

d. All of them

Soln.: division of state only requires changes in schedules of constitution, etc. which is done by ordinary bill (according to article 4 of constitution). Point II, comes under executive powers but III requires modification in article 1, part 1 of constitution.

22. Consider the following statements about the treaty CITES:

I: Its aim is to ensure international trade in specimens of both animals and plants doesn't threaten endangered species.

II. India is a party to this agreement.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora, also known as the Washington Convention) is a multilateral treaty to protect endangered plants and animals. It was drafted as a result of a resolution adopted in 1963 at a meeting of members of the International Union for Conservation of Nature (IUCN). The convention was opened for signature in 1973, and CITES entered into force on 1 July 1975. Its aim is to ensure that international trade in specimens of wild animals and plants does not threaten the survival of the species in the wild, and it accords varying degrees of protection to more than 34,000 species of animals and plants. India has signed the agreement. in fact, only a handful of nations have not signed.

23. Consider the following statements about Multi-sectoral Development Programme (MsDP):

I. Districts for MsDP are selected on the basis of minority population and backwardness parameters.

II. Jains are not included in the minority population.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: jains are proposed to be included in minority list and cabinet proposal for the same was approved, it has not yet been notified though. Multi-sectoral Development Programme under nodal ministry of minority affairs aims to bring together various development programes and schemes for benefit of those districts identified as minority concentration districts.

24. Consider the following two sets:

Set 1: I. Bhil II. Ho III. Jarawa IV. Toda

Set 2: A. Andaman & Nicobar Islands B. Gujarat C. Jharkhand D. Tamil Nadu

Which of the following correctly matches the tribes with their respective states?

a. I-A, II-D, III-B, IV-C

b. I-B, II-C, III-A, IV-D

c. I-C, II-A, III-D, IV-B

d. I-D, II-B, III-C, IV-A

Soln.: Jarawa tribe was in news because of 'human safari' allegations. Bhils are tribes found in south gujarat and UTs of DN haveli, Daman. Ho tribe associated with Jharkhand, They are the fourth most numerous scheduled tribe in Jharkhand after Santals, Oraons, and Mundas, and constitute around 10.5 percent. toda tribals are very few in number and live in nilgiri region in southern India.

25. The group of monuments at Hampi is an example of:

a. Chola architecture

b. Chalukya architecture

c. Pallava architecture

d. Vijaynagara architecture

Soln.: Hampi monuments are part of the ruins of vijaynagara, the former capital of the Vijayanagara Empire.

    

26. Consider the following statements about the newly appointed Coal Regulator:

I. It is a non-statutory body.

II. It would not have the power to decide prices of coal in the domestic market and Coal India Ltd (CIL) will continue to set the prices.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.:  The Bill seeks to establish a Coal Regulatory Authority of India (CRAI) to: (i) ensure conservation of coal resources and compliance with the mining plan and mine closure plan, (ii) specify methods for testing the quality of coal and procedure for coal sampling, (iii) collect information and publish statistics relating to the coal sector, (iv) specify principles and methodologies for determination of the price of coal and by-products for all producers, (v) specify the standards of performance and norms of operational efficiency (except for mine safety), and (vi) adjudicate disputes between entities and between entities and other persons.

27. Which North-East state(s) of India do/does not have an international land boundary?

a. Assam only

b. Meghalaya only

c. Meghalaya and Tripura

d. None of them

Soln.: all  North-Eastern states have international boundary with one or more countries

28. Consider the following two sets:

Set 1: I. Meteor II. Meteorite III. Meteoroid

Set 2:

A. An object that burns and vaporizes upon entry into the Earth's atmosphere.

B. An object that survives the plunge through the Earth's atmosphere and lands on Earth's surface.

C. A a small rocky or metallic body traveling through space.

Which of the following matches the two sets correctly?

a. I-B, II-C, III-A

b. I-C, II- A, III-B

c. I-C, II-B, III-A

d. I-A, II-B, III-C

Soln.: meteoroid - A meteoroid is a small rocky or metallic body travelling through space.  (remember asteroid, minor planets/bodies found between mars and jupiter); the three set 2 actually are standard definition of each of the three terms in set 1.

29. Rajya Sabha can pass a resolution to allow Parliament to legislate on a subject from Stale List. Which of the following statements about the resolution is NOT correct?

a. The resolution needs to be supported by two-third of members present and voting.

b. The resolution remains in force for 6 months.

c. The resolution can be renewed any number of times.

d. The law ceases to have an effect 6 months after the resolution has expired.

Soln.: a is correct - special majority is required, c - there is no limit on passing such resolution again and again, d - 6 month window after the expiry of resolution is provided as the Rajya sabha (in fact also lok sabha) must convene within 6 months,( i.e minimum gap), and thus it gets an ample opportunity to renew/re pass/ reconsider the resolution.

30. Which of the following does 'Haiyan' refer to?

a. Anti-nuclear policy of Japan

b. Disputed island in South China Sea

c. Food for work program launched in North Korea

d. Tropical cyclone that hit Phillipines in 2013

Soln.: Typhoon Haiyan, known as Typhoon Yolanda in the Philippines, was a powerful tropical cyclone that devastated portions of Southeast Asia, particularly the Philippines, on November 8, 2013. more than 5000 people died.

31. Consider the following statements:

I. The Constitution does not lay down any grounds for removal of the Governor by the President.

II. The Governor does not have any further role to play after he has reserved a bill for the President.

III. The Governor cannot pardon a death sentence.

Which of the above statements is/are true?

a. I and II

b. I and III

c. II and III

d. All of them

Soln.: pardon a death sentence is under president.

32. Which of the following is the largest source of the tax revenue in India (over the past 10 years)?

a. Corporation Tax

b. Customs

c. Excise

d. Personal Income Tax

Soln.: Corporation Tax>>Personal Income Tax>excise~customs

33. Consider the following statements with reference to the Khilafat Movement:

I. The demand of the movement was to restore the Caliphate in Turkey.

II. Mahatma Gandhi was chosen as the President of the All India Khilafat Conference.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: movement started to oppose end of caliph's rule or power in turkey. gandhi and congress stuck a deal with ali brothers in which gandhi would support their demands and in turn muslims support the non-coop movt. movement collapsed when regime shifted in turkey in itself and it leaned westwards in ideology. ali brothers then joined muslim league and are considered as major force in pakistan creation and regarded as one of their founding fathers.

34. Consider the following countries:

I. Finland II. Kazakhstan III. Mongolia IV. Poland

Which of the above countries share a land boundary with Russia?

a. I, II and III

b. I, II and IV

c. I, III and IV

d. All of them

Soln.: Poland shared boundary with erstwhile USSR at one point but present day russia does not  share a land boundary with Russia. rest three share significant boundaries, in different regions, with russia.

35. Consider the following statements about the Nilgiri Hills:

I. Nilgiri hills are a part of the Western Ghats.

II. Nilgiri mountains are an example of volcanic mountain.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: nilgiris are part of The Western Ghats, which are not true mountains, but are the faulted edge of the Deccan Plateau. They are believed to have been formed during the break-up of the super continent of Gondwana some 150 million years ago.

36. Consider the following statements about India's performance regarding Millennium Development Goals:

I. India has already achieved its goal to reduce Maternal Mortality Rate to 1/4^th of 1990 level by 2015.

II. India has already achieved its goal to reduce Under Five Child Mortality Rate to 1/3^rd of 1990 level.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: India is far behind in its target achievements. visit these for detailed numbers  - http://www.thehindu.com/sci-tech/health/policy-and-issues/un-india-likely-to-miss-mdg-on-maternal-health/article3595095.ece and

www.searo.who.int/publications/journals/seajph/whoseajphv1i3p279.pdf‎

37. The reports of which of the following is NOT tabled by the President before the Parliament?

a. CAG

b. Election Commission

c. Finance Commission

d. UPSC

Soln.:

38. Consider the following two sets:

Set 1: I. Anshu Jain          II. Ivan Menzes  III. Indra Nooyi  IV. Satya Nadella

Set 2: A. Deutsche Bank  B. Diageo            C. Microsoft       D. PepsiCo

Which of the following matches the above two sets correctly?

a. I-A, II-B, III-C, IV-D

b. I-A, II-B, III-D, IV-C

c. I-B, II-A, III-C, IV-D

d. I-B, II-A, III-D, IV-C

Soln.: satya nadella recently made CEO of Microsoft. Indra Nooyi heads pepsico for a long time now. anshu jain is co-ceo along with a German citizen as their shareholders objected to non-German CEO.

39. 'Fourteen points' was proposed by M.A. Jinnah in response to

a. Congress' Gaya resolution demanding united India

b. Cripps Commission's report

c. Nehru Report

d. Simon Commission's report

Soln.: Motilal Nehru's report prompted jinnah to formulate his response as 14 points. the points as well as nehru report dealt with separate electorate and other muslim demands. cripps and simon report dealt with issues of more governing powers and came out much later than nehru report.

40. Consider the following statements about the properties of 'Stem Cells'?

I. Stem cells are found only in humans.

II. A human egg cell (ovum) is an example of stem cell.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: Stem cells are found in most multi cellular organisms. embryonic stem cells are formed only after 4-5 days of fertilization. hence,  A human egg cell (ovum) is not an example of stem cell.

41. Consider the following statements about 'Endosulfan':

I. It was used as a fertilizer, mostly in South Asian countries.

II. Stockholm Convention seeks to eliminate the use of Endosulfan.

III. India is a party to the Stockholm Convention.

Which of the above statements is/are true?

a. Only I

b. I and II

c. II and III

d. All of them

Soln.: Endosulfan was (and still is in many areas) used as pesticide. it is a broad spectrum killer and destroys useful pests as well and extremely harmful to humans too. Stockholm Convention's agenda included elimination of the use of Endosulfan and india was signatory. it is officially banned in India.

42. Consider the following items with reference to India's balance of payments:

I. External commercial borrowing by Indian companies

II. FDI in Indian companies

III. Imports from other countries

IV. Remittances sent to India

Which of the above will lead to an increase in the Foreign Exchange reserves of India?

a. I and II

b. I and IV

c. I, II and IV

d. II, III and IV

soln.: for imports we have to spend from our own Foreign Exchange reserves,therefore decreases. Remittances are the salary/income earned by indians working abroad and sent to India. hence leads to increase in Foreign Exchange reserves. External commercial borrowing by Indian companies means borrowing money from companies, financial institutions, etc. of foreign countries which invest in their own currency.

43. Consider the following statements about Prevention of Corruption (Amendment) Bill, 2013:

I. It seeks to make giving of bribe an offence.

II. It seeks to extend protection from prosecution without prior sanction from the state or central governments to retired public officials if they were in office at the time of the alleged offence.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.:

44. Consider the following statements about the outcomes of Gandhi-Irwin Pact of 1931:

I. Government agreed to release all political prisoners not convicted of violence.

II. Government recognized the right to make salt in coastal villages for personal consumption.

III. Congress agreed to suspend the Civil Disobedience Movement.

Which of the above statements is/are true?

a. Only I

b. Only III

c. I and III

d. All of them

Soln.: point I was hotly debated as it excluded  political prisoners like Bhagat Singh and other revolutionaries. their release was demanded and expected by majority Indians and even Congress leaders. II was granted as the civil disobedience movement that led to this pact was started by salt satyagraha at dandi. III was why British entered the negotiations/talks itself.

45. Which of the following correctly describes 'sub-urbanization'?

a. Lack of urban amenities and infrastructure in new urban areas

b. Trend of people moving away from congested urban areas to cleaner areas outside the city

c. Less population in the urban areas than its infrastructure can support

d. Increasing resemblance of rural areas to urban areas

Soln.:  in India, andheri and borivali in Mumbai , Mayur vihar & Dwarka in Delhi can be called sub-urbs (at least these were at one point). these areas have all the urban amenities and infrastructure but located at some distance from main city. also, option c makes no sense and option d can be termed as urbanization.

46. Which of the BRICS nations are members of the G-20 (major economies) group?

a. Russia, India and China

b. Brazil, Russia, India and China

c. Russia, India, China and South Africa

d. All of them

Soln.: Currently, there are 20 members of the group. These include, at the leaders summits, the leaders of 19 countries and of the European Union. Collectively, the G-20 economies account for around 85% of the gross world product (GWP), 80% of world trade.

All 19 member nations are among the top 29 economies as measured in GDP at nominal prices in a list published by the International Monetary Fund (IMF) for 2013. Not represented by membership in the G-20 are Switzerland (ranked 20th by the IMF), Iran (21), Norway (23) and Taiwan (27), even though they rank higher than some members. Spain (13), the Netherlands (18), Sweden (22), Poland (24), Belgium (25) and Austria (28) are included only as part of the EU, and not independently.

47. Consider the following statements with reference to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013:

I. Compensation for the owners of the acquired land shall be four times the market value in case of rural areas and twice in case of urban areas.

II. In case of acquisition of land for use by private companies or public private partnerships, consent of 80 per cent of the displaced people will be required.

III. The Act does not apply to acquisitions under the Special Economic Zones (SEZ) Act, 2005.

Which of the above statements is/are true?

a. Only II

b. I and II

c. II and III

d. All of them

Soln.: I and II can be found in the text of the act http://www.prsindia.org/billtrack/the-land-acquisition-rehabilitation-and-resettlement-bill-2011-1978/

III not only Special Economic Zones (SEZ) Act, 2005, several other central government acts through which centre acquires land are out of purview of the act.

48. In which of the following categories of protected areas in India are local people NOT allowed to collect and use the biomass?

a. Biosphere Reserves

b. National Parks

c. Wetlands

d. Wildlife sanctuaries

Soln.:  Biosphere reserves protect larger areas of natural habitat, and often include one or more national parks and/or preserves, along buffer zones that are open to limited economic activities, i.e. in biosphere reserves, biomass collection is allowed.

national parks are the most protected among the options. look at these links to get a clear idea - http://www.iucn.org/about/work/programmes/gpap_home/gpap_quality/gpap_pacategories/

http://en.wikipedia.org/wiki/Protected_areas_of_India

49. The outcome of Shimla Conference was known as:

a. Cabinet Mission Plan

b. Desai-Liaqat Pact

c. Mountbatten Plan

d. Wavell's Plan

Soln.: The Simla Conference was a 1945 meeting between Viceroy Archibald Wavell and the major political leaders of India at Simla, India. Convened to agree on and approve the Wavell Plan for Indian self-government, it reached a potential agreement for the self-rule of India that provided separate representation to Muslims and reduced majority powers for both communities in their majority regions.

The British Cabinet Mission of 1946 to India aimed to discuss and plan for the transfer of power from the British Government to Indian leadership, providing India with independence. Formulated at the initiative of Clement Attlee, the Prime Minister of the United Kingdom, the mission consisted of Lord Pethick-Lawrence, the Secretary of State for India, Sir Stafford Cripps, President of the Board of Trade, and A. V. Alexander, the First Lord of the Admiralty. Lord Wavell, the Viceroy of India, did not participate.

desai-liaqat and mountbatten plans bear not much similarity, background, participants, time/date or period, with shimla conference and hence can be discounted as such.

50. Consider the following statements about Labour Force Participation Rate (LFPR):

I. As LFPR increases, employment rate also increases.

II. As more graduates choose to do post-graduation, it decreases LFPR.

Which of the above statements is/are true?

a. Only I

b. Only II

c. Both of them

d. None of them

Soln.: not everybody participates in the formal labour market, eg. housewives work in their homes, children go to schools. LFPR says what percentage of total population is participating in labour market. as this increases, unemployment rate increases because number of jobs remain the same but no. of people wanting jobs increases. hence, I is false, As LFPR increases, employment rate decreases.

II is true because, graduates opting for post-graduation move out of the labour market and hence Labour Force Participation Rate(LFPR) gets lowered