Why in News?

Recent debates over the role of Artificial Intelligence (AI) in warfare, surveillance, cybersecurity, and governance have intensified after reports linked AI-enabled defence systems to military operations in West Asia. Simultaneously, growing concerns about the absence of strong global regulation over AI technologies have triggered discussions on ethics, privacy, democratic accountability, and national security.

UPSC Relevance

GS-II: Governance, Privacy, Human Rights, Regulation of Technology

GS-III: Artificial Intelligence, Cybersecurity, Internal Security, Science and Technology,

The Expanding Influence of Artificial Intelligence

Artificial Intelligence has rapidly moved beyond being a technological tool and is now influencing:

• Warfare and defence systems
• Governance and surveillance
• Economic production and labour markets
• Social interaction and information ecosystems
• Creativity, media, and education

AI systems are increasingly shaping how societies function and how states exercise power. This has led to concerns that technological corporations may accumulate unprecedented influence over public life without adequate democratic oversight.

AI and the Militarisation of Technology

One of the most significant concerns today is the growing integration of AI into military decision-making.

Companies developing advanced AI systems increasingly argue that future geopolitical dominance will depend on software capabilities, autonomous systems, and data-driven warfare.

AI in Modern Warfare

AI technologies are now being used for:

• Target identification
• Drone operations
• Intelligence gathering
• Predictive military analysis
• Cyber warfare

This raises serious ethical concerns because:

• Human oversight may weaken.
• Automated systems can make life-and-death decisions.
• Civilian casualties may increase.
• Accountability becomes difficult to establish.

The use of AI in warfare also creates the danger of an arms race among technologically advanced nations.

The Rise of Surveillance Capitalism

Another major concern is the use of AI-powered surveillance systems by governments and private corporations.

Expanding Surveillance Systems

AI-based tools are increasingly used for:

• Facial recognition
• Behaviour prediction
• Social profiling
• Immigration enforcement
• Predictive policing

These systems rely on large-scale collection of personal data.

Critics argue that such technologies:

• Threaten privacy rights.
• Enable mass surveillance.
• Increase state control over citizens.
• Reinforce social and racial biases.

Predictive policing systems in several countries have already been criticised for disproportionately targeting marginalised communities.

Concerns Regarding Democratic Accountability

A central issue in AI governance is that many critical decisions are now being shaped by private technology corporations rather than democratically accountable institutions.

Concentration of Power

A few major technology companies control:

• Advanced AI models
• Computing infrastructure
• Massive datasets
• Digital communication platforms

This concentration of technological power raises concerns regarding:

• Monopoly control
• Influence over public discourse
• Manipulation of information ecosystems
• Weak public accountability

The growing dependence of governments on private technology firms further complicates regulatory oversight.

What are the Ethical Challenges in AI Development?

Many AI companies have introduced internal ethical frameworks and “AI constitutions” to guide model behaviour.

These frameworks generally aim to ensure that AI systems:

• Avoid harmful content
• Prevent cyber misuse
• Reduce violent or illegal outputs
• Operate within ethical boundaries

However, critics argue that:

• Self-regulation is insufficient.
• Ethical standards vary across corporations.
• Profit motives may override safety concerns.
• Private companies cannot replace public regulation.

The absence of legally enforceable global standards remains a major governance gap.

AI and Cybersecurity Risks

Advanced AI models are increasingly capable of:

• Writing malicious code
• Conducting sophisticated cyberattacks
• Identifying system vulnerabilities
• Automating hacking operations

This creates serious threats to:

• Financial systems
• Energy infrastructure
• Defence networks
• Public institutions

As AI capabilities improve, the possibility of autonomous cyber warfare becomes a growing concern.

What is the Impact on Employment and Economy?

AI-driven automation is expected to transform labour markets across sectors.

Potential Economic Effects

AI may:

• Increase productivity
• Improve efficiency
• Create new industries

However, it may also:

• Displace workers
• Increase income inequality
• Concentrate wealth among technology owners
• Reduce demand for routine labour

Sectors most vulnerable include:

• Manufacturing
• Customer support
• Transport
• Data processing
• Administrative work

The challenge for governments will be balancing innovation with social protection and workforce transition.

AI, Creativity and Intellectual Property

AI systems are trained using massive datasets containing:

• Books
• Articles
• Music
• Paintings
• Online content

This has triggered debates over:

• Copyright infringement
• Fair use
• Ownership of AI-generated content
• Compensation for original creators

Writers, artists, and creators increasingly fear that AI may undermine human creativity while benefiting corporations commercially.

What are Global Regulatory Responses?

Different countries and regions are attempting to regulate AI through varying approaches.

European Union

The European Union AI Act seeks to:

• Categorise AI systems by risk.
• Ban certain harmful applications.
• Introduce transparency obligations.
• Protect fundamental rights.

It is currently one of the world’s most comprehensive AI regulatory frameworks.

Brazil

Brazil has advocated stronger global AI governance focused on:

• Human rights
• Data protection
• Information integrity
• Protection of creative industries

Brazilian leadership has warned against unchecked concentration of technological power.

India’s Approach

India has so far adopted a relatively soft regulatory approach.

Its governance guidelines recognise concerns related to:

• Bias
• Privacy
• Misinformation
• Accountability

However, India has not yet enacted a comprehensive AI legislation.

India faces a complex balancing challenge:

• Encouraging innovation and digital growth
• Protecting citizens’ rights and democratic values

Key Challenges in AI Governance

Lack of Global Consensus

There is no universally accepted framework governing:

• AI ethics
• Autonomous weapons
• Data ownership
• Cross-border AI regulation

Rapid Pace of Technological Change

Technology is advancing faster than policymaking and institutional capacity.

Governments often struggle to:

• Understand emerging risks
• Develop technical expertise
• Implement timely regulations

National Security Competition

Major powers increasingly view AI as a strategic geopolitical asset.

This intensifies:

• Technological rivalry
• Defence competition
• Data nationalism
• Strategic secrecy

As a result, cooperation becomes more difficult.

Need for Responsible AI Governance

Effective AI governance requires:

• Democratic oversight
• Transparent algorithms
• Protection of privacy
• Ethical safeguards
• International cooperation

Regulation must ensure that technological innovation serves public welfare rather than concentrating power in a few corporations or states.

A balanced framework should promote:

• Innovation
• Human dignity
• Accountability
• Inclusion
• Constitutional values

Conclusion

Artificial Intelligence represents one of the most transformative developments of the 21st century. While it offers immense opportunities in healthcare, education, governance, and economic productivity, it also poses profound ethical, political, and security challenges.

The central issue is no longer whether AI will shape the future, but who will control it, how it will be governed, and whether democratic societies can ensure that technological progress remains aligned with human rights, accountability, and public welfare.

Unchecked technological power, especially when concentrated in a small number of corporations or states, risks deepening inequality, weakening privacy, and undermining democratic institutions. Therefore, robust and inclusive governance frameworks are becoming essential for ensuring that AI remains a tool for human advancement rather than domination.

Practice Questions

Prelims Practice Questions

1. With reference to Artificial Intelligence (AI), consider the following statements:

1. Predictive policing systems use AI-based algorithms to identify potential criminal activity.
2. The European Union AI Act seeks to regulate AI applications based on risk categories.
3. AI systems can never exhibit algorithmic bias because they rely on data-driven decision-making.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Correct Answer:

(a) 1 and 2 only

2. Which of the following are major concerns associated with Artificial Intelligence?

1. Mass surveillance
2. Algorithmic bias
3. Job displacement
4. Cybersecurity threats

Select the correct answer using the code below:

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1, 2, 3 and 4
(d) 1 and 4 only

Correct Answer:

(c) 1, 2, 3 and 4

3. The term “predictive policing” refers to:

(a) Forecasting weather-related disasters using AI
(b) Use of algorithms and data analytics to predict potential criminal activities
(c) AI-based military surveillance in border regions
(d) Predicting cyberattacks on financial institutions

Correct Answer:

(b) Use of algorithms and data analytics to predict potential criminal activities

Mains Practice Questions

1. Discuss the ethical and governance challenges posed by the rapid expansion of Artificial Intelligence technologies.

2. “The concentration of AI capabilities in a few corporations poses risks to democracy and individual freedoms.” Examine.

3. Artificial Intelligence presents opportunities for economic growth as well as risks to employment, privacy, and national security. Critically analyse.

4. Why is global cooperation necessary for regulating Artificial Intelligence? Discuss the challenges in evolving a multilateral AI governance framework.

5. Examine the implications of AI-driven surveillance systems on civil liberties and democratic accountability.

Why in News?

The European Union’s Carbon Border Adjustment Mechanism (CBAM) came fully into force on January 1, 2026. Simultaneously, India and the European Union concluded negotiations for a Free Trade Agreement (FTA) on January 27, 2026. The debate has intensified over whether CBAM unfairly burdens Indian exports and whether India should evolve its own carbon pricing and border adjustment mechanisms.

UPSC Relevance

GS-II: India-EU Relations, International Institutions, Global Governance
GS-III: Climate Change, Environmental Conservation, Economy, Energy Security, International Trade

Understanding the Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism is a climate-related trade policy introduced by the European Union to impose a carbon price on imports entering the EU market.

The EU argues that domestic industries already pay carbon costs under the EU Emissions Trading System (ETS), and imported products should bear similar costs to ensure a “level playing field”.

Initially, CBAM covers carbon-intensive sectors such as:

• Steel
• Aluminium
• Cement
• Fertilisers
• Electricity
• Hydrogen

Under this mechanism, importers into the EU must pay charges corresponding to the embedded carbon emissions in imported products.

Objectives Behind CBAM

Preventing Carbon Leakage

Carbon leakage refers to industries relocating production to countries with weaker environmental standards to avoid stringent climate regulations.

CBAM seeks to prevent this by ensuring imports face comparable carbon costs.

Supporting EU Climate Goals

The mechanism is linked to the EU’s ambition of achieving climate neutrality by 2050 under the European Green Deal.

Protecting Domestic Industries

Critics argue that beyond climate concerns, CBAM also acts as a protective trade instrument shielding European industries from cheaper imports.

Why CBAM Concerns India?

Competitive Disadvantage for Indian Exports

Indian steel, cement and aluminium producers generally operate with higher carbon intensity compared to many European firms due to:

• Dependence on coal-based energy
• Older industrial technologies
• Limited access to green finance
• High transition costs

As a result, Indian exports may become costlier in European markets.

Unequal Playing Field

A major criticism is that European industries continue to enjoy:

• Free emission allowances under the EU ETS
• Subsidised public finance
• Large-scale decarbonisation support

These protections reduce their effective carbon costs even while CBAM is imposed on external exporters.

Indian producers, however, face the full burden without equivalent state support.

WTO and Trade Justice Concerns

The debate over CBAM has important implications for the global trading system.

Possible Conflict with GATT Principles

Under the World Trade Organization framework, Article III of the General Agreement on Tariffs and Trade (GATT) discourages the use of internal taxes and regulations to unfairly protect domestic industries.

Developing countries argue that CBAM indirectly functions as:

• A trade barrier
• A green protectionist tool
• A mechanism transferring adjustment burdens onto poorer countries

Climate Justice Dimension

The principle of “Common But Differentiated Responsibilities” (CBDR) under global climate governance recognises that developed nations historically contributed more to climate change and therefore should shoulder greater responsibility.

Critics argue that CBAM ignores developmental asymmetries between developed and developing economies.

India-EU Free Trade Agreement and CBAM

The India-EU FTA did not provide India any exemption from CBAM.

However, the agreement contains an important provision through Annex 14-A, which establishes:

• Technical dialogue on carbon border measures
• Recognition of effective carbon pricing paid in India
• Most-Favoured-Nation (MFN) treatment if flexibility is granted to others

This creates a limited but significant diplomatic and legal opening for India.

India’s Carbon Credit Trading Scheme (CCTS)

India notified the Carbon Credit Trading Scheme in 2023.

The scheme establishes a domestic carbon market through tradable carbon certificates.

Key features include:

• Sectoral coverage of major industries
• Market-based carbon pricing
• Compliance obligations for installations
• Gradual expansion across sectors

The scheme is intended to help India transition toward lower-carbon industrial production while maintaining economic growth.

Article 9 of CBAM and India’s Opportunity

CBAM Regulation Article 9 allows deductions for carbon prices already paid in the country of origin.

This means that if Indian exporters already pay carbon costs under India’s domestic system, these costs can potentially be adjusted against EU CBAM liabilities.

This provision becomes strategically important because:

• It prevents double carbon taxation
• It gives legitimacy to India’s domestic carbon market
• It strengthens India’s negotiating position

India Border Adjustment Mechanism (IBAM)

Concept

Experts have proposed that India create its own India Border Adjustment Mechanism (IBAM).

Under this model:

• India itself would collect carbon-related charges on exports
• These charges would be recognised under CBAM Article 9
• Indian exporters would not pay additional net carbon costs in Europe

The crucial difference is that the revenues would remain within India instead of flowing into European treasuries.

Potential Benefits of IBAM

Retaining Carbon Revenues

Instead of Europe retaining adjustment revenues, India could use these funds domestically.

Financing Green Transition

The revenues can support:

• Green steel production
• Hydrogen-based technologies
• Renewable energy expansion
• Energy-efficient industrial upgrades
• Worker transition and reskilling

Strengthening Climate Sovereignty

IBAM would allow India to shape its own climate transition rather than merely complying with external regulatory frameworks.

What are the Challenges Before India?

Industrial Readiness

Many Indian industries still rely heavily on fossil fuels and may struggle with transition costs.

Monitoring and Verification

A credible carbon pricing system requires:

• Accurate emissions accounting
• Strong monitoring mechanisms
• Transparent reporting systems
• Independent audits

Trade Retaliation Risks

Aggressive border adjustment measures could trigger trade disputes or retaliatory measures.

Balancing Development and Decarbonisation

India must simultaneously:

• Reduce emissions
• Ensure industrial growth
• Protect employment
• Maintain export competitiveness

This creates a difficult policy balancing act.

Broader Geopolitical Significance

CBAM reflects the increasing intersection of:

• Climate policy
• Trade policy
• Industrial strategy
• Geopolitics

Climate regulations are gradually becoming instruments of economic power and global influence.

For developing countries like India, the challenge is not only environmental adaptation but also ensuring policy autonomy within an evolving green global order.

Way Forward

India’s response must combine diplomacy, industrial policy and climate strategy.

Strengthening India’s Domestic Carbon Market

India must accelerate the implementation of the Carbon Credit Trading Scheme (CCTS) by gradually expanding sectoral coverage, improving emissions accounting standards, and ensuring transparent monitoring, reporting and verification (MRV) systems. A credible and compliance-grade domestic carbon market will strengthen India’s position in negotiations with the European Union regarding recognition under CBAM Article 9.

A robust domestic carbon pricing system would also reduce the risk of double carbon taxation on Indian exports.

Negotiating Mutual Recognition Under CBAM Article 9

India should utilise the institutional mechanisms available under the India-EU Free Trade Agreement, especially Annex 14-A, to secure formal recognition of carbon prices paid domestically.

The focus should be on:

• Recognition of India’s carbon credits as valid offsets
• Transparent methodologies for carbon accounting
• Exchange-rate conversion mechanisms
• Avoidance of double adjustment burdens

This would ensure that Indian exporters are not unfairly penalised.

Developing a Carefully Designed India Border Adjustment Mechanism (IBAM)

India may gradually evolve its own India Border Adjustment Mechanism (IBAM), but this must be designed cautiously and in consultation with trading partners.

An effective IBAM should:

• Be WTO-compatible
• Avoid retaliatory trade conflicts
• Align with domestic carbon pricing systems
• Ensure transparency and predictability

Most importantly, revenues generated through such mechanisms should remain within India and be utilised for domestic decarbonisation efforts.

Using Carbon Revenues for Green Industrial Transition

Carbon-related revenues should be ring-fenced into a dedicated climate transition fund.

These resources can support:

Industrial Modernisation

• Green steel production
• Low-carbon cement technologies
• Energy-efficient manufacturing systems
• Electrification of industrial processes

Renewable Energy Expansion

India must accelerate investments in:

• Solar energy
• Wind energy
• Green hydrogen
• Energy storage systems

Reducing fossil fuel dependence will lower export carbon intensity over time.

Worker Protection and Just Transition

Decarbonisation must not disproportionately burden workers and vulnerable communities.

Dedicated transition support is necessary through:

• Reskilling programmes
• Social protection measures
• Green employment generation
• Regional economic diversification

Enhancing Technological Capacity

Indian industries require access to affordable clean technologies.

India should therefore:

• Encourage domestic green technology innovation
• Expand research and development support
• Promote technology transfer partnerships
• Increase public-private collaboration

The transition to low-carbon manufacturing cannot succeed without technological upgrading.

Climate Finance and International Equity

India should continue demanding greater climate finance commitments from developed countries based on the principle of Common But Differentiated Responsibilities (CBDR).

Developed countries historically contributed more to global emissions and therefore carry greater obligations in supporting developing economies through:

• Green finance
• Technology transfer
• Capacity building
• Adaptation assistance

Climate measures should not become disguised forms of green protectionism.

Building Coalitions with Developing Countries

India should work closely with:

• BASIC countries
• BRICS nations
• G77 groupings
• Other developing economies affected by CBAM

Collective bargaining can strengthen the Global South’s negotiating position in global trade and climate forums.

A coordinated approach is essential to ensure that climate governance remains equitable and inclusive.

Ensuring WTO-Compatible Climate Policies

India’s response must remain consistent with the rules of the World Trade Organization.

This requires:

• Non-discriminatory climate measures
• Transparent carbon accounting
• Predictable trade regulations
• Scientific justification for adjustments

A rules-based approach will reduce the risk of prolonged trade disputes.

Strengthening Domestic Institutional Capacity

Effective climate-trade governance requires strong institutional coordination among:

• Ministry of Commerce
• Ministry of Environment, Forest and Climate Change
• Ministry of Finance
• Bureau of Energy Efficiency
• Industry regulators

India must develop specialised expertise in carbon accounting, climate diplomacy and green industrial policy.

Promoting Sustainable Consumption and Circular Economy

India should also reduce industrial emissions through circular economy strategies such as:

• Recycling and reuse
• Scrap-based steelmaking
• Resource efficiency
• Waste minimisation

This can simultaneously improve competitiveness and reduce environmental pressures.

Integrating Development with Decarbonisation

India’s climate strategy must reflect its developmental realities.

Unlike developed economies, India continues to face challenges relating to:

• Poverty reduction
• Energy access
• Industrialisation
• Employment generation

Therefore, India’s transition pathway must balance environmental sustainability with developmental priorities and energy security.

Conclusion

The debate over CBAM is not merely about environmental regulation; it represents a larger struggle over who controls the economics of decarbonisation in the 21st century.

For India, the challenge lies in ensuring that climate action does not become a new form of trade asymmetry. Mechanisms such as the Carbon Credit Trading Scheme and a carefully designed India Border Adjustment Mechanism could help India retain both policy autonomy and carbon revenues while participating constructively in global climate governance.

Prelims Practice Questions

1. Consider the following statements regarding the Carbon Border Adjustment Mechanism (CBAM):

1. It has been introduced by the European Union.
2. It aims to prevent carbon leakage.
3. It currently applies only to agricultural products.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3

Answer: (a)

2. Which of the following sectors are covered under the European Union’s CBAM?

1. Steel
2. Cement
3. Aluminium
4. Hydrogen

Select the correct answer using the code below:

(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4

Answer: (d)

3. The principle of “Common But Differentiated Responsibilities” (CBDR) is associated with:

(a) World Trade Organization
(b) United Nations Framework Convention on Climate Change
(c) International Monetary Fund
(d) Basel Convention

Answer: (b)

Mains Practice Questions

1. “Climate-related trade measures are increasingly becoming instruments of economic power.” Examine in the context of the European Union’s Carbon Border Adjustment Mechanism (CBAM).

2. Discuss the implications of the European Union’s CBAM for India’s industrial competitiveness, climate policy and trade sovereignty.

3. Critically analyse whether carbon border taxes violate the principles of climate justice and equitable global trade.

Why in News?

The Allahabad High Court, in an April 2026 judgment concerning the Tharu tribal community of Palia Kalan Tehsil in Uttar Pradesh, reaffirmed the supremacy of the Forest Rights Act over earlier inconsistent laws and court orders. The Court struck down a District Level Committee (DLC) decision that had rejected forest rights claims by relying on an old Supreme Court interim order restricting de-reservation of forests.

The judgment has revived debate over the implementation of the Forest Rights Act (FRA), tensions between conservation and tribal rights, and repeated instances where administrative authorities and courts have bypassed statutory protections available to forest-dwelling communities.

UPSC Relevance

GS-II: Welfare Schemes, Tribal Issues, Governance, Rights-Based Legislation, Forest Governance,
GS-III: Environment, Biodiversity, Conservation, Inclusive Development

Background: The Forest Rights Act, 2006

The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 was enacted to correct the “historical injustice” committed against forest-dwelling communities during colonial and post-colonial forest governance.

Before the FRA, forest-dependent communities were often treated as encroachers despite living in forests for generations. The Act sought to shift forest governance from an exclusionary conservation model to a participatory and rights-based framework.

Objectives of the FRA

The FRA aims to:

• Recognise and vest forest rights in forest-dwelling Scheduled Tribes (FDSTs) and Other Traditional Forest Dwellers (OTFDs).
• Ensure livelihood security for forest communities.
• Democratise forest governance through Gram Sabhas.
• Integrate conservation with community participation.
• Prevent arbitrary eviction and displacement.

Who are Eligible under the FRA?

Forest Dwelling Scheduled Tribes (FDSTs)

Scheduled Tribes residing in forest areas prior to December 13, 2005.

Other Traditional Forest Dwellers (OTFDs)

Non-tribal forest dwellers who have lived in forests for at least three generations (75 years) before December 13, 2005.

Rights Recognised under the FRA

Role of the Gram Sabha

The FRA places the Gram Sabha at the centre of forest governance.

Its functions include:

• Initiating and verifying claims.
• Consolidating evidence.
• Protecting community forest resources.
• Monitoring implementation of rights.

This reflects the constitutional principle of decentralised governance under the 73rd Constitutional Amendment.

What was the Case Before the Allahabad High Court?

The District Level Committee (DLC) in Lakhimpur Kheri rejected forest rights claims filed by the Tharu tribal community in 2021.

The DLC relied on a 2000 interim order of the Supreme Court that barred de-reservation of forests, sanctuaries, and national parks.

The petitioners challenged this rejection before the Allahabad High Court.

Key Observations of the Allahabad High Court

FRA Overrides Earlier Inconsistent Orders

The Court reaffirmed a foundational legal principle:

A later law overrides earlier inconsistent laws and judicial directions.

The FRA itself explicitly states that forest rights shall be recognised “notwithstanding anything contained in any other law”.

Thus, earlier court orders inconsistent with the FRA cannot override statutory rights granted under the Act.

Recognition of Statutory Rights

The Court held that the DLC could not deny rights solely on the basis of older judicial directions when Parliament had subsequently enacted a law recognising those rights.

This strengthens the legal position of forest-dwelling communities across India.

Reaffirmation of Tribal Rights

The order reinforces the idea that forest dwellers are rights-bearing citizens rather than illegal encroachers.

It also highlights that administrative authorities must operate within the framework of the FRA.

Constitutional Dimensions

Article 21

The right to livelihood, dignity, shelter, and life of forest dwellers is connected to Article 21.

Article 46

The State must protect the educational and economic interests of Scheduled Tribes and weaker sections.

Fifth Schedule

Provides special governance mechanisms for Scheduled Areas and tribal welfare.

Article 243

Supports decentralised governance through Gram Sabhas and Panchayati Raj Institutions.

Important Legal Issue: Can the ECI Ignore FRA Provisions?

The article highlights a broader concern that administrative authorities and even courts have often bypassed FRA protections.

Several High Courts have earlier upheld evictions or restrictions without adequately considering FRA provisions.

Examples include cases in:

• Tamil Nadu
• Uttarakhand
• Madras High Court jurisdictions

The Allahabad High Court judgment is significant because it restores the primacy of the FRA in such disputes.

FRA and Protection Against Eviction

The FRA explicitly prohibits eviction or removal of forest dwellers until:

• Recognition of rights is completed, and
• Verification procedures are fully exhausted.

This safeguard is critical because many forest communities lack formal land records despite long historical occupation.

FRA and Grazing Rights

The FRA recognises traditional grazing rights and access to forest resources.

However, conflicts frequently arise between:

• Wildlife conservation laws,
• State forest laws, and
• Community rights under the FRA.

Recent judicial orders restricting grazing in protected areas reignited this debate.

The Allahabad High Court judgment indirectly strengthens the argument that FRA rights cannot be casually overridden by earlier State laws.

Major Challenges in FRA Implementation

Administrative Resistance

Forest departments in many States continue to view FRA as a threat to bureaucratic control over forests.

Slow Recognition of Community Forest Rights

Community Forest Rights (CFRs), considered the transformative aspect of FRA, remain poorly implemented.

High Rejection Rates

Large numbers of claims are rejected due to procedural technicalities and lack of documentation.

Lack of Awareness

Many tribal and forest communities are unaware of their legal entitlements.

Conflict Between Conservation and Rights

Conservation policies often prioritise exclusionary protection models over community-led conservation.

Significance of the Judgment

The Allahabad High Court ruling is important because it:

• Reaffirms parliamentary supremacy of the FRA.
• Protects tribal communities from arbitrary exclusion.
• Reinforces the role of Gram Sabhas.
• Strengthens the legal basis of community forest governance.
• Reasserts that constitutional democracy must include forest-dependent populations.

The judgment also signals that administrative authorities cannot selectively ignore welfare legislation enacted to remedy historical injustice.

Way Forward

Strengthening Gram Sabhas

Gram Sabhas must be empowered institutionally and financially to perform their statutory functions effectively.

Faster Recognition of CFRs

States should prioritise recognition of Community Forest Resource rights, which remain under-implemented.

Harmonisation of Laws

Forest, wildlife, and conservation laws should be harmonised with FRA provisions to reduce legal conflict.

Capacity Building

Training should be provided to district officials, forest officers, and local bodies regarding FRA provisions and tribal rights.

Technology and Transparency

Digital claim-tracking systems and public disclosure of rejection reasons can improve accountability.

Community-Led Conservation

India should promote participatory conservation models where forest dwellers become stakeholders in biodiversity protection.

Judicial Sensitisation

Courts must interpret environmental and forest laws in harmony with constitutional protections for tribal communities.

Conclusion

The Allahabad High Court judgment is a major reaffirmation of the rights-based philosophy underlying the Forest Rights Act, 2006. It recognises that forest governance in India cannot remain rooted solely in colonial conservation frameworks that excluded indigenous and forest-dependent communities.

The ruling reiterates that social justice, constitutional morality, and environmental governance must coexist. The future of India’s forests depends not only on ecological preservation but also on democratic inclusion and recognition of the rights of those who have historically lived closest to the forests.

Prelims Practice Questions

1. With reference to the Forest Rights Act (FRA), 2006, consider the following statements:

1. The Gram Sabha is the authority to initiate the process for determining forest rights.
2. The FRA recognises both individual and community forest rights.
3. Grazing rights are excluded under the FRA.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a)

2. Which of the following rights are recognised under the Forest Rights Act, 2006?

1. Rights over minor forest produce
2. Habitat rights of PVTGs
3. Community forest resource rights
4. Rights to commercial mining in reserved forests

Select the correct answer using the code below:

(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4

Answer: (b)

3. Consider the following statements regarding the Forest Rights Act, 2006:

1. It seeks to correct historical injustice against forest dwellers.
2. It applies only to Scheduled Tribes.
3. It prohibits eviction until recognition and verification procedures are completed.

Which of the statements given above are correct?

(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3

Answer: (a)

Mains Practice Questions

1. Discuss the role of Gram Sabhas in democratising forest governance in India.
2. “The Forest Rights Act, 2006 represents a shift from exclusionary conservation to participatory forest governance.” Discuss.
3. Examine the constitutional and governance issues surrounding the implementation of the Forest Rights Act, 2006.
4. The Allahabad High Court judgment on FRA reaffirms the principle that welfare legislation cannot be overridden by inconsistent administrative practices. Analyse.

Why in News?

The disruption of liquefied natural gas (LNG) supplies due to the closure of the Strait of Hormuz amid the ongoing West Asia conflict has highlighted India’s vulnerability to external energy shocks. With LNG cargo movements from the Persian Gulf severely affected for over two months, policymakers and energy companies are reconsidering India’s limited LNG storage capacity.

Petronet LNG, India’s largest LNG importer, has indicated that both industry and government stakeholders are now actively considering expansion of LNG storage infrastructure, including additional cryogenic tanks and improved gas pipeline connectivity.

UPSC Relevance

GS-II: International Relations, India-West Asia Relations
GS-III: Energy Security, Infrastructure, Economy, Environmental Sustainability, Climate and Development

Understanding LNG

Liquefied Natural Gas (LNG) is natural gas cooled to around –162°C, converting it into liquid form for easier storage and transportation.

The LNG supply chain involves:

1. Liquefaction of natural gas.
2. Transportation through specialised cryogenic LNG carriers.
3. Storage in insulated cryogenic tanks at regasification terminals.
4. Reconversion into gaseous form for pipeline distribution.

LNG is increasingly important for countries seeking cleaner transition fuels compared to coal and oil.

India’s Dependence on LNG Imports

India imports nearly half of its natural gas requirements in the form of LNG.

The major suppliers include:

• Qatar
• United Arab Emirates
• Australia
• United States

A significant portion of these imports passes through the Strait of Hormuz, one of the world’s most critical maritime chokepoints.

Strategic Importance of the Strait of Hormuz

The Strait of Hormuz connects the Persian Gulf to the Arabian Sea and is vital for global energy trade.

Its importance includes:

• Carries nearly one-fifth of global oil and LNG trade.
• Main route for Gulf energy exports.
• Essential for Asian energy-importing economies including India, China, Japan, and South Korea.

Any disruption in the Strait directly affects global energy prices and supply chains.

Impact of the West Asia Conflict on India

The closure and disruption of vessel movement through the Strait of Hormuz led to:

LNG Supply Interruptions

India reportedly did not receive LNG cargoes from the Persian Gulf for over two months.

Industrial Supply Constraints

The government prioritised gas allocation to:

• Household cooking fuel,
• City gas distribution,
• Transportation sectors.

Industrial users faced rationing of natural gas supplies.

Price Volatility

Reduced LNG availability led to higher spot market prices and increased import costs.

Energy Security Concerns

The crisis exposed India’s limited capacity to absorb prolonged external disruptions.

Why LNG Storage Capacity Matters

Strategic Buffer Against Supply Shocks

Higher LNG storage capacity allows countries to maintain emergency reserves during geopolitical crises.

Unlike crude oil, India has very limited strategic LNG reserves.

Cushion Against Price Volatility

Stored LNG can reduce dependence on volatile spot markets during emergencies.

Supply Stability

Larger stockpiles ensure uninterrupted supply to critical sectors such as:

• Fertilisers,
• Power generation,
• City gas distribution,
• Transportation.

Operational Flexibility

Additional storage enables terminals to continue functioning efficiently even during temporary shipping disruptions.

Existing LNG Infrastructure in India

India currently has:

• Around 23 LNG storage tanks,
• Multiple regasification terminals,
• Expanding pipeline infrastructure.

Major LNG terminals include:

Why Existing Capacity is Inadequate

Current LNG tanks are primarily designed for operational continuity rather than emergency stockpiling.

According to industry estimates:

• One LNG tank roughly stores one shipload of LNG.
• India consumes about 1.25 tank-equivalents daily.

Thus, existing infrastructure provides only limited short-term resilience.

Petronet LNG’s Expansion Plans

Petronet LNG plans to significantly expand storage capacity.

Proposed Additions

Dahej Terminal

• Existing: 8 tanks
• Proposed addition: 4 more tanks

Kochi Terminal

• Existing: 2 tanks
• Proposed addition: 1 more tank

Gopalpur Terminal

• Under development
• Planned addition: 2 tanks

The company estimates overall LNG storage capacity may increase by nearly 70%.

Importance of Gas Pipeline Connectivity

Storage alone is insufficient without strong evacuation infrastructure.

Some Indian LNG terminals suffer from:

• Weak pipeline connectivity,
• Low utilisation rates,
• Limited market access.

Improved gas grid integration is essential for:

• Efficient fuel transportation,
• Better terminal utilisation,
• Expansion of gas-based economy.

LNG and India’s Energy Transition

Natural gas is viewed as a “transition fuel” in India’s move toward cleaner energy.

It emits less carbon dioxide compared to coal and oil.

India aims to raise the share of natural gas in its energy mix from around 6% to 15%.

Gas is important for:

• Cleaner industrial fuel,
• Urban cooking energy,
• Transport fuel (CNG),
• Fertiliser production,
• Backup power generation.

Challenges in Expanding LNG Storage

High Capital Costs

Cryogenic LNG tanks require specialised engineering and insulation technologies.

Long Construction Timelines

A single LNG tank may take three or more years to complete.

Land Constraints

Large storage terminals require coastal land availability.

Safety Concerns

LNG handling involves stringent safety and environmental regulations.

Import Dependence

Storage buffers reduce short-term risks but do not eliminate dependence on imported energy.

Strategic Lessons from the Hormuz Crisis

The crisis demonstrates that:

• Even low-probability geopolitical events can severely disrupt energy supply chains.
• Energy security must include diversification, redundancy, and strategic reserves.
• India needs integrated planning across storage, transport, procurement, and diplomacy.

Wider Implications for India’s Energy Security

The LNG disruption has revived broader debates on:

Diversification of Supply Sources

Reducing excessive dependence on Gulf suppliers.

Strategic Energy Reserves

Developing reserves not only for crude oil but also for gas.

Domestic Gas Production

Boosting exploration and production under initiatives such as:

• Open Acreage Licensing Policy (OALP),
• Hydrocarbon Exploration and Licensing Policy (HELP).

Renewable Energy Expansion

Reducing fossil fuel vulnerability through renewables and green hydrogen.

Way Forward

Creation of Strategic LNG Reserves

India should establish dedicated emergency LNG reserves similar to strategic petroleum reserves.

Expansion of Storage Infrastructure

More cryogenic tanks must be built at major terminals with long-term planning.

Strengthening Pipeline Connectivity

The national gas grid should be expanded to improve evacuation and distribution.

Diversification of Import Sources

India should secure long-term LNG contracts from multiple geographies including:

• Africa,
• Australia,
• United States,
• Russia.

Promotion of Domestic Production

Domestic natural gas exploration and extraction should be accelerated.

Integrated Energy Security Framework

India needs a coordinated national energy security strategy linking:

• Storage,
• Infrastructure,
• Diplomacy,
• Market reforms,
• Renewable transition.

Development of Green Hydrogen

In the long run, green hydrogen and renewable energy can reduce exposure to imported fossil fuel disruptions.

Conclusion

The LNG supply disruption caused by the West Asia conflict and the closure of the Strait of Hormuz has exposed a major vulnerability in India’s energy architecture. While India has developed substantial LNG import capacity, its storage buffers remain inadequate for prolonged geopolitical disruptions.

The crisis has underscored that energy security today is not merely about securing imports, but also about building resilience through storage, diversification, infrastructure expansion, and strategic planning. Expanding LNG storage capacity, strengthening pipeline connectivity, and accelerating the transition toward cleaner domestic energy sources will be critical for ensuring India’s long-term energy stability.

Prelims Practice Questions

1. With reference to Liquefied Natural Gas (LNG), consider the following statements:

1. LNG is natural gas cooled to extremely low temperatures.
2. LNG occupies less volume than gaseous natural gas.
3. LNG can be stored in ordinary steel tanks at room temperature.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a)

2. The Strait of Hormuz is strategically important because:

(a) It connects the Mediterranean Sea with the Atlantic Ocean
(b) It connects the Persian Gulf with the Arabian Sea
(c) It connects the Red Sea with the Gulf of Aden
(d) It connects the Black Sea with the Mediterranean Sea

Answer: (b)

3. Consider the following statements:

1. India imports a substantial portion of its LNG from Qatar.
2. LNG regasification terminals convert LNG back into gaseous form.
3. India currently maintains large strategic LNG reserves comparable to its strategic crude oil reserves.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a)

Mains Practice Questions

1. Examine the challenges and opportunities in expanding India’s natural gas infrastructure and storage capacity.
2. Discuss the strategic importance of LNG in India’s energy transition and energy security framework.
3. The Strait of Hormuz remains a critical vulnerability for India’s energy imports. Examine the geopolitical and economic implications of disruptions in the region.
4. Energy security in the 21st century requires resilience, diversification, and strategic reserves. Analyse in the context of India’s LNG sector.

Why in News?

India recorded an all-time peak electricity demand of 256.1 GW on April 25, 2026, with solar energy contributing 21.5% of the afternoon electricity load — the highest ever contribution from solar power during peak daytime demand. However, despite rapid growth in installed solar capacity, solar contributed only around 10.8% of total daily electricity generation and almost negligible supply during evening peak hours after sunset.

This has intensified policy discussions on the urgent need for battery energy storage systems (BESS) to stabilise renewable energy integration and reduce curtailment of solar power.

UPSC Relevance

GS-II: Government Policies and Interventions, Climate Governance
GS-III: Energy Security, Infrastructure, Environment, Science and Technology, Climate Change, Renewable Energy Transition, Sustainable Development, Climate Resilience

India’s Renewable Energy Transition

India is undergoing one of the world’s fastest energy transitions.

The country has set ambitious targets:

• 500 GW of non-fossil fuel electricity capacity by 2030,
• Net-zero emissions target by 2070,
• Rapid reduction in carbon intensity of GDP.

Solar energy has emerged as the central pillar of this transition.

India’s solar installed capacity has grown rapidly due to:

• Falling solar tariffs,
• Government incentives,
• Large solar parks,
• International climate commitments,
• Domestic manufacturing push.

Rise of Solar Power in India

India’s solar share in installed electricity capacity has nearly doubled:

Major solar-producing States include:

• Rajasthan
• Gujarat
• Tamil Nadu
• Karnataka
• Andhra Pradesh

India is also home to some of the world’s largest solar parks, including:

• Bhadla Solar Park
• Pavagada Solar Park

The Core Problem: Solar Intermittency

Solar power generation depends entirely on sunlight availability.

This creates a major challenge:

• Solar generation peaks during daytime.
• Electricity demand often peaks during evening hours after sunset.

This mismatch is known as the “duck curve” problem in power systems.

As a result:

• Excess solar power during daytime cannot always be utilised.
• Evening demand continues to depend heavily on coal and gas plants.

Thus, installed solar capacity alone does not guarantee reliable electricity supply.

Understanding the Generation-Capacity Gap

A key issue in India’s energy transition is the growing gap between:

• Installed renewable capacity,
  and
• Actual electricity generation contribution.

Although solar forms nearly 28% of installed capacity, its actual contribution to total daily generation remains much lower.

Reasons include:

Limited Sunlight Hours

Solar plants generate electricity only during daytime.

Grid Constraints

Transmission bottlenecks limit evacuation of power from renewable-rich regions.

Absence of Adequate Storage

Excess daytime electricity cannot be stored efficiently.

Renewable Curtailment

Grid operators sometimes ask solar plants to reduce generation to maintain grid stability.

Solar Curtailment: A Growing Problem

India reportedly curtailed about 2.3 TWh of solar power during 2025.

This means electricity generated by solar plants was not utilised despite being available.

Why Curtailment Happens

Grid Stability Concerns

Electricity supply and demand must remain balanced in real time.

Lack of Storage

Without batteries, surplus power cannot be preserved.

Transmission Congestion

Insufficient transmission infrastructure prevents power movement.

Demand Mismatch

Midday solar generation often exceeds local demand.

Economic Costs of Curtailment

Curtailment creates significant economic inefficiencies.

Public Financial Burden

Power producers are often compensated even when electricity is not dispatched.

Investor Uncertainty

Frequent curtailment reduces project profitability and discourages investment.

Wastage of Renewable Energy

Clean energy that could reduce fossil fuel dependence goes unused.

Why Battery Storage is Critical

Battery Energy Storage Systems (BESS) allow electricity generated during sunny periods to be stored and used later.

This solves the intermittency problem.

Functions of Battery Storage

Time-Shifting of Electricity

Daytime solar energy can be supplied during evening peak demand.

Grid Stabilisation

Batteries help balance fluctuations in electricity frequency and voltage.

Peak Load Management

Stored electricity reduces stress on conventional thermal plants.

Renewable Integration

Storage enables higher renewable penetration without destabilising the grid.

Falling Battery Costs: A Positive Development

Battery storage economics are improving rapidly.

Reported battery storage tariffs declined significantly during 2025:

This decline is driven by:

• Global scale economies,
• Improved battery technologies,
• Growth of electric vehicle manufacturing,
• Expansion of lithium-ion production.

India’s Battery Storage Capacity Remains Limited

Despite growing awareness, operational battery storage capacity remains very small.

This remains inadequate compared to India’s rapidly expanding renewable energy base.

Policy Push for Energy Storage

The Union Government has initiated several measures to support storage deployment.

Viability Gap Funding (VGF)

Financial support for large battery storage projects.

Renewable Energy + Storage Tenders

Solar projects increasingly include mandatory storage components.

National Electricity Plan

Recognises storage as essential for future grid reliability.

Green Energy Corridors

Transmission projects to integrate renewable-rich regions.

Importance of Co-Located Storage

Experts increasingly recommend pairing solar plants with nearby battery systems.

Benefits include:

• Reduced transmission losses,
• Better grid stability,
• Reduced curtailment,
• Improved dispatch reliability.

This integrated model is becoming globally standard in renewable energy systems.

Link Between Climate Change and Energy Demand

The India Meteorological Department’s forecast of a below-normal monsoon adds urgency to the issue.

A hotter and drier summer leads to:

• Higher cooling demand,
• Greater air-conditioner use,
• Rising daytime electricity demand.

This is precisely when solar generation can contribute most effectively — provided adequate storage exists.

India’s Larger Energy Transition Challenge

India faces a complex balancing act:

Expanding Renewable Capacity

Rapidly scaling clean energy generation.

Maintaining Grid Reliability

Ensuring uninterrupted electricity supply.

Managing Affordability

Preventing excessive tariff burdens on consumers.

Achieving Climate Goals

Reducing fossil fuel dependence.

Storage systems are increasingly central to balancing all these objectives simultaneously.

Global Trends in Battery Storage

Countries such as:

• China
• United States
• Australia

have aggressively expanded battery storage alongside renewable energy growth.

Large-scale battery deployment has enabled:

• Greater renewable integration,
• Reduced grid instability,
• Lower dependence on peaking thermal plants.

India is now entering a similar phase.

Challenges in Expanding Battery Storage

High Upfront Costs

Despite falling prices, battery systems remain capital-intensive.

Dependence on Critical Minerals

Lithium, cobalt, and nickel imports create supply vulnerabilities.

Financing Constraints

Many renewable projects already face stressed finances due to low tariffs.

Technological Dependence

India still relies significantly on imported battery technologies.

Recycling and Disposal Issues

Battery waste management remains underdeveloped.

Strategic Importance for India

Battery storage is not merely an energy technology issue.

It is linked to:

• Energy security,
• Industrial policy,
• Climate resilience,
• Strategic autonomy,
• Manufacturing competitiveness.

India’s renewable transition cannot succeed sustainably without storage infrastructure.

Way Forward

Accelerate Large-Scale Battery Deployment

India must move from pilot projects to nationwide utility-scale deployment.

Integrate Storage into All Renewable Auctions

Future solar and wind tenders should include mandatory storage requirements.

Strengthen Domestic Manufacturing

Initiatives such as the Production Linked Incentive (PLI) scheme should support battery manufacturing ecosystems.

Develop Alternative Battery Technologies

Research into sodium-ion, solid-state, and flow batteries should be encouraged to reduce dependence on imported lithium.

Expand Grid Infrastructure

Transmission and distribution upgrades are essential for renewable integration.

Improve Renewable Forecasting

Advanced forecasting systems can reduce grid instability caused by intermittent generation.

Create Strategic Mineral Partnerships

India should secure long-term access to lithium and other critical minerals through international partnerships.

Encourage Distributed Storage

Residential, commercial, and community-level battery systems can reduce pressure on central grids.

Strengthen Regulatory Frameworks

Clear regulations for storage pricing, grid integration, and ancillary services are necessary.

Conclusion

India’s record solar contribution during peak daytime demand demonstrates the remarkable progress of its renewable energy transition. However, the widening gap between installed solar capacity and actual usable electricity generation reveals a deeper structural challenge.

Without large-scale battery storage, solar energy remains only partially effective in addressing India’s long-term energy needs. Curtailment losses, evening demand dependence on fossil fuels, and grid instability all underscore that generation capacity alone is insufficient.

Battery storage represents the missing bridge between renewable ambition and reliable electricity delivery. India’s energy future will depend not only on how much solar capacity it installs, but also on how effectively it stores, manages, and distributes that clean energy across time and geography.

Prelims Practice Questions

1. Consider the following statements regarding Battery Energy Storage Systems (BESS):

1. They help store excess renewable electricity for later use.
2. They can improve grid stability and frequency regulation.
3. They eliminate the need for transmission infrastructure.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a)

2. Which of the following are major challenges associated with solar energy integration?

1. Intermittent generation
2. Grid balancing requirements
3. Lack of energy storage capacity
4. Dependence on critical minerals

Select the correct answer using the code below:

(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 1, 3 and 4 only
(d) 1, 2, 3 and 4

Answer: (d)

3. With reference to India’s renewable energy transition, consider the following statements:

1. Solar energy contributes a larger share to installed capacity than to actual electricity generation.
2. Renewable energy curtailment refers to underutilisation of available renewable power.
3. India aims to achieve net-zero emissions by 2050.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a)

Mains Practice Questions

1. Discuss the importance of battery energy storage systems in ensuring the success of India’s renewable energy transition.
2. Despite rapid expansion of solar capacity, renewable energy curtailment remains a major challenge in India. Examine the reasons and suggest solutions.
3. “Solar capacity without storage is a half-built bridge.” Analyse this statement in the context of India’s energy security and climate commitments.
4. Evaluate the opportunities and challenges associated with large-scale battery deployment in India.

Why in News?

The Reserve Bank of India informed the Supreme Court of India that 30 banks have been integrated with the UDGAM portal to help legal heirs trace unclaimed deposits belonging to deceased account holders. The submission was made during hearings on a Public Interest Litigation (PIL) concerning rising unclaimed financial assets in banks and other institutions.

UPSC Relevance:

GS II:
Digital governance, citizen-centric administration, ease of living, access to justice, and financial inclusion.

GS III:
Banking reforms, financial sector regulation, digital public infrastructure, and data privacy concerns in centralized financial platforms.

Background

A Public Interest Litigation filed by journalist Sucheta Dalal highlighted the growing volume of dormant and unclaimed financial assets lying with banks, insurance companies, post offices, and investment institutions.

The petition argued that legal heirs often remain unaware of the existence of such accounts and face procedural difficulties while claiming them. It sought the creation of a unified digital mechanism enabling heirs to search and recover financial assets of deceased persons.

During the hearing, the RBI informed the Court about the operationalisation and expansion of the UDGAM portal.

What is the UDGAM Portal?

UDGAM stands for:

Unclaimed Deposits – Gateway to Access InforMation

It is a centralized web portal launched by the RBI in August 2023 to help individuals identify unclaimed deposits across multiple banks through a single platform.

The portal enables users to:

• Search for dormant or unclaimed bank deposits.
• Trace deposits belonging to deceased relatives.
• Identify the concerned bank holding such deposits.
• Initiate the process of claiming the funds from the respective bank.

The portal does not itself settle claims or transfer money. It only facilitates tracing and identification of deposits.

What are Unclaimed Deposits?

Unclaimed deposits refer to amounts lying in savings accounts, fixed deposits, recurring deposits, or other banking instruments that have remained inactive for a specified period without any customer operation.

Under RBI norms:

• A bank account becomes inoperative if there are no transactions for two years.
• Deposits remaining unclaimed for ten years are transferred to the Deposors’ Education and Awareness Fund (DEAF).

Common reasons for unclaimed deposits include:

• Death of account holder.
• Lack of nominee details.
• Migration of account holders.
• Forgotten accounts.
• Absence of communication with legal heirs.

Depositors’ Education and Awareness Fund (DEAF)

The DEAF was established by the RBI in 2014.

Features

The PIL highlighted the rapid growth of the DEAF corpus.

This increase raised concerns regarding lack of awareness and procedural barriers in recovery of deposits.

RBI’s Submission Before the Supreme Court

The RBI informed the Court that:

• 30 banks have already been integrated with the portal.
• These banks account for nearly 90% of deposits lying in the DEAF.
• Around 20 lakh users have registered on the portal.
• Approximately 44 lakh searches had been conducted as of April 1, 2026.

The RBI also stated that several improvements have been introduced:

• User registration made optional.
• Search functionality expanded using address details.
• Relaxation of restrictions on number of searches and logins.

Constitutional and Legal Dimensions

The issue involves multiple constitutional and legal concerns.

1. Right to Property

Though no longer a Fundamental Right, Article 300A protects property rights and states that no person shall be deprived of property except by authority of law.

Unclaimed deposits legally continue to belong to depositors or their heirs.

2. Access to Justice

Lengthy documentation requirements such as:

• Succession certificates,
• Probate,
• Court orders,

often create barriers for ordinary citizens, especially poor families.

The petition argued that the refund process must become simple, affordable, and citizen-friendly.

3. Digital Governance and Financial Inclusion

The UDGAM portal reflects the broader move toward:

• Digital public infrastructure,
• Ease of access,
• Centralized governance systems,
• Financial inclusion.

It attempts to reduce information asymmetry between financial institutions and citizens.

Issues and Challenges

Fragmented Financial Information

Currently, different categories of assets remain scattered across institutions:

There is no single unified search platform.

Procedural Complexity

Banks and financial institutions frequently insist upon:

• Probate,
• Legal heir certificates,
• Succession certificates,

even in uncontested cases.

This increases litigation burden and delays.

Lack of Awareness

Many families are unaware that deceased relatives had:

• Bank accounts,
• Insurance policies,
• Investments,
• Deposits.

Poor financial documentation within households worsens the problem.

Data Privacy and Security

Creating integrated centralized financial databases raises concerns regarding:

• Data misuse,
• Cybersecurity,
• Unauthorized access,
• Privacy protection.

Investors’ Education and Protection Fund (IEPF)

The petition also highlighted growth in unclaimed investment-related funds.

The IEPF is managed by the Ministry of Corporate Affairs and contains:

• Unclaimed dividends,
• Matured debentures,
• Shares,
• Interest amounts.

This demonstrates the wider issue of unclaimed financial assets beyond banking.

Significance of the UDGAM Initiative

Strengthening Financial Inclusion

The portal helps ordinary citizens recover dormant wealth.

Reducing Information Asymmetry

A centralized platform reduces dependence on individual bank branches.

Enhancing Trust in Financial Institutions

Simplified recovery procedures improve public confidence in the banking system.

Promoting Digital Governance

The initiative aligns with India’s expanding digital governance architecture.

Supporting Ease of Living

Legal heirs, especially senior citizens and rural families, benefit from reduced procedural burden.

Way Forward

Creation of a Unified Financial Asset Registry

India may consider integrating:

• Banks,
• EPFO,
• Insurance companies,
• Post offices,
• Securities depositories,
• Mutual funds,

into a single interoperable national platform.

Simplification of Claim Procedures

For low-value uncontested claims:

• Self-declarations,
• Nominee verification,
• Aadhaar-based authentication,

should be sufficient without requiring court intervention.

Mandatory Nominee Updating

Financial institutions should periodically require customers to update nominee information.

Public Awareness Campaigns

Mass awareness campaigns should educate citizens regarding:

• Nomination,
• Joint accounts,
• Digital records,
• Estate planning.

Strong Data Protection Framework

Integration of financial databases must operate within a robust legal framework ensuring:

• Privacy,
• Cybersecurity,
• Consent-based access.

Time-bound Disposal Mechanism

Banks and institutions should be mandated to settle verified claims within a fixed timeframe.

Conclusion

The expansion of the UDGAM portal represents an important step toward improving access to unclaimed financial assets and strengthening citizen-centric financial governance. However, the issue extends beyond banking and reflects the broader challenge of fragmented financial systems and procedural barriers faced by legal heirs. A unified, transparent, and legally streamlined framework is essential to ensure that citizens are not deprived of their rightful assets due to institutional complexity or lack of awareness.

Prelims Practice Questions

1. With reference to the UDGAM portal, consider the following statements:

It has been launched by the Reserve Bank of India.

It directly settles claims relating to unclaimed deposits.

It enables users to search unclaimed deposits across multiple banks.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer:

(b) 1 and 3 only

2. The Depositors’ Education and Awareness Fund (DEAF) is associated with:

(a) SEBI
(b) Ministry of Finance
(c) Reserve Bank of India
(d) NABARD

Answer:

(c) Reserve Bank of India

Mains Practice Questions

1. Discuss the significance of the UDGAM portal in improving financial inclusion and citizen access to unclaimed financial assets in India.

2. Examine the legal, administrative, and technological challenges associated with recovery of unclaimed deposits and financial assets in India.

3. “Digital governance initiatives must balance ease of access with privacy and data security concerns.” Discuss in the context of centralized financial information platforms in India.