VOX POPULI

by

Aam Admi

Issue: 132

Date: 29.09.2012

Contents:

1. National Security Issues While Sourcing Critical Infrastructure Equipment

2. Deliberate Obfuscation To Persist With Corruption

3. The Western Tilt Of India's Policy Planners

4. Naveen Jindal’s Obscene Salary and A MAT To Fund Social Schemes

National Security Issues While Sourcing Critical Infrastructure Equipment

There was a news item recently that Lanco, Adani & PunjLloyd have been banned from port projects on account of national security but at the same time Reliance Power was allowed to sign up with China’s Datang Corporation for electrical products critical to the transmission and distribution (T&D) of electrical power in India. Not only did Reliance Power announce its tie-up with China’s Datang Corporation and almost immediately the PM announced FDI approval for power exchanges. Who says that the Ambanis no more have close connections with government? We have also already signed for supply of equipment for India’s thermal power plants (TPP) from China primarily on account of cost and not performance which is a major lapse and which has impacted us in the last year in terms of lost generation of some 40,000MW. We need to look into these aspects since in the US even recently Huawei & ZTE Technologies, the telecom Cos. from China, were hauled up before the US Congressional Committees on account of national security issues and whether there was a software option by which in their equipment a rear window is provided to the Chinese government to spy on the US. Do we at all look at such matters or like going to the vegetable market, we go on the basis of the lowest price for our critical equipment buying and dump all our secrets in the lap of those who are inimical to us. Quite a few years back when Huawei started their software operations in Bangalore, there were concerns expressed about their staff sent in from China and their antecedents but then as is usual in our country everything has died a natural death and we have probably not even thought about such issues since then.

Deliberate Obfuscation To Persist With Corruption

The deliberate obfuscation by asking CBI to look at coal allocations from 1993 onwards by the UPA-2 is with the clear intention to put a lid on Coalgate. One wonders why 1993, and why not from 1947? This will allow generations of CBI officials to be fully employed. Why the present Coalgate could not be tackled separately and with the details of ministers and the Congress politicians kith and kin involved in the mining of coal coming out, is something which is not understood? Our political class does not take heed from the moral – One Thing At A Time And That Done Well. After tackling the present exposures on Coalgate they could have then gone backwards into time and exposed others involved in such activities. Now just like the 2G case passed onto the JPC, nothing will come of Coalgate for the next 5 years since one or the other party involved in it will try to sabotage the probe. And by that time all this is over, some new scam would have come to occupy the public mind. It is not only this case but that of Madhu Khoda in Jharkhand, then the CWG scam where all the accused including Suresh Kalmadi is on bail and the Adarsh scam in Mumbai. Time and again we have seen in our country that major corruption scams have been reduced to a political circus and stakes have been gambled on the strength of powerful individuals and/or parties and bargaining conducted with the intention to put a lid on the matter, without even looking at the issue at stake. Thus the scam or corrupt act gets lost in the overlays of claims and counterclaims leaving the common man stunned with the audacity and manner with which our politicians wriggle out of their illicit acts. Take the latest case of Ajit Pawar’s resignation in Mumbai on account of an irrigation scam and that too in Vidarbha which has had the highest incidence of farmer suicides in the country and where practically no irrigation project came up in the last 10 years and all the money sanctioned was siphoned out. This issue is now being turned around into a prestige fight between the 2 coalition partners, the NCP and the Congress along with the internecine clashes within the NCP, while putting the continuance of the government in Maharasthra at stake. The demand being that the Congress should not target NCP politicians for corruption which has even senior leaders like Chagan Bhujbal and others tainted with one or the other scam. It is not that the Congress are as they – washed in the holy waters of the Ganges, but their turn could also have come later. All this has left the common man in Mumbai stunned (or numbed or no reaction since they are by now inured) to see the kind of leaders that they sent to the legislature. Is there no solution to this wholesale and mass organized robbery by these politicians to make themselves rich at the cost of the common man?

The Western Tilt Of India's Policy Planners

The connection with the foreign hand or the preference for it is clear with Manmohan Singh which we saw during the finalization of the Indo-US nuclear deal and now again in the announcement of the FDI in multi-brand retail. This tendency is not only with him but with almost all our senior policy planners. The reason for this may be related to the education in the western universities like with Manmohan Singh or association with them and the UN and other world body multilateral institutions by him and the others. Take the case of Kaushik Basu, the erstwhile Economic Advisor to the PM who came from US academia and upon completion of his assignment in India went back as Executive VP of the World Bank. The same is true with R Raghuram who replaced Kaushik Basu who came into this position from his stint with the IMF & the World Bank. It is but natural therefore that their views would be clouded with western tints and their opinions aligned to western interests. It is not only these people but also Montek Singh Ahluwalia, who time and again comes out as a strong believer and votary of Western economic thinking and who more often than not can see nothing wrong with Western rules and regulations and advocates for their implementation in India. In fact he was publicly pulled up just last week by P Chidambaran who in a rejoinder said that the West is not always right and we should also think for ourselves. Even D Subba Rao, the present RBI Governor has been recommending for our banking sector among other things to implement the Basel III norms which has been criticized by the US and that too by the FDI, a Federal deposit agency, saying that structurally the banks should be stable and paying lip-service to Basel III in term of filing reports of compliance is just not enough and what needs to be improved is the control and regulation of the banking sector so that crises like sub-prime do not surface again. We have also seen so many financial scandals that have dogged the Western banking system particularly over the last few years with set-ups like Lehmann Brothers going under and rogue trading which have ensured some banks to totter on their very existence, but even then we want to follow the policies of the West! Thus one thinks that it is time for us to eschew Western financial thinking and develop our own economic policy structures and work out our own programs within that as also evolve our own financial sector rules and regulations which will work for us than blindly aping the West.

Naveen Jindal’s Obscene Salary and A MAT To Fund Social Schemes

Naveen Jindal’s obscene salary at Rs. 73.4 crore per year along with the top 15 salary grossers in corporate India aggregating annual salaries of a total of Rs. 478 crores and having seen an increase of Rs. 38 crores over last year is something which is completely contradictory to the ethos of this country. There needs to be a rationalization of salaries in the corporate sector and there be should be some relationship between the lowest wage employee in the company and that of the highest paid. With Naveen Jindal drawing Rs. 73.4 crore per year, one wonders what the lowest paid draws? We are not the US or other parts of the developed world where capitalism is flaunted and the ability to command and draw exceptional salaries is considered an achievement. With 53% of the country below the poverty line our industrialists should realize that they have an onerous duty to better the lot of their fellow brethren who are lesser privileged. Our industrialists should also realise that they are from this same land and their money earned is from here and that is why they should support the local people. Paying lip-service by building charitable trusts, hospices and the like is just not enough and it is time that they put their action where today their words are spoken. Like they say, they need to - Walk Their Talk. The industrialists should contribute to make a visible difference over a span of a decade for a community large enough and in such a manner that this group can stand on its own feet. It is also time that our government thought of some tax rebates in the range of 20% of profits of corporate entities to directly fund social support schemes which they can generate on their own and in the environs in which they operate like the Tatas at Jamshedpur etc. or contribute to the MNREGA, Sadak Yojana etc. People may say that if this is done then the rich will work less and show lesser profits, but like they say, avarice and greed is difficult to cap and ultimately it will prevail. But with such strictures it will be ensured that a part of it will definitely go towards mitigating the lot of the deprived. Postscript: Since writing this Naveen Jindal has responded in the press that the Board and the shareholders have approved the salaries which is carrying the obtuseness a bit too far. Naveen Jindal will remember the PM while addressing FICCI the last time he spoke to them advising that salaries of senior functionaries in the private sector should be set with moderation which in the context of the present disclosures the PM is sure to repeat when he addresses the FICCI again in Dec 2012 after a gap of 4 years.

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VOX POPULI

by

Aam Admi

Issue: 131

Date: 22.09.2012

Contents:

1. The LPG Cap Raised From 6 to 9 in Congress-ruled States?

2. The Big Bang Reforms May End In A Whimper

3. Remain Content With Low Growth For 2 Years But Plug The Leaks In The Interim‏

4. What Was The Hurry To Move On The Big Bang Reforms Package

5. Rollbacks Will Pacify UPA Allies

6. Diesel Price Hike Counter-Productive

The LPG Cap Raised From 6 to 9 in Congress-ruled States?

LPG cap raised from 6 to 9 in Congress ruled States? That was the news over y/day(20th Sept). Not only was this bit of news confusing but also disturbing. The cap was brought about by the Petroleum Ministry at the Centre and by rights if there is to be a relaxation then it should be brought around by them and applicable to the whole country and not just the Congress ruled States. Where is the authority with Sonia Gandhi or the Congress party or the Congress ruled States to fiddle with this measure? What is Sonia Gandhi up to since as mentioned by one of her flunkeys on national TV, it was on her directive that the relaxation was announced? Is she showing off her displeasure with the cap as articulated also by the Food Minister K V Thomas and the Himachal Pradesh CM? Or is she trying to be deliberately divisive with the country and split it with some concessions for Congress ruled States and none for others. So much for the Congress President thinking about this nation or is her mind being taken up with Italy these days. The LPG cap will lead to black-marketing which is another matter that the common citizen will now have to contend with.

The Big Bang Reforms May End In A Whimper

The Big Bang reforms of FDI in retail, airlines, broadcasting sector and power exchanges announced on Black Friday, 14th September 2012 are going to escalate disparities between our rich and the poor and will also hand over the country into the hands of the new foreign ‘economic’ colonial powers like Walmart and others. What surprises one is why the sudden foot on the accelerator to the chugging Indian economy moving in second gear, which is surely going to stall with all the extra power being fed into it. Could this not have been done in a phased manner over the last couple of years, if at all it had to be done, phasing in the reform process. The Big Bang is clearly thus strategised to take off the attention that Coalgate has been hogging in the political space as well as the public mind lately. The precursor to Friday’s push of economic reforms was set off a day earlier by the IED of the hike in diesel prices by Rs. 5 a litre which for the sake of form should have included petrol also. At the same time the number of LPG cylinders available at the lower price was limited to 6 and any cylinders taken by customers after that would have to be paid at the full price. Hiking the price of diesel alone lays the UPA-2 open to the charge that they have been dawdling over this decision for long and finally bravado and misplaced enthusiasm has taken over concerted deliberate decision making on important and critical policy matters. Even the Prime Minister’s comment that if we are to go under then it is better to do something and then go under rather than not doing anything at all is rather blaise. The counter to this would be that if the UPA were sure that they were going under it would have been better to leave the country the way it was rather than initiate half-baked and unrealistic reforms which the next governments will find it difficult to undo, putting the country into a graver economic mess than existing.

Remain Content With Low Growth For 2 Years But Plug The Leaks In The Interim‏

We have had sharply reduced growth from the heady years of 10% growth a few years ago. The growth projected in the current year of around 6% and maybe down to even 5% is considered a disaster. That is probably the reason why the PMO hit panic stations on Black Friday, 14th September 2012 and released almost every single proposal on FDI that was pending in its In tray. In addition it touched the pricing of diesel, considered the Holy Grail of farmer prosperity to provide motive power for their irrigation pumps, that is when they are not taking it unauthorisedly from the overhead electricity lines and then there is the issue that it would feed inflation considering that transportation costs would go up making commodities more expensive. There was also a threat the international credit agencies would lower India’s credit rating unless something dramatic was done. How much the credit rating is important, is another debate when we have our own urgent and critical internal economic issues to resolve. But then, one does think, that we should for a moment step back and take an overview of the scenario that is prevailing in the Indian economy and take steps to correct the lacunaes that have been built in and which are being considered as given and non-negotiable. It is all right to assume that without growth in the 8 – 10% region we will not have enough revenue from taxation to support our economic measures and to tackle the budget deficit that has been widening by the year. But then we also need to understand that with close to 53% of the country being close to or below the BPL, we need to think how many more we are pushing into poverty by each % increase in inflation. With earnings becoming uncertain and with the scarce earnings buying less and less, there are many in this country who have to forgo basic needs and more often than not sleep on an empty stomach. Thus as inflation creeps up, so does the numbers below the BPL. The reason for inflation going up among many other reasons is that for every single thing the easiest solution is being resorted to and that is to increase price. For fossil fuel under-recoveries raise price, for electricity tariffs raise prices to meet costs, for anything at all let us first raise price and then see, seems to be the attitude. Nobody has been telling the planners to maintain the price line, and manage around that and look for other means to compensate costs. It could be technology, it could be leakages in the system, wastage, spoilage etc. which if suitable managed could help hold the price line. On the other side we have this dodgy situation of our bureaucrats not knowing how things work and why the problem exists. Take the case of waiving off of farmer loans of some Rs. 60,000 crores a few years ago, where it was found that the scheme was of no use to farmers with small holdings since they rarely took bank loans and mostly borrowed from the village money-lender. There was a lot of hullabaloo about the great social initiative that this waival represented but the benefits were appropriated by farmers with large land holdings and who were being provided with irrigated land at government expense. It needs no saying that the then Agriculture Minister played a large role in ensuring that this scheme was tailormade to his home State and surprise of surprises farmer suicides in the State, one of the highest in the country, did not reduce but after the scheme had actually increased. Then there is the issue of our leaky PDS system where the subsidized commodities are hijacked and black-marketed in the open market by moving them sometimes straight out of government godowns and telling the targeted community that the shortages in the fair-price ration shops is because the government does not supply the commodities. The MNREGA claimed to be the flagship social scheme of the UPA is known for its sieve structure for funding where the money does not reach the targeted community 40% of the time and when it reaches at the village level it is fudged for the benefit of the caste group which dominates the panchayat. Thus in this scheme and also those similar to it like the Gram Sadak Yojana you have on paper many roads and civil works made but the ground reality is that nothing has been done. The last issue is size of government which is largely responsible for the budget deficit keeps growing and there is no attempt on the part of government to reduce it. While projects are increasingly seeing the PPP, BOOT route and many of the social ministries depend on NGO’s to reach the public, but even then the size of the government keeps on increasing. Thus the approach to our development has to put in suspended animation our economy for some time (not more than 2 years) and then recast our approaches to revenue and spending. Currently our approach is to pour water into a can skewered all over with holes and pouring more and more water into it and hoping that the leaks would stop and more water would remain in the can. This is never going to happen and we have to stop this mindless profligacy to throw our revenue down the drain. What we need to do is to remain content in the interim with the reduced revenue stream at 5-6% growth, plug the leaks in the system and to ensure that the targeted expenditure reaches the desired segment of population. At the same time reduce the size of government so that the size of our deficit reduces proportionately. Once this is done, concentrate on growth and with the leakages plugged you will find the target of inclusive growth easily achievable. This model of growth leading to trickle fed development of all sectors of the population has not worked and has only ended up to increasing and deepening the rich - poor divide.It is more than time to stop this now. In the present method of this UPA government which is in avoidance mode and not facing up to reality, the approach seems to be to hand over the country to the 'neo-colonialist' corporate entities like Walmart and others from the US and other developed nations. The rich will only applaud and welcome these initiatives since they have reached a stage in their lives where convenience and access is more important to them than price and that is exactly where we are doing a dis-service to the large and greatly deprived population of this great country. At the rate we are going the day is not far off where some country-hick senator will move a motion in the US Senate to make India the 53rd state of the United states of America, and our people like Manmohan Singh here will stand and applaud the achievement of this signal honour!

What Was The Hurry To Move On The Big Bang Reforms Package

The knee-jerk announcement of what is termed as the Big Bang of the next wave of reforms in the Indian economy seems to have been motivated by the two denigrating articles in TIME magazine and the newspaper, The Washington Post against Manmohan Singh. Otherwise there has been no other reason for him to run onto the streets of Delhi ala Archimedes shouting – Eureka! Eureka!, announcing everything that Walmart, Tesco & Carrefour wanted, along with Ikea getting their demands accepted and Areva firming up their position for the nuclear reactor at the Jaitapur NPP. As expected the US commended the Prime Minister for his ‘bold’ initiatives towards FDI in multi-brand retail. All these measures and many more have been hanging fire for years and without going into the merits of what has been cleared now, it could have been done a long time ago and in a much more planned manner. Haste makes waste is something that Manmohan Singh has still not realized. The timing of the reforms is also suspiciously close to Pranab Mukherjee being shunted upstairs to the office of the President. If so was he the stumbling block for blocking the reforms process. P Chidambaran who took over as Finance Minister from Pranab Mukherjee and known for his enigmatic Cheshire Cat smiles had also lost no time in reversing or putting on the back burner many of the measures announced by his predecessor particularly the GAAR on the Vodafone deal. Thus when we knew all along what we had to do why did we have to wait until the 24th Sept 2012 to announce the Big Bang. Is it something that we have to wait for every 7-8 years for the elder statesman Manmohan Singh to stir himself once every 7-8 years like the last time while signing the Indo-US nuclear deal and now the Big Bang bunch of economic reforms. No wonder we have to collapse our 5 year Plans to be aligned with the wakefulness and responsiveness of our esteemed Prime Minister. We have Montek Singh Ahluwalia piping in for his two pennies worth, that rolling back on the diesel price hike and the FDI in retail policies would severely affect the credibility of this government. Little does he realize that at the end of all this there should be a government and then only the question of credibility is valid, particularly in the context of Mamata. Banerji and her TMC pulling the plug from UPA-2.

Rollbacks Will Pacify UPA Allies

The political circus in the aftermath of the diesel and LPG price hike and on the back of the Big Bang reforms is likely to move like this. The UPA allies like the TMC and the SP not willing to rock the boat and have mid-term elections will be happy with a partial roll-back of the diesel prices by maybe Rs. 2 and no limit on the number of LPG cylinders on subsidized prices. As for the Big Bang reforms, escape clauses are built-in in the particularly sensitive FDI in retail by saying that those states who do not want to go in for it, can abstain. Thus everything will settle down like the dust after a bull-fight as one of the Congress Cabinet Ministers said that everyone will forget Coalgate just like they did Bofors and many others in the past. That is the sum total of the political morality in India. Create smokescreens to hide massive corruption and carry on in the premise that public memory is short and our people are stupid. That in essence is the faultline of living in a democracy which comprises of largely illiterate voters.

Diesel Price Hike Counter-Productive

The diesel hike by Rs. 5 per litre will contribute to rise in prices and inflation. What the government has done is to take the easy solution. The manner in which they are projecting it, seems like this was the only thing stopping India’s growth rate from reaching 8%. Why we need this growth is also debatable since we have seen with high growth the scams like 2G & Coalgate tend to increase? Considering the slowing down of the economy and the persistent and unyielding rise in prices which has led to lower revenue by way of taxes and duties, the government thought it best as usual to break the backs of the uncomplaining farmers and the common man by hiking diesel prices and limiting LPG cylinders at subsidized prices. This hike is not going to help and will feed inflation that will eat away growth. What should have been done is that fossil fuels like petrol, diesel, CNG, LPG, furnace oil etc. except for aviation fuel should have been allowed into the country duty-free, both customs and excise, and the States persuaded to be satisfied with VAT of 4% on these products. This would have led to a rationalization for the long term in terms of fossil fuel pricing and encouraged consumption. This would have given the much needed push to the economy allowing for growth to be on a more stable footing.

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