02 January 2026

• The Ministry of Finance notified the implementation of a new taxation regime for tobacco products effective 1 February 2026.
• Changes arise from the Central Excise (Amendment) Act, 2025.
• Provisions of the Health Security se National Security Act, 2025 imposing a cess on pan masala units also come into force.
• The GST Compensation Cess on tobacco products will cease from 1 February 2026, formally ending the compensation framework.

Key Points

• Excise Duty
  • Earlier rendered nominal under GST (fraction of a paisa per cigarette).
  • New specific excise rates notified to restore price-based deterrence.
• GST Rate Changes
  • Beedis: 28% → 18%
  • All other tobacco products: 40% slab  
  • Effective from 1 February 2026.
• GST Compensation Cess
  • Introduced in 2017 for 5 years to compensate States.
  • Extended till 2026 due to COVID-related revenue shortfall and Centre borrowing.
  • Fully discontinued after repayment of compensation loans.
• New Valuation Mechanism
  • GST value of chewing tobacco, gutkha, khaini, jarda, scented tobacco based on Retail Sale Price (RSP).
  • Aims to curb undervaluation and tax evasion.
• Dedicated Cess for Security
  • Pan masala units to fund national security preparedness.
  • Designed as non-lapsable and purpose- specific.

Static Linkages

• Specific vs Ad Valorem Taxation – Public finance (NCERT, Economic Survey).
• Cess vs Tax – Article 270; cess not shareable with States unless specified.
• Sin Taxes – Correcting negative externalities (public health economics).
• GST & Fiscal Federalism – Compensation mechanism and Centre–State trust.

Critical Analysis

• Pros
  • Aligns with WHO FCTC guidance on annual specific excise hikes.
  • Reduces cigarette affordability over time.
  • Strengthens compliance through RSP-based valuation.
  • Dedicated cess avoids burdening general taxpayers.
• Concerns
  • Risk of illicit trade and smuggling.
  • Lower GST on beedis may weaken health objectives.
  • Legal scrutiny possible on linking pan masala cess to national security.
  • States lose a predictable compensation stream.

Way Forward

• Implement track-and-trace systems for tobacco products.
• Periodic indexation of specific excise to inflation and income growth.
• Transparent reporting and auditing of cess utilisation.
• Integrate taxation with tobacco cessation programmes.
• Strengthen Centre–State fiscal dialogue post- cess.

DRONE STRIKE IN KHERSON KILLS 24

KEY HIGHLIGHTS

• Alleged Ukrainian drone strike in Russian-held Kherson region reportedly killed civilians during New Year celebrations.
• Russia accused Ukraine of targeting civilian infrastructure; claims remain unverified.
• Moscow also alleged a drone attempt on a residence linked to Vladimir Putin, which Ukraine denied.
• Developments occurred alongside intensified peace negotiations involving the U.S. and European states.
• Russia simultaneously launched large-scale drone attacks on Ukraine, including the Odesa region.

Key Points

• Drone warfare is increasingly used for deep strikes beyond active battlefronts.
• Civilian areas are becoming vulnerable, raising IHL compliance concerns.
• Information warfare (claims, denials, unverifiable evidence) is central to the conflict.
• Ukraine claims high drone interception rates, indicating escalation in aerial attacks.
• Peace talks continue despite active hostilities, reflecting “war–talk parallelism.”

Static Linkages

• UN Charter, 1945
  • Article 2(4): Prohibition on use of force
  • Article 51: Right to self-defence after armed attack.
• Geneva Conventions
  • Principle of distinction between civilians and combatants.
  • Principle of proportionality in military operations.

• Security Dilemma
  • Military actions intended as defence may trigger escalation.
• Hybrid Warfare
  • Combination of conventional force, drones, cyber and information operations.

Critical Analysis

• Strategic Aspect:
  • Drone strikes lower cost of warfare but widen conflict geography.
• Legal Aspect:
  • Alleged civilian targeting undermines IHL norms.
• Diplomatic Aspect:
  • Escalation risks derailing fragile peace negotiations.
• Moral Aspect:
  • Civilian casualties weaken legitimacy of military actions.
• Verification Challenge:
  • Limited independent access complicates accountability.

Way Forward

• Establish independent international verification of drone strikes.
• Incorporate civilian protection and monitoring in peace frameworks.
• Develop global norms and regulations on armed drone use.
• Strengthen confidence-building measures alongside negotiations.
• Prioritise humanitarian access and de- escalation mechanisms.

MARATHI TEXTS: SAVANNAS NATURAL

• A recent study published in People and Nature re-evaluates the ecological history of western Maharashtra.
• Using medieval Marathi literature (13th–20th century) and oral traditions, the study argues that regional savannas are ancient ecosystems, not degraded forests.
• Research conducted by Ashish N. Nerlekar and Digvijay Patil.

Key Points

• Open tree–grass savannas have persisted for~750 years, predating colonial forest exploitation.
• 28 georeferenced literary sources studied across Pune, Satara, Solapur, Sangli, Nashik and Ahilyanagar.
• 62 plant species identified:
  • 27 savanna indicators
  • 14 generalists
  • 3 forest indicators
• Dominant savanna flora: Vachellia, Senegalia, Butea, perennial grasses (Sehima).
• Two savanna types:
  • Fine-leaf savannas (≤1000 mm rainfall)  
  • Broadleaf savannas (≥700 mm rainfall)
• Species show fire, grazing and drought adaptations (thick bark, resprouting, spines).

Static Linkages

• Indian ecosystems: Grasslands and savannas of the Deccan Plateau (NCERT Geography).
• Human–environment interaction: pastoralism and commons in pre-colonial India (NCERT History).
• Biodiversity concepts: ecosystem diversity and disturbance regimes (fire–grazing cycles).
• Colonial legacy: forest-centric land classification and “wasteland” concept.

Critical Analysis

• Why Important
  • Challenges the assumption that grasslands = degraded forests.
  • Highlights risks of misguided afforestation in native savannas.
  • Strengthens case for ecosystem-specific conservation.
• Concerns
  • Current policies prioritise tree cover over ecosystem diversity.
  • Administrative difficulty in recognising cultural–ecological evidence.
  • Potential conflict with infrastructure and land conversion.

Way Forward

• Official recognition of savannas and grasslands as native ecosystems.
• Shift from blanket afforestation to ecosystem- appropriate restoration.
• Integrate historical ecology and local knowledge in biodiversity action plans.
• Support community-based conservation with pastoral groups.
• Update land-use and climate strategies to protect open natural ecosystems.

• Delhi High Court held that students cannot be debarred from examinations solely due to non- fulfilment of rigid attendance norms.
• The ruling arose from challenges by law students against compulsory attendance requirements.
• Court emphasised that learning outcomes ≠ physical presence and cautioned against coercive academic regulations.
• Decision has wider implications for higher education governance and academic autonomy

Key Points

• Attendance rules are regulatory, not absolute statutory mandates.
• Examination eligibility cannot be denied in a mechanical manner.
• Quality of education depends on pedagogy and engagement, not surveillance.
• Reflects changing realities of digital learning and access to knowledge.
• Reinforces student dignity and autonomy within universities.

Critical Analysis

• Positives
  • Strengthens academic freedom and student-centric learning.
  • Pushes universities to improve teaching quality.
  • Aligns India with global higher- education practices.
  • Reduces bureaucratic control over classrooms.
• Concerns
  • Possible misuse by disengaged students.
  • Weak institutions may struggle without attendance as a control tool.
  • Requires robust alternative assessment mechanisms.
  • Faculty preparedness remains uneven.

Way Forward

• Shift towards competency- and outcome-based assessment.
• Attendance to be advisory, not punitive.
• Invest in faculty training and pedagogy reforms.
• Promote blended, experiential, and discussion-based learning.
• Strengthen internal academic review instead of coercive compliance.

PAYING MUSK, EXCESS AND GAPS

What exactly happened?

• Tesla shareholders approved a performance- based pay package for CEO Elon Musk.
• If extremely ambitious future targets are met (very high market value, large-scale production, AI/robotics success), Musk could receive stock worth nearly $1 trillion.
• This decision was taken through shareholder voting, which is the core mechanism of shareholder capitalism.
• The controversy arises because current profits and sales do not fully justify Tesla’s present valuation, indicating heavy reliance on future expectations.

Why are experts calling it “speculative”?

• Investors are rewarding future promises, not present performance.
• Markets are assuming Tesla will dominate AI, robotics, and mobility, despite uncertainty.
• Such behaviour is called speculation, where asset prices rise based on expectations rather than fundamentals.
• John Maynard Keynes warned that economies dominated by speculation become unstable.

Why is this linked to inequality?

• If targets are met, wealth worth hundreds of billions will be concentrated in one individual.
• Wealth inequality matters more than income inequality because it:
  • Concentrates economic power  
  • Enables political influence
  • Weakens democratic equality
• Even if overall wealth increases, relative inequality widens

Didn’t shareholders approve it? Why is that a problem?

• Yes, the decision followed procedural democracy (voting).
• But:
  • Shareholders vote based on financial returns, not social impact.
  • Voting does not consider:
    • Political influence of extreme wealth
    • Ethical behaviour of leadership
• This exposes the limits of shareholder capitalism.

Why is democracy brought into the discussion?

• Extreme wealth allows control over:
  • Media platforms
  • Political narratives  
  • Election influence
• Economic power increasingly translates into political power.
• Democratic institutions assume diffused power, which extreme inequality erodes.

What does this tell us about shareholder capitalism?

• What it claims:
  • Shareholders act as checks on CEOs.
  • Market rewards innovation and efficiency.
• What it reveals:
  • Shareholders may legitimise excessive executive power.
  • Financial incentives override ethical and democratic concerns.
  • Voting rights alone cannot ensure economic democracy.

What is the balanced view?

• The issue is not capitalism vs socialism.  The issue is unchecked capitalism.
• Keynes argued capitalism works best when regulated and constrained.
• Modern economies need:
  •  Regulation
  • Redistribution
  • Democratic oversight

model conclusion

• “The Tesla case highlights the structural limitations of shareholder capitalism in addressing speculative excess and wealth concentration. While markets reward innovation, democratic institutions must ensure that economic power does not undermine political equality.”