Sitharaman Flags ‘3F’ Concerns: Fuel, Fertiliser and Foreign Exchange Centre Likely to Remove 11% Duty on Cotton Amid Rising Prices Physicists Find New Ways to Make Electrons Behave Strangely Volcano Eruption in Japan I-T Dept flags common errors in SFT filings

1.Sitharaman Flags ‘3F’ Concerns: Fuel, Fertiliser and Foreign Exchange

Subject: EconomySource: The Hindu, Pg 1

Why in News?

Finance Minister Nirmala Sitharaman highlighted concerns regarding “3Fs” — fuel, fertiliser, and foreign exchange — amid rising geopolitical tensions in West Asia and increasing pressure on India’s external sector. The remarks come at a time when crude oil prices, fertiliser costs, capital outflows, and rupee volatility have created concerns regarding inflation, forex reserves, and economic stability.

Background of the Issue

• The concerns are linked to ongoing geopolitical instability in West Asia, especially tensions involving Iran, Israel, and disruptions around the Strait of Hormuz. Since a major share of global oil trade passes through this route, any conflict or blockade directly affects energy-importing countries like India.
• India depends heavily on imports for crude oil and fertilisers. Rising international prices increase the country’s import bill and create pressure on foreign exchange reserves and the rupee.
• At the same time, Foreign Portfolio Investors (FPIs) have withdrawn substantial investments from Indian markets since late February, contributing to depreciation of the rupee and financial market volatility. The Reserve Bank of India (RBI) has intervened in currency markets to stabilize the rupee, leading to a decline in forex reserves.

Understanding the ‘3F’ Concerns

FuelIndia imports nearly 85% of its crude oil requirements. Rising crude prices increase transportation costs, industrial input costs, and inflationary pressures across the economy.Higher oil prices also widen the current account deficit and increase pressure on government finances. Since a large portion of India’s oil imports pass through the Strait of Hormuz, instability in West Asia directly threatens India’s energy security.FertiliserIndia is among the world’s largest importers of fertilisers and fertiliser raw materials. Rising global fertiliser prices increase the subsidy burden on the government and raise agricultural input costs.This can affect food security and contribute to food inflation. Global disruptions in supply chains and energy markets further complicate fertiliser availability and pricing.Foreign ExchangeForeign exchange reserves are essential for financing imports and maintaining confidence in the economy. Due to rising import costs and RBI intervention to stabilize the rupee, India’s forex reserves have declined significantly.Depreciation of the rupee makes imports more expensive, particularly oil and fertilizers, thereby increasing imported inflation. Sustained capital outflows by FPIs have added further pressure on the external sector.

Government and RBI Measures

• To conserve foreign exchange and manage external vulnerabilities, the government has taken several measures including higher import duties on gold and precious metals, restrictions on duty-free gold imports, and fuel price adjustments.
• The RBI has intervened in currency markets through forex sales to reduce excessive volatility in the rupee. Despite global uncertainties, the government maintains that India’s domestic economy remains relatively resilient due to strong macroeconomic fundamentals and continued growth.

Economic Implications

Economists have warned that prolonged rise in oil prices and sustained capital outflows could increase risks of inflation, fiscal pressure, and Balance of Payments stress.

The situation highlights India’s vulnerability to external geopolitical shocks because of dependence on imported fuel, fertilizers, and global capital flows.

At the same time, it underlines the importance of strengthening:

• Energy security.
• Forex reserve management.
• Domestic manufacturing and fertilizer production.
• Renewable energy expansion.
• Export competitiveness.

Conclusion

The “3F” concerns raised by Sitharaman reflect the growing impact of global geopolitical instability on India’s economy. Rising fuel and fertiliser prices, weakening of the rupee, and pressure on forex reserves have increased challenges for economic management. While India’s macroeconomic position remains relatively stable, the developments highlight the importance of prudent fiscal management, external sector resilience, and reduced dependence on volatile global supply chains.

2.Centre Likely to Remove 11% Duty on Cotton Amid Rising Prices

Subject: Economy / Agriculture / TradeSource: The Hindu, Pg 13

Why in News?

The Union government is likely to remove the 11% import duty on cotton until October 2026 to support the textile and apparel industry amid rising cotton prices and global economic uncertainty linked to the West Asia crisis. Cotton prices have reportedly increased by 10–15% in the last month due to hoarding, supply pressures, and rising demand, leading textile manufacturers to seek relief from rising input costs.

Background of the Issue

• India is one of the world’s largest producers and consumers of cotton and has a major textile and apparel industry that contributes significantly to exports, employment, and manufacturing output.
• Despite large domestic production, India depends on imports for nearly 15% of raw cotton requirements and around 20% of yarn demand. Rising global prices and supply disruptions have therefore directly affected domestic manufacturers.
• The Apparel Export Promotion Council (AEPC) and textile industry representatives requested the government to remove import duties because high cotton prices were reducing competitiveness of Indian textile exports in global markets.
• The government had earlier removed cotton import duty temporarily during 2025 when manufacturing and exports were affected by external trade pressures and tariff-related uncertainties.

Reasons Behind Rising Cotton Prices

Cotton prices have increased sharply due to a combination of domestic and international factors.

One major reason is geopolitical instability in West Asia, which has pushed up global crude oil prices and transportation costs. Rising fuel prices increase logistics and manufacturing expenses across the textile value chain.

Domestic hoarding and speculative stock accumulation have also contributed to short-term price increases.

Another structural issue is stagnation in India’s cotton production. Experts point to:

• Lack of introduction of high-yield seed varieties.
• Limited adoption of modern irrigation systems.
• Pest and disease-related crop losses.
• Climate variability affecting productivity.

As a result, domestic supply growth has remained limited despite rising industrial demand.

Impact on Textile and Apparel Industry

India’s textile and apparel industry is highly sensitive to raw material prices because cotton is a major input.

Rising cotton prices increase production costs for:

• Yarn manufacturers.
• Garment exporters.
• Textile processing units.
• This reduces the competitiveness of Indian exports, especially in comparison with countries that enjoy lower raw material costs or preferential trade access through Free Trade Agreements (FTAs).
• Industry representatives argue that removing import duty would help stabilize domestic prices, improve access to cheaper imported cotton, and strengthen export competitiveness.
• The move is also seen as important because some global manufacturers are diversifying production away from Bangladesh due to political and supply-chain uncertainties, potentially creating opportunities for India to attract new investments.

Free Trade Agreements and Export Competitiveness

The issue also highlights the importance of Free Trade Agreements (FTAs) in global textile trade.

• FTAs reduce tariffs and trade barriers between countries, helping exporters access foreign markets at lower costs. India is increasingly pursuing FTAs with countries and regions such as the UK, EU, UAE, and Australia to improve export competitiveness.
• For the textile sector, competitive raw material prices combined with FTA access can help Indian manufacturers compete more effectively in global apparel markets.
• Reducing cotton import duty is therefore viewed as part of a broader strategy to strengthen India’s position in international textile supply chains.

Concerns and Economic Implications

While removal of import duty may benefit manufacturers and exporters, cotton farmers may be concerned about cheaper imports affecting domestic prices and farm incomes.

The government therefore has to balance:

• Interests of cotton farmers.
• Industrial competitiveness.
• Export growth.
• Inflation management.

The issue also reflects broader vulnerabilities arising from dependence on imported raw materials and exposure to global commodity price fluctuations.

Conclusion

The proposed removal of the 11% import duty on cotton reflects the government’s attempt to protect India’s textile and apparel industry from rising input costs and global economic uncertainties. The move is expected to improve competitiveness of Indian exports and stabilize raw material availability. At the same time, the situation highlights the need for long-term reforms in cotton productivity, supply-chain resilience, and trade competitiveness to strengthen India’s textile sector in global markets.

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3.Physicists Find New Ways to Make Electrons Behave Strangely

Subject: Science and TechnologySource: The Hindu, Pg 2

Why in News?

Physicists have successfully achieved the Fractional Quantum Hall Effect (FQHE) in pentalayer graphene without using strong magnetic fields, marking a major breakthrough in quantum physics and materials science. The discovery demonstrates how electrons can exhibit unusual collective behaviour and may open new possibilities for advanced quantum computing technologies.

Background: Hall Effect and Quantum Hall Effect

• The foundation of this discovery lies in the Hall Effect, discovered in 1879. When electric current passes through a conductor placed in a magnetic field, a voltage develops perpendicular to the direction of current flow.
• At extremely low temperatures and very strong magnetic fields, scientists discovered that the Hall resistance changes only in discrete steps rather than continuously. This phenomenon is known as the Integer Quantum Hall Effect.
• Later, physicists discovered an even more unusual phenomenon called the Fractional Quantum Hall Effect (FQHE), where electrons collectively behave in ways that make them appear to carry fractional electric charge instead of the normal elementary charge.
• The discovery showed that electrons under special quantum conditions can form entirely new states of matter.

Fractional Quantum Hall Effect (FQHE)

The Fractional Quantum Hall Effect occurs in two-dimensional electron systems under extreme quantum conditions.

In this state:

• Electrons interact collectively rather than behaving independently.
• Quasiparticles carrying fractional electric charge emerge.
• These quasiparticles are known as “anyons.”

The phenomenon is important because anyons can store quantum information more robustly than ordinary particles, making them highly valuable for fault-tolerant quantum computing.

Traditionally, achieving FQHE required:

• Extremely strong magnetic fields.
• Ultra-clean materials.
• Temperatures near absolute zero.

These conditions made practical applications difficult.

Breakthrough Using Pentalayer Graphene

• In 2024, researchers achieved FQHE without applying strong magnetic fields by using pentalayer graphene.
• Graphene is a single layer of carbon atoms arranged in a hexagonal lattice and is known for extraordinary electrical and mechanical properties.
• In pentalayer graphene, five graphene layers are stacked at carefully controlled twist angles, creating a structure known as a moiré superlattice.
• The twisted arrangement slows down electron movement sufficiently for electron-electron interactions to dominate. This mimics the effect normally produced by strong magnetic fields and allows formation of collective quantum states necessary for FQHE.
• This achievement is significant because it demonstrates that exotic quantum behaviour can be engineered through material design rather than relying entirely on extreme external conditions.

Importance for Quantum Computing

The discovery is particularly important for future quantum technologies.

The quasiparticles formed during FQHE behave as anyons, which are considered promising candidates for topological quantum computing. Unlike ordinary quantum bits, information stored in topological quantum systems is more resistant to environmental disturbances and errors.

This could help solve one of the biggest challenges in quantum computing — maintaining stable quantum information for long periods.

The research therefore represents an important step toward development of:

• Fault-tolerant quantum computers.
• Advanced quantum materials.
• Ultra-efficient electronic devices.

Challenges and Limitations

Despite the breakthrough, practical applications remain challenging because the phenomenon still requires:

• Extremely precise control of graphene layer alignment.
• Advanced material engineering.
• Very low temperatures.

Large-scale manufacturing and stable real-world applications of such quantum materials are still under development.

Further research is also required to fully understand the behaviour of anyons and exploit them for commercial quantum computing systems.

Conclusion

The successful creation of the Fractional Quantum Hall Effect in pentalayer graphene without strong magnetic fields marks a major advancement in condensed matter physics and quantum materials research. The discovery deepens scientific understanding of exotic quantum states and may significantly accelerate progress toward practical quantum computing technologies in the future.

4.Volcano Eruption in Japan

Subject: Geography / Disaster ManagementSource: The Hindu, Pg 7

Why in News?

Mount Tokachi in northern Japan erupted on May 25, 2026, causing widespread destruction in nearby areas of Hokkaido. The eruption buried houses under lava and volcanic debris, suspended railway services, and left thousands of people missing, including miners and farmers. The disaster has once again highlighted the severe risks associated with volcanic hazards in tectonically active regions located along the Pacific Ring of Fire.

Mount Tokachi Eruption and Its Impact

• Mount Tokachi is one of Japan’s active volcanoes situated in Hokkaido, a region frequently affected by seismic and volcanic activity. The eruption caused extensive devastation in nearby settlements, especially Miye town, where nearly 60 houses were reportedly buried beneath lava flows and volcanic ash.
• Transportation infrastructure was severely affected, leading to suspension of train services and disruption of local connectivity. Initial reports also indicated that nearly 120 miners working inside a sulphur mine near the volcano were missing following the eruption. In addition, thousands of farmers and residents in surrounding areas were reported missing or displaced.
• The eruption triggered panic because volcanic activity also released water and debris from underground, resulting in flooding and mudflows that caused further casualties and destruction. Authorities recovered several bodies from affected regions while rescue and evacuation operations continued.

Volcanic Hazards and Secondary Disasters

• Volcanic eruptions generate multiple hazards beyond lava flows alone. The Mount Tokachi eruption demonstrated how volcanic disasters can trigger secondary hazards such as lahars, floods, and landslides.
• Lahars are fast-moving volcanic mudflows formed when volcanic ash and debris mix with water from rainfall, rivers, underground water, or melted snow. These flows can travel long distances and bury settlements, agricultural land, and infrastructure.
• Volcanic ashfall also creates serious environmental and health concerns. Fine ash particles reduce visibility, contaminate water sources, damage crops, disrupt transport systems, and cause respiratory illnesses.
• In addition, volcanic gases such as sulphur dioxide and carbon dioxide can pose major health risks and contribute to environmental pollution.

Japan and the Pacific Ring of Fire

• Japan is one of the world’s most disaster-prone countries because it lies along the Pacific Ring of Fire, a highly active tectonic zone surrounding the Pacific Ocean.
• The region experiences frequent earthquakes, volcanic eruptions, and tsunamis due to interaction and subduction of tectonic plates. Japan has over 100 active volcanoes, making volcanic monitoring and disaster preparedness extremely important for national safety.
• The eruption of Mount Tokachi reflects the continuing geological instability associated with tectonic plate movement in the region.

Importance of Disaster Preparedness

The disaster highlights the importance of effective volcano monitoring systems, early warning mechanisms, evacuation planning, and public awareness in minimizing casualties during volcanic events.

Modern volcanic monitoring involves use of:

• Seismic sensors.
• Satellite observation.
• Ground deformation analysis.
• Gas emission monitoring.

Rapid evacuation and efficient emergency response become especially important in densely populated areas or industrial zones located near active volcanoes.

The eruption also demonstrates the vulnerability of mining activities and settlements situated close to volcanic zones.

Conclusion

The eruption of Mount Tokachi in Japan illustrates the devastating impact volcanic hazards can have on human settlements, infrastructure, and economic activity. The disaster emphasizes the importance of scientific monitoring, disaster preparedness, and resilient infrastructure in tectonically active regions. It also highlights how volcanic eruptions can trigger multiple secondary disasters, making comprehensive risk management essential for minimizing long-term human and economic losses.

5.I-T Dept flags common errors in SFT filings

Why in News?

I-T Department finds errors in SFT filings by banks, mutual funds, including duplicate reporting and missing PAN details.

Key Highlights:

• The Income Tax Department has identified common errors in Statement of Financial Transactions (SFT) filings by banks and mutual funds.
• Errors include duplicate reporting, incorrect transaction values, and missing PAN details.
• These errors can cause inconvenience for taxpayers.
• Reporting entities are required to furnish details of prescribed financial transactions and reportable accounts in the SFT to tax authorities under the Income Tax Act.

Detailed Insights:

• The Statement of Financial Transactions (SFT) is a crucial tool for the Income Tax Department to track financial transactions and ensure tax compliance.
• Accurate SFT filings are essential for pre-filling income tax returns and reducing discrepancies, thereby improving tax administration efficiency.
• Addressing these errors will enhance data accuracy, minimize taxpayer grievances, and improve the overall effectiveness of tax monitoring and compliance.

Income Tax Act, 1961: The Cornerstone of India’s Direct Taxation System

The Income Tax Act, 1961 (IT Act) is the primary legislation governing direct taxation in India, providing the legal framework for the levy, administration, collection, and recovery of income tax. It came into force on April 1, 1962, replacing the Income Tax Act of 1922.

Core Objectives and Scope

The IT Act serves multiple critical functions for the Indian economy and governance.

• Revenue Generation: The primary objective is to raise revenue for the government to fund public expenditure and development projects.
• Economic Regulation: It acts as a tool for economic management, influencing investment, savings, and consumption patterns through various incentives and disincentives.
• Social Equity: Aims to reduce income disparities through progressive taxation, where higher incomes are taxed at higher rates.
• Legal Framework: Provides a comprehensive and structured legal basis for taxing income, ensuring fairness and transparency.
• Applicability: Extends to the whole of India, including Jammu & Kashmir, and applies to all persons (individuals, HUFs, companies, firms, AOPs/BOIs, local authorities, and artificial juridical persons).

Key Concepts and Definitions

The IT Act defines various terms crucial for understanding its application.

• Assessee (Section 2(7)): A person liable to pay tax, or in respect of whom any proceeding under the Act has been initiated. This includes deemed assessee and assessee in default.
• Assessment Year (AY) (Section 2(9)): The period of 12 months commencing on April 1st every year, immediately following the previous year. Income earned in the previous year is taxed in the assessment year.
• Previous Year (PY) (Section 3): The financial year immediately preceding the assessment year, in which income is earned. For a newly set up business, the PY starts from the date of commencement of business.
• Person (Section 2(31)): Broadly defined to include:
  • An individual
  • A Hindu Undivided Family (HUF)
  • A company
  • A firm
  • An Association of Persons (AOP) or Body of Individuals (BOI)
  • A local authority
  • Every artificial juridical person
• Income (Section 2(24)): Not exhaustively defined, but includes profits and gains, dividends, voluntary contributions, perquisites, capital gains, and various other receipts. It’s a wide and inclusive definition.
• Taxable Event: The earning of income, which triggers the liability to pay tax.

Basis of Charge and Residential Status

The liability to pay income tax in India depends on the residential status of a person and the source of their income.

• Basis of Charge (Section 4): Income tax is charged on the total income of every person for the previous year at the rates prescribed by the Finance Act for the relevant assessment year.
• Residential Status (Sections 5 & 6): Determines the scope of total income taxable in India.
  • Resident and Ordinarily Resident (ROR): Taxable on global income (income earned anywhere in the world).
  • Resident but Not Ordinarily Resident (RNOR): Taxable on Indian income and foreign income derived from a business controlled in India or a profession set up in India.
  • Non-Resident (NR): Taxable only on income accrued or received in India.
  • Criteria: Based on physical presence in India for a specified number of days in the previous year and preceding years.

Recent Reforms and Key Amendments

The Income Tax Act is continuously updated to reflect economic changes, policy goals, and ease of compliance.

• Faceless Assessment Scheme (2020): A major reform to eliminate physical interface between taxpayers and tax authorities, promoting transparency and efficiency.
• New Tax Regime (Section 115BAC): Introduced in Finance Act 2020, offering lower tax rates with the condition of foregoing most deductions and exemptions (e.g., 80C, 80D, HRA). Made default from FY 2023-24 (AY 2024-25).
• Reduced Corporate Tax Rates (2019): For domestic companies, rates reduced to 22% (without exemptions) and 15% for new manufacturing companies.
• Taxation of Digital Assets (2022): Introduction of a 30% tax on income from the transfer of Virtual Digital Assets (VDAs) and 1% TDS on VDA transactions above a threshold.
• Angel Tax (Section 56(2)(viib)): Tax on premium received by unlisted companies on share issuance, now extended to non-resident investors (Finance Act 2023), aiming to curb money laundering but raising concerns for startups.
• Updated ITR (Section 139(8A)): Introduced in Finance Act 2022, allowing taxpayers to file an updated return within two years from the end of the relevant assessment year, subject to additional tax.