We hear government telling us that the high presence inflation in food has dwarfed economic growth. We also hear government telling us that in view of the perilous production of oil seeds and their conversion into edible oil, we needed to import a high quality to break-even between supply and demand. Our Planning experts are telling us that food grains growth would stabilize once the monsoon hits India. Monsoon did hit India, and very severely that the flood devastated many areas with its fury. Even the national capital was not spared.
The Supreme Court had faulted the government for having amassed food grains more than the stock required and due to clumsy storing, the entire stores got devastated by the rats that ate what was supposed to be given for distribution amongst the poor through Public Distribution System and through Antodya Anna Yojana. The Court ordered their free distribution with a time tag. But our iron clad bureaucracy is sitting tight and is in the process of devising a plan to distribute the food grains. When and how will be the reason that there will be delay?
The Planning Commission is of the view that the total BPL families in India are around 6.25 Cr. However, the States do not agree. They estimate the BPL families at 10.7 Cr. Why a head count was not taken is any body’s guess. As against Antdodya Anna Yojana, the beneficiaries entitled to benefits has been reackoned as 2.5 Cr. However, the State government has been able to enlist 1.82 Cr households, and they have been given Ration cards. While 0.68 Cr needs to be accounted, the subsidy for 2.5 Cr households have been calculated, and the amount budgeted and will be released pro rata. What will happen to the budget relating to 0.68 Cr will lie in the wilderliness.
Government, according to Economic Survey (Page 205, Table 8.29) says that in 2008-9, the production of oil seeds was 281.57 lakh tones of which edible oil was produced to the extent of 85.98 lakh tones, while 67.20 lakh tones was imported of which 83% was accounted by Palm Oil. So the available oil was 153.18 lakh tones when the actual requirement was only 132.80 lakh tones. The imported oil in surplus was 20.38 lakh tones which accounted for 15.34% excess. During 2009-10, 255.09 lakh tones was the production of oil seeds and converted into edible oil was 82 lakh tones. The import figures went staggering to 101 lakh tones. The total available oil was 183 lakh tones against the requirement of 138.18 lakh tonne. The difference was 44.82 lakh tones which accounted for 32.44% in excess of demand. Another factor was these oil were imported at ‘nil’ duty for Crude and 7.5% for Refined against the normal 45% and 52.5% and the loss on this account was in the region of Rs 25,000 Cr. Added to this, government thought it wise to release Rs 15 per Kg on imported oil for release through PDS. The recurring expenditure stand at Rs 1,500 Cr!
The question that comes to the fore is why are we importing in excess of what is required. There will inevitably be a closing stock which will become next year’s opening stock. What happened to that? The excess of import during the next year, what will happen to that? To whom do these reserves sold or given?
During 2008-09 an amount of Rs 43,668.08 Cr was released as agricultural subsidies which grew by a staggering 39.69 % over 2007-8 and upto Dec 29, 2009, Rs 46,906.68 Cr was spent which was in excess of 7.42 % over the full year’s spending of 2008-9. This was the time, the Government announced time and again, food inflation going to double figures and crossing 16%. During the same period, our Planning Commission stood ground with the theory that India’s agricultural growth will be 4% and to reduce it in the last quarter to negative 0.20%. Just to upset them, the agricultural growth turned positive and recorded 0.20% growth.
Our Government talks of austerity. Government is committed to fiscal consolidation. Bringing down the fiscal deficit from 5.5%. Our Planning Commission talks of apparatus to enhance growth through paradigm change growth models. While all these are professed, there is waste, excess expenditure, unexplainable imports, poor support to India’s domestic sector which is in the wilderliness.India, paradox, thy name?
The figures provided by Economic Survey, Planing Commission, Ministry of Agriculture, never meets. What growth? What expenditure? Will anybody correct the anomoly?
Friday, September 3, 2010
Thursday, September 2, 2010
Ghost of Bhopal tragedy resurrected?
The ghost of the Bhopal gas tragedy which is characterized as one of the world’s worst industrial catastrophes is in the news once again.
The tragedy occurred onDec 2-3, 1984. The case was filed in the Court of original jurisdiction after a long gap. The parties were aligned against Sec 304 A Part II which charges a person of having caused culpable homicide not amounting to murder, which fetches a maximum sentence of 10 years in Jail under rigorous imprisonment. The CEO of the Company escaped Indian Law! The Company filed an appeal to Madhya Pradesh High Court with a plea that charges under 304 A Part II be dropped instead, they be tried under Sec 304 A of IPC . The High Court rightfully dismissed the case, which was contested by the Company in the Supreme Court before justice Ahamedi’s (Chief Justice) First bench. The Supreme Court diluted the Section of 304 A Part II (IPC) to 304 A which meant that if the culpability was proved, the maximum sentence under the Section was 2 years RI. The Case was reverted to the trial Court, and after 24 glorious years, the trial Court found all the accused guilty and sentenced them to 2 years in prison.
There was a huge public outrage. Jurists and Advocates, Political parties, Environmentalists, cried foul. Channels 24x7 beamed the sad story of Bhopal tragedy. There was pandemonium everywhere. Justice is inadequate screamed civil society.
CBI forced by the pro active lobby, went to Supreme Court with a curative petition. It asked the Hon’ble Court to review 1996 verdict and restore the charge of culpable homicide not amounting to murder (IPC Sec 304 Part II) against 7 person and make them stand trial once again. It is in the rarest of the rarest cases that the Supreme Court admits a curative petition. It is the last resort against its own judgment. The petition is admitted if their Lordships found that there were reasonable evidences to show that the earlier judgment of the apex Court caused grave miscarriage of Justice.
We had Courts re-opening Cases where the trial Court had already given its judgment in the Jessica Lal Case even though all the witnesses had turned hostile during the trial and the High Court based the case on circumstantial evidence and jailed powerful politicians’ kith and kin. In the DIG Rathod case (Ruchika molestation case) also, the higher Court intervened, as a result, Rathod went to prison.
Even though the Supreme Court had admitted the Case and is sure to order a re-trial on the basis of stringent provision of Laws, one point is conviently forgotten. Though the punishable should be punished, the people who are affected by deep injuries, scar, minor injuries, and those orphaned by the death of near and dear ones, must be given adequate and reasonable compensation.. This is the missing link in the whole story. The estimated death is 15,000 even though there are other figures of death as well. 558,125 injured, 38,378 (temporary and partial injuries), 3900 severely and permanently disabled. When we are running providing inclusive growth in the rural areas, these hapless people who are punished for no fault of theirs, need solarium.
Now coming back to the ownership of the Union Carbide India Ltd, 49.1% of the shares are held by government controlled public banks and Indian public. What about public money invested in the Company? The Factory inspectors did they conduct any inspection, before or after the catostrophe? Any adverse action came to their notice? Has the Member Secretary of the State Pollution Control Board ever visit the factory? Did he find anything amiss? Where is the safety log book- any noting there?
It may be recalled that the factory was set up in 1969. The company was producing pesticides (Sevin) using menthyl isocyanate as an intermediate.MC(Menthyl Iso Cyanite) was stored in large tanks within the factory. On Dec2/3, water entered the tank containing 42 tonnes of MIC resulting in exothermic reaction, increased the pressure inside the tank to 200 degrees C (392 Degrees F). It is the contention of the Company that workers were cleaning out a clogged pipe with water about 400 feet from the tank. The tank vented releasing toxic gases into the atmosphere. The gases were blown by northwesterly winds over Bhopal.
Indian Industry seldom allots budgetary funds for safety procedures. How many Fire extinguishers are in use in the Indian factories today? Undersized safety devices dependence is solely thrust on manual operations; priming safety management is an austerity measure, insufficient maintenance, and finally inadequate emergency action plans. Authorities should design Disaster plans/ disaster management Schemes. Storing MC in large tanks beyond recommended levels should never have happened; Poor maintenance after the Plant ceased MIC production at the end of 1984, though used for hardly 4 years is likely to cause post-closure problems. In Bhopal, they had one manual back up system compared to 4 stage systems working in the United States. Safety systems were switched off to save energy costs. The MIC tank refrigeration system would have mitigated the disaster severely had the temperature of 4.5 degree Celsius maintained in the MIC tank against 20 degree Celicus.
The CSIR and CBI did not do mock tests to find out whether leakage of water to MIC tank would cause severe exothermic reaction. There is speculation that the trial test done by these agencies proved otherwise. After the sealing of the factory no maintenance was ever done as a result chemicals continue to leak and pollute ground water. The meandering slums, short comings in health care, and socio economic rehabilitation was conspicuous by its absence.
Without connecting the commissioning of the crime to deliberate inherent weaknesses and without caring for the need to rehabilitate the hapless victims by responding to their financial needs, and concentrating exclusively on punishing the guilty alone, would serve little purpose. The want of the hour is solace and philanthropy and not lip sympathy?
The tragedy occurred onDec 2-3, 1984. The case was filed in the Court of original jurisdiction after a long gap. The parties were aligned against Sec 304 A Part II which charges a person of having caused culpable homicide not amounting to murder, which fetches a maximum sentence of 10 years in Jail under rigorous imprisonment. The CEO of the Company escaped Indian Law! The Company filed an appeal to Madhya Pradesh High Court with a plea that charges under 304 A Part II be dropped instead, they be tried under Sec 304 A of IPC . The High Court rightfully dismissed the case, which was contested by the Company in the Supreme Court before justice Ahamedi’s (Chief Justice) First bench. The Supreme Court diluted the Section of 304 A Part II (IPC) to 304 A which meant that if the culpability was proved, the maximum sentence under the Section was 2 years RI. The Case was reverted to the trial Court, and after 24 glorious years, the trial Court found all the accused guilty and sentenced them to 2 years in prison.
There was a huge public outrage. Jurists and Advocates, Political parties, Environmentalists, cried foul. Channels 24x7 beamed the sad story of Bhopal tragedy. There was pandemonium everywhere. Justice is inadequate screamed civil society.
CBI forced by the pro active lobby, went to Supreme Court with a curative petition. It asked the Hon’ble Court to review 1996 verdict and restore the charge of culpable homicide not amounting to murder (IPC Sec 304 Part II) against 7 person and make them stand trial once again. It is in the rarest of the rarest cases that the Supreme Court admits a curative petition. It is the last resort against its own judgment. The petition is admitted if their Lordships found that there were reasonable evidences to show that the earlier judgment of the apex Court caused grave miscarriage of Justice.
We had Courts re-opening Cases where the trial Court had already given its judgment in the Jessica Lal Case even though all the witnesses had turned hostile during the trial and the High Court based the case on circumstantial evidence and jailed powerful politicians’ kith and kin. In the DIG Rathod case (Ruchika molestation case) also, the higher Court intervened, as a result, Rathod went to prison.
Even though the Supreme Court had admitted the Case and is sure to order a re-trial on the basis of stringent provision of Laws, one point is conviently forgotten. Though the punishable should be punished, the people who are affected by deep injuries, scar, minor injuries, and those orphaned by the death of near and dear ones, must be given adequate and reasonable compensation.. This is the missing link in the whole story. The estimated death is 15,000 even though there are other figures of death as well. 558,125 injured, 38,378 (temporary and partial injuries), 3900 severely and permanently disabled. When we are running providing inclusive growth in the rural areas, these hapless people who are punished for no fault of theirs, need solarium.
Now coming back to the ownership of the Union Carbide India Ltd, 49.1% of the shares are held by government controlled public banks and Indian public. What about public money invested in the Company? The Factory inspectors did they conduct any inspection, before or after the catostrophe? Any adverse action came to their notice? Has the Member Secretary of the State Pollution Control Board ever visit the factory? Did he find anything amiss? Where is the safety log book- any noting there?
It may be recalled that the factory was set up in 1969. The company was producing pesticides (Sevin) using menthyl isocyanate as an intermediate.MC(Menthyl Iso Cyanite) was stored in large tanks within the factory. On Dec2/3, water entered the tank containing 42 tonnes of MIC resulting in exothermic reaction, increased the pressure inside the tank to 200 degrees C (392 Degrees F). It is the contention of the Company that workers were cleaning out a clogged pipe with water about 400 feet from the tank. The tank vented releasing toxic gases into the atmosphere. The gases were blown by northwesterly winds over Bhopal.
Indian Industry seldom allots budgetary funds for safety procedures. How many Fire extinguishers are in use in the Indian factories today? Undersized safety devices dependence is solely thrust on manual operations; priming safety management is an austerity measure, insufficient maintenance, and finally inadequate emergency action plans. Authorities should design Disaster plans/ disaster management Schemes. Storing MC in large tanks beyond recommended levels should never have happened; Poor maintenance after the Plant ceased MIC production at the end of 1984, though used for hardly 4 years is likely to cause post-closure problems. In Bhopal, they had one manual back up system compared to 4 stage systems working in the United States. Safety systems were switched off to save energy costs. The MIC tank refrigeration system would have mitigated the disaster severely had the temperature of 4.5 degree Celsius maintained in the MIC tank against 20 degree Celicus.
The CSIR and CBI did not do mock tests to find out whether leakage of water to MIC tank would cause severe exothermic reaction. There is speculation that the trial test done by these agencies proved otherwise. After the sealing of the factory no maintenance was ever done as a result chemicals continue to leak and pollute ground water. The meandering slums, short comings in health care, and socio economic rehabilitation was conspicuous by its absence.
Without connecting the commissioning of the crime to deliberate inherent weaknesses and without caring for the need to rehabilitate the hapless victims by responding to their financial needs, and concentrating exclusively on punishing the guilty alone, would serve little purpose. The want of the hour is solace and philanthropy and not lip sympathy?
Tuesday, August 31, 2010
Rain, Rain, Monsoon, Please come
Our lives are so fragile and vulnerable dependent on the monsoon winds. A deflection of even four degrees in the travel of these winds in any year can make for the draught in several States. To this day, with all the economic and technological advancements, the irony is that farmers continue to look up to the sky and pray for the winds and the rains on time; urban cities in their search for solutions for water and power shortages, are so completely dependent on the monsoon for life and living. If the farmer cannot grow food without the winds and the rains, the urban dweller does not get power at home and food at the Mall, without the rich water catchments that either generate hydel power or increase the inflow of greens and cereals into the market.
The rainfall pattern has held for many years on the same. So on what does this pattern depend upon? The Indian sub continent is the only region in the entire world which is dependent on winds that flow 24/7 from across the seas to the land and back again to the Arabian Sea and Bay of Bengal and the vast Indian Ocean that lies beneath. These northwest and southwest monsoon are as old as Time, and travel at a speed of 12/18 Kms an hour. These winds might have taken the present directions after the formation of Himalayas which must be just over 15-20 million years ago; this is nothing compared to the fact that the creation of earth goes back to over 4,000 million years.
Malabar Coast became a leading trading hub and a vibrant passage of cross cultural mergers and dialogues because the sea lanes beyond the borders led the ancients to this place because of the wind movement. Monsoon lands in Kerala in India at the first instance. The guts of wind that herald rain bends and break the Coconut trees, which are very weak or too stiff and upright, but the more flexible ones bend and extend their palm leaves to break the downpour and so many tiny waterfalls hang out from their branches.
Like the self sufficiency in food while mass hunger continues in many parts, it is another great contradiction of India that there is too much water in some areas while draught prevail in others. Distribution is the key word in both cases. Meanwhile, traditional and local water management practices, which sustain the most deprived in remote areas are ignored and damaged by modern development.
The full moon day in the thick of monsoon, is a day villagers come in herds to worship the water itself; the life sustaining element created by the harmonies of nature.
Monsoon if bountiful will push our agricultural output; if deficit, it will hit the food economy. Rainfall in 2009 was lowest since 1972, yet that fiscal accounted for a diminishing 0.2% in output. If monsoon comes, India’s agriculture will regain resilience. Output of Khariff food grains fell by 15% and oil seeds by 5%. Government released the figures that the agricultural growth accounted for 0.2% in agricultural GDP. Are the estimates correct? The Economists, who are policy advisors, have to anticipate problems and suggest solutions before problems turn to crisis. And not justify the crisis as a fall-out of international reasons. Devaluation of the Dollar has been a frenzied monster, and to offset that, the Rupee: Dollar parity should have been narrowed down, which if done, would have angered the business crowd. Our Agricultural policy is ridiculous. Planning Commission and MoA, and the economic advisors of the PM/Finance Ministry have been fooling people. Inflation is directly related to hoarding of food grains. The solution lies in bringing down stocks to appropriate levels, and inventory should relate to food grains required for PDS. Government has no business to buy food grains more than what is required for PDS and that too at the prevalent market rates. Government policy appears to be: give farmers highest prices and give the grains at throw away prices. Traders do not keep any inventories of food grains, and what they did was paid the farmers and allowed the goods to be kept with them, and took them and sold them at savaging prices during mid inflation in food. The price raise has been caused by a plethora of problems, the government needs to accept them and the opposition need to understand them and then evolve effective policies to solve it. Instead, destructive arguments for all the wrong reasons see Parliament adjourned again and again. Government’s only solution appears to be imports of food grains and essential oils. And to curb inflation, its only solution is minimizing Customs duties. It has also banned import of edible oils by canalizing imports and has prohibited all sorts of exports of essential edible oils. With free import of oils from abroad at nil customs duties, the market is invaded nakedly by the imported oils that it sounds death knell for indigenous edible oils. But our agricultural ministry behaves like King Canute, who asked the waves to roll back. Is the Government not acting like King Caunte by asking the monsoons to come? The economists have no other option or armory. Our agricultural minister thinks that agriculture prices are like a 20:20 match. The more the price goes up, the more will be supply. But unfortunately, the Opposite happens!
In the context of Growth Vs Inflation, it is intellectually and methodologically flawed. Economic strategy must reflect high yield, high growth with modest inflation and high employment. When prices were falling globally, Govt adopted an aggressive food procurement programme. When there were enough stocks, the right approach should have been to release that and allow market forces to act. This would have allowed demand and supply equation, and the prices would have been in sync with global prices. Government also did not undertake any global market operations. Food issue was dealt with too many ministries- Finance, Cabinet Committee on prices, NAC, PDS was not good. There is also a need to know behaviour trends like cropping pattern, emerging trends in growth in different crops, weather trends. Food prices are high, Foreign exchange reserves is not a problem, monsoon is good, food supplies are ample available. How to do, what needs to be done and that too, very fast.
We need to restructure the PDS model, as PDS has not been able to perform for the last 60 years.
In a general equilibrium model, you need to operate in both. Demand side is a larger issue, whereas spillover of food inflation into a more of generalized inflation is a core issue. If you have a strategy that is led by consumption instead of investment, then the demand side management is an issue. On the supply side, we need to take care of wastage. More than 45% of the food and vegetables are wasted.
The rainfall pattern has held for many years on the same. So on what does this pattern depend upon? The Indian sub continent is the only region in the entire world which is dependent on winds that flow 24/7 from across the seas to the land and back again to the Arabian Sea and Bay of Bengal and the vast Indian Ocean that lies beneath. These northwest and southwest monsoon are as old as Time, and travel at a speed of 12/18 Kms an hour. These winds might have taken the present directions after the formation of Himalayas which must be just over 15-20 million years ago; this is nothing compared to the fact that the creation of earth goes back to over 4,000 million years.
Malabar Coast became a leading trading hub and a vibrant passage of cross cultural mergers and dialogues because the sea lanes beyond the borders led the ancients to this place because of the wind movement. Monsoon lands in Kerala in India at the first instance. The guts of wind that herald rain bends and break the Coconut trees, which are very weak or too stiff and upright, but the more flexible ones bend and extend their palm leaves to break the downpour and so many tiny waterfalls hang out from their branches.
Like the self sufficiency in food while mass hunger continues in many parts, it is another great contradiction of India that there is too much water in some areas while draught prevail in others. Distribution is the key word in both cases. Meanwhile, traditional and local water management practices, which sustain the most deprived in remote areas are ignored and damaged by modern development.
The full moon day in the thick of monsoon, is a day villagers come in herds to worship the water itself; the life sustaining element created by the harmonies of nature.
Monsoon if bountiful will push our agricultural output; if deficit, it will hit the food economy. Rainfall in 2009 was lowest since 1972, yet that fiscal accounted for a diminishing 0.2% in output. If monsoon comes, India’s agriculture will regain resilience. Output of Khariff food grains fell by 15% and oil seeds by 5%. Government released the figures that the agricultural growth accounted for 0.2% in agricultural GDP. Are the estimates correct? The Economists, who are policy advisors, have to anticipate problems and suggest solutions before problems turn to crisis. And not justify the crisis as a fall-out of international reasons. Devaluation of the Dollar has been a frenzied monster, and to offset that, the Rupee: Dollar parity should have been narrowed down, which if done, would have angered the business crowd. Our Agricultural policy is ridiculous. Planning Commission and MoA, and the economic advisors of the PM/Finance Ministry have been fooling people. Inflation is directly related to hoarding of food grains. The solution lies in bringing down stocks to appropriate levels, and inventory should relate to food grains required for PDS. Government has no business to buy food grains more than what is required for PDS and that too at the prevalent market rates. Government policy appears to be: give farmers highest prices and give the grains at throw away prices. Traders do not keep any inventories of food grains, and what they did was paid the farmers and allowed the goods to be kept with them, and took them and sold them at savaging prices during mid inflation in food. The price raise has been caused by a plethora of problems, the government needs to accept them and the opposition need to understand them and then evolve effective policies to solve it. Instead, destructive arguments for all the wrong reasons see Parliament adjourned again and again. Government’s only solution appears to be imports of food grains and essential oils. And to curb inflation, its only solution is minimizing Customs duties. It has also banned import of edible oils by canalizing imports and has prohibited all sorts of exports of essential edible oils. With free import of oils from abroad at nil customs duties, the market is invaded nakedly by the imported oils that it sounds death knell for indigenous edible oils. But our agricultural ministry behaves like King Canute, who asked the waves to roll back. Is the Government not acting like King Caunte by asking the monsoons to come? The economists have no other option or armory. Our agricultural minister thinks that agriculture prices are like a 20:20 match. The more the price goes up, the more will be supply. But unfortunately, the Opposite happens!
In the context of Growth Vs Inflation, it is intellectually and methodologically flawed. Economic strategy must reflect high yield, high growth with modest inflation and high employment. When prices were falling globally, Govt adopted an aggressive food procurement programme. When there were enough stocks, the right approach should have been to release that and allow market forces to act. This would have allowed demand and supply equation, and the prices would have been in sync with global prices. Government also did not undertake any global market operations. Food issue was dealt with too many ministries- Finance, Cabinet Committee on prices, NAC, PDS was not good. There is also a need to know behaviour trends like cropping pattern, emerging trends in growth in different crops, weather trends. Food prices are high, Foreign exchange reserves is not a problem, monsoon is good, food supplies are ample available. How to do, what needs to be done and that too, very fast.
We need to restructure the PDS model, as PDS has not been able to perform for the last 60 years.
In a general equilibrium model, you need to operate in both. Demand side is a larger issue, whereas spillover of food inflation into a more of generalized inflation is a core issue. If you have a strategy that is led by consumption instead of investment, then the demand side management is an issue. On the supply side, we need to take care of wastage. More than 45% of the food and vegetables are wasted.
No forcible land acqusitions
In deference to the near unanimity amongst the political parties against forcible land acquisitions, the Centre is proposing to bring out a bill which was being considered by the Group of Ministers headed by Agriculture Minister Mr Sharad Pawar. The interest of farmers would be protected through a comprehensive legislation. There were many conversion of agricultural lands for being converted to SEZ. Governments were buying land from farmers at throw away prices and passing them on to the authorities for development, industrialization etc depending upon a Law enacted in 1894.
The Supreme Court in a case filed by an individual whose lands were acquired for public purpose by the State Government by invoking the Special Land Acqusition Act held that when fixing the compensation, the present market value plus the future potential value, the purpose for which the land was acquired and proposed to be used must be taken into account when arriving at the just compensation.
The Court held that today’s market value of the property but the value with reference to the better use to which it is reasonably capable of being put in the immediate or near future. The potentiality of the acquired land, in so far as it relates to the use to which it is reasonably capable of being put, must be given due consideration.
The location of the land that was being acquired, the futuristic developments that are in the pipe line, and the increase in the marketability of the property has to be assessed to arrive at a fair compensation value by prudent examination of the existing, potential and notional increase in value.
The State Government, Central Government, Public bodies acquire land for different purposes citing public purpose as the indent for their acquiring the land. If it is an agricultural land, the body vested with the power, provides NoC to convert the existing agricultural land into general land which can be used even for commercial purposes. The lands have been taken over to build dams, hydro electric power stations, setting up factories, building colleges, setting establishments of Central government, or state government including defence, public sector undertakings, setting up parks, recreation centres, for development of houses under various Schemes, etc. In India, we do not have a Rehabilitation and Resettlement Plan/Act by which displaced persons are given dwelling places on the same scale or model in which they lived prior to the acquisition. A settlement is disturbed, the persons are given dwelling places in four or five different areas, splitting them according to land availability, where there will be no infrastructure and facilities similar to the one enjoyed by the displaced.
In Karwar, when the naval establishment (for Defence purposes) proposed to acquire about 20,000 hectres of land along the sea coast, I did a costing taking into the calculation, the notional value of returns from coconut trees, jack fruits, and areca trees, the notional loss due to the tract of sea front lost for fishermen to fish, and consequent to the setting up of the naval base, an area will be declared as No entry Zone, which will restrict the movement of the traditional fishermen. In North Canara, the land was scarce, hence alternate land was difficult to be obtained. All this, should be factored in the Compensation. The Govt of India was kind enough to accept some of the arguments, and a proposal namely, Greater Karwar Development Authority was suggested. But in the absence of a uniform Rehabilitation policy, along with a Resettlement Act, it would not be possible for the evictees to get instant justice, but the case will drag on. The Government’s late thinking of bringing a law to curb poaching agricultural land and/or acquiring the agricultural land and permitting legal conversion, will go a long way to restrict frequent misue of the public purpose take-over of land. The Supreme Court’s direction has not come a day soon, as it will open up discussion on arriving at a just formula which could be arrived at for uniform implementation on a case to case basis depending upon parameters.
Especially when Right to property has been removed from the fundamental right even though the people who enacted the Constitution where part of the Constituent Assembly on the basis of land holding. The 116 year old Act needs overhaul. Government should Act now. Right now.
The Supreme Court in a case filed by an individual whose lands were acquired for public purpose by the State Government by invoking the Special Land Acqusition Act held that when fixing the compensation, the present market value plus the future potential value, the purpose for which the land was acquired and proposed to be used must be taken into account when arriving at the just compensation.
The Court held that today’s market value of the property but the value with reference to the better use to which it is reasonably capable of being put in the immediate or near future. The potentiality of the acquired land, in so far as it relates to the use to which it is reasonably capable of being put, must be given due consideration.
The location of the land that was being acquired, the futuristic developments that are in the pipe line, and the increase in the marketability of the property has to be assessed to arrive at a fair compensation value by prudent examination of the existing, potential and notional increase in value.
The State Government, Central Government, Public bodies acquire land for different purposes citing public purpose as the indent for their acquiring the land. If it is an agricultural land, the body vested with the power, provides NoC to convert the existing agricultural land into general land which can be used even for commercial purposes. The lands have been taken over to build dams, hydro electric power stations, setting up factories, building colleges, setting establishments of Central government, or state government including defence, public sector undertakings, setting up parks, recreation centres, for development of houses under various Schemes, etc. In India, we do not have a Rehabilitation and Resettlement Plan/Act by which displaced persons are given dwelling places on the same scale or model in which they lived prior to the acquisition. A settlement is disturbed, the persons are given dwelling places in four or five different areas, splitting them according to land availability, where there will be no infrastructure and facilities similar to the one enjoyed by the displaced.
In Karwar, when the naval establishment (for Defence purposes) proposed to acquire about 20,000 hectres of land along the sea coast, I did a costing taking into the calculation, the notional value of returns from coconut trees, jack fruits, and areca trees, the notional loss due to the tract of sea front lost for fishermen to fish, and consequent to the setting up of the naval base, an area will be declared as No entry Zone, which will restrict the movement of the traditional fishermen. In North Canara, the land was scarce, hence alternate land was difficult to be obtained. All this, should be factored in the Compensation. The Govt of India was kind enough to accept some of the arguments, and a proposal namely, Greater Karwar Development Authority was suggested. But in the absence of a uniform Rehabilitation policy, along with a Resettlement Act, it would not be possible for the evictees to get instant justice, but the case will drag on. The Government’s late thinking of bringing a law to curb poaching agricultural land and/or acquiring the agricultural land and permitting legal conversion, will go a long way to restrict frequent misue of the public purpose take-over of land. The Supreme Court’s direction has not come a day soon, as it will open up discussion on arriving at a just formula which could be arrived at for uniform implementation on a case to case basis depending upon parameters.
Especially when Right to property has been removed from the fundamental right even though the people who enacted the Constitution where part of the Constituent Assembly on the basis of land holding. The 116 year old Act needs overhaul. Government should Act now. Right now.
Why guarantee employment, when unemployment dominant?
Many years ago, perhaps in the sixtees, there was a migration of white collared like typists, stenographers, to Mumbai the land of Opportunity. Like United States, Bombay was the land of many migrants who have made it one of the best cosmopolitan cities in India. This is old story.
Today, there is migration of labour to hot spots in South India. Not migration, rather an exodus. The wheel of the circle has changed 360 degrees.
The Government of India feels that there is large scale un-employment. They promulgated the Scheme, the Mahatma Gandhi (National) Rural Employment Guarantee Scheme, which gives a fixed wage for 100 days in a year to a particular individual. Does this Scheme open the door for further opportunities? Or does its tail end there?
Unemployment? Under employment? Voluntary unemployment? There are people with necessary qualifications and aptitude. Due to lack of sophistication or naïve manners, they do not get appropriate employment. There are others, who do not want to do employment. If you ask them why, they tell you, why should we work? We have enough at home. Or our brother is there in the Gulf. He is sending regular money. There are auto stands where a number of autos will be parked. You get into the first auto, the driver will come after a lapse of time and will tell you, ‘I am not going, get into the next auto’. This is the case, if you hail an auto which is passing by. You have hardly a requirement of an electrician for half-an-hour for a small repair. You search and search. You won’t find a single electrician. The same thing with a plumber. The worst is your search for a Computer mechanic. Worser still for the internet service provider or TV channel provider.
There has been major shortage of manual labourers in the agriculture, hotel, service industry, small shops, households, etc. Getting local labourers who are just not available is a serious problem. All the demands of the domestic sector, catering, hotel services, sales, maintaining of huge walls, dormitory works of hospitals, security agencies, house hold chorus, there are not enough people available. Nepalese gurkhas have earned a niche for themselves in the Security service and most of them have left their homes becomes of insecure uncertainty in the Himalayan Kingdom.
Most of the migrant labour makes a beeline to the construction industry. It might be a pride for this lot, as they were the major workers who saw the construction work of the Tamil Nadu Assembly Secretariat building complex at Chennai. Construction industry remains in the throes of workers from Bihar, Orissa. They neither come without any formal education nor acquire any skills. Their skills are self acquired, and are brought to the various southern cities by middle men who bring hoardes of fresh hands from Bihar, Northeast, Orissa and other far off States. There is acute and major shortage of manual labour whether it is agriculture, hotels and services, cleaners, semi skilled unorganized labour, cooks for households, gardeners, due to diminishing local supply of labour. Domestic servants are difficult to get. It is said that in Kerala, people who climb coconut trees have come down drastically, with the result the cropping cycles have changed to once in 4 months from 2 months. Migrant labour is an important ingredient of the manual labour scenario. Local boys and girls opt for more skilled work, call centres, telemarketing, field studies, sales boys and girls making a bonus through their sales in addition to their salaries. The qualified youth have moved up the employment chain. They are prepared to sit on the bench in expectation of white collared job.
Another advantage for these agents who involve migrant labour which constitute around 20% of the labour force, these labourers do not come under any labour laws, they have intimidating working conditions, no fixed working hours, low wages and are over-exploited. But since they are mostly in the un-organized sector, with language problems, they hang on. Taking advantage of the labour boom, some undesirable elements like criminals, law breakers also come in their wake. Since these workers do not have a permanent address, there was a thought that they must be given an identification card, their details collected, their photo videoed and their details must be catalogued through Computer.
New pastures present itself with greater opportunities. New development
would draw more industries, ventures, and investments. For completion of these, manual labour is required. The law of demand and supply takes over. New herds of unskilled labour migrate and learn the various skills. When they go up the value chain, another wave of migrants come. Which ever place is in need of labour, workers in anticipation of jobs converge on that place. They will work to earn their livelihood. If such is the case in the labour scenario, why should government bring in schems like employment gurantee scheme? Labour is in shortage. There is demand for more and more labour. Shortage makes it more complex. Why should anybody guarantee employment when employment opportunities are available in plenty?
Today, there is migration of labour to hot spots in South India. Not migration, rather an exodus. The wheel of the circle has changed 360 degrees.
The Government of India feels that there is large scale un-employment. They promulgated the Scheme, the Mahatma Gandhi (National) Rural Employment Guarantee Scheme, which gives a fixed wage for 100 days in a year to a particular individual. Does this Scheme open the door for further opportunities? Or does its tail end there?
Unemployment? Under employment? Voluntary unemployment? There are people with necessary qualifications and aptitude. Due to lack of sophistication or naïve manners, they do not get appropriate employment. There are others, who do not want to do employment. If you ask them why, they tell you, why should we work? We have enough at home. Or our brother is there in the Gulf. He is sending regular money. There are auto stands where a number of autos will be parked. You get into the first auto, the driver will come after a lapse of time and will tell you, ‘I am not going, get into the next auto’. This is the case, if you hail an auto which is passing by. You have hardly a requirement of an electrician for half-an-hour for a small repair. You search and search. You won’t find a single electrician. The same thing with a plumber. The worst is your search for a Computer mechanic. Worser still for the internet service provider or TV channel provider.
There has been major shortage of manual labourers in the agriculture, hotel, service industry, small shops, households, etc. Getting local labourers who are just not available is a serious problem. All the demands of the domestic sector, catering, hotel services, sales, maintaining of huge walls, dormitory works of hospitals, security agencies, house hold chorus, there are not enough people available. Nepalese gurkhas have earned a niche for themselves in the Security service and most of them have left their homes becomes of insecure uncertainty in the Himalayan Kingdom.
Most of the migrant labour makes a beeline to the construction industry. It might be a pride for this lot, as they were the major workers who saw the construction work of the Tamil Nadu Assembly Secretariat building complex at Chennai. Construction industry remains in the throes of workers from Bihar, Orissa. They neither come without any formal education nor acquire any skills. Their skills are self acquired, and are brought to the various southern cities by middle men who bring hoardes of fresh hands from Bihar, Northeast, Orissa and other far off States. There is acute and major shortage of manual labour whether it is agriculture, hotels and services, cleaners, semi skilled unorganized labour, cooks for households, gardeners, due to diminishing local supply of labour. Domestic servants are difficult to get. It is said that in Kerala, people who climb coconut trees have come down drastically, with the result the cropping cycles have changed to once in 4 months from 2 months. Migrant labour is an important ingredient of the manual labour scenario. Local boys and girls opt for more skilled work, call centres, telemarketing, field studies, sales boys and girls making a bonus through their sales in addition to their salaries. The qualified youth have moved up the employment chain. They are prepared to sit on the bench in expectation of white collared job.
Another advantage for these agents who involve migrant labour which constitute around 20% of the labour force, these labourers do not come under any labour laws, they have intimidating working conditions, no fixed working hours, low wages and are over-exploited. But since they are mostly in the un-organized sector, with language problems, they hang on. Taking advantage of the labour boom, some undesirable elements like criminals, law breakers also come in their wake. Since these workers do not have a permanent address, there was a thought that they must be given an identification card, their details collected, their photo videoed and their details must be catalogued through Computer.
New pastures present itself with greater opportunities. New development
would draw more industries, ventures, and investments. For completion of these, manual labour is required. The law of demand and supply takes over. New herds of unskilled labour migrate and learn the various skills. When they go up the value chain, another wave of migrants come. Which ever place is in need of labour, workers in anticipation of jobs converge on that place. They will work to earn their livelihood. If such is the case in the labour scenario, why should government bring in schems like employment gurantee scheme? Labour is in shortage. There is demand for more and more labour. Shortage makes it more complex. Why should anybody guarantee employment when employment opportunities are available in plenty?
Saturday, August 28, 2010
Fair and fast Judicial reforms
Indian judiciary, one of the pillars of the Indian Constitution, was venerated, respected and believed to be conscience keeper of the Country’s constitution. Certain land mark judgments, which recognized the right of the individual over absolute Power, independence of the IV estate and Executives invasion into the freedom of the Press had been considered sacred by the Courts, even Courts looked into certain legislative actions from the strict eyes of Law and juristic covenants, precedents and templates, have bee lauded and respected. It acted as an accountable body protecting the fundamental rights, the Courts struck acts and laws transgressing the limits of the Constitution, and kept up its supremacy.
However, when the Governments at the Centre and States started tinkering with Laws, and any arbitration between Centre and states, states and States, States Vs individuals were referred to the Courts for adjudication, the Executive wantonly transferred its responsibility to Courts. When even administrative matters were not solved on the basis of Driot Administratef, Central Government and State Government Rules, but referred to Courts,. Examples of this are Ayodhya dispute, Cauveri Water dispute, etc were referred to Courts for its arbitration. There are many issues which had been referred by the President of India to the Supreme Court for its clarification, Courts naturally became highly pro active, and took upon itself, cases which normally should not have been admitted. The Public Interest litigation was easy route for anybody to approach the highest Court of the land, whether the applicant had prima facie interest and affected by a particular order or action of the government, he surpassed the usual channels of law available to him, and knocked at the Supreme Court whether he was bona fide affected or not. This PIL later became a nuisance, and Supreme Court had warned the petitioners not to file vexatious PIL without sufficient reasons.
The present judiciary is losing common man’s respect for obviously many reasons. Cases have been piled up in the lower Courts, higher Courts and Supreme Courts for ages, there are corruption charges against Judges of the higher Court, there are impeachment proceedings against some Judges, some judges involved in the PF case have brought shame to the judiciary. Criticism of one judge by another pusine judge through twitter or speeches have become common, there are parallel trails by the visual media 24x7 which prejudices the Case and one of the sad repercussions of these are loss of faith by the litigants on Courts which is supposed to dispense Fair Law. There have been past judgments which have been reversed 360 degrees by higher Courts. The recent incidents involving some of the sitting judicial officers for their Post Graduate legal examination at Andhra Pradesh were caught red handed copying by a CCTV camera is a shame on the entire judicial system. If a judicial officer who should administer fair justice indulge in incorrect procedures, who will give justice to the litigants? Can litigants have faith in such judicial officers or the judicial system?
There are also reports that appointments to the High Courts and Supreme Courts and transfer of High Court judges from one state to another are not fair. Good lawyers do not want to become Judges. Another factor in delay in delivering Justice is shortage of Judges. Even cases filed in the Fast Track Courts are unusually delayed.
There is a need for overhauling reforms in Judiciary. The left over of the colonial past including Rules, regulations, acts, laws have been a stumbling block to deliver Law in these days when speed is a necessity. Globalization has changed global laws. World has changed. There are States or nations which indulge in Wars. There are non state actors who indulge in terrorism acts or take Law into their hands. Whether these acts are out of frustration, economic backwardness or political thinking is another matter. Judges are human, they can commit mistakes. But when some of the judicial officers think that they are conferred with infinite powers, they should be told that there are checks and balances in the judicial system. There are many acts of indiscipline within the Court rooms. The Judges are accountable to the system and Rule of Law. They are also accountable to the Constitution of India. They must be mild in their observations for the litigant who has obeyed the Law and stringent in their language against law breaker. Government also should respect protocols and act impassionately. During the vote on account during the introduction of the Financial bill, CBI told the Supreme Court that enough evidence of financial irregularity against Mayawati is not there; but when to get the Nuclear Bill passed, where there was necessity to get the Left and BJP to support the Government, the CBI took a 360 degree turn and now says that evidences are there against Mayawati. This is the highest political misuse.
Judicial Reforms is the need of the hour. Like the Fourth estate, Indian judiciary needs to exert self discipline. The hallowed institution should command respect, reverence and worship! It must regain its lost legacy.
However, when the Governments at the Centre and States started tinkering with Laws, and any arbitration between Centre and states, states and States, States Vs individuals were referred to the Courts for adjudication, the Executive wantonly transferred its responsibility to Courts. When even administrative matters were not solved on the basis of Driot Administratef, Central Government and State Government Rules, but referred to Courts,. Examples of this are Ayodhya dispute, Cauveri Water dispute, etc were referred to Courts for its arbitration. There are many issues which had been referred by the President of India to the Supreme Court for its clarification, Courts naturally became highly pro active, and took upon itself, cases which normally should not have been admitted. The Public Interest litigation was easy route for anybody to approach the highest Court of the land, whether the applicant had prima facie interest and affected by a particular order or action of the government, he surpassed the usual channels of law available to him, and knocked at the Supreme Court whether he was bona fide affected or not. This PIL later became a nuisance, and Supreme Court had warned the petitioners not to file vexatious PIL without sufficient reasons.
The present judiciary is losing common man’s respect for obviously many reasons. Cases have been piled up in the lower Courts, higher Courts and Supreme Courts for ages, there are corruption charges against Judges of the higher Court, there are impeachment proceedings against some Judges, some judges involved in the PF case have brought shame to the judiciary. Criticism of one judge by another pusine judge through twitter or speeches have become common, there are parallel trails by the visual media 24x7 which prejudices the Case and one of the sad repercussions of these are loss of faith by the litigants on Courts which is supposed to dispense Fair Law. There have been past judgments which have been reversed 360 degrees by higher Courts. The recent incidents involving some of the sitting judicial officers for their Post Graduate legal examination at Andhra Pradesh were caught red handed copying by a CCTV camera is a shame on the entire judicial system. If a judicial officer who should administer fair justice indulge in incorrect procedures, who will give justice to the litigants? Can litigants have faith in such judicial officers or the judicial system?
There are also reports that appointments to the High Courts and Supreme Courts and transfer of High Court judges from one state to another are not fair. Good lawyers do not want to become Judges. Another factor in delay in delivering Justice is shortage of Judges. Even cases filed in the Fast Track Courts are unusually delayed.
There is a need for overhauling reforms in Judiciary. The left over of the colonial past including Rules, regulations, acts, laws have been a stumbling block to deliver Law in these days when speed is a necessity. Globalization has changed global laws. World has changed. There are States or nations which indulge in Wars. There are non state actors who indulge in terrorism acts or take Law into their hands. Whether these acts are out of frustration, economic backwardness or political thinking is another matter. Judges are human, they can commit mistakes. But when some of the judicial officers think that they are conferred with infinite powers, they should be told that there are checks and balances in the judicial system. There are many acts of indiscipline within the Court rooms. The Judges are accountable to the system and Rule of Law. They are also accountable to the Constitution of India. They must be mild in their observations for the litigant who has obeyed the Law and stringent in their language against law breaker. Government also should respect protocols and act impassionately. During the vote on account during the introduction of the Financial bill, CBI told the Supreme Court that enough evidence of financial irregularity against Mayawati is not there; but when to get the Nuclear Bill passed, where there was necessity to get the Left and BJP to support the Government, the CBI took a 360 degree turn and now says that evidences are there against Mayawati. This is the highest political misuse.
Judicial Reforms is the need of the hour. Like the Fourth estate, Indian judiciary needs to exert self discipline. The hallowed institution should command respect, reverence and worship! It must regain its lost legacy.
Friday, August 20, 2010
Cut throat competition to get top salaries?
The salaries of CEOs have skyrocketed over the past 20 years, rising at a faster pace than average wages, managerial pay, or corporate earnings. This is mainly due to compensation benchmarking. A standard practice in many industries, benchmarking occurs when compensation committees use peer executives at rival firms to establish a “fair” market wage. The problem is that each year, some CEOs leapfrog others by raking in huge bonuses or raises that are unrelated to their company’s performance, often thanks to poor corporate governance or oversight. These inflated salaries are then used by other companies to set their compensation levels; over time, the snowball effect makes CEOs’ salaries swell dramatically.
The compensation survey conducted by Standard & Poor’s (1992 to 2006) revealed that there were haphazard sharp increases in CEO salaries. When the pay of Chief Executives were compared with the compensation received by the salaried Directors on different Boards. An attempt at examination as to how CEO pay was determined by analyzing consultant and compensation committee records. Leapfrogging accounted for about half of the overall increase in CEO salaries in that time period, according to the survey. The mean CEO salary plus bonus, adjusted for inflation, grew by 58 percent from 1993 to 2005, and the mean total compensation, which included stock and stock options, increased by 116 percent. Meanwhile, mean annual compensation in India overall rose by only 20 percent.
As per SIBI Guidelines, there is a mandate that the firms shall disclose the salaries drawn by the top-CEOs, how much bonus, percentage of profit was paid to them, what were their perks. Also salaries, commissions drawn by paid Directors also need to be disclosed. Some firms give Stock options to the Staff, wherein a good chunk in blue chip companies land in favour of the top executives like CEO, Mg Director, Dy Mg Director, Working Director etc. One CEO of a firm based in Chennai draws Rs 42 Cr as compensation per annum. His wife, who is the Dy MD, is also drawing an equivalent sum. There are many CEOs in India who draw an average salary and compensation of Rs 1 Cr and above.
The salaries of CEOs fixed during the last twenty years or so, based on standard surveys conducted by international reputed Analysts are that competition benchmarking is the bottomline for fixing the salaries of their own CEOs. Otherwise, there will be migration or desertion. But the comparison of salaries of competitions is often inflated, which artificially drive up competition.
The same benchmarking with the 6th pay commission recommendations to the bureaucrats has necessitated an enlargement in the salary and allowances of members of Parliament. However, Cabinet on the basis of the recommendation by parliamentary affairs ministry proposed to increase the salary from Rs 16,000 to Rs 50,000 against Rs 80,000 as recommended by the Parliamentary panel. Today, a Secretary to Government gets a pay of Rs 80,000 per month after the revision of their salaries after introduction of 6th Pay Commission. In addition an MP gets a daily allowance of Rs 1,000 per day, constituency allowance of Rs 40,000 and office expense of Rs 40,000 per month. The conveyance allowance has been increased to Rs 4 lakh. Spouses are also eligible for free travel by flight. The increase is from retrospective effect (arrears from May 2009). In addition each MP is provided with Rs 2 Cr which can be spent by him for special works in his constituency. These are times when inflation is in the two digits, there is widespread disquiet because of non availability of jobs, or basic income, huge defence outlay because of fearsome neighbours, terrorist masterminds who want to see the country destroyed, agriculture and industry’s growth is slow paced.
The free economy regime will see demand for more and more wealth, and creation of more wealth will lead to more spending resulted in runaway inflation.
..
The compensation survey conducted by Standard & Poor’s (1992 to 2006) revealed that there were haphazard sharp increases in CEO salaries. When the pay of Chief Executives were compared with the compensation received by the salaried Directors on different Boards. An attempt at examination as to how CEO pay was determined by analyzing consultant and compensation committee records. Leapfrogging accounted for about half of the overall increase in CEO salaries in that time period, according to the survey. The mean CEO salary plus bonus, adjusted for inflation, grew by 58 percent from 1993 to 2005, and the mean total compensation, which included stock and stock options, increased by 116 percent. Meanwhile, mean annual compensation in India overall rose by only 20 percent.
As per SIBI Guidelines, there is a mandate that the firms shall disclose the salaries drawn by the top-CEOs, how much bonus, percentage of profit was paid to them, what were their perks. Also salaries, commissions drawn by paid Directors also need to be disclosed. Some firms give Stock options to the Staff, wherein a good chunk in blue chip companies land in favour of the top executives like CEO, Mg Director, Dy Mg Director, Working Director etc. One CEO of a firm based in Chennai draws Rs 42 Cr as compensation per annum. His wife, who is the Dy MD, is also drawing an equivalent sum. There are many CEOs in India who draw an average salary and compensation of Rs 1 Cr and above.
The salaries of CEOs fixed during the last twenty years or so, based on standard surveys conducted by international reputed Analysts are that competition benchmarking is the bottomline for fixing the salaries of their own CEOs. Otherwise, there will be migration or desertion. But the comparison of salaries of competitions is often inflated, which artificially drive up competition.
The same benchmarking with the 6th pay commission recommendations to the bureaucrats has necessitated an enlargement in the salary and allowances of members of Parliament. However, Cabinet on the basis of the recommendation by parliamentary affairs ministry proposed to increase the salary from Rs 16,000 to Rs 50,000 against Rs 80,000 as recommended by the Parliamentary panel. Today, a Secretary to Government gets a pay of Rs 80,000 per month after the revision of their salaries after introduction of 6th Pay Commission. In addition an MP gets a daily allowance of Rs 1,000 per day, constituency allowance of Rs 40,000 and office expense of Rs 40,000 per month. The conveyance allowance has been increased to Rs 4 lakh. Spouses are also eligible for free travel by flight. The increase is from retrospective effect (arrears from May 2009). In addition each MP is provided with Rs 2 Cr which can be spent by him for special works in his constituency. These are times when inflation is in the two digits, there is widespread disquiet because of non availability of jobs, or basic income, huge defence outlay because of fearsome neighbours, terrorist masterminds who want to see the country destroyed, agriculture and industry’s growth is slow paced.
The free economy regime will see demand for more and more wealth, and creation of more wealth will lead to more spending resulted in runaway inflation.
..
Sunday, August 15, 2010
Agriculture in a mess due to faulty Planning?
India of 2010 is not the India of 1947.
In India, which has a population of over 1.2 billion today, does it have sufficient grannery to feed the mouths? Has our Below Poverty Line estimate suffices the requirement of food for the downtrodden. The much proclaimed Food Guarantee Bill, will it create a harvest of mouthful for these have-nots? India is looking forward to a thrillion economy; in these, how much these dastard and laggard people, earn to lead a hand-to-mouth livelihood. Has Malthusian theory come true in India?
When the First Five Year Plan gave supremacy of Agriculture, and the Green Revolution that followed, today’s plan (XI Five Year Plan) has hopes of achieving 4% growth even though the Plan delivered a flat 0.20% during the mid-term analysis of the XI Plan. The Plan, gives scant outlay to agriculture, does not evolve Schemes to better productivity in agri-based products, and in the least pretexts, and look as an instant solution to Imports. It even imported Public Loan 480 from America, the rice not fit enough even for rats! The Rice, and wheat stored in the Food Corporation of India mainly meant for distribution to the BPL families, is fodder for rats. Food Security Bill with Crores of Rupees of public money can be advantageous only if the food reached the poor, downtrodden. In India, for agriculture subsidy, kerosene oil subsidy (for lighting, cooking), fertiliserz, etc the middle-men knocked off a chunk of money. The Plan architect Montek Singh Aluwaliah, and the agriculture expert Dr Swaminathan are polls apart in perceiving what is best for agriculture. Our Economists theorize but often theory in the alter of reality never meet; we have massive outlay for Agriculture, that is funds spent in the name of agriculture. Hydro electric projects drowned the fertile lands, and doused the agricultural yield. Conversion of agricultural land for development, a mantra of the Globalization concept, has devastated agricultural development and growth. In Kerala, where Coconut was a plantation has become a home stud crop thanks to Kerala Land Reforms.
First area of concern is Agricultural Credit. Credit flow has risen sharply, Dr B K Chaturvedi, Dy Governor will explain eloquently. The Credit was channelised through RRBs, commercial Banks in rural areas. Commercial banks gave loans to SIDBI and other institutions that supported agriculture. Agricultural loans were characterized as priority sector loans. In the last decade or so, loans were given to Corporates, tractor manufacturers, fertilizer companies, advances worth many Crores, but they were shown as priority sector advances to agriculture. A disturbing future of the agriculture Credit is astronamal growth of agricultural finance that is urban in nature. The share of agricultural Credit supplied by urban and metropolitan bank branches in India increased from 16.3% to 30.7%. . One third of the agricultural Credit was given by metropolitan and urban banks while the share of the rural, semi-urban, RRB got reduced to less than 50%. One question is pertinent- Corporate/agricultural firms get Credit over Rs 1 cr in aggregate per borrower, but shown in Bank books as agriculture Credit (2007 onwards). Is it not an institutional make-up in the loan portfolio to show that Credit for agricultural is growing. Fertilizer subsidy, one would like to ask the question. How much have fertilizer companies grown their declared profits, and what catalytic role they played in improving agricultural productivity? In the state of Maharashtra alone, rural branches provided 25.7% credit towards agriculture while metropolitan bank branches gave a credit for agricultural sector @ 42.6% of the total agricultural credit in Maharashtra in 2008. The actual farmer in the villages, whose financial needs are sparse, would benefit the least from the present Agricultural Credit Policy which are pocked by Corporate, partnership firms having as allied enterprise, agriculture, etc. Reliable data is available to show that what is termed as agriculture Credit may have little to do with agriculture! Shocking!
The Second area of which government is least concerned is the irrigational source. Hon’ble Minister of Agriculture, Dy Chairman of Planning Commission will blame the rains for failure in Rabi crops or poor show of kharif crops. Poor monsoon, sluggish agriculture growth. No agriculturalist is concerned about average rainfall data but he looks for daily rainfall during the agricultural season for his survival. The Planners presuppose that the fluctuation of monsoon on a year-on-year basis is the problem of agricultural diminishing returns. It is not the total rainfall or levels in reservoirs that matter to majority. It is the rain on time. Dry crops might not require lot of Water or expensive irrigation facilities but timely rain. Drought related measures to temporarily assist may be useful but strategic and long term measures need to be taken. Here, our planners have failed lock, stock, and barrel. Irrigation infrastructure is deteriorating due to poor maintenance of irrigation systems. The overuse of Water is being covered by over pumping aquifers, but as they are falling by foot of ground water yield, this is limited resource. It is unscientific approach of the Planning Commission for the improper use of water, irrigation planning.
We suggest some steps: a. Agriculture, adaptation measures in rural sector should receive major institutional/financial support for evolving policies for implementation of specific programmes in the short- to- long term. (b) Measures to manage water resources on an annual cycle basis and it should be stored and distributed; some times long spell of rainfall above the normal, some times successive draught hamper the storage of water policy. The water storage level has to be decentralized to a sub basin level. Storing water on surface and underground in order to build storages for later years need to be planned. (c) Focusing on dry land agriculture and soil moisture. 75 million hectares are under food grain production in the dry land mode (d) Policy interventions: lack of saving the water or improving water productivity is actually leading to wastage. But not one rupee is in the XI Plan is allotted; (ii) incentives to use chemical fertilizers may actually induce soil degradation and put farmers of dry land farming in disadvantage(iii) Poor farmers, rural farmers do not require Rs 1 cr capital loan; the metropolitan banks need not support agriculture. Let it to be supported by NABARD (by forming micro finance companies run by honest NGOs), RRB, and Rural Banks. Stop writing off of loans, stop free power, and re-look at the clients who have agricultural loans.
Let Planning Commission answer? Let RBI do some introspection in respect of Credits to agricultural farmers? Let the Agriculture Minister look at the agriculture in its total prespective. Let the Controller and Audit General, look at Crores of Rupees of money not getting into the Agricultural arena? Let the opposition ask pertinent questions and do some honest homework. Let our newspapers and electronic media look at the agricultural issue in germane and file a faithful and accurate report. All these institutions are sleeping. Only when rats enter the FCI godowns and eat wheat, the matter comes to national attention?
In India, which has a population of over 1.2 billion today, does it have sufficient grannery to feed the mouths? Has our Below Poverty Line estimate suffices the requirement of food for the downtrodden. The much proclaimed Food Guarantee Bill, will it create a harvest of mouthful for these have-nots? India is looking forward to a thrillion economy; in these, how much these dastard and laggard people, earn to lead a hand-to-mouth livelihood. Has Malthusian theory come true in India?
When the First Five Year Plan gave supremacy of Agriculture, and the Green Revolution that followed, today’s plan (XI Five Year Plan) has hopes of achieving 4% growth even though the Plan delivered a flat 0.20% during the mid-term analysis of the XI Plan. The Plan, gives scant outlay to agriculture, does not evolve Schemes to better productivity in agri-based products, and in the least pretexts, and look as an instant solution to Imports. It even imported Public Loan 480 from America, the rice not fit enough even for rats! The Rice, and wheat stored in the Food Corporation of India mainly meant for distribution to the BPL families, is fodder for rats. Food Security Bill with Crores of Rupees of public money can be advantageous only if the food reached the poor, downtrodden. In India, for agriculture subsidy, kerosene oil subsidy (for lighting, cooking), fertiliserz, etc the middle-men knocked off a chunk of money. The Plan architect Montek Singh Aluwaliah, and the agriculture expert Dr Swaminathan are polls apart in perceiving what is best for agriculture. Our Economists theorize but often theory in the alter of reality never meet; we have massive outlay for Agriculture, that is funds spent in the name of agriculture. Hydro electric projects drowned the fertile lands, and doused the agricultural yield. Conversion of agricultural land for development, a mantra of the Globalization concept, has devastated agricultural development and growth. In Kerala, where Coconut was a plantation has become a home stud crop thanks to Kerala Land Reforms.
First area of concern is Agricultural Credit. Credit flow has risen sharply, Dr B K Chaturvedi, Dy Governor will explain eloquently. The Credit was channelised through RRBs, commercial Banks in rural areas. Commercial banks gave loans to SIDBI and other institutions that supported agriculture. Agricultural loans were characterized as priority sector loans. In the last decade or so, loans were given to Corporates, tractor manufacturers, fertilizer companies, advances worth many Crores, but they were shown as priority sector advances to agriculture. A disturbing future of the agriculture Credit is astronamal growth of agricultural finance that is urban in nature. The share of agricultural Credit supplied by urban and metropolitan bank branches in India increased from 16.3% to 30.7%. . One third of the agricultural Credit was given by metropolitan and urban banks while the share of the rural, semi-urban, RRB got reduced to less than 50%. One question is pertinent- Corporate/agricultural firms get Credit over Rs 1 cr in aggregate per borrower, but shown in Bank books as agriculture Credit (2007 onwards). Is it not an institutional make-up in the loan portfolio to show that Credit for agricultural is growing. Fertilizer subsidy, one would like to ask the question. How much have fertilizer companies grown their declared profits, and what catalytic role they played in improving agricultural productivity? In the state of Maharashtra alone, rural branches provided 25.7% credit towards agriculture while metropolitan bank branches gave a credit for agricultural sector @ 42.6% of the total agricultural credit in Maharashtra in 2008. The actual farmer in the villages, whose financial needs are sparse, would benefit the least from the present Agricultural Credit Policy which are pocked by Corporate, partnership firms having as allied enterprise, agriculture, etc. Reliable data is available to show that what is termed as agriculture Credit may have little to do with agriculture! Shocking!
The Second area of which government is least concerned is the irrigational source. Hon’ble Minister of Agriculture, Dy Chairman of Planning Commission will blame the rains for failure in Rabi crops or poor show of kharif crops. Poor monsoon, sluggish agriculture growth. No agriculturalist is concerned about average rainfall data but he looks for daily rainfall during the agricultural season for his survival. The Planners presuppose that the fluctuation of monsoon on a year-on-year basis is the problem of agricultural diminishing returns. It is not the total rainfall or levels in reservoirs that matter to majority. It is the rain on time. Dry crops might not require lot of Water or expensive irrigation facilities but timely rain. Drought related measures to temporarily assist may be useful but strategic and long term measures need to be taken. Here, our planners have failed lock, stock, and barrel. Irrigation infrastructure is deteriorating due to poor maintenance of irrigation systems. The overuse of Water is being covered by over pumping aquifers, but as they are falling by foot of ground water yield, this is limited resource. It is unscientific approach of the Planning Commission for the improper use of water, irrigation planning.
We suggest some steps: a. Agriculture, adaptation measures in rural sector should receive major institutional/financial support for evolving policies for implementation of specific programmes in the short- to- long term. (b) Measures to manage water resources on an annual cycle basis and it should be stored and distributed; some times long spell of rainfall above the normal, some times successive draught hamper the storage of water policy. The water storage level has to be decentralized to a sub basin level. Storing water on surface and underground in order to build storages for later years need to be planned. (c) Focusing on dry land agriculture and soil moisture. 75 million hectares are under food grain production in the dry land mode (d) Policy interventions: lack of saving the water or improving water productivity is actually leading to wastage. But not one rupee is in the XI Plan is allotted; (ii) incentives to use chemical fertilizers may actually induce soil degradation and put farmers of dry land farming in disadvantage(iii) Poor farmers, rural farmers do not require Rs 1 cr capital loan; the metropolitan banks need not support agriculture. Let it to be supported by NABARD (by forming micro finance companies run by honest NGOs), RRB, and Rural Banks. Stop writing off of loans, stop free power, and re-look at the clients who have agricultural loans.
Let Planning Commission answer? Let RBI do some introspection in respect of Credits to agricultural farmers? Let the Agriculture Minister look at the agriculture in its total prespective. Let the Controller and Audit General, look at Crores of Rupees of money not getting into the Agricultural arena? Let the opposition ask pertinent questions and do some honest homework. Let our newspapers and electronic media look at the agricultural issue in germane and file a faithful and accurate report. All these institutions are sleeping. Only when rats enter the FCI godowns and eat wheat, the matter comes to national attention?
Thursday, August 12, 2010
Infrastructure growth inadequate?
Infrastructure capacity over-stretched in India?
India’s infrastructure, meaning Ports, Roads, airports, and railways, are they sufficient to meet the burgeoning demand of the economic growth of the Country which is expected to emerge as one of the largest economies of the World in a few year’s time?
Is India’s growth commensurate with the growth in automobile, bus, motor vehicle, two wheelers, three wheelers, four wheelers, six wheelers, and giant trucks that move Containers, passenger growth in trains, aero planes, and Container traffic through ports?
Has the Planning Commission estimated the normal growth and superfluous growth, and arrived at the forecasts that would accurately predict the demand: Supply? Year-on-Year, the Finance Ministers have worried about raising expenditure, bridging the gap, collecting taxes, and focusing on bringing down the fiscal deficit, and allotting a chunk of money for populist schemes with the Vote banks in view. Is there any sincerity in their spending for the downtrodden? Is it aimed at making their standard of living grow? With all the spending, the have-nots increase in geometrical progression. Why? Faint and half hearted attempts to give an impression that the Government looks at an egalitarian Society, when Laws are framed and passed to assist the rich grow to figure in the Forbes List!
You cannot plan growth of rural areas by experimenting with examples. Gross root economics is not what is visualized in the theories of master economists. Even Hayward and London School economists failed to come up with an alternate strategy when the world economy led by America and Europe fretted and fumed?
The Central Government can wash off its hands saying that Road Transport is a state subject. That is why, when they raise the price of petrol or diesel, they tell states to reduce the Commercial/Sales Tax. But it is a fact that the vehicle population, both existing and new, is out of proportion to the available infrastructure. India hardly spends 4% of the GDP when China allocates 9% of the GDP for infrastructure growth. Infrastructure capacity is wholly inadequate rather inconsistent. The supply has not picked momentum against demand. Sector has not achieved the growth commensurate with its potential. The Road usage should have been restricted to 70% of its capacity. In India, the Road capacity is stretched beyond 100%. Port capacities are extremely stretched which raise inefficiencies as the utilization has breached 100%. The traffic is growing at a Compounded Annual Growth rate of 20%, while new capacities created are sizably low. Strong domestic consumption and favourable demographies in terms of young working population in India has resulted in heavy growth of vehicles. To cite an example, the State Bank of India, Kerala Circle, (the smallest circle of the SBI in India) gave auto loans to the extent of Rs 354 Cr in 2009-10 against Rs 34 Cr in 2008-9. What is the percentage of increase? Can the roads in Kerala, limited as they are, accept this additional load?
Just to give comparative figures, the automobile population (including the two wheeler segment) in India during 1990-91 was 22 lakh against 8.59 Cr in 2008-9.
According to statistics provided by the Economic Survey (2009-10), 11,037 Kms of High way has been completed. The Survey says that 1, 45,000 Kms of rural roadways at a cost of Rs 37,000 Cr has been laid upto 2008-9. This year’s budget for the NHAI is Rs 6,972.47 by Cess Funds collected from petrol & diesel users. The Government concedes that it underwrites under-recoveries to the extent of Rs 20,000 Cr. The Cess collected through compulsory taxation is 30% of the under-recoveries. Government should explain that when such is the case, how they can say mathematically the oil Companies are in the red, even after an upward increase every three months. There is something wrong somewhere, taking into account IOC profit of Rs 10,000 Cr in 2008-9. This is a mathematical puzzle more complicated than Satyam. If we look at the budget of NHAI, Rs 6,942.47 Cr is collected through Cess, Rs 1515 Cr is ploughed by way of External assistance (in the form of grant & loan) Rs 379 Cr + Rs 1096.26 Cr borrowings, while the actual Government’s budgetary support is only Rs 159 Cr. Mr Kamalnath is right that when the planning commission coughs up just Rs 159 Cr through budgetary support while the Ministry’s fixture is to lay 20 Kms of highway totaling 7,000 Kms of national Highway per annum. That is to say Government spends Rs 2, 27,142.85 to build 1 km of National Highway.
Private Sector invested 19% of the total plan outlay as participation in the Highway Development Programme, while it has grown to 30% in the XI Plan. Only in the building of Roads, PPP has risen from 5% to 36%.
Term funding, both equity and debt, by Banks, is impossible for the simple reason that the gap in long term debt financing is largely due to asset: liability mismatch facing the Banking industry. Long term equity capacity is also difficult to come by. Permitting pension funds and insurance cos to invest in long term stabilized constructions like roads, directly and indirectly, would be cost effective. Indirect investment in infrastructure funds or creation of listed perpetual funds holding infrastructure assets where investors could invest with an annuity philosophy may be explored. Foreign Exchange Reserves may be deployed for asset creation at little costs but with high returns. If Planning Commission goes on singing in chorus as to the whereabouts of the funds, even though the deployment is in unproductive and unwanted sectors, the infrastructure development will halt the country’s progress.
India’s infrastructure, meaning Ports, Roads, airports, and railways, are they sufficient to meet the burgeoning demand of the economic growth of the Country which is expected to emerge as one of the largest economies of the World in a few year’s time?
Is India’s growth commensurate with the growth in automobile, bus, motor vehicle, two wheelers, three wheelers, four wheelers, six wheelers, and giant trucks that move Containers, passenger growth in trains, aero planes, and Container traffic through ports?
Has the Planning Commission estimated the normal growth and superfluous growth, and arrived at the forecasts that would accurately predict the demand: Supply? Year-on-Year, the Finance Ministers have worried about raising expenditure, bridging the gap, collecting taxes, and focusing on bringing down the fiscal deficit, and allotting a chunk of money for populist schemes with the Vote banks in view. Is there any sincerity in their spending for the downtrodden? Is it aimed at making their standard of living grow? With all the spending, the have-nots increase in geometrical progression. Why? Faint and half hearted attempts to give an impression that the Government looks at an egalitarian Society, when Laws are framed and passed to assist the rich grow to figure in the Forbes List!
You cannot plan growth of rural areas by experimenting with examples. Gross root economics is not what is visualized in the theories of master economists. Even Hayward and London School economists failed to come up with an alternate strategy when the world economy led by America and Europe fretted and fumed?
The Central Government can wash off its hands saying that Road Transport is a state subject. That is why, when they raise the price of petrol or diesel, they tell states to reduce the Commercial/Sales Tax. But it is a fact that the vehicle population, both existing and new, is out of proportion to the available infrastructure. India hardly spends 4% of the GDP when China allocates 9% of the GDP for infrastructure growth. Infrastructure capacity is wholly inadequate rather inconsistent. The supply has not picked momentum against demand. Sector has not achieved the growth commensurate with its potential. The Road usage should have been restricted to 70% of its capacity. In India, the Road capacity is stretched beyond 100%. Port capacities are extremely stretched which raise inefficiencies as the utilization has breached 100%. The traffic is growing at a Compounded Annual Growth rate of 20%, while new capacities created are sizably low. Strong domestic consumption and favourable demographies in terms of young working population in India has resulted in heavy growth of vehicles. To cite an example, the State Bank of India, Kerala Circle, (the smallest circle of the SBI in India) gave auto loans to the extent of Rs 354 Cr in 2009-10 against Rs 34 Cr in 2008-9. What is the percentage of increase? Can the roads in Kerala, limited as they are, accept this additional load?
Just to give comparative figures, the automobile population (including the two wheeler segment) in India during 1990-91 was 22 lakh against 8.59 Cr in 2008-9.
According to statistics provided by the Economic Survey (2009-10), 11,037 Kms of High way has been completed. The Survey says that 1, 45,000 Kms of rural roadways at a cost of Rs 37,000 Cr has been laid upto 2008-9. This year’s budget for the NHAI is Rs 6,972.47 by Cess Funds collected from petrol & diesel users. The Government concedes that it underwrites under-recoveries to the extent of Rs 20,000 Cr. The Cess collected through compulsory taxation is 30% of the under-recoveries. Government should explain that when such is the case, how they can say mathematically the oil Companies are in the red, even after an upward increase every three months. There is something wrong somewhere, taking into account IOC profit of Rs 10,000 Cr in 2008-9. This is a mathematical puzzle more complicated than Satyam. If we look at the budget of NHAI, Rs 6,942.47 Cr is collected through Cess, Rs 1515 Cr is ploughed by way of External assistance (in the form of grant & loan) Rs 379 Cr + Rs 1096.26 Cr borrowings, while the actual Government’s budgetary support is only Rs 159 Cr. Mr Kamalnath is right that when the planning commission coughs up just Rs 159 Cr through budgetary support while the Ministry’s fixture is to lay 20 Kms of highway totaling 7,000 Kms of national Highway per annum. That is to say Government spends Rs 2, 27,142.85 to build 1 km of National Highway.
Private Sector invested 19% of the total plan outlay as participation in the Highway Development Programme, while it has grown to 30% in the XI Plan. Only in the building of Roads, PPP has risen from 5% to 36%.
Term funding, both equity and debt, by Banks, is impossible for the simple reason that the gap in long term debt financing is largely due to asset: liability mismatch facing the Banking industry. Long term equity capacity is also difficult to come by. Permitting pension funds and insurance cos to invest in long term stabilized constructions like roads, directly and indirectly, would be cost effective. Indirect investment in infrastructure funds or creation of listed perpetual funds holding infrastructure assets where investors could invest with an annuity philosophy may be explored. Foreign Exchange Reserves may be deployed for asset creation at little costs but with high returns. If Planning Commission goes on singing in chorus as to the whereabouts of the funds, even though the deployment is in unproductive and unwanted sectors, the infrastructure development will halt the country’s progress.
Wednesday, August 11, 2010
Meaning of 'Globalization to the 3rd world'?
Until the markets went global, Marketing has been one of the neglected functions in the Indian business environment. Few Indian Companies had assiduously applied and practiced marketing strategies till about a decade and half ago. They had a distribution arm and a selling arm. Since the dawn of 1990s, however, the Climate has changed considerably, thanks to what is being described by Economists as LPG- Liberalization, Privatization and Globalization.
The term ‘Globalization’ was first used by Mr. Theodore Levitt in an article in Harvard Business Review in 1983. Globalization meant, national products, identity and companies were replaced by globalized products, globalized identities and globalized Companies. The market did not have any boundaries and it was Open market without boundaries. The increased integration of national economy, the more and more Joint ventures, dealer networks, wholesale markets were replaced by retail markets where world class goods were available for wholesale prices, all these constituted the syndrome of this paradigm shift. All these have ushered a new world economic order. The harbingers of the cataclysm are on its way. But it has its own perils too. Globalization can be disquiet too. When American banking began to fail, and liquidity became sparse in America, it caused an economic meltdown; this permeated to Europe, another developed continent. And this development cascaded to a number of developing countries including the new blocks of economic growing power like India, China, Brazil and Russia, resulting in trade slowdown affecting the economic growth of these countries which were slated to touch double digit growth against which it faced double dip growth.
Organizations will need to master and muster new competencies in order to advance and progress in this scenario. Managers and workers will require new skills to function in the context of a global conglomerate. Globalize or perish would become the mantra for achieving any commercial success in the millennium. It is only the commercial or economic changes, but all other resonant and consequent changes in the social, economic, political menu.
If we need to understand the evolution of the global market, the theory of state and nation, the historic perspective of different models of the national economy and their correlation to the genesis and growth of globalization as a contemporary phenomenon, we need to relook at the origin of modern global economy, political philosophies and economic theories of Adam Smith, Kant, Jeremy Bentham, John Mill, Karl Marx, etc. We also need to look at the interregnum between two world wars. The Great Depression, the establishment of Gold standard, Bretton Wood Conference, meergence of Third world in the international economy is forerunners to the Globalization of the economy.
The genesis of globalization in the context of and in sequel to the crisis in the international economy makes a fascinating transition from welfare capitalism to laissez-faire economy. Has the collapse of Soviet Russia and formation of the Commonwealth of independent states anything to do with liberalization?
Globalization, what it means to the third world, developing world, and developed work demystifies the concepts of world economy of the immediate post war economic era of 1945! Right or wrong, time alone can tell.
The term ‘Globalization’ was first used by Mr. Theodore Levitt in an article in Harvard Business Review in 1983. Globalization meant, national products, identity and companies were replaced by globalized products, globalized identities and globalized Companies. The market did not have any boundaries and it was Open market without boundaries. The increased integration of national economy, the more and more Joint ventures, dealer networks, wholesale markets were replaced by retail markets where world class goods were available for wholesale prices, all these constituted the syndrome of this paradigm shift. All these have ushered a new world economic order. The harbingers of the cataclysm are on its way. But it has its own perils too. Globalization can be disquiet too. When American banking began to fail, and liquidity became sparse in America, it caused an economic meltdown; this permeated to Europe, another developed continent. And this development cascaded to a number of developing countries including the new blocks of economic growing power like India, China, Brazil and Russia, resulting in trade slowdown affecting the economic growth of these countries which were slated to touch double digit growth against which it faced double dip growth.
Organizations will need to master and muster new competencies in order to advance and progress in this scenario. Managers and workers will require new skills to function in the context of a global conglomerate. Globalize or perish would become the mantra for achieving any commercial success in the millennium. It is only the commercial or economic changes, but all other resonant and consequent changes in the social, economic, political menu.
If we need to understand the evolution of the global market, the theory of state and nation, the historic perspective of different models of the national economy and their correlation to the genesis and growth of globalization as a contemporary phenomenon, we need to relook at the origin of modern global economy, political philosophies and economic theories of Adam Smith, Kant, Jeremy Bentham, John Mill, Karl Marx, etc. We also need to look at the interregnum between two world wars. The Great Depression, the establishment of Gold standard, Bretton Wood Conference, meergence of Third world in the international economy is forerunners to the Globalization of the economy.
The genesis of globalization in the context of and in sequel to the crisis in the international economy makes a fascinating transition from welfare capitalism to laissez-faire economy. Has the collapse of Soviet Russia and formation of the Commonwealth of independent states anything to do with liberalization?
Globalization, what it means to the third world, developing world, and developed work demystifies the concepts of world economy of the immediate post war economic era of 1945! Right or wrong, time alone can tell.
Base Rate effect-Bane or Boon?
Banks all over the globe have been clearly avoiding the public gaze till very recently, whether it is for presenting its balance sheet, cost of funds, interest mechanism, handling of bad debts, and similar crucial aspects of their operations. This has been 100% true of Indian banks. NPA of Banks published or otherwise is incorrect and profit is padded up profits, and the growth of deposits is not transparently projected by all Banks. Gold loan is projected as priority sector advance for agriculture by taking a piece of paper wherein the borrower states he is an agriculturalist and has 5 cents of land! Cars loans and building loans, which are loans having high collateral security are stated to be amongst the public loans which has grown year after year plummeting the profit yield of Banks.
Whenever a new guideline for transparency come from RBI, the public hopes for more benefits such as increase in deposit rates, reduction in the rate of borrowings, etc. The home loan buyer is the target group, consisting of a good number of senior citizens. NRI deposits are perennial source of deposits for the Banks. They are the most sought after constituency by the Bank personnel. Credit Card group (salaried employees) is another favoured customer constituency the Bank seeks favour from.
The recent changeover by Banks to the Base Rate has also attracted much enthusiasm among prospective borrowers, and even the existing borrowers. The Base rate now being widely published is the successor to the Prime Lending Rate (PLR) which has been in vogue for over a decade now. Before the PLR came into operation, there used to be a linkage with the Bank Rate or RBI rate. SBI Rate was the prime rate, was an independent rate, not comparable with other Banks’ rates.
Even though PLR was in operation during the last decade, some Banks started lending at sub-PLR to wean fat account from competitator banks. There was unhealthy competition amongst the Banks. For large lenders, the sub PLR was adjusted most favourably. RBI set up the Deepak Mohanty Committee, which came up with the Base rate concept. RBI has announced that with effect from 1 July 2010, all Banks will have a base rate. However, Creditors with a lending rate different from base rate would have that rate, if they do not agree to the base rate, and all new creditors will have base rate. The banks have asked RBI to advise them on this possibility.
As the Base rate is based on Cost of funds of each bank, the liquidity levels after the compliance with statutory requirements like CRR and SLR and pre-tax return on assets, the benefits to borrowers will not be uniform, varying from bank to bank. Banks with less cost of funds and higher return on lending may be able to offer a lower base rate.
The Home loan segment has been charged interest either at fixed or floating rate. Fixed rate may attract a change only when there is a review or at the reset time forming the conditions of Contract between the bank and loanee. For floating rate, a change may come when there is a renewal of the facility. Since the Base rate is reworked every three months, there cannot be modification in the interregnum. The Creditors expectation that Base Rate would be advantageous is a misplaced notion. PLR may be a shade lower than the Base rate. The Base rate depends upon the Credit Policy of RBI announced quarterly. It is ambiguous at this point to say which is better. RBI’s intention, whether good or bad, can be concluded after a gestation.
Whenever a new guideline for transparency come from RBI, the public hopes for more benefits such as increase in deposit rates, reduction in the rate of borrowings, etc. The home loan buyer is the target group, consisting of a good number of senior citizens. NRI deposits are perennial source of deposits for the Banks. They are the most sought after constituency by the Bank personnel. Credit Card group (salaried employees) is another favoured customer constituency the Bank seeks favour from.
The recent changeover by Banks to the Base Rate has also attracted much enthusiasm among prospective borrowers, and even the existing borrowers. The Base rate now being widely published is the successor to the Prime Lending Rate (PLR) which has been in vogue for over a decade now. Before the PLR came into operation, there used to be a linkage with the Bank Rate or RBI rate. SBI Rate was the prime rate, was an independent rate, not comparable with other Banks’ rates.
Even though PLR was in operation during the last decade, some Banks started lending at sub-PLR to wean fat account from competitator banks. There was unhealthy competition amongst the Banks. For large lenders, the sub PLR was adjusted most favourably. RBI set up the Deepak Mohanty Committee, which came up with the Base rate concept. RBI has announced that with effect from 1 July 2010, all Banks will have a base rate. However, Creditors with a lending rate different from base rate would have that rate, if they do not agree to the base rate, and all new creditors will have base rate. The banks have asked RBI to advise them on this possibility.
As the Base rate is based on Cost of funds of each bank, the liquidity levels after the compliance with statutory requirements like CRR and SLR and pre-tax return on assets, the benefits to borrowers will not be uniform, varying from bank to bank. Banks with less cost of funds and higher return on lending may be able to offer a lower base rate.
The Home loan segment has been charged interest either at fixed or floating rate. Fixed rate may attract a change only when there is a review or at the reset time forming the conditions of Contract between the bank and loanee. For floating rate, a change may come when there is a renewal of the facility. Since the Base rate is reworked every three months, there cannot be modification in the interregnum. The Creditors expectation that Base Rate would be advantageous is a misplaced notion. PLR may be a shade lower than the Base rate. The Base rate depends upon the Credit Policy of RBI announced quarterly. It is ambiguous at this point to say which is better. RBI’s intention, whether good or bad, can be concluded after a gestation.
Thursday, July 29, 2010
Punarabi Jananam, Punrabi maranam
Punarabi Jananam, Punarapi Maranam
As I look back at he lost years which withered away, I feel very much upset and throttled. What did I achieve? The fleeting time in the formidable age of my life: time spent nonchalantly, wasted and forgotten!
To rise from a great fall, one requires formidable courage, considerable luck and Divine Grace, and above all, destiny. Destiny, changes the course of life, alters outlooks and rewrites perceptions. Time, is a great healer, and helps man to gain experiences from foolishness, fine-tunes his capacity, brings out all his perfections, makes him think ahead of times, and makes him great, as destiny smiles on him. It makes him sober, steady and stable. He endures the present with past livid memories of Time.
What is life? What is its meaning? Tagore, eloquently and beautifully describes the boy at the age of 14, his whining ways, meandering paths, his tantrums, moody behaviour at times, restlessness, oscillating attitudes, best of times, etc. At 20, the boy sheds his Youth and he changes in his behvaiour, attitude, physically and mentally. He often finds fault with the world. At 25, a huge transformation to adulthood. A fascinating change that nature bestows on a human being. The age of adolescence brings all round change in a man; he becomes handsome, radiant. His attitude to life changes. His behvaiour changes instantaneously. His likes and dislikes vary. His voice quivers. He feels lonely. He seeks championship. This attracts him to the opposite sex. Life at 30 brings maturity and responsibility. He comes to face life. It is at this age, his championship ends in marriage. Blissful days follow. Championship strengthens. As he reaches 40, he becomes philosophically inclined, though buries himself with the bustle of life’s chores. As one is near to fifty, he becomes mature. He transforms himself. He leans more on philosophy to understand the ‘elixir of life’, and examines his life with contentment and disgust of his life, which oscillated like the pendulum. As he becomes sixty, he is in the midway- the fast life and future. Darkness seems to engulf him, people fade, near and dear ones slowly disappear. He sits forlorn, sad and in solitude, reflecting on the good, bad and ugly of his life. Reflection after reflection. Memory pulls its strings as he sits in melancholy, forlorn, and with musings of the good old days of the Past often coming in flashes.
William Shakespeare, the bard of Stafford Avon, has beautifully versed the seven stages at different ages of Man. Ben Johnson, his contemporary has poetically emphasized for a short life for enchantment rather than long for withered ending.
Lord Krishna in the Bhagavat Gita sings a symphony to drive home the two pillars of extremes, as life cycles are meant to be endured, cherished and enjoyed, which might oscillate from one corner to another. From womb to grave, man thinks that he is born to enjoy life in its pinnacle form. But before and after, he knows not what he was and what he will be. Adi Sankara’s “poonarabi jananam, punarpi maranam”, sums up all. Life is a mist, with birth and death cycles. Birth, Death, Rebirth…..
Monday, July 26, 2010
Petroleum companies are fleecing people?
Indian petroleum companies are shedding crocodile tears for no apparent reason.
Myth: 1] Indian oil Corporation has gone on record and stated that it incurred a loss of Rs 3,388.89 Cr in the first quarter of current fiscal as against a nett profit of Rs 3,682.83 Cr recorded in the first quarter of last year.
2] The Company made a net profit of Rs 10,000 Cr in 2009-10 and the Dy Chairman, Plg Commission states that this is inclusive of the 50% subsidies provided by the Government to the tune of Rs 20,000 Cr during 2009-10.
3] It is a fact that Government revised the prices of petroleum products by Rs 3/- in the last quarter of 2009-10, the benefit of which would have cascaded to 2010-11, and in the second instance, another adhoc increase, just a month ago, raising the price of petrol by Rs 3.50/litre, diesel by Rs 2.00, LPG Cylinder by Rs 35/-, Rs 3/per litre for kerosene. Kerosene is mostly used by the Below the Poverty Line families.
4] Oil companies contend that they incur $ 3 barrel on processing of every barrel of Crude oil. This year (April-June, 2010), they state that their gross refining margin (GRM) was Rs 7.36 per barrel.
5] The oil Companies admit that ‘refining margins were low due to inventory losses on oil as oil prices had come down compared to the closing stock(April 1).
While oil companies put forward such arguments to prove the acute under pricing in the import of crude, and the under recovery caused by the sale of oil, which is only 50% subsidized by the Government, they argue for increased prices from the consumer. Simple Law of demand and Supply pricing.
Reality: 1] One should go into the mathematical calculations of the purchase of Crude oil, quantity of Crude oil purchased, what is the demand: supply position of Petroleum products in India, how is the pricing done in the existing circumstances, and when there has been no appreciable increase in the petroleum prices in the international market, why are the Petroleum Companies in India are on a song, and hungry for more revenue? Now, how could the profit of Rs 3,682.82 Cr during the last first fiscal, turn into a loss, assuming that Government did not part with Rs 1,694.45 Cr as 50% of its share in the loss. This is only a notional adjustment in the balance sheet. Loss is a loss, whether it is subsidized by people or Government.
Dr B K Chaturvedi Committee went into the issue of usage of Kerosene oil in the Country. His findings have been documented. The study revealed that the use of kerosene has come down from 40% to 51% used earlier, only 1% is used for cooking purposes; out of 39% PDS Kerosene, 18% finds a way to the black market to adulterate diesel, 24% of rural consumption used for lighting is in villages where there is 100% electrification. Only 40% of the kerosene finds use. The rest is not used. Government’s subsidy for kerosene is Rs 17.92/a litre. What happens to the kerosene which is said to be distributed? The distribution is only in paper. Why can’t the Planning Commission do a detailed study to unearth the truth?
2] The truth is Petroleum companies’ profits are notched. They are virtual profits. How can any body say that factoring government subsidies, Companies make profit? These are monopoly Companies who are answerable to nobody.
3] During the year, the Government revised the petroleum prices at least on two occasions. Yet, why should there be a steep loss. Is it operational efficiency? Seepage? Misue?
4) How come such a vast change in refining? Has the government gone into the pricing of refining? In the first instance, they use the term cost of processing of Crude oil, and in the second case, they say gross refining margin. What does these two mean? Let the Economists of North bloc ponder over this aspect
5) The oil inventory showed it held excess stock. This stock had a price that was higher than the prevailing price as on 1 April 2010. The Oil Companies also admit that negatives on account of exchange losses due to Rupee depreciation and higher provisioning of bonds(the Government bonds that was given in lieu of 50% of the under recoveries). If they contend that these anomalies must be factored into the price of petroleum products, it is not fair and decent price determination.
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Due to dollar depreciation, the invoice value of crude import should have come down, as the prices are paid in dollars. There is a comfortable cushion in this. In India, you are selling in Rupees. You don’t link the price to the Dollar. Hence twin advantage. Please use the same matrix for comparison.
The Company argues that the nett revenue lost by IOC was Rs 11,013.58 Cr. It was compensated Rs 3,671.26 Cr from upstream firms like Oil & Gas Corporation, GAIL and Oil India. Consequent to non revision of retail selling price in line with the international prices, net under realization was Rs 7,341.59 Cr. The usual practice was that the Government reimbursed Rs 20,000 Cr for under recoveries of IOC, BP, and HP during 2010-11.
The oil Companies agree that the net sales during 2010-11 went up by 23% to Rs 71,257 Cr. IOC alone had 17.254 million tones of petroleum products against 16.703 million tones duing the corresponding period (April-June 2009) while it exported 1.058 million Tonnes. The Refineries refined 13.278 million tones of Crude oil against 12.466 million tones a year ago during March-June of 2010 and 2009. The refineries are said to have clamped Rs 6.50 per litre as charges.
The oil Companies do not do any homework and incapable of working an alternate strategy. One aspect that Planning Commission should look into the capacity of motor cars being sold in India during a year, and whether the present infrastructure has capacity to withstand them. Secondly, if the demand for petroleum products could be brought down through planning, it will have a cascading effect on the supply and pricing. Merely to boost the manufacturing output, if uneven growth in manufacture of motor cars is made, the infrastructure would break down. It is good to draw a road map to build 7,000 km of highway Roads. But the wear and tear, its optimum capacity and longevity are factors that needed to be factored in. It can’t be utopian. Banks find it easy to provide vehicle loan as the motorcar is a tangible asset. But whatever incremental growth that is achieved should be practical and long withstanding otherwise, it will become Robinson Crusoe paradox situation.
Myth: 1] Indian oil Corporation has gone on record and stated that it incurred a loss of Rs 3,388.89 Cr in the first quarter of current fiscal as against a nett profit of Rs 3,682.83 Cr recorded in the first quarter of last year.
2] The Company made a net profit of Rs 10,000 Cr in 2009-10 and the Dy Chairman, Plg Commission states that this is inclusive of the 50% subsidies provided by the Government to the tune of Rs 20,000 Cr during 2009-10.
3] It is a fact that Government revised the prices of petroleum products by Rs 3/- in the last quarter of 2009-10, the benefit of which would have cascaded to 2010-11, and in the second instance, another adhoc increase, just a month ago, raising the price of petrol by Rs 3.50/litre, diesel by Rs 2.00, LPG Cylinder by Rs 35/-, Rs 3/per litre for kerosene. Kerosene is mostly used by the Below the Poverty Line families.
4] Oil companies contend that they incur $ 3 barrel on processing of every barrel of Crude oil. This year (April-June, 2010), they state that their gross refining margin (GRM) was Rs 7.36 per barrel.
5] The oil Companies admit that ‘refining margins were low due to inventory losses on oil as oil prices had come down compared to the closing stock(April 1).
While oil companies put forward such arguments to prove the acute under pricing in the import of crude, and the under recovery caused by the sale of oil, which is only 50% subsidized by the Government, they argue for increased prices from the consumer. Simple Law of demand and Supply pricing.
Reality: 1] One should go into the mathematical calculations of the purchase of Crude oil, quantity of Crude oil purchased, what is the demand: supply position of Petroleum products in India, how is the pricing done in the existing circumstances, and when there has been no appreciable increase in the petroleum prices in the international market, why are the Petroleum Companies in India are on a song, and hungry for more revenue? Now, how could the profit of Rs 3,682.82 Cr during the last first fiscal, turn into a loss, assuming that Government did not part with Rs 1,694.45 Cr as 50% of its share in the loss. This is only a notional adjustment in the balance sheet. Loss is a loss, whether it is subsidized by people or Government.
Dr B K Chaturvedi Committee went into the issue of usage of Kerosene oil in the Country. His findings have been documented. The study revealed that the use of kerosene has come down from 40% to 51% used earlier, only 1% is used for cooking purposes; out of 39% PDS Kerosene, 18% finds a way to the black market to adulterate diesel, 24% of rural consumption used for lighting is in villages where there is 100% electrification. Only 40% of the kerosene finds use. The rest is not used. Government’s subsidy for kerosene is Rs 17.92/a litre. What happens to the kerosene which is said to be distributed? The distribution is only in paper. Why can’t the Planning Commission do a detailed study to unearth the truth?
2] The truth is Petroleum companies’ profits are notched. They are virtual profits. How can any body say that factoring government subsidies, Companies make profit? These are monopoly Companies who are answerable to nobody.
3] During the year, the Government revised the petroleum prices at least on two occasions. Yet, why should there be a steep loss. Is it operational efficiency? Seepage? Misue?
4) How come such a vast change in refining? Has the government gone into the pricing of refining? In the first instance, they use the term cost of processing of Crude oil, and in the second case, they say gross refining margin. What does these two mean? Let the Economists of North bloc ponder over this aspect
5) The oil inventory showed it held excess stock. This stock had a price that was higher than the prevailing price as on 1 April 2010. The Oil Companies also admit that negatives on account of exchange losses due to Rupee depreciation and higher provisioning of bonds(the Government bonds that was given in lieu of 50% of the under recoveries). If they contend that these anomalies must be factored into the price of petroleum products, it is not fair and decent price determination.
.
Due to dollar depreciation, the invoice value of crude import should have come down, as the prices are paid in dollars. There is a comfortable cushion in this. In India, you are selling in Rupees. You don’t link the price to the Dollar. Hence twin advantage. Please use the same matrix for comparison.
The Company argues that the nett revenue lost by IOC was Rs 11,013.58 Cr. It was compensated Rs 3,671.26 Cr from upstream firms like Oil & Gas Corporation, GAIL and Oil India. Consequent to non revision of retail selling price in line with the international prices, net under realization was Rs 7,341.59 Cr. The usual practice was that the Government reimbursed Rs 20,000 Cr for under recoveries of IOC, BP, and HP during 2010-11.
The oil Companies agree that the net sales during 2010-11 went up by 23% to Rs 71,257 Cr. IOC alone had 17.254 million tones of petroleum products against 16.703 million tones duing the corresponding period (April-June 2009) while it exported 1.058 million Tonnes. The Refineries refined 13.278 million tones of Crude oil against 12.466 million tones a year ago during March-June of 2010 and 2009. The refineries are said to have clamped Rs 6.50 per litre as charges.
The oil Companies do not do any homework and incapable of working an alternate strategy. One aspect that Planning Commission should look into the capacity of motor cars being sold in India during a year, and whether the present infrastructure has capacity to withstand them. Secondly, if the demand for petroleum products could be brought down through planning, it will have a cascading effect on the supply and pricing. Merely to boost the manufacturing output, if uneven growth in manufacture of motor cars is made, the infrastructure would break down. It is good to draw a road map to build 7,000 km of highway Roads. But the wear and tear, its optimum capacity and longevity are factors that needed to be factored in. It can’t be utopian. Banks find it easy to provide vehicle loan as the motorcar is a tangible asset. But whatever incremental growth that is achieved should be practical and long withstanding otherwise, it will become Robinson Crusoe paradox situation.
Tax the Politicians
An Open Letter to the Finance Minister of India
We have a pragmatic Finance minister at the helm. He is a seasoned Politician. A friend of the Left, a Parliamentarian of vast experience, and very close the source of Congress power 10, Janpath. 5 and 7 Race Course Road are not relevant when Congress leads the coalition and is governing the Country. India, perhaps, due to practicising grass root economists, and Cambridge, Oxford and Harvard studied Economists, India never have to bear the holocaust of the Economic meltdown or world economic crisis. We have laid a road to progress. We know the path to prosperity. We will be guided by our goals and pragmatic vision which will take India to the pinnacle of Glory. Already BRIC is supposed to be akin the roaring Asian Tigers of the 90s. The world will be at out feet, sooner or later.
Our Finance Minister is hungry to tax the people. Already, he has made it very clear that people will bear higher charges for the petroleum products. Still, the under recovery the GoI will bear is estimated at Rs 20,719 Cr. National Rural Employment Guarantee programme (NREGA), Sixth Pay Commission, loan waiver for agricultural sector (Rs 70,000 Cr), subsidy on fertilizers, the FM in his election year budget procrastinated that the inflation will cease, and the fiscal deficit would be brought down considerably in a two year frame. When India recovers fully, our FM promised that we will breach 9% growth. In the post-Lehman period (2007-8), India was able to garner a shade below 6% for a couple of months and could settle down to 6.7%. In spite of the shadow growth, India attracted an investment of 25% of the GDP.
With having stabilized the enormous liquidity available in the System, our Finance minister is looking for greener pastures for begetting more taxation.
Already he has reached the super saturation level as far as TDS is concerned. The only sector from where government regularly gets tax is from the Tax deducted at Source head. Another head is the Services Tax when introduced by India’s present PM when he was Finance Minister yielding Rs 500 Cr has ballooned to Rs 60,000 Cr. According to United Nations Conference on Trade and Development (UNCTAD), India attracted FDI worth $ 34.6 billion, while the outward FDI was $ 14.9 billion in 2009-10, and by 2012 expected to be third highest economy for FDI in the world in 2012. The Indian exports are in strong weather with $ 185 billion, expected to surge $ 200 billion. The Goods and Services Tax is expected to increase the GDP upward by 2- 2.5% with 10% increase in exports. India will emerge as a $ 2 trillion economy.
The Country is happy to know that the Finance Minister is going to give a fixed salary of Rs 80,000 every month from the present Rs 16,000/- to every Parliament member, and correspondingly, the state assemblies will also increase the emoluments of Members of the Legislative Assemblies. These members are doing Public service and devoting their precious time for public good. With Parliamentarians in good mood, the nation can expect lot of good from these people who will steer the Country to great heights. Since, every Service is taxed in India, the finance Minister could reap a harvest, if he were to impose Service Tax on the Politician from the highest to the lowest, so that this constituency which has a good numerical number would provide many Crores to the exchequer. The Ministers at the Centre and State, panchayat members, municipal councillours,Corporation members, District Panchayat members, Rural Panchayat members, should be made to pay Service Tax. Why exempt “public service” from taxation? No taxation without representation, cried the Boston Tea party members. Representation with taxation should be our motto. Is it not, Finance Minister?
We have a pragmatic Finance minister at the helm. He is a seasoned Politician. A friend of the Left, a Parliamentarian of vast experience, and very close the source of Congress power 10, Janpath. 5 and 7 Race Course Road are not relevant when Congress leads the coalition and is governing the Country. India, perhaps, due to practicising grass root economists, and Cambridge, Oxford and Harvard studied Economists, India never have to bear the holocaust of the Economic meltdown or world economic crisis. We have laid a road to progress. We know the path to prosperity. We will be guided by our goals and pragmatic vision which will take India to the pinnacle of Glory. Already BRIC is supposed to be akin the roaring Asian Tigers of the 90s. The world will be at out feet, sooner or later.
Our Finance Minister is hungry to tax the people. Already, he has made it very clear that people will bear higher charges for the petroleum products. Still, the under recovery the GoI will bear is estimated at Rs 20,719 Cr. National Rural Employment Guarantee programme (NREGA), Sixth Pay Commission, loan waiver for agricultural sector (Rs 70,000 Cr), subsidy on fertilizers, the FM in his election year budget procrastinated that the inflation will cease, and the fiscal deficit would be brought down considerably in a two year frame. When India recovers fully, our FM promised that we will breach 9% growth. In the post-Lehman period (2007-8), India was able to garner a shade below 6% for a couple of months and could settle down to 6.7%. In spite of the shadow growth, India attracted an investment of 25% of the GDP.
With having stabilized the enormous liquidity available in the System, our Finance minister is looking for greener pastures for begetting more taxation.
Already he has reached the super saturation level as far as TDS is concerned. The only sector from where government regularly gets tax is from the Tax deducted at Source head. Another head is the Services Tax when introduced by India’s present PM when he was Finance Minister yielding Rs 500 Cr has ballooned to Rs 60,000 Cr. According to United Nations Conference on Trade and Development (UNCTAD), India attracted FDI worth $ 34.6 billion, while the outward FDI was $ 14.9 billion in 2009-10, and by 2012 expected to be third highest economy for FDI in the world in 2012. The Indian exports are in strong weather with $ 185 billion, expected to surge $ 200 billion. The Goods and Services Tax is expected to increase the GDP upward by 2- 2.5% with 10% increase in exports. India will emerge as a $ 2 trillion economy.
The Country is happy to know that the Finance Minister is going to give a fixed salary of Rs 80,000 every month from the present Rs 16,000/- to every Parliament member, and correspondingly, the state assemblies will also increase the emoluments of Members of the Legislative Assemblies. These members are doing Public service and devoting their precious time for public good. With Parliamentarians in good mood, the nation can expect lot of good from these people who will steer the Country to great heights. Since, every Service is taxed in India, the finance Minister could reap a harvest, if he were to impose Service Tax on the Politician from the highest to the lowest, so that this constituency which has a good numerical number would provide many Crores to the exchequer. The Ministers at the Centre and State, panchayat members, municipal councillours,Corporation members, District Panchayat members, Rural Panchayat members, should be made to pay Service Tax. Why exempt “public service” from taxation? No taxation without representation, cried the Boston Tea party members. Representation with taxation should be our motto. Is it not, Finance Minister?
Thursday, July 15, 2010
Do we want to destroy our fragile eco System?
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If you are very choosy about God’s Own Country, you will describe a number of positive things that is unique to the state. You will also list out Kerala’s negativity, which will consume a larger paper than all the good that you wrote. Kerala is nevertheless a tourist’s paradise, for every year, a large trek of people from countries across the globe which are not noticeable in the atlas, land, come and seem to enjoy.
Kerala’s past, in the opening years of history has been formidable. It was known to the ancient sea faring tribes, voyagers, traders, merchants. There have been regular plying of vessels carrying riches from the Orient, and they take back invaluable pepper, spices, and other remarkable crops, which had great value in the international markets. Kerala people knew the stories of Arabian Nights much before other parts of India and the world were aware of. But these traders came strictly to trade, make a barter trade, bring their goods, take goods from Kerala. When Jesus Christ introduced to the world, Christianity, his direct disciple St Thomas, came to Kerala. There is vivid history of Christianity having spread to the four corners of Kerala. Christianity came here, much before it went to Europe. Islam also spread to Kerala much before the world was aware of this religion. The Jews came here in herds, when they had to run away for their lives. In the 15th century, we have seen the European powers one on the tail of others, coming to trade, colonizing the country and looting its wealth for their well being. English, French, Dutch, Portuguese, all belonged to this School.
It has been in the blood of Kerala people to voyage. Set sail by sea. This adventurous trait of the ordinary Kerala man, and the appetite to do hard work, and the vision to succeed, made him leave Indian shores in search of greener pastures. As a single person, the ordinary Keralite called mallu, in North India, always performed admirably, but as a team, there was always poor performance. This limitation of behaviour had strayed to every part of life of a Keralite. When six economists are gathered, there are seven opinions. But when six Keralites discuss, they will give ten opinions.
Opening up of educational institutions by Christian missionaries, had a large impact on the educational field. In the old Ernakulam, there were only two Government Colleges, one Maharajas College and another Law College. All the other colleges were privately run. There is a powerful educational lobby in Kerala, where education is both in private and public forms. Dr T M A Pai would have conceived the privatization of commercial education, but it was Kerala, who developed private education in such a big way. Though there was higher education, and many educational pursuits, there was no matching economic or industrial growth in Kerala, which could absorb the talents. Central investment was/is the lowest in Kerala. The private sector is also reluctant to set up their units in a big way. All these have made Kerala absorb consumerism, and not manufacturing activity. Trading is a way of life. There are more malls in Kochi than in a metro like Bangalore or Hyderabad. People’s craze for gold is higher here than in any other place. One Economist in a lecture pointed out that Kerala required more policing because of its craze for Golden jewellery which accounts for sizable investment in each household. His comment should be taken seriously. Second is fashion consciousness. I do not think, there is any other place in the world, where fashion is part of culture. Tradition is breadth. Festivities are part of every Keralite. Hospitality is a trade mark, special to Kerala. The religious cosmopolitan culture has held the state proud. But today, the name of Keralites crop up everywhere where a terror act has disturbed the public peace.
Militancy of labour has been benchmarked with Kerala, rightly or wrongly. This has been the chief reason, why industries fear to thread to Kerala territory even though they see lot of potential. In Kerala, they say there is rampant unemployment. But if I look around for a car driver, carpenter, plumber, electrician, I seldom get one. In Kerala, there is more Voluntary Unemployment than in any other state because the Gulf remittance from one member in the family takes care of the other members of the family making their both ends meet.
Vallarpadam Container terminal, growth of IT industry, growth in Kochi Export Processing zone, bio-technology and industrial hubs concept promoted by the Kerala Government has started yielding results. Cochin port, Nedumassery Airport, are all on their feet booking profits through improving their business. This is a good sign.
Then there was a Jairam Ramesh effect on Kerala based export merchandise. From 2007-9, when he was the Minsiter of State for Commerce, he highly patronized the Kerala sectors, tea, marine products, cashew, coconut, coir, and rubber. The price of 1 kg of rubber is Rs 175/-. This has been made possible by Jairam Ramesh effect. Every Saturday/Sunday, he used to tour Kerala, and actively participate in raising the standard and productivity of these industries. A tiny industry like Coir exports rose from Rs 475 Cr to Rs 800 Cr. Spices exports, got many schemes, Spices Park, branding of spices produce, participation in international exhibitions, developing use of vanilla, etc were outcome of his support.
Now let me come to Athirapally Project. The Kerala Government which never bothered to use Mr Jairam Ramesh, even though he was more than friendly to the Kerala crops, now accuse him of playing spoilt to Kerala’s development. When he was Minister of Commerce, I had taken him to Kodungallur, and showed him the historical monuments there, and explained to him. Based on his note, Central Government gave a bonanza of restoration of Kodungallur as a historical monument and sanctioned Crores of Rupees.
Athirapalli is one of the most bewitching waterfalls in Kerala having a high percentage of aquatic and eco diversity in the State. The outlay for the entire project is estimated at Rs 675 Cr. The expected power production is arrived as 163 MW. The dam is supposed to come up in the east of Chalakudi, along Chalakudi Annamali inter-state highway (Vazhakal forest division). The dam is expected to have a height of 23m and will have a width of 311 m. The dam is projected as a peak load station where Water will be diverted via penstock (pipe) to turbines downstream. A dam toe powerhouse downstream of the dam will be built to maintain Athirapally-Vazhachal Waterfalls. On the basis of the expert committee of River valley projects, power should be generated only between 7-11 p.m. during Feb1-May31 which are the driest months in the Kerala calendar. It has also ordained that 7.65 cubic metre/second (cumec) of water over the Atirapalli falls must be maintained always.
Environmentalists and public spirited hydrologists argue that the river experiences the maximum flow during July (102 cumecs) During the dry months of Feb,March and April, its flow is reduced to 14-15 cumec, and if the water level be reduced to 7.65 cumec during the dry months, there will be no waterfall at all. It is also argued that for power generation, 7 Km long penstock will absorb 86% of water from the dam, which indirectly will leave people living upto 7 kms devoid of drinking water, as no alternate sources exist. The project being a peak loading station, Chalakudi River will experience heavy fluctuation in its flow during the 4 hours when power is generated during which time the release of water can be as high as 130 cumec. Overflowing problems and affliction to downstream Chalakudi River diversion scheme which irrigates and provides drinking water to way side villages and panchayats in Trichur and Ernakulam district will cease. The riparian forests of the Chalakudy River have revealed the existence of a thick riparian vegetation of more than 10 metres width for a distance of 10.5 km downstream from Peringalkuth, covering an area of 58.5 hectares. Out of this, 26.4 hectares lie within the Vazachal area, including three large islands densely covered by riparian forests.
The riparian forests of the area have been found to be characterised by the presence of typical riparian species of plants, in addition to evergreen and semi-evergreen species. Out of the 319 species of flowering plants identified from the study area, 24 are endemic species of the Western Ghats and 10 are rare and endangered.
Moreover, the Chalakudy River is known for its diversity, as it contains 85 species of fresh water fishes out of the 152 species known from Kerala. Among these, 35 are endemic species of the Western Ghats and nine are considered to be endangered. Highly endangered Cochin Forest Cane turtle and the river bed is the nestling site of Malabar pied hombele birds. The area is supposed to be the best elephant conservation spot. . Any disruption to this ecofragile ecosystem will spell disaster.
The Power Engineers also feel that reduced water flow would not even help production of 26.7 MW as against 163 MW envisaged (234 million units of energy). In such a case, the cost: benefit analysis vis-à-vis the investment costs, running costs, maintaining costs, and recovery of costs would be unviable. The notional cost for the destruction of ecology and ecosystem would be unimaginable. Kerala’s density of forests has come down because the estuaries have been destroyed. Sea and Coastal erosion is taking a heavy toll due to unscientific dredging. Our fish sanctuaries have vanished, and bird habitats have disappeared. As per the state records, there is a transmission loss of 3020 million units. Why don’t we try to curb transmission losses by at least 10 to 15%, which will allow a nett energy of 303 million? The other way, is increase productivity of the existing hydro electric projects by up-grading the machines. Hydro electric projects are no answer for restoring balance to the power needs of the state. Mr Nehru called Bakranangal as the temple of India. Today, there are many alternate sources to produce electricity. And the cost of producing power is also cheaper.
In view of so many negative features that deters go ahead for the Athirapally hydro electric power station, can we blamed Hon’ble Shri Jairam Ramesh alone. We have to give solid arguments countering each of the points. Our eco systems are already overburdened. Any callous attitude or action will cause catastrophe tomorrow? We do not have the right to destroy the fragile eco-system which belongs to tomorrow’s generation.
Kerala’s past, in the opening years of history has been formidable. It was known to the ancient sea faring tribes, voyagers, traders, merchants. There have been regular plying of vessels carrying riches from the Orient, and they take back invaluable pepper, spices, and other remarkable crops, which had great value in the international markets. Kerala people knew the stories of Arabian Nights much before other parts of India and the world were aware of. But these traders came strictly to trade, make a barter trade, bring their goods, take goods from Kerala. When Jesus Christ introduced to the world, Christianity, his direct disciple St Thomas, came to Kerala. There is vivid history of Christianity having spread to the four corners of Kerala. Christianity came here, much before it went to Europe. Islam also spread to Kerala much before the world was aware of this religion. The Jews came here in herds, when they had to run away for their lives. In the 15th century, we have seen the European powers one on the tail of others, coming to trade, colonizing the country and looting its wealth for their well being. English, French, Dutch, Portuguese, all belonged to this School.
It has been in the blood of Kerala people to voyage. Set sail by sea. This adventurous trait of the ordinary Kerala man, and the appetite to do hard work, and the vision to succeed, made him leave Indian shores in search of greener pastures. As a single person, the ordinary Keralite called mallu, in North India, always performed admirably, but as a team, there was always poor performance. This limitation of behaviour had strayed to every part of life of a Keralite. When six economists are gathered, there are seven opinions. But when six Keralites discuss, they will give ten opinions.
Opening up of educational institutions by Christian missionaries, had a large impact on the educational field. In the old Ernakulam, there were only two Government Colleges, one Maharajas College and another Law College. All the other colleges were privately run. There is a powerful educational lobby in Kerala, where education is both in private and public forms. Dr T M A Pai would have conceived the privatization of commercial education, but it was Kerala, who developed private education in such a big way. Though there was higher education, and many educational pursuits, there was no matching economic or industrial growth in Kerala, which could absorb the talents. Central investment was/is the lowest in Kerala. The private sector is also reluctant to set up their units in a big way. All these have made Kerala absorb consumerism, and not manufacturing activity. Trading is a way of life. There are more malls in Kochi than in a metro like Bangalore or Hyderabad. People’s craze for gold is higher here than in any other place. One Economist in a lecture pointed out that Kerala required more policing because of its craze for Golden jewellery which accounts for sizable investment in each household. His comment should be taken seriously. Second is fashion consciousness. I do not think, there is any other place in the world, where fashion is part of culture. Tradition is breadth. Festivities are part of every Keralite. Hospitality is a trade mark, special to Kerala. The religious cosmopolitan culture has held the state proud. But today, the name of Keralites crop up everywhere where a terror act has disturbed the public peace.
Militancy of labour has been benchmarked with Kerala, rightly or wrongly. This has been the chief reason, why industries fear to thread to Kerala territory even though they see lot of potential. In Kerala, they say there is rampant unemployment. But if I look around for a car driver, carpenter, plumber, electrician, I seldom get one. In Kerala, there is more Voluntary Unemployment than in any other state because the Gulf remittance from one member in the family takes care of the other members of the family making their both ends meet.
Vallarpadam Container terminal, growth of IT industry, growth in Kochi Export Processing zone, bio-technology and industrial hubs concept promoted by the Kerala Government has started yielding results. Cochin port, Nedumassery Airport, are all on their feet booking profits through improving their business. This is a good sign.
Then there was a Jairam Ramesh effect on Kerala based export merchandise. From 2007-9, when he was the Minsiter of State for Commerce, he highly patronized the Kerala sectors, tea, marine products, cashew, coconut, coir, and rubber. The price of 1 kg of rubber is Rs 175/-. This has been made possible by Jairam Ramesh effect. Every Saturday/Sunday, he used to tour Kerala, and actively participate in raising the standard and productivity of these industries. A tiny industry like Coir exports rose from Rs 475 Cr to Rs 800 Cr. Spices exports, got many schemes, Spices Park, branding of spices produce, participation in international exhibitions, developing use of vanilla, etc were outcome of his support.
Now let me come to Athirapally Project. The Kerala Government which never bothered to use Mr Jairam Ramesh, even though he was more than friendly to the Kerala crops, now accuse him of playing spoilt to Kerala’s development. When he was Minister of Commerce, I had taken him to Kodungallur, and showed him the historical monuments there, and explained to him. Based on his note, Central Government gave a bonanza of restoration of Kodungallur as a historical monument and sanctioned Crores of Rupees.
Athirapalli is one of the most bewitching waterfalls in Kerala having a high percentage of aquatic and eco diversity in the State. The outlay for the entire project is estimated at Rs 675 Cr. The expected power production is arrived as 163 MW. The dam is supposed to come up in the east of Chalakudi, along Chalakudi Annamali inter-state highway (Vazhakal forest division). The dam is expected to have a height of 23m and will have a width of 311 m. The dam is projected as a peak load station where Water will be diverted via penstock (pipe) to turbines downstream. A dam toe powerhouse downstream of the dam will be built to maintain Athirapally-Vazhachal Waterfalls. On the basis of the expert committee of River valley projects, power should be generated only between 7-11 p.m. during Feb1-May31 which are the driest months in the Kerala calendar. It has also ordained that 7.65 cubic metre/second (cumec) of water over the Atirapalli falls must be maintained always.
Environmentalists and public spirited hydrologists argue that the river experiences the maximum flow during July (102 cumecs) During the dry months of Feb,March and April, its flow is reduced to 14-15 cumec, and if the water level be reduced to 7.65 cumec during the dry months, there will be no waterfall at all. It is also argued that for power generation, 7 Km long penstock will absorb 86% of water from the dam, which indirectly will leave people living upto 7 kms devoid of drinking water, as no alternate sources exist. The project being a peak loading station, Chalakudi River will experience heavy fluctuation in its flow during the 4 hours when power is generated during which time the release of water can be as high as 130 cumec. Overflowing problems and affliction to downstream Chalakudi River diversion scheme which irrigates and provides drinking water to way side villages and panchayats in Trichur and Ernakulam district will cease. The riparian forests of the Chalakudy River have revealed the existence of a thick riparian vegetation of more than 10 metres width for a distance of 10.5 km downstream from Peringalkuth, covering an area of 58.5 hectares. Out of this, 26.4 hectares lie within the Vazachal area, including three large islands densely covered by riparian forests.
The riparian forests of the area have been found to be characterised by the presence of typical riparian species of plants, in addition to evergreen and semi-evergreen species. Out of the 319 species of flowering plants identified from the study area, 24 are endemic species of the Western Ghats and 10 are rare and endangered.
Moreover, the Chalakudy River is known for its diversity, as it contains 85 species of fresh water fishes out of the 152 species known from Kerala. Among these, 35 are endemic species of the Western Ghats and nine are considered to be endangered. Highly endangered Cochin Forest Cane turtle and the river bed is the nestling site of Malabar pied hombele birds. The area is supposed to be the best elephant conservation spot. . Any disruption to this ecofragile ecosystem will spell disaster.
The Power Engineers also feel that reduced water flow would not even help production of 26.7 MW as against 163 MW envisaged (234 million units of energy). In such a case, the cost: benefit analysis vis-à-vis the investment costs, running costs, maintaining costs, and recovery of costs would be unviable. The notional cost for the destruction of ecology and ecosystem would be unimaginable. Kerala’s density of forests has come down because the estuaries have been destroyed. Sea and Coastal erosion is taking a heavy toll due to unscientific dredging. Our fish sanctuaries have vanished, and bird habitats have disappeared. As per the state records, there is a transmission loss of 3020 million units. Why don’t we try to curb transmission losses by at least 10 to 15%, which will allow a nett energy of 303 million? The other way, is increase productivity of the existing hydro electric projects by up-grading the machines. Hydro electric projects are no answer for restoring balance to the power needs of the state. Mr Nehru called Bakranangal as the temple of India. Today, there are many alternate sources to produce electricity. And the cost of producing power is also cheaper.
In view of so many negative features that deters go ahead for the Athirapally hydro electric power station, can we blamed Hon’ble Shri Jairam Ramesh alone. We have to give solid arguments countering each of the points. Our eco systems are already overburdened. Any callous attitude or action will cause catastrophe tomorrow? We do not have the right to destroy the fragile eco-system which belongs to tomorrow’s generation.
Tuesday, July 13, 2010
Finance Minister's Chicken & the Egg Econometrics
On the one hand there is a clamour against price rise. On the other are various restrictions on imports. This way, prices will remain high and we will continue to see more and more tinkering with interest rates. The problem is that high interest rates raise the cost of capital and, therefore, discourage investment. When the rate of growth in investment reduces, growth suffers. Lower rates of growth are clearly unacceptable, so are high prices. But with high tariffs and high/vague protectionism, we will not be able to help neither the slowdown in growth nor increase in domestic prices.
Look at the recent hike on June 25, 2010 in Petroleum prices. The increase was (+) Rs 3.50 for petrol, (+) Rs 2/- for diesel, Rs 3/- more for kerosene, and (+) Rs 35/- per LPG Cylinder. The increase is across the board. According to Government, subsidizing Petrol companies which show book profits on sales price of petrol + Government subsidies which causes 5 digit profits cannot be afforded by the nation. The subsidy burden is transferred to the people, whom the Government feels, have paying capacity so that vulnerable sections who do not have paying capacity can be helped through specialized subsidy schemes. India is after all a benign socialist democracy. Economic pundits and intellectual economists who have been advising the Government have averred that the hike in petroleum products will have an impact less than 1% on headline inflation which is hovering around 10.16% making it rise to 11%. The disparity between the Wholesale Price Index and Consumer price Index which was very high has been narrowed down, and the food inflation has been brought down to 12.92% from 16%. To further counter check inflation, RBI has increased the repo and reverse repo rates which today stand at 5.5% and 4% respectively.
The Finance Minister’s cautious budget had placed fiscal deficit at 5.5% of the GDP. His expenditure was estimated at Rs 11.09 lakh Crore, while tax and non tax revenue were expected to yield the state Rs 6.82 lakh Crore. Fiscal deficit for 2009-10 was 6.9%. Rolling targets for fiscal deficit for 2011-12 and 2012-13 has been expected to come down to 4.8%. Very commendable progressive budget compared to the deficit finance budget of earlier years. Forget, it was the Congress that ruled the country and the Finance minister was from one of its ranks.
Who said that the Public Distribution System is not in order? The 57% of the targeted 652.03 lakh Below Poverty Line people are covered for which an outlay of Rs 64,929 Cr was ear-marked. The Government has fixed Central Issue Prices (CIP) for APL at the purchase price of FCI, so that BPL could be supplied at 50%of FCI’s economic cost. But with all this spending the incidence of poverty should have come down. But it has gone up. Government wants to preserve money for the Food Security Programme to obliterate poverty by providing one square meal a day. Already 100 days compulsory employment programme has emancipated the capacity of many, claims Government. There are many who want to remain ‘voluntarily’ unemployed. These people are in the ‘you can take horse to water but cannot make it drink’. According to the study conducted by Dr B K Chaturvedi Committee, it was found that 39% of PDS was diverted and 18% reached the hands of those who used it for adulterating petrol. The Committee also observed that rural use of kerosene for lighting has come down to 40% to 51%, and hardly 1% is used by BPL families for cooking purposes. A shock assessment was that 24% of rural consumption going to states for lighting where there is 100% electrification. Often kerosene oil reaches the hands of the unintended. The difference between APL and BPL prices provide strong incentives for illegal diversions to the market. The number of BPL families varies according to the State list, Planning Commission figures, NCAER, etc. A new study-the multidimensional poverty index(MPI)- by Oxford Poverty and Human Development-UNDP initiative revels that there are 421 million MPI poor spread across Bihar, Chittisgarh, Jharkhand, MP, Orissa, Rajasthan, Uttar Pradesh, West Bengal(in India) compared to 410 million in the 26 poorest African countries put together. The MPI assesses poverty on the deprevations on a host of key factors. How can BPL inspite of heavy subsidizing multiply? Is Malthusian theory at work?
The prices of vegetables and other food items have been going up steadily. The manufacturing growth has been accelerating. Share market is steadily galloping. However, there is a short term shift is noticed from equity and reality markets to risk free, capital guaranteed deposits in India. This is the reason, that despite the purchasing power among the middle class, white collared, ethnic population, etc, invest in Fixed Deposits though the returns are marginal having eroded due to government’s wild fetched theory of low interest regime. When interest is lower than inflation, it is not a healthy sign, forgot the Economics studied rulers and advisors in the Government.
Surpringly for Government, Spectrum auction brought Rs 70,000 Cr to its coffers. Petroleum hike reduced the subsidy burden on the Government. Base rate will enable the Banks to squeeze the common man, advantage multinationals, so that more paper interest will accrue, and the balance sheet will be green. Even though all the bank top executives shook their head together when an internal committee of RBI had recommended replacement of erstwhile BPLR system with base rate regime. Now Bankers started having second thoughts. If the borrower refused to accept the ‘base rate’, there would be two set of interest bearing loan accounts- one with the old rate, and one with the base rate. The bankers have requested RBI to add a sunset clause to its earlier notification asking banks to benchmark lending rates on the base rate effective from 1 July 2010. It was announced that the RBI will give the Banks an extension of a year to follow the base rate. Should not the notification anticipate legal problems, before the announcement? Government bodies become wise after the event. That is what Harshad Mehta taught the Government. Limping export sector is grouping in the dark, awaiting Domiciles Sword at any time. Half of the Stimulus outlay will be removed says grapevine from Delhi. That would add to available surplus. Finance Minister has already announced disinvestment to the tune of Rs 24,000 Cr. Another shedding of 2.5% in the nationalized Banks, Insurance Companies and navaratnas would easily fetch him Rs 25,000 Cr. With all these monies on his chest, the Finance Minister is sitting on a chest of money. If P Chidambaram can write off Rs 70,000 Cr as farm loan waiver, why can’t his successor do much more? Provide Food Stability to the extent of Rs 1, 00,000 Cr?
Has the Finance Minister heard of Nils Gilman, who authored the ‘Deviant Globalization theory?’ In our economy, there are illegal unrecorded transactions like flow of unaccounted money, black money transactions in financial, real estate, energy, drugs, organs, hawala transactions, which can torpedo meticulous planning in the controlled economy. Swiss Bank accounts? Every body promises to bring the money, but nobody has. We need to vigilantly and vigorously pursue the agenda that we have written. Finance Minister should be slow when undertaking the exercise of taxation which he thinks is the only way to bring sunshine to India’s fragile economy, a philosophy exploded by Dr Montek Singh Aluwahlia at the Devil’s Advocate programme.
Look at the recent hike on June 25, 2010 in Petroleum prices. The increase was (+) Rs 3.50 for petrol, (+) Rs 2/- for diesel, Rs 3/- more for kerosene, and (+) Rs 35/- per LPG Cylinder. The increase is across the board. According to Government, subsidizing Petrol companies which show book profits on sales price of petrol + Government subsidies which causes 5 digit profits cannot be afforded by the nation. The subsidy burden is transferred to the people, whom the Government feels, have paying capacity so that vulnerable sections who do not have paying capacity can be helped through specialized subsidy schemes. India is after all a benign socialist democracy. Economic pundits and intellectual economists who have been advising the Government have averred that the hike in petroleum products will have an impact less than 1% on headline inflation which is hovering around 10.16% making it rise to 11%. The disparity between the Wholesale Price Index and Consumer price Index which was very high has been narrowed down, and the food inflation has been brought down to 12.92% from 16%. To further counter check inflation, RBI has increased the repo and reverse repo rates which today stand at 5.5% and 4% respectively.
The Finance Minister’s cautious budget had placed fiscal deficit at 5.5% of the GDP. His expenditure was estimated at Rs 11.09 lakh Crore, while tax and non tax revenue were expected to yield the state Rs 6.82 lakh Crore. Fiscal deficit for 2009-10 was 6.9%. Rolling targets for fiscal deficit for 2011-12 and 2012-13 has been expected to come down to 4.8%. Very commendable progressive budget compared to the deficit finance budget of earlier years. Forget, it was the Congress that ruled the country and the Finance minister was from one of its ranks.
Who said that the Public Distribution System is not in order? The 57% of the targeted 652.03 lakh Below Poverty Line people are covered for which an outlay of Rs 64,929 Cr was ear-marked. The Government has fixed Central Issue Prices (CIP) for APL at the purchase price of FCI, so that BPL could be supplied at 50%of FCI’s economic cost. But with all this spending the incidence of poverty should have come down. But it has gone up. Government wants to preserve money for the Food Security Programme to obliterate poverty by providing one square meal a day. Already 100 days compulsory employment programme has emancipated the capacity of many, claims Government. There are many who want to remain ‘voluntarily’ unemployed. These people are in the ‘you can take horse to water but cannot make it drink’. According to the study conducted by Dr B K Chaturvedi Committee, it was found that 39% of PDS was diverted and 18% reached the hands of those who used it for adulterating petrol. The Committee also observed that rural use of kerosene for lighting has come down to 40% to 51%, and hardly 1% is used by BPL families for cooking purposes. A shock assessment was that 24% of rural consumption going to states for lighting where there is 100% electrification. Often kerosene oil reaches the hands of the unintended. The difference between APL and BPL prices provide strong incentives for illegal diversions to the market. The number of BPL families varies according to the State list, Planning Commission figures, NCAER, etc. A new study-the multidimensional poverty index(MPI)- by Oxford Poverty and Human Development-UNDP initiative revels that there are 421 million MPI poor spread across Bihar, Chittisgarh, Jharkhand, MP, Orissa, Rajasthan, Uttar Pradesh, West Bengal(in India) compared to 410 million in the 26 poorest African countries put together. The MPI assesses poverty on the deprevations on a host of key factors. How can BPL inspite of heavy subsidizing multiply? Is Malthusian theory at work?
The prices of vegetables and other food items have been going up steadily. The manufacturing growth has been accelerating. Share market is steadily galloping. However, there is a short term shift is noticed from equity and reality markets to risk free, capital guaranteed deposits in India. This is the reason, that despite the purchasing power among the middle class, white collared, ethnic population, etc, invest in Fixed Deposits though the returns are marginal having eroded due to government’s wild fetched theory of low interest regime. When interest is lower than inflation, it is not a healthy sign, forgot the Economics studied rulers and advisors in the Government.
Surpringly for Government, Spectrum auction brought Rs 70,000 Cr to its coffers. Petroleum hike reduced the subsidy burden on the Government. Base rate will enable the Banks to squeeze the common man, advantage multinationals, so that more paper interest will accrue, and the balance sheet will be green. Even though all the bank top executives shook their head together when an internal committee of RBI had recommended replacement of erstwhile BPLR system with base rate regime. Now Bankers started having second thoughts. If the borrower refused to accept the ‘base rate’, there would be two set of interest bearing loan accounts- one with the old rate, and one with the base rate. The bankers have requested RBI to add a sunset clause to its earlier notification asking banks to benchmark lending rates on the base rate effective from 1 July 2010. It was announced that the RBI will give the Banks an extension of a year to follow the base rate. Should not the notification anticipate legal problems, before the announcement? Government bodies become wise after the event. That is what Harshad Mehta taught the Government. Limping export sector is grouping in the dark, awaiting Domiciles Sword at any time. Half of the Stimulus outlay will be removed says grapevine from Delhi. That would add to available surplus. Finance Minister has already announced disinvestment to the tune of Rs 24,000 Cr. Another shedding of 2.5% in the nationalized Banks, Insurance Companies and navaratnas would easily fetch him Rs 25,000 Cr. With all these monies on his chest, the Finance Minister is sitting on a chest of money. If P Chidambaram can write off Rs 70,000 Cr as farm loan waiver, why can’t his successor do much more? Provide Food Stability to the extent of Rs 1, 00,000 Cr?
Has the Finance Minister heard of Nils Gilman, who authored the ‘Deviant Globalization theory?’ In our economy, there are illegal unrecorded transactions like flow of unaccounted money, black money transactions in financial, real estate, energy, drugs, organs, hawala transactions, which can torpedo meticulous planning in the controlled economy. Swiss Bank accounts? Every body promises to bring the money, but nobody has. We need to vigilantly and vigorously pursue the agenda that we have written. Finance Minister should be slow when undertaking the exercise of taxation which he thinks is the only way to bring sunshine to India’s fragile economy, a philosophy exploded by Dr Montek Singh Aluwahlia at the Devil’s Advocate programme.
Kochi Port wants a Patron
We talk about Imports and Exports. We talk about shipping capacities. We also talk about containerization. Seldom is break bulk cargo shipped, as the modern ships are not built to carry break bulk cargo. Mother ships call at various Ports. There are voyages to Europe and United States once in a week. As transshipment Ports were not available, the Indian cargo bound for Europe/America had to go through hub Ports like Sri Lanka and/or Dubai, and then they are dispatched to Europe/USA. What happens in such situations is, the turn round time for cargo diversion is more, making shipping costs high, and the time schedule in respect of receipt of Cargo also about a month. The feeder vessels who make journey to and fro Colombo and/or Dubai, will be costlier compared to the shipping cost, if the merchandise is conveyed through a mother vessel. There is also no break off time at the hub Port.
Cochin Port is one of the best ports, an all-weather Port in India. With the fact that there were regular visitors through sea to Kerala from time in memorial, sea routes have been designed, mapped, and virtually available. Yet, in terms of income from cargo, why is Kochi lagging behind other Ports like Tuticorin, which was set up in 1985 only. People attribute it to the labour strife. But the fact of the matter is, labour strife is prevalent but the more important aspect is political apathy to the development of Cochin Port. The Port authorities are vexed that around 60 lakh tones of Palmoil is imported into India; but its import through Cochin port is banned. Inspite of the territorial ban, palm oil is abundantly available in Kerala. Why to deprieve revenue for the Cochin Port only. On what basis or logic? What is Cochin’s loss is Mangalore, Chennai and Tuticorin Ports gain.
Kerala historically is a neglected state. There have been top political bosses in Kerala who had a hand in running the Government of the day. Shri R K Shanmugham Shetty, the last Diwan of Cochin was India’s first Finance Minister. Another great name was that of Shri V K Krishna Menon, who was left and right hand of Mr Nehru.. Kerala had surplus electricity, which it sold to neighbouring states. The income from sale of electricity was a revenue head in the State budget. Kerala has 44 rivers, and water everywhere. Today, in terms of per capita consumption of water, it is in the 20th place, lower down to Rajasthan. The National Highway stretch is very bad compared to the stretches elsewhere.
Kerala’s more than 1.5 million educated have migrated to West Asia, Europe, America, etc. Around 0.7 million are working in different parts of India. According to Government’s statistics, of 20 million expats from India, 8 million are in West Asia (most of them from Kerala). The remittances from West Asia are higher in volume (no of transactions) while United States NRIs lead in absolute value. It is also a fact that India account for about 20% of remittances to developed countries. A recent phenomenon noticed is that the people abroad do not use the money in share market operations and real estate deals, though valuation are at such amazing levels, but invest in risk free capital guaranteed deposits in banks. That is why, despite the low interest rates offered, the Deposits in Banks are swelling. AP (IT) accounts for 22% of the remittance, Maharashtra has 15%. Kerala constitute the highest 55%. RBI acknowledges that $ 40.296 billion is the inward remittance which in value is higher than the Foreign Direct Investment in India.
New generation ships are not coming to India, least of all to Kerala. Newer ships coming on-line are able to hold 2/3 times as many TEUs as ships as old as a decade. New ships are faster, undertaking more voyages than the older ships. The number of containers sucked up by new ships is manifold compared to the older ones.
There are destination wise Ports. Ports which have imports and exports in tandem. Some are only Ports having export consignments. There are some other Ports which have import priority. There are Internal Container Depots and Container Freight stations. ICDs are beyond 100 Kms of a Port while CFS is set up adjoining the port also to avoid congestion. Now, if the two ways (Import/Export) from a Port is brisk, then the problem of availability of Containers is not a problem. Otherwise, the container gone, or the container that has been off loaded, has to be transferred in an empty state, for which railways charge freight, if by Road transport it is uneconomical. Ages of the containers are also going down. So, there can be a compartitative cost only if the net imported container trade in volume compares well with net export portion.
The problem of Ports is compounded by the interpretation of tertiary policing agency like the Customs, Central Excise, DGFT, etc. Indian government publishes tariffs and import tax rates, but they are not transparent. There is no single official publication that includes all necessary information. Importers must consult separate tariff and excise tax schedules as well as any applicable additional public notifications and notices to determine current tariff and tax rates. Furthermore, different classification nomenclatures for tariffs and excise taxes cause confusion, even though they are aligned at the 4 digit and 6 digit levels. . India continues to maintain a negative import list. The negative list is currently divided into three categories: (1) banned or prohibited items; (2) restricted items which require an import license; and (3) "canalized*" items, importable only by government trading monopolies subject to cabinet approval regarding timing and quantity. India has liberalized many restrictions on the importation of capital goods. The government allows imports of second-hand capital goods by actual users without license, provided the goods have a residual life. The laws governing customs duties are the Customs Act, 1962 and the Customs Tariff Act, 1975. The Customs Act, 1962 is the basic Statute which empowers, under Section 12, duties to be levied on goods imported into or exported from India. The categories of items and the rates of duties which are leviable have been specified in two schedules in the Customs Tariff Act, 1975. The first Schedule to the said Act specifies the various categories of import items in a systematic and well considered manner, in accordance with an international scheme of classification of internationally traded goods – termed ‘harmonized system of commodity classification’. Different rates of duties are prescribed by the legislature on different commodities/group of commodities mentioned in the first Schedule. The duties are levied both on specific and ad-valorem basis, while there are few cases where at times both specific and ad-valorem duties are also collected on imported items. The Government of India applies discretionary customs valuation criteria to import transactions. U.S. exporters have reported that India’s customs valuation methodologies do not reflect actual transaction values and effectively raise tariff rates. Indian Customs requires extensive documentation. Processing delays often occur. In large part the delays are a consequence of India’s complex tariff structure and multiple exemptions, which may vary according to product, user, or specific Indian export promotion programme. The Government of India fixes minimum import prices for certain imported products.
The exporter/importer may have to study a lot of theory to do foreign trade. Our government, even though the export value had quadrupled from $ 44 billion in 2003-4 to US $ 185 billion in 2009-10, fails to give importance neither to the export sector nor improving its logistics and infrastructure.
Cochin Port is one of the best ports, an all-weather Port in India. With the fact that there were regular visitors through sea to Kerala from time in memorial, sea routes have been designed, mapped, and virtually available. Yet, in terms of income from cargo, why is Kochi lagging behind other Ports like Tuticorin, which was set up in 1985 only. People attribute it to the labour strife. But the fact of the matter is, labour strife is prevalent but the more important aspect is political apathy to the development of Cochin Port. The Port authorities are vexed that around 60 lakh tones of Palmoil is imported into India; but its import through Cochin port is banned. Inspite of the territorial ban, palm oil is abundantly available in Kerala. Why to deprieve revenue for the Cochin Port only. On what basis or logic? What is Cochin’s loss is Mangalore, Chennai and Tuticorin Ports gain.
Kerala historically is a neglected state. There have been top political bosses in Kerala who had a hand in running the Government of the day. Shri R K Shanmugham Shetty, the last Diwan of Cochin was India’s first Finance Minister. Another great name was that of Shri V K Krishna Menon, who was left and right hand of Mr Nehru.. Kerala had surplus electricity, which it sold to neighbouring states. The income from sale of electricity was a revenue head in the State budget. Kerala has 44 rivers, and water everywhere. Today, in terms of per capita consumption of water, it is in the 20th place, lower down to Rajasthan. The National Highway stretch is very bad compared to the stretches elsewhere.
Kerala’s more than 1.5 million educated have migrated to West Asia, Europe, America, etc. Around 0.7 million are working in different parts of India. According to Government’s statistics, of 20 million expats from India, 8 million are in West Asia (most of them from Kerala). The remittances from West Asia are higher in volume (no of transactions) while United States NRIs lead in absolute value. It is also a fact that India account for about 20% of remittances to developed countries. A recent phenomenon noticed is that the people abroad do not use the money in share market operations and real estate deals, though valuation are at such amazing levels, but invest in risk free capital guaranteed deposits in banks. That is why, despite the low interest rates offered, the Deposits in Banks are swelling. AP (IT) accounts for 22% of the remittance, Maharashtra has 15%. Kerala constitute the highest 55%. RBI acknowledges that $ 40.296 billion is the inward remittance which in value is higher than the Foreign Direct Investment in India.
New generation ships are not coming to India, least of all to Kerala. Newer ships coming on-line are able to hold 2/3 times as many TEUs as ships as old as a decade. New ships are faster, undertaking more voyages than the older ships. The number of containers sucked up by new ships is manifold compared to the older ones.
There are destination wise Ports. Ports which have imports and exports in tandem. Some are only Ports having export consignments. There are some other Ports which have import priority. There are Internal Container Depots and Container Freight stations. ICDs are beyond 100 Kms of a Port while CFS is set up adjoining the port also to avoid congestion. Now, if the two ways (Import/Export) from a Port is brisk, then the problem of availability of Containers is not a problem. Otherwise, the container gone, or the container that has been off loaded, has to be transferred in an empty state, for which railways charge freight, if by Road transport it is uneconomical. Ages of the containers are also going down. So, there can be a compartitative cost only if the net imported container trade in volume compares well with net export portion.
The problem of Ports is compounded by the interpretation of tertiary policing agency like the Customs, Central Excise, DGFT, etc. Indian government publishes tariffs and import tax rates, but they are not transparent. There is no single official publication that includes all necessary information. Importers must consult separate tariff and excise tax schedules as well as any applicable additional public notifications and notices to determine current tariff and tax rates. Furthermore, different classification nomenclatures for tariffs and excise taxes cause confusion, even though they are aligned at the 4 digit and 6 digit levels. . India continues to maintain a negative import list. The negative list is currently divided into three categories: (1) banned or prohibited items; (2) restricted items which require an import license; and (3) "canalized*" items, importable only by government trading monopolies subject to cabinet approval regarding timing and quantity. India has liberalized many restrictions on the importation of capital goods. The government allows imports of second-hand capital goods by actual users without license, provided the goods have a residual life. The laws governing customs duties are the Customs Act, 1962 and the Customs Tariff Act, 1975. The Customs Act, 1962 is the basic Statute which empowers, under Section 12, duties to be levied on goods imported into or exported from India. The categories of items and the rates of duties which are leviable have been specified in two schedules in the Customs Tariff Act, 1975. The first Schedule to the said Act specifies the various categories of import items in a systematic and well considered manner, in accordance with an international scheme of classification of internationally traded goods – termed ‘harmonized system of commodity classification’. Different rates of duties are prescribed by the legislature on different commodities/group of commodities mentioned in the first Schedule. The duties are levied both on specific and ad-valorem basis, while there are few cases where at times both specific and ad-valorem duties are also collected on imported items. The Government of India applies discretionary customs valuation criteria to import transactions. U.S. exporters have reported that India’s customs valuation methodologies do not reflect actual transaction values and effectively raise tariff rates. Indian Customs requires extensive documentation. Processing delays often occur. In large part the delays are a consequence of India’s complex tariff structure and multiple exemptions, which may vary according to product, user, or specific Indian export promotion programme. The Government of India fixes minimum import prices for certain imported products.
The exporter/importer may have to study a lot of theory to do foreign trade. Our government, even though the export value had quadrupled from $ 44 billion in 2003-4 to US $ 185 billion in 2009-10, fails to give importance neither to the export sector nor improving its logistics and infrastructure.
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