Monday, June 25, 2012

The difference between Akhilesh Yadav and Mamata Banerjee….

She may be a bigger veteran in politics, but Mamata surely has a lot to learn from young Akhilesh Yadav. Both set out to achieve the same goal – procuring resources from the Center for their state. Both knew the central government was vulnerable and both used pressure tactics. But one was savvier than the other. The savvier one has ensured that his state gets the resources it wants; the aggressive and uncouth bully on the other hand will go back empty handed. If this message is repeated a few times, it would do a hell of a lot of good for our politics.

The TOI today reports a “deal” between the SP and the UPA, as part of which, as much as Rs 90,000 crores of resources will be directed towards UP. Now everyone knows that UP needs these resources if it has to progress. So does West Bengal, which after more than three decades of Left rule, has gone totally off the Right path (pun intended!). But unfortunately for WB, their leader has got drowned in a dangerous concoction of a bloated personal ego, intellectual dinosaurism (if ever there was a word like that!) and aggressive bullying and totally ineffective tactics. Smart politics is what Akhilesh is practising. He went to the PM, asked for the center’s resources, promised his support in return and came back with his hands full. No doubt, he must have wielded the baton too….but that would have been decently concealed. Given the general demeanous of the PM, it would not even have been required. A good deal would have been stuck, in which the center got support for reforms in return for the financial support that the state wanted.

Akhilesh Yadav is a shrewd pragmatist. I guess it comes with the age. Youngsters want to “get the things done”. Oldies want to fight on for some arbitrary and archaic “principle”. Youngsters get pride from being seen as doers. Oldies from winning pyrrhic victories on needless issues. This one difference makes youngsters so much more effective in doing business, while the oldies stay entrenched in power politics. Mamata may be in young in age, but this is one characteristic of youngsters that she certainly doesn’t possess.

One doesn’t know if the TOI report is entirely correct. The reason I bring this up is because many reports in media these days are speculative and based on motivated canards. Just look at the conspiracy theories that emerged after the Mantralaya fire in Mumbai. TV news channels fanned theories that the fire was a sabotage. And more than hinted that the state government had intentionally staged it so that vital documents could be destroyed. Documents that could incriminate the Congress and its government in Maharashtra. To be sure, media hid itself behind a thin veil. Media didn’t itself created the conspiracy theories. It just amplified what some opposition leaders and some cant-speak-enough activists and look-everything-is-corrupt Anna crusaders said. The foremost of them all was what I call Scam TV – a news channels that relies entirely on scams (mostly imagined of course) – which went hammer and tongs after the state government. Today this channel has been silenced. The preliminary investigations undertaken by experts reveal that the fire may have been caused by some explosion in the hydrogen batteries of servers. There were problems with where the back-up batteries were lodged and if the space had been better designed, the fire would have been easily contained. All true….but there doesn’t appear to be any conspiracy at all. The CM also said that all files would be retrieved within a month (how? Since all government papers have copies that are sent to a multitude of departments) and that absence of papers wouldn’t be a reason for delays. Scam TV of course forgot to even mention this development on its prime time show yesterday! And of course the original conspiracy theorists would say that the investigations are all rigged!

But assuming that the news report of Akhilesh’s deal with the center is correct, what does it mean for us all? Does it explain the little display of confidence that we are now seeing from the PM and his government? The PM made some strong statements at Rio and at the G-20 about taking bold measures to kick start the economy. Anand Sharma – Minister of Commerce – also has made some uncharacteristically bold statements about it being the state’s call whether to allow FDI in multi-brand retail; that no state could block other states from exercising their right. There are reports that the cobwebs on some other reforms are being dusted off. If all this is true, it is great news. The deal with Akhilesh would have been a good one; one that would help the country pull itself out of the policy freeze it finds itself in.

Let’s wait and see what happens. But one thing is clear. WB’s loss is UP’s gain. Hopefully the people of Bengal will read the message clearly. And hopefully this time, they won’t take more than three decades to do what they need to do.

The real truth is that in a mulit-layered and multi-dimensional country like us; one whose people are restless for rapid progress; politicians must learn to do business, even as they play their usual games. The people have no patience for hard positions. They want action. Akhilesh has shown that he can get what he wants in a business-like spirit…..that should be a lesson for all

Sunday, June 24, 2012

Defending Pranab Mukherjee as Finance Minister….

As he plans to move to Rashtrapati Bhavan, Pranab Mukherjee is facing criticism that he performed poorly as FM. In his three years as Finance Minister, Pranab Mukherjee has seen good and bad times. While it is true that the economy has headed southwards in the last year, it grew smartly in his first two years. So how much of the criticism is fair?

Much of the reason for this debate is the performance of the economy in the last financial year. From 7.7% annual growth in GDP in the 1st quarter of FY12 (Apr-June 2011), the growth rate fell continuously every quarter to a disturbing 5.3% in the 4th quarter (Jan-Mar 2012). The 4th quarter growth numbers were the lowest in the last nine years. There is a general sense of gloom in the country and the worry is that the worst is yet to come. Lack of decision making, unimaginative tax policies, inability to carry allies along and a vindictive and personalized attack on select corporates seem to be building a case against Pranab. It almosts appears as if Pranab is running away from a sinking ship. But in an intelligent debate, how much criticism can be really piled up on Pranab’s doorsteps?

To start with, let’s look at the growth numbers during Pranab’s 3 years as FM (he took over in Feb 2009….the last quarter of FY09). In that quarter, the economy had grown at 6.3% - hit as it was by the Lehman crisis. Prior to this quarter, the growth had been very ordinary for at least two more quarters at 5.8% in Q4 and 6.1% in Q3 of FY08. So when Pranab took over as FM, the country had seen three poor quarters of between 5.8 – 6.3% growth rates.

Since he took over, the growth improved, partly no doubt because of a global revival. To his credit, Pranab was responsible for launching a liberal fiscal policy – raising government spending to revive the economy much the same way that other large economies were doing so. While India’s numbers were hardly comparable to the US’s ($2 trillion Quantitative Easing-1) and China’s stimulus ($750 billion +), they were substantial enough to lift the economy. Excise duties were cut to boost industrial activity. Dollar inflows were encouraged and the monetary policy was significantly eased. Not surprising then that the economy responded handsomely. It grew by 8.6%, 7.3% and 9.4% in the remaining three quarters of FY10. Pranab was delivering; the Indian economy was back to its dream 9% levels.

The good run continued in FY11, even though it tamped down a bit, again in response to a slowing global environment. The European crisis had already begun to impact global growth. Greece was already a bother. The Indian economy still managed to grow at 9.3%, 8.9%, 8.3% and 7.8% in FY11 – not a mean feat considering the slack global sentiment. Yes, the growth rates were reducing quarter after quarter, but what the heck – the absolute numbers were strong enough.

It’s only in FY12 that the GDP growth started sputtering, giving rise to the criticism againt Pranab. But how much of this is really attributable to him? In other words, would a different FM have managed better results? What is it that Pranab didn’t do well enough? These are questions that need to be analyzed before concluding whether Pranab messed up or not.

In this context, an article in The Economic Times on June 21st by Professor TT Ram Mohan of IIM Ahmedabad (S&P, India Inc Overdoing Gloom - By ignoring objective constraints on growth, many commentators are whipping up futile negativity) is worth reading. The point that the Professor makes is that while India’s growth rates have fallen, so also have those of China (less than 7%), Brazil (2-3%) and Russia (some 4% or so). He also makes the point that the balance of payments crisis has been vastly exaggerated. India’s external debt is a small part of its overall debt; even that has been falling as a % of GDP over the years. If one were to look at these numbers objectively, it is difficult to blame Pranab.

What about the other charges against Pranab? Let’s take one at a time:

There have been no reforms at all. The reforms in the Banking, Insurance and Pension sectors have been hanging fire for long. The GST has also missed its date several times. Ditto the DTC. But an honest assessment of this charge would indicate that the blame cannot be placed on Pranab’s doorsteps, nor in fact on the UPA’s. The fact is that the UPA has one recalcitrant ally – Mamata – and a strident opposition that often forgets its own principles and opposes for the sake of opposing. Critics often dare the government to take bold steps and stick its neck out and not worry about the consequences. But surely, this would be foolhardy. Sanity must prevail at all times. Sacrificing a government makes no sense at all. Early elections (or even elections in 2014) are hardly likely to throw up a stable and strong government. One needs to be practical. No government and no finance minister can be held responsible for this state of affairs.

The other charge against Pranab is that the inflation has been running haywire for more than two years now. The data is correct, but a closer observation will reveal that this inflation – unlike the usual ones – is in fact benign inflation. This inflation is not hurting the poor; in fact this inflation is a result of more money in the hands of the poor. The high inflation is arising from programs like NREGA and the rapidly rising MSPs (minimum support prices) for agricultural products. Indeed, this is a point of departure between the UPA and the NDA. The UPA’s core constituency is the rural poor, and so it keeps increasing MSPs every year. The NDA on the other hand hardly increased MSPs during its six year rule. The farmers are having it better under the UPA rule; the urban middle-class had it better during the NDA period. The urban middleclass also may complain today, but the fact is that their incomes have risen faster than inflation. The high inflation reflects the distribution of wealth taking place in the country. This is bound to hurt the more affluent sections – the more vocal ones – but the poor are in fact getting better.

What about fiscal deficit? Now the fiscal deficit is just an intermediate data point. The impact of the fiscal deficit is high inflation and consequently high interest rates. There is no doubt that Pranab Mukherjee should have done more on managing the fiscal deficit better. Cutting wasteful subsidies is a must. Increasing diesel and power prices would be a good starting point. But just look at how the opposition reacts to price increases of even petrol – the one fuel that doesn’t touch the bulk of the poor. There are protests organized even by parties that like the Congress are pro-poor (the Left, the TMC)….they should ideally be supporting petrol price increases (while demanding that diesel price not be increased). But politics has reached such a point that opposition to any move is a given. Pranab should have realized this and been bolder. In the long run, the only smart way to reduce subsidies is to direct them better. And in this, Nandan Nilekani’s UID program is going to play an important role. Give it a few years and the subsidies will come down.

Some facetious arguments have been used recently to dent Pranab’s record. One such is that the growth rate achieved during UPA-1 was because of the good work done by the NDA. This is rubbish. The NDA’s six years saw GDP growth go below the rate hit in the period before it came to power. The second such facetious argument is that the UPA-1 saw high growth rates because of global conditions. That liquidity was so high that foreign capital was bound to come to India. All developing countries grew rapidly in this period of time. This is indeed true; but then why should the slow-down not be attributed to global factors?

This is not to say that Pranab did everything correctly. I do feel that he could have done better. Given his astute political skills, he should have been able to work more closely with the opposition. He should have been able to push his party to rebuff Mamata. Pranab should also have managed the RBI better. Agreed the RBI is an independent authority, but surely there are enough formal and informal consultations that happen between the Ministry of Finance and the RBI. Had the RBI not increased interest rates so much, the GDP growth rate – especially the drop in industrial production – would not have been this steep. RBI has been irresponsible – read Surjit Bhalla’s articles in The Indian Express against the RBI’s actions. Pranab was perhaps also wrong in bringing in the retrospective tax. Many countries in the world have done the same thing, but given the timing, and given India’s need to access global capital, this move could have been avoided. Somehow, an impression was created that Pranab had been miffed by the SC order against his ministry; and this led him to take vindictive action.

The real truth is that Pranab Mukherjee also had his downsides. Who doesn’t? But it is true that he delivered high growth rates in two of his three years. This is the best anyone could be expected given the global conditions and given the political instability in the country. Overall, I think its unfair to blame Pranab…..

Friday, June 22, 2012

Julian Assange deserves exemplary punishment….

Had Julian Assange been an Indian, the media here would have gone into overdrive accusing the Indian state of victimizing a good man. It would have said that we don't have freedom of speech – forgetting how much rubbish it is allowed to get away with on the same grounds. That our democracy is a farce. That we threaten and legally blackmail those who dare to expose the dirty corruption in our government. Blah blah blah. All such people must be really disappointed that the mecca of democratic values and freedom of speech – the West – is behaving in this manner against a person who was one of the finalists for the Time Magazine of the Year for 2010 and a nominee for the Noble Peace Prize for 2011. They must surely believe that the fact that he didn't win either is another evidence of how illiberal the West has become….

I have always held that Assange was a dangerous element and that he should be arrested and jailed for good. What is his core business? To steal and publish confidential stuff. If the information is not confidential, it is of no interest to him. If it didn't embarrass different governments and countries and cause a sensation around the world, it was not of any use. It mattered little to him that delicate diplomatic relations between countries could be jeopardized by his irresponsible exposes. He would find ways to get access to confidential government documents – perhaps even by illegal inducements. His excuse would be that someone or the other gave the information to him; that he wasn't involved directly in acquiring anything. This is the most standard trick anyone has when running a business of this sort. Media in India does this all the time. They run proxy campaigns on issues of interest to them. They prop up “informed sources” without naming them to put out stories that they may have themselves created. It’s good that this farce is being brought to an end for Assange. Hopefully, this farce will be brought to an end for the Indian media as well.

Julian Assange is now running like a coward. The London courts have all ordered his extradition to Sweden to face trial in what must look like very minor crimes – rape and sexual assault of two women in that country. Like a coward, he has sought refuge in Ecuador. Ecuador? A country that suffered military dictatorship till the late 1970s? Why would the champion of free speech go to a country that is not particularly well known for freedom of speech and democracy itself?

Julian Assange should be taken to America and tried for treason like he fears. What he has done by revealing American defense secrets is nothing short of treason. It’s the same with all the other diplomatic stuff that he routinely finds and publishes. The fact that he was considered a super here by the public is no reason for him not to pay for his crimes. No one should be allowed to steal state secrets. State secrets are part of the requirement of governance. India has many such state secrets. It may say one thing in public on a sensitive subject, but may practice a totally different thing in reality – all for the good of the Indian public. What if documents related to nuclear codes were put out in public and that compromised our entire security regime? Would that be an example of free speech or treason?

Assange was rightfully denied the Time Magazine of the year award in 2010. He didn’t deserve it at all. There was nothing creative or useful in what he did. There are moles in all government departments. Laying hands on confidential stuff is hardly creative stuff. All that you have to do is to provide a platform to publish the stuff. It’s the same with our news TV channels. They claim they have done “scoops”, but in reality the material itself lands up on their desks. Those who have the scoop decide who they want to give it to. Julian Assange should have been smarter; he should have gone about his business covertly. The way smugglers and traitors go about theirs. But then psychotic people like Assange think that by publishing openly, they are being “brave”. I think Assange was plain stupid. Such bravery is misplaced…..and even if the public applauds such people, the law eventually gets them.

Assange should be sentenced to the maximum punishment that the US law provides for treason. Rather than thinking of him as a crusader or an activist, he must be considered as one endangering world peace. It is not difficult to imagine how revelations of confidential documents can reduce friends to enemies, convert peaceful neighborhoods into war zones. Assange and people like him are a threat to society. They encourage ordinary people to reveal confidential information. It is they who get caught, not people like Assange. It is Bradley Manning – the American military soldier who gave confidential American defense info to Assange – who got arrested on charges of treason. He may even be hanged for this. And yet, people like Assange have been enjoying their lives without fear….in fact with much public adulation. Its time this farce is brought to an end.

The real truth is that a stable and peaceful world needs a few curbs on freedom of speech. Assange’s business was inherently illegal. Freedom of speech was just a fa├žade. Assange was a criminal himself in his earlier life – a hacker. He was let off lightly by the Australians when he was caught. Rather than reform himself, he became even more sinister. Wikileaks should have been stopped much before it went this far. But it’s better to be late than never. Assange should now be put behind bars and Wikileaks shut down.….

Thursday, June 21, 2012

“Conspiracy Theory” playing on TV news channels….

I am of course referring to the 1997 thriller called Conspiracy Theory starring Mel Gibson and Julia Roberts. Mel Gibson’s character believes everything is a conspiracy including absolute crazy stuff like NASA plotting to kill the US President using some earthcause-causing secret weapon! It’s no different in modern day India today with TV news channels seeing conspiracies in everything. There is a conspiracy in why the monsoons are delayed; why the rupee is crashing against the dollar, why Mahesh Bhupathi and Rohan Bopanna don’t want to play with Lee…..there is a conspiracy in everything! Not surprising then that TV news channels found a conspiracy in the fire that gripped Mantralaya – the Maharashtra government’s seat of power.

As government officials rushed to deny these conspiracy theories, certain TV channels (especially one I call Scam TV that has “conspiracy” inscribed into its genes) started asking why the government was in such a rush to deny a conspiracy theory! Nice. Had the government not come forward to clarify, the same channels would have said “See, no one in the government is coming out and saying anything. These theories must be true!” The same thing happened recently during the Coalgate allegations, when the opposition demanded that an enquiry be ordered. When the government didn’t initially order the enquiry, the conspiracy was that the government was trying to hide the facts. When it did eventually order it, the conspiracy theorists claimed that their accusations must be true, because “why else would the government order an enquiry”! No one wants to wait for the investigations; for the results to come. Everyone believes everyone is corrupt and everything is a scam.

It hardly mattered to the TV channels that just like they were accusing the government of hushing up conspiracy theories, they too could be accused of amplifying them in the first place. To be sure, media never makes its own controversies, only provides a platform for others to publicize theirs. Apparently some opposition leaders first claimed this fire was intentionally set so that the Adarsh scam papers could be destroyed. As soon as the CM clarified (and the CBI reaffirmed) that those papers were in order, the highly creative conspiracy-writers moved on to other “important” documents that had been gutted. In modern day India, this is what media has become. A platform for absolutely unproven and slanderous charges to be freely made. For irresponsible politics to be openly practiced in front of a shocked nation.

That is why it is always better to read newspapers than to watch news channels. The TOI gives a balanced reporting of the fire. It gives more details….when the fire started, how it started, how many fire brigades turned up, when did they turn up, how many people were inside the building, which ministers were there and not there, etc etc. It also mentioned that many documents had been destroyed as they would be in any fire. It did mention the conspiracy theory, but only in a small way in the inset (table). Very importantly, the TOI raised its voice against the ill-preparedness of the authorities to tackle a fire in even the most important of all government buildings. In my mind, the TOI’s coverage was honest and unbiased. In contrast, TV channels glossed over all the mundane details; focusing almost entirely on the conspiracy.

In the inside pages, the TOI did dwell on the conspiracy theory a bit more. “Speculation was rife through the day whether the fire was an accident or an act of sabotage carried out to destroy documents relating to crucial cases and projects.” That’s an honest statement to make. There were conspiracy theories floating around, but the TOI did not lend those theories any credibility by endorsing them. Again it mentioned that “Officials stressed that Adarsh records can be recovered from the CBI or the two-member judicial commission; CBI officers too maintained that they have all the “requisite documents necessary to file a chargesheet”. The farthest the paper went was to say that “Still, conspiracy theories raged over the cause of the inferno. Many wondered if the secretariat was sabotaged to rid of records maintained by the urban development department of real estate proposals and projects.” At no point did it sensationalize the subject.

In contrast, TV channels, especially Scam TV, had already pronounced the verdict. It cooked up some “Rs 25000 crores worth of scams” that were being probed. I have never heard of this, nor do the papers mention this. And when the CBI officials clarified that they had all the Adarsh papers with them, the anchor of Scam TV went “Aah ha” in his “see the conspiracy?” tone. The only thing missing was the Balaji-like sound effects. Give it a little time….the news channels will get these embellishments as well!

From the little I could gather on TV and in the press, I think the fire department did a fairly decent job. They reached the building in 15 minutes, which is not bad in India. They did not have any water shortage. Their equipment was working fine. They were able to reach the top floors without any difficulty. They rescued almost all people who were trapped. The fact that only 2 people died should come as a relief. Yes, we have many miles to cross before we reach Western standards in fire protection. But continuously cribbing won’t get us there. Sometimes, providing a constructive environment works better.

The real truth is what I have repeated many times. Media has lost its balance. It has lost its bearing. News anchors and editors must agree on certain minimum standards. If they demand high standards from public functionaries, they must first pass the test themselves….

Wednesday, June 20, 2012

NDA fundamentally an unsustainable alliance….

There is only one thing that makes the NDA an alliance. Anti-Congressism. The enemy of my enemy is my friend is the glue that binds the various NDA partners together. As long as nothing else comes in the way, the glue is strong enough to hold the partners together. But as soon as other factors that matter in politics come into play, the glue ceases to bind. And the alliance comes unstuck.

The factor that is more important than even anti-Congressism and the one that raises its head every now and then is Secularism. It is because of the threat to secularism that the NDA gets rocked everytime the bogey of Hindutva is raised by the BJP. The BJP might taunt the concept of Secularism but in a complex heterogeneous country like ours, it is a better glue than any religion is. Secularism is the basis on which India stays united; had that not been the case, several Pakistans would have got created from within India by now. Further, Hinduism is hardly a homogeneous concept. There may be 80%+ Hindus in India, but a closer look will show that Hinduism is not what unites our people…..other factors like culture, language, customs etc do so. Had religion been the only thing that mattered, Bangladesh would never have been carved out of Pakistan. Caste is a far more important factor that Hinduism. Caste divides Hindus into heterogeneous units. The BJP largely appeals to the Brahmins. The rest feel alienated and migrate to caste-based parties like the RLD, the SP, BSP, RJD etc. Even those who are included in the Hindu set are hardly a homogeneous lot. For example, STs are tribals who have very little in common with traditional Hindu practice. The dalits may be added to the Hindu count but they have been converting themselves to Buddhism. The Jains may be conveniently added to the Hindu lot, but they are a very distinct lot. So this monochromatic concept of Hinduism is a myth. The identity of India can never be Hinduism….it has to be secularism.

No surprise then that Advani, a hardline Hindu voice of the BJP, could never make it to the PM’s position. Vajpayee was the one who made it given his secular credentials. Advani’s lasting imagery in the minds of all people – Hindus and others – is that he was the architect of the Babri demolition. He was right there at Ayodhya when the demolition took place; he was the one who gave those fiery speeches provoking ordinary people to undertake the dastardly act; and like a coward, he was the one who ran away from taking responsibility. Advani soon realized the fatal flaw of a hardcore Hindu ideology in politics; that is why he tried to make amends after his trip to Pakistan where he praised Jinnah. But a hardcore and highly traditional party like the BJP found Advani’s sudden praise of Jinnah to be too liberal – and too unpalatable – a concept. For a party smitten by religious jingoism, being kind even to historical figures was unacceptable. So eventually Advani succumbed and abandoned his liberal views. But it was already too late. Advani doesn’t stand a chance any more. Not with the Hindus, not with the secularists.

Nitish Kumar is being accused of hunting with the hounds and running with the hares. This is probably right and the BJP has reasons to feel that way. But this is hardly surprising given the high Muslim population in Bihar. Further, Nitish has reasons to be worried. I was in Bihar recently and was surprised to find that Nitish’s popularity is vastly exaggerated. The people of Bihar were initially happy with Nitish but they now want more. But with no power and no industry even now in Bihar, there are no jobs. The people are getting disenchanted. It’s a matter of time (maybe Nitish will get one more tenure as CM) before the JD (U) feels the heat. When push comes to shove, JD (U) will also use the standard Hindi heartland political strategy – divide the Hindus on the basis of caste and also reach out to the Muslims. In a scenario like this, the BJP would become a huge liability. Ideally, NItish would like to stay with the BJP for now (his government will become unstable without the BJP), but would like to keep his options open. Additionally of course, Nitish considers himself a better PM candidate than Modi (and I agree with this entirely).

The strongest allies of the BJP are those parties which are themselves based on religion. The Shiv Sena is a known Hindu party, so is the Akali Dal a Sikh party. No one else can be taken to be a strong NDA ally. Mamata’s TMC will think ten times before joining the NDA again (30% Muslims in the state). BJD is worried about too much Hindu jingoism too (the strong tribal population hardly has any Hindu persuasion). The other catchment areas for the NDA are states where the non-Hindu populations are small and hence Hinduism is not an issue – states like TN, Karnataka….out there, anti-Congressism is a stronger force than secularism and the BJP may well succeed in sewing together an alliance.

All in all, the NDA can hardly be called a cohesive unit. Anti-congressism and secularism pull in opposite directions. JD (U) is better with the UPA than with the NDA.

The real truth is that even before the NDA has come to power (and I doubt if it will in 2014….even though the UPA may lose it), the divisions have started to become bigger. It’s a reminder to the NDA that those who live in glass houses should not throw stones at others. The BJP is in a quandary. If it goes the Hindutva way, it will weaken the NDA and if it strengthens the NDA, its own core Hindutva philosophy goes for a toss. But then this is what happens when you make your party on religious grounds…..

Thursday, June 14, 2012

Teach Mamata a lesson….

Mamata Banerjee should be accused of treason. She was like a mole for the opposition within the UPA. All along her opposition to her own alliance was condoned and tolerated under the pretext that she was Mamata after all – a maverick. In reality, she proved to be nothing but her usual destructive force so driven by her own revolutionary instincts that she didn’t know how to distinguish between friends and foes. Her conduct intentionally or unintentionally gave the BJP a good stick to wield and beat the UPA up with; their constant taunt to the Congress being that “your own coalition partners are not with you”. What kind of a coalition partner would behave like this? Earlier she’d joined the BJP alliance twice and ditched the party twice. Now she was doing the same to the Congress. That’s why I think it’s time Mamata is taught a lesson.

Obviously, this is easier said than done. The fact that Mamata has over-reached herself has been obvious for long. She consistently opposed every single move of the UPA. At first, she used to oppose anything that had even the hint of FDI. She was one of the early opponents of FDI in multi-brand retail. In fact, it is largely because she, as part of the ruling alliance, opposed it that the opposition found the motivation to get together. Had she stuck to the UPA’s decision, the policy could have been rolled out. Because it couldn’t be, a billion Indian consumers were denied the benefits of the policy. But of late, she was opposing almost everything the Congress proposed. She created the bogey of threat to the federal structure when she first opposed the creation of the Lok Ayukta under the Lok Pal Act (Anna…..are you listening?) and then the formation of the NCTC (a body created under an act that had already been passed a few years back). Mamata chose subjects on which she could become the rallying point. She was sure of the BJP’s support on most such things. The BJP itself was keen merely on embarrassing the UPA government; they were happy to even their own beliefs a back seat. Mamata, working with the BJP, became the single biggest stumbling block for the UPA. The sense of policy paralysis that has gripped the country can be attributed directly to Mamata. As if this was not enough, Mamata was becoming more audacious by the day. She saw herself as the final decision maker within the UPA, the ultimate boss. She even opposed Kapil Sibal’s plans on the common entrance test for engineering studies. Did she even understand the matter? There is no doubt that it was she who was provoking the Congress. It wasn’t the Congress that was not consulting her enough; it was she who was playing truant.

Mamata said yesterday that she wouldn’t tolerate anyone’s threats. But was she was being threatened by someone or was she threatening her coalition? When she wanted the financial package for Bengal, it was a “demand”, not a friendly chat. A party with 19 MPs was constantly threatening a party with 206 MPs. How long could this be tolerated after all? Her threats prompted me to write my post yesterday on the modern day “cash for votes” scam that she was re-enacting.

In a fractured Lok Sabha, smaller parties are bound to get more than their commensurate share of power. But that said, there are finite limits to which the political rubber band can be pulled. At a certain point in time, it has to snap. In snapping, everyone may get hurt, but it’s a natural phenomenon that it will snap. Sometimes the snapping of the rubber band actually helps to bring everyone back together. Maybe that will happen here too….maybe Mamata will be back in the UPA as a mellower person.

I think there is a reason why Mamata is in so much of a rush to have a mid-term elections now, rather than even six months later. Her credibility in Bengal is in tatters; most people are hardly appreciative of the “paribartan” that they have seen. She’s been on the wrong side of public opinion on several occasions – like in the rape cases or in the storming of the police station when two of her party hoodlums were arrested. She’s done nothing to build a better investment climate in Bengal. You think industrialists who observed her handling of Dinesh Trivedi as the Railways Minister would be inspired to invest in Bengal? With the passage of time, the Left must surely have started to gather itself, although there is no direct evidence of that. It may take a little longer, but it’s obvious the Left will resuscitate itself faster than it would have had it been anybody else in power. Mamata is herself not sure of her position after six months; hence she wants to force elections now.

But where does Mamata’s exit leave the UPA? While some feel that mid-term elections are bound to happen at the earliest, my own view is that this may not be the case. I think the BJP wants to avoid elections as much as the Congress wants to. Both parties will conspire to protect their own backsides. The BJP has a lot on its plate to sort out first. Its internal bickering is getting messy; its allies like the JD (U) are starting to assert themselves. Is this the right time to go in for elections, or would that right time be a year later? If the recent elections in UP, Punjab and Uttarakhand are anything to go by, the BJP must be a shaken party, no matter what their bravado. It would ideally like a handsome win in Gujarat first before it starts the campaign for the central government. Something miraculous is bound to happen behind the scenes. Something tells me the BJP will lean on its allies to douse the fires of a mid-term election.

But at best, this will give only a little relief to the UPA. We are going to be in for a long period of political unrest. In all likelihood, the next elections will spring up an even more divided Parliament. Both the centrist parties – the Congress and the BJP – are likely to yield even more ground to the regional parties. A period similar to the 1989-91 era when VP Singh and Chandra Shekhar became PMs one after another in an unstable political scenario is likely to emerge. In the meantime, the country is likely to come to a complete stop. Sad….really sad.

The real truth is that Mamata needs to be taught a lesson. It’s good to be a political opportunist within limits, but when it exceeds those limits; it’s time for the person to be cut to size. Both the BJP and the Congress have to realize this truth….

Wednesday, June 13, 2012

A modern day cash-for-votes scam unfolding in the Presidential elections….

Unfortunately, I cannot claim to be the one who thought of this rather interesting concept. This was actually mentioned by a former minister of the Government and a member of an ally of the Congress at a recent interaction he had with a select few members of the financial world and the corporate sector in Mumbai. The context was the Presidential elections and the factors that were going to decide who became President. After yesterday’s “googly” by Mulayam and Mamata, his words ring even more true!

Why cash for votes? Because at least as far as Mamata’s game is concerned, it looks simple. Give me the financial package I am “demanding” for Bengal and you can have your Presidential candidate. I don’t care how you find the funds, but you find them. If it creates a bad precedence, that’s your problem. If it means giving similar packages to other states, that’s your problem too. The trade-off is clear and specific and monetary. The cash demanded is some Rs 20000 crores (in the form of aninterest waiver and a moratorium for payment of interest for a further period of time). The seats offered are some 4% of the Electoral College. Isn’t this cash for votes?!

The story with Mulayam is no different. He is a willing “friend” of the UPA from time to time. He’s found the right excuse to support the UPA – he wants to keep the communal forces out it seems! Now that he owes no one any explanation for supporting the UPA, he also wants his pound of flesh. News reports indicate that he is willing to come on-board a plan to support the Congress’s candidate if the Congress Government promises him cash for his 6% votes.

There is of course a difference with the original cash for votes scam. Both Mulayam and Mamata appear to be asking for the cash for their states, not for themselves personally. While in the actual cash for votes scam, the allegation was that three members of the BJP were offered cash in their personal capacity to vote for the Congress (supposedly by the Congress since they benefitted – don’t try to think about evidence or logic – this is politics. Here any accusation sticks without need for any evidence!). There is one other difference. If the original was to ensure the support of just three votes, this one is to ensure a far larger number. If the cash paid then were a few suit-cases full, this time it is in the tens of thousands of crores of rupees. This is surely one measure of economic progress that the country has made!

This MP has been a Parliamentarian since 1990. When asked if this was the worst period and type of politics he had seen since that year, he strongly agreed. And he is right. The difference between all the politics of the past and the present is that now there is not even a pretence of ideology left in opposing a candidate or proposing another one. Now its openly and brazenly self serving interests which determine such decisions. Mamata’s opposition of Pranab Mukherjee is not because he is eligible or uncapable; but simply because he isn’t yielding to her on the financial package. Her support for Somnath Chaterjee is simply because he revolted against the Left. Mulayam owes no one any explanation for his flip-flops. Both Ansari and Kalam were “bureaucrats” as he had called them earlier in explaining why he wouldn’t back them. Now he is ok to support them.

But you have to give it to Mamata and Mulayam for playing some real smart politics. For both of them, the other was the handicap. Mamata wasn’t able to exert herself strongly enough (in her reckoning!) because the Congress could always count on Mulayam for support. And vice-versa. By coming together, both of them have together taken the wind out of the Congress’s sails. If both work together even for a limited period of time, they can easily get the Congress to do anything they want. At the very minimum, they can get the government to stop moving even at the minute, barely visible, microscopic speed that it is moving at.

I asked the MP the question if he saw things improving in 2014. Even assuming the NDA came to power, would the situation of the BJP be any different than it is of the Congress at present. Not surprisingly, the MP agreed with my views. He too believes that the situation would become worse after 2014. The only hope he offered from his experience was that when things became really bad (a few years and several PMs later….after 2014), people would vote back a single party to power. That’s when India will be back on its tracks. In his view, in the long journey a country undertakes, a set-back of a few years doesn’t mean much. For us mortals of course, we would like every year to count.

I doubt if this Mulayam-Mamata partnership will last too long. They are not natural allies. They don’t think of the Congress as a huge enemy in their home states. They consider some one else (the BSP and the Left) as their real enemies and the support of the Congress would be welcome, even if not essential. The two parties also have ideological differences. For Mamata, Somnath Chatterjee is acceptable because that would really hurt the Left. For Mulayam, no matter what he says now, the Left is an ally he wants to cultivate. So at some point in time, their paths have to become tangled. This is an opportunistic alliance meant only to last till the Presidential elections end.

The real truth is that while everyone in the country seems to be enjoying an interesting and intriguing ringside view of the drama that’s being enacted in Delhi, it’s a really sad moment for the country. A weak center – supported by a multiple “allies” – is an untenable political structure. It may survive but it cannot function. The NDA faces its own alliance problems. The JD (U) has become an irritant. Even if they do patch up, no one knows how long the patch up will last. That’s why we need electoral reforms that ensure a degree of stability. How to get those, I don’t know at this point…..but maybe we should start a debate.

Tuesday, June 12, 2012

Rotten politics begets rotten economic policies….additional excise on diesel vehicles the latest example….

For completely ridiculous reasons, the Government prefers to increase the excise duty on diesel cars so as to recover subsidy on diesel fuel. The normal thing to do would be to increase the price of diesel (maybe slowly), so that the subsidy would keep coming down over a period of time. But given the rotten political landscape that exists, it is more acceptable politically to increase excise on diesel cars than to increase diesel prices.

Let me explain the rotten politics first. Just imagine what would happen if the diesel prices were increased even marginally. Without a doubt, there would be a huge political uproar. If there can be a political uproar when petrol prices are hiked, there would surely be a bigger one if dieself prices were touched. The BJP as usual would find a clever excuse to stage a bandh: This government doesn’t care for the poor. Or why is the price hike so steep? Or why did the government not increase prices for so long? And conclude by demanding someone’s resignation, if not the entire government’s. Team Anna would be back saying this is a sign of corruption and maybe the entire Government should be probed for it (you see, activists don’t have to produce evidence or follow the institutions of the country)! The Left would shout hoarse too. And all this assumes that Mamata Banerjee would approve of the price increase in the first place – an impossibility. So don’t blame the Congress alone for not taking the right path to reforms. Blame all the politicians.

Now let’s see what’s rotten about this economic decision. The first rotten thing is that it puts the onus of paying for the diesel subsidy only on the new car buyers. The ones who already own diesel vehicles get away scot free. Given the fact that the existing pool of diesel vehicles is far more than the new sales of diesel vehicles made every year, this puts an unfair and huge burden on the new buyers. Maybe the government will prefer not to increase excise duties so much….in that case, it will be unable to recover the full subsidy. In other words, this policy will end up being mere tokenism.

The second rotten thing is that in a situation where the industrial production is already down, this will ensure that at least the auto sector goes into a tailspin. Further, the new buyers will have to pay the entire subsidy burden upfront. This is surely going to kill the diesel car industry. I’m not sure the government should want to do that.

The third rotten thing is that this apparently is being done only for “cars”. Do SUVs like the Toyota Innova, or the range of Tata and Mahindra vehicles – all of which are used extensively for rural and semi-urban transportation purposes – or the much more premium SUVs (Honda CRV, Merc, BMW and Audi SUVs etc etc) used largely by the urban rich all get covered under this policy of higher excise duty? I doubt they do, for if they did, then a lot of the rural folks would get affected, and a politically afraid government would like to avoid that. If the higher excise duties don’t apply to all vehicles, then basically the government would have to find a way to exclude the higher end of SUVs while still giving the benefit to the lower end ones. So basically, we will have arbitrary rules in play. Some bureaucrat will decide on an involved excise regime…..This is crazy and fundamentally illogical.

The fourth rotten thing is that the calculations that the government would do in calculating this upfront additional excise duty will be inherently flawed and unfair. Has the government considered the better mileage (kms per litre) of diesel cars? What if the distance covered in a year is less (say 10000 kms only) for some and more for others? Shouldn’t the upfront payment vary with usage? Further, does a car last for 10 years at all as the government’s thinking appears to be? In today’s world, by the time a car is 6-7 years old, it is pretty much near its end. If used beyond this period, it would have become a fuel guzzler and then the entire calculation goes awry anyways. One last small hiccup. As fuel prices keep rising (sorry… petrol prices keep rising), and the gap with diesel keeps becoming more and more, are we saying that the additional excise duty will also keep rising? In other words, rather than changing diesel pricing, we would be changing excise duties every two weeks! And what if the gap drops? Then will the government be intellectually honest and lower the excise duty?

One last point. What kind of an industrial climate are we creating here? While the government is within its rights to change its fiscal policies, every government tries to assure industrialists of consistent policies. This decision would come after years of investments made by industrialists in diesel car manufacturing. Can the government instantaneously change its excise policy or should it give a few years for manufacturers to adjust their strategies. In short, should the government make this policy applicable from now itself or from some future date five years or more away?

It’s crazy really. Finding convoluted solutions to really simple problems. And then those convoluted solutions will create new problems which will require even more convoluted solutions. Remember the days of the License Raj? Similar convoluted structures existed then too. There were subsidies given to small scale manufacturers and many sectors were kept out of reach of the big boys. For example icecreams were reserved for the small sector. So the big boys produced “frozen desserts” rather than “icecreams”! And the small guys produced such lousy icecreams that no one had them anyways. Indians would go abroad and hog the much better icecreams available there! Just imagine those days. In small but sure steps, we are heading in that direction now.

What should be done is that diesel pricing should gradually be freed up – say over the next 5 years. The assurance the government should give to the people is that the entire saving of subsidy would be diverted towards setting up of new public transport. New metros, new BRTS systems and new modern buses. I am sure the people would support such initiatives.

Otherwise, this current policy will support petrol cars. And petrol cars are fundamentally more inefficient in usage of fuel compared to diesel cars. Sad….really sad.

The real truth is that convoluted, dangerous and rotten politics is forcing the government to think of convoluted, dangerous and rotten economic policies. Don’t blame the Congress for this. Any political party would do the same given its need to survive. It’s time for us to wake up and raise our voice against stupid economics. And stupid politics….

Monday, June 11, 2012

S&P is right. India’s politics is all junk….

Standard & Poor’s – the global credit rating agency – has threatened to downgrade India to a junk investment grade status. Should this happen, India’s reputation will take a big hit. The first fallen angel amongst the BRIC nations as the papers have been screaming. India will struggle to raises foreign capital to fuel its ambitious growth agenda if this happens. But can one really blame S&P for its statement. Is it off the mark when it says that the politics is the real culprit in India?

A lot of people have complained about the UPA-2’s non-performance. Many have said that the problems come from within the UPA, not outside. What this statement really means is that Mamata Banerjee is really an opposition leader who pretends to be part of the UPA. It’s perhaps only because she sees the Central government as a sort of piggy bank which she can withdraw money from all the time that she continues to be counted as a leader of the UPA. Take Mamata out, and the UPA struggles to hit the majority 272 mark in the Lok Sabha. Even with Mamata in its fold, the coalition suffers from a lack of majority in the Rajya Sabha. So those who blame the UPA for all the ills may want to keep this statistical equation in mind. In a situation of such imbalance, only the lowest common denominator – policy decisions that no one can fault (read the most populist policies) – go through. The latest proof of this is that after widespread consultations (and no one can blame the Congress for once), there is no agreement (forget consensus) amongst the UPA allies and outside friends on the Presidential nominee. It’s easy for the SP to oppose Ansari and for Mamata Pranab Mukherjee. It’s no longer even a shame for Mamata to openly threaten the UPA. Give me the loan waiver or I won’t support Pranab. There is not even a pretence of an ideological point of view on this subject or a care for the national good; it’s like the threat of a kidnapper who has taken someone hostage.

But wait a second. Surely the S&P hasn’t rated India poorly only because of the present state of politics? Surely, it must have cast its eyes a little further – beyond 2014. What it would have seen would have truly thrown it off its feet. For the picture beyond 2014 is worse than the picture that you see today.

Beyond 2014, the Congress will surely struggle to reach its present 206 count. The UPA is clearly in trouble, unlikely to return to power unless it turns things around real quick. But what about the BJP and the NDA? Surely, the two are looking like squeaky clean and ready to lead strongly in comparison?

In reality, if there is anything even more certain than that the UPA is in trouble, it is that the BJP and NDA is in even more trouble. The BJP gets hardly 32 seats out of 289 seats in the top 6 states that contribute more than 53% to the Lok Sabha (UP, Maharashtra, WB, AP, Bihar and TN). Has this changed? Not one bit. The BJP’s favorite states – Gujarat, MP, Chhatisgarh and Rajasthan (off and on) – don’t matter politically as much. Karnataka is all but gone, and the Bihar coalition is in deep trouble.

So in 2014, it is safe to assume that even if the BJP becomes a larger party than the Congress, it will have fewer seats than 206. Its highest tally ever has been 182, and let’s not forget that those were heady days. Those were days when a large part of the Hindu mass forgot its caste-based divisions for a moment, and came out in defence of a perceived threat to its religion. Those moments have long passed. India’s Hindus are back to their divided self. What’s worse is that even the OBCs have been further divided into the Most Backwards and the Mahadalits. There is nothing left which can be united under a Hindu agenda. There is no Hindu agenda left for the BJP to exploit.

So when S&P looks beyond 2014, it sees an India with an even weaker center. The leader of the UPA doesn’t have a place in the cabinet; the PM is an appointed leader. This is indeed a problem. Does the BJP offer anything better? Its party leader – elected for a 2nd time – and the earlier ones (Bangaru Laxman, Rajnath Singh, Venkaiah Naidu) – have traditionally been weaklings. So the BJP has no grounds to snipe at Sonia. Now consider its PM candidates. Most of the leaders are regional satraps, not national leaders; Modi the foremost of them all (the Modi economic myth has been busted yet again in today’s story in TOI – Gujarat: Myth and Reality). Sushma Swaraj is hardly known outside her North Indian belt; The other strong leaders – Vasundhara Raje Scindia, Raman Singh, Shivraj Singh Chouhan, even Rajnath Singh are all regional small fries. That leaves Arun Jaitley – in my mind the best of all BJP leaders to become PM – again a largely non-political figure; a Rajya Sabha member who has never won a Lok Sabha election. So much for the BJP’s attacks on the PM.

Surely, S&P has considered all this before issuing the warning it did. Rather than fret about this warning, it is important we make amends. For starters, we need political reforms. Essentially, a Mamata should not be able to threaten the downfall of the UPA (or a Jayalalitha of the NDA when it ruled). A German style formula – where a ruling government cannot be “felled” unless an alternative coalition is put together first – should be actively considered. Mamata won’t be allowed to pull out unless she helps make an alternate formulation at the Center – a near impossibility. Alternatively, a rule that alliance partners cannot split mid-way through a Lok Sabha tenure. Such reforms will give us stability, while retaining the essential flavor of democracy and choice intact.

A government that knows its stability is not threatened for five years will still be kept under check by the various signals it will get from time to time. State elections will keep happening and the news there will indicate whether the ruling coalition is doing well or not.

Hopefully, stability will bring better decision making and governance to the fore. The political establishment will be able to pursue goals without worrying about some or the other partner pulling out. It will be able to take tough decisions that are in the country’s interests rather than worrying about allies all the time. This is the larger message from the S&P warning.

The real truth is that Indian politics stinks. We’ve entered a fundamentally unstable era – even by coalition standards. In a normal coalition, political parties maintain a certain decency. What we are seeing now is insouciant vulgarity. The one who wields the sticks threatens everyone else. If this continues, India will truly deserve the junk status from S&P…..

Wednesday, June 6, 2012

Amazing the depths to which media has plummeted…..prefers to dicuss Montek’s toilets on prime time…..

On a day when the US Defense Secretary was in India, trying to woo India into a futuristic partnership (and no doubt trying to sell his country’s wares!); on a day when China too was wooing India’s foreign minister on the sidelines of the Shanghai Cooperation Organization (SCO); on a day when the PM finally shook off the lethargy of his government and announced some bold steps; at least one TV channel in India was focused on the Rs 35 lacs spent on the renovation of toilets at the Planning Commission! Surprisingly, this subject was not branded “toiletgate” or some such idiotic thing as has become standard practice in media these days.

A full 20 minutes or so of prime time was dedicated to this subject. A full panel comprising 4 or 6 (I forget how many) “eminent” panelists were called in to debate this subject of supposedly vital national importance. The anchor no doubt was in full flush; using his facial expressions to add drama to the anyways-dramatic discussion that was going on!

Consider this. One panelist said that within a few square kms of the Planning Commission’s office were huge residences “occupied” by ministers. Each plot was worth hundreds of crores of rupees. I didn’t quite understand why this man was going on and on in this direction when the topic itself was so interesting and of such extreme importance. Then I figured. He was probably referring to the plush toilets that already existed in the bungalows of Lutyen’s Delhi, his suggestion perhaps being that Montek should go to his own house if he felt nature’s urge rather than splurge the “tax payer’s” money!

Another lady (a former or current bureaucrat) went on to explain the feudal system of India and how ordinary Indians wet the toilets (true indeed!) and hence the other Indians (the empowered class as it were) couldn’t possibly use those toilets. In other words, they needed their own toilets! I couldn’t quite understand if she was OK with the expense incurred or found it too elitist. I think she was confused, unclear and unable to decide – like much of the bureaucracy these days!

Then there was Mohandas Pai who started off really well by saying what the right thing was. That Rs 35 lacs is such a small sum of money that it doesn’t warrant a discussion on prime time TV. That the government of India has an annual budget of some Rs 12 lac crores and hence a small spend of this order wouldn’t do anyone any harm. That there were other big ticket items that should be contained in order to rein in the fiscal deficit. Suddenly however, he felt compelled to add more value to justify his presence on national TV. Suddenly, he blamed the Planning commission for not having provided toilets to 60% of Indians after 60 years of independence. Notice how clever corporate honchos are getting with language! The brilliance in the syntax of using 60 twice for effect is unmistakable! It’s the media effect I say!

And finally the anchor was trying his level best to juice up the debate as much as he could. Using predictable puns (all toilet jokes his “newsdesk” could think up!), he added a really interesting twist to the debate by wondering if the news media’s ire on this subject was because Montek had defined the poverty line at just Rs 28 a day! I understand that news anchors don’t understand economics, but this has to be the height of demonstrated ignorance!

And of course, as is often the case, the numbers were all mixed up. Was Rs 35 lacs spent on 2 toilets (that would indeed be too lavish) or on 2 toilet blocks? Someone conveniently (and in the interest of making the show interesting I guess!) forgot the word “blocks” after the numeral 2. Now Rs 35 lacs for 2 blocks would be fine, wouldn’t it? But Vinod Mehta, the other panelist, who usually speaks a lot of sense, thought it was Rs 35 lacs for 2 toilets. He went on to narrate how he had recently refurbished 3 toilets in his house for Rs 1.5 lacs. Wow! He must be a terrific negotiator. Or maybe he is ok with wet toilets! Anyways, he was later told that it was for 2 blocks of toilets which had 20 “seats”. Unfortunately this clarification didn’t help. Vinod Mehta thought it was 2 toilets which could seat 20 people…..hahahaha. At this point, I just couldn’t take it any longer. This was a true comedy show pretending to call itself a prime time news show! I preferred switching to the other channel that was glued onto some scam that it had supposedly unearthed (it unearths one every day!) and eventually onto the “yet another” channel that preferred to discuss Ramdev’s entertainment quotient! Kirron Kher was on the show and she got so lost in pushing her party’s cause that she forgot she was on TV, not on the big screen! Couldn’t make up my mind if she was an entertainer at all or not for she pointed out strongly that she also had a mind and a soul. Guess entertainers don’t have either!

Such is the state of affairs of India’s news channels. There is a drought of intelligence out there. Prioritization of objectives worse than what the  Planning Commission manages. And political bias more obvious than the deep freeze that is seen in decision making!

The real truth is it matters little how much the Planning Commission spent on its toilets. I have visited several ministries and government offices and I am sorry but the offices are really pathetic. The toilets stink. The corridors are dark. The doors are broken, the glasses chipped. The cutlery is of awful quality. This is not how the government of the 2nd fastest growing major country should present itself to the thousands of global visitors that come visiting. It’s time we stopped counting the pennies…..and focused instead on the bigger stuff…..

Tuesday, June 5, 2012

The Congress has more work to do than its Government….

The Congress Working Committee (CWC) recently ticked off the government, blaming it for policy paralysis and inflation, both of which were apparently hurting the party’s electoral prospects. Made me wonder why the CWC didn’t meet more often, if pushing the government could be so easily achieved! Made me also wonder if the Congress wasn’t pushing the blame on the government, without taking its fair share on itself.

After all, the Government (the Executive) can only do so much. The Government has prepared the road map for several new policy pieces. The Pension reforms are ready and have been whetted by the Standing Committee. The Government has already agreed to accept the BJP’s recommendations and get it on board. Likewise, the Government has readied its plans to allow FDI in multi-brand retail; in fact, it went ahead and made the announcement a few months back. Ditto with reforms in the Banking and Insurance sectors, Land Reforms, Mining etc etc. In all these cases, the Government has done its bit. However, for purely political reasons, policy announcements and law making have been held back. This is where the party has to come in. This is where Sonia Gandhi has to start to act.

The Congress (the party) has to strategize on how to get the Government’s initiatives passed in Parliament (if required) or executed in practice (if Parliamentary approval is not required). It’s first and foremost task is to manage Mamata. Mamata has been the biggest roadblock for the UPA and her more-left-than-the-Left attitude has completely derailed all reforms. The words “FDI” are like a red rag for Mamata. More importantly, Mamata’s tantrums and protests have given the BJP a handy excuse to stonewall any efforts by the Government to move ahead. This is a fabulous situation to be in for the BJP when no policy making gets done (exactly to its liking), but it needs to take no blame. Mamata’s association with the UPA doesn’t help the UPA one bit, except perhaps in notionally keeping it afloat. Yet, sidetracking Mamata and sinking the Government cannot be a solution either. This is where the Congress President has to take her share of the responsibility. It has to either find a way to handle Mamata or get new allies on board.

The Congress has to align with the Samajwadi Party in bringing Mamata to toe its line. The alliance with SP is a natural one, as I have written earlier. The SP’s main turf is UP; the Congress’s all of India. The SP’s crown prince Akhilesh Yadav would be largely content (at least for now) in being the UP CM. The Congress’s crown prince has no intentions of being CM and would like to be PM. The Congress is weak in UP; the SP oscillates from being the strongest to being the 2nd strongest; either way it is a force to reckon with in the state. Both the Congress and the SP consider the BJP to be the primary competitor. The SP is a more natural ally of the Congress than perhaps Mamata is. The alliance with SP however has its problems. The Congress has to get the 20 seats it got from UP if it has to retain anywhere close to a leadership position in the 2014 Lok Sabha elections. That is where the problem starts. It wants to grow in UP; but that limits its ability to align with the SP and hence its current performance. If it aligns with the SP now, it will no doubt suffer in 2014.

The Congress also needs to learn to communicate much better as a party. Its spokespeople don’t inspire confidence. Renuka Chowdhury cannot get over her visual jhatkas and matkas and half the time ends up saying “Oh please” when an aggressive Ravi Shankar Prasad or Nirmala Seetaraman push their point hard. At present the only decent spokesperson of the Congress is Ashwani Kumar. All the earlier spokespeople like Manish Tewari, Jayanthi Natarajan and Abhishek Manu Singhvi have gone. But more important than the spokespeople are the people who run the party. Why can’t Sonia Gandhi and Rahul Gandhi talk to the media more often, explaining their point of view? In any case, the Government hardly talks – with the likes of the PM, the foreign minister, the defence minister, the I&B minister, and most of the times the finance minister refusing to talk on subjects political. With both the party and the Government not communicating, it appears that governance has gone into a deep freeze.

The Congress also has to step in to rein in the Government as it swings the other way (as a pendulum) on matters where it has been stung hard by the CAG and the SC. Take 2G spectrum auctions for instance. Now the SC has said that the FCFS policy was wrong and that auctions should be conducted. I don’t agree with this. The Government also has challenged this order through a Presidential reference. But even if auctions have to be conducted, does the Government have to go so far as to make 2G into a money making exercise? Today’s TOI editorial correctly suggests that maximizing revenues cannot be the sole objective of the Government. For all the flak that it has got in giving away spectrum cheap (a good policy decision), the fact remains that the UPA has helped grow teledensity by nearly 4 times than what existed in 2004. Without cheap spectrum and the consequent cheap call rates, this revolution would not have happened. The government has to increase the spectrum made available for auctions, has to keep reserve prices low and has to ensure that while spectrum is allocated efficiently through auctions, the price structure does not change so drastically that the revolution gets undone. Likewise with coal blocks. I agree with giving coal blocks away cheaply, as long as the beneficiary doesn’t make super normal profits. That’s the case with all power companies that have got these coal blocks free. None of them is reporting super normal profits; all of them have passed on the benefits in the form of cheap electricity tariffs. We need more electricity; we need cheap electricity; we still have 300 million Indians who do not have adequate electricity to lead even a bare minimum lifestyle. The Congress has to step in here, and prevent the Government from committing hara-kiri.

The real truth is that more than the Government, it is the Congress party that has to take the blame for the current situation that it finds itself in. More than the PM, it is Sonia Gandhi who has to act. Ideally, both the Government and the party need to tango together. But as the first step, it is the party that needs to start to move….

Sunday, June 3, 2012

Kejriwal calls five politicians corrupt…..still none from the BJP!

How obvious it is that Kejriwal (and the whole of Team Anna) is nothing but a stooge of the BJP. Very sparing of its criticism of the BJP (and doing it only when it is absolutely necessary), Team Anna has found one innovative excuse after another to protect the BJP and attack the Congress.

Apparently, passing the Lokpal Bill is only the Congress’s responsibility. Why? Because it is in power at the Center. Fantastic! And what about ensuring the support of the other parties who seem not to be supporting the bill? Well, that’s the Congress’s problem to handle! What about their favorite party, the BJP? Now don’t say anything about the BJP please! When the BJP opposed the Lok Ayukta clause in the Lokpal Bill (a volte face on the Sense of the House Resolution given to Anna), Team Anna must have been acutely embarrassed. Guess what clever solution then found to avoid attacking the BJP? They found Mamata to blame instead! Thank god, there is always Mamata to blame! And for every accusation that people make that they are partisan in their support and opposition to select political parties (in particular towards their support to the BJP), they point towards Justice Hegde’s strong action against Yeddy. True indeed, but what about all the obvious omissions of the passions of the other BJP patriarchs and seniors? What about Narendra Modi’s stoic refusal for eight years to have a Lok Ayukta in his state? What about Pokhriyal of Uttarakhand fame who finally had to be sacked by the party just before the state elections? What about the murder of the RTI activist Shehla Masood in MP in which a BJP MLA is allegedly involved? Surely Anna could have spoken against the corruption in the BMC (Mumbai)?

But Kejriwal chose to ignore all this when he named four names yesterday at the joint rally with Ramdev. Mulayam Singh Yadav (now isn’t he the one propping up the Congress…..putting paid to all of BJP’s well crafted plans to topple the UPA?), Mayawati (another thorn in the flesh for the BJP), Laloo (one name perhaps rightly named) and Jayalalitha (now why doesn’t she formally join the NDA????!). No Naveen Patnaik (remember all the land acquisition for Posco and Vedanta charges?), no Nitish Kumar (remember the Rs 11000 crore “treasury” scam?), no Bal Thackeray (remember BMC roads scam???) and of course no BJP Chief Ministers.

The ganging up with Ramdev is curious. Ramdev wants the government to get back all the black money that has been stashed abroad by corrupt Indians. How about starting with him only first? What about the island that he allegedly owns near Glasgow, Scotland? What about the charges against his ayurvedic formulations (they contained human body parts?)? Isn’t it true that the Enforcement Directorate is after Ramdev too? Should he just clear his name first before mounting an attack at the government? Is it the government that is attacking Ramdev for his illegal businesses, or is Ramdev attacking the government to pre-empt any action against his businesses?

Team Anna is split on whether to attack Manmohan Singh personally or not. But all of them are united that whether he is culpable personally or not, he is surely guilty of not having acted against the so called corrupt ministers in his cabinet. Is he less or more guilty than Anna – who too seems to tolerate such wanton elements like Kejriwal, Bhushan and Bedi in his movement? Did Anna ask the tough questions when it came to Bedi’s travel statements (ripping the government the most in the process) or Kejriwal’s funds management skills and delayed payment of dues to the government or Bhushan’s favorable allotment of land in Noida? I doubt it….because if he had, he would have sacked the trio much the same way he wants the PM to sack 15 cabinet ministers.

Maybe Team Anna needs a lesson in basic economics. Maybe it needs to understand that its difference of views with the Congress’s economic policies doesn’t make it a case of corruption. Did the cheap or free allocation of 2G spectrum and coal blocks lead to super normal profits for the private companies that supposedly benefited from the government’s largess? Is the government’s role maximizing revenues (are we a purely capitalistic country), or allocating resources for the most optimal public good (see where 2G penetration has reached thanks to cheap pricing)? Because if Team Anna understood what governance is, they may perhaps understand why the coal blocks were allocated in a jiffy. It is this urgency of action that led to the addition of 20000 MW of power last year (more than what the BJP put together when it ruled during the 10th five year plan). A little knowledge of economics would show Anna that not everything can be linked to corruption – the higher petrol prices now are not because of corruption elsewhere as they claim….

Team Anna may also want to read the newspaper reports about all the people who seem to be flocking to them for dubious reasons. General VK Singh is the latest in this list. But maybe Anna should read the Business Standard front page story of the 31st of May “Army Chief slams BEML on Tatra, awards it Rs 1500 cr deal” – where it is alleged that the General signed a $275 million contract for 204 ARVs (Armoured Recovery Vehicles) in spite of BEML’s poor past record. It may also want to check out why the CAG made a mess out of the Antrix probe – alleging that it was a Rs 2 lac crore scam – when it made a huge mistake in comparing the price of S band spectrum (akin to the price of a house in Virar) with that of 3G (a house on Malabar Hill). Again, Anna may want to ask Medha Patkar which form of electricity she prefers because I am a little confused here. She’s spoken against hydro power in the past, continues to speak against nuclear power in the present and also keeps complaining about thermal power every now and then. So does she advocate we burn wood to run our factories? But knowing Team Anna, and its political motivations, it is unlikely to check these things out. That is why yesterday was another farce. Nothing but a farce.

The real truth is that when we refer to Anna’s movement, we should perhaps add the words “Sponsored by BJP” to it. In any case, the people of this country have figured this out. Why not acknowledge it publicly then???? There is no shame in being a political movement. But there should be shame in trying to hoodwink the public….

Friday, June 1, 2012

The real truth: As policies evolve, old ones cannot be called corr...

The real truth: As policies evolve, old ones cannot be called corr...:

Every time a better policy takes shape, should we conclude that the older one was "corrupt"???? That is what 2G and Coalgate is all about....

As policies evolve, old ones cannot be called corrupt…..

A TV anchor was building his case against the UPA government as he does virtually on every day by claiming that there were too many similarities between the 2G “scam” and now “Coalgate”. In his wise opinion (?), the government was corrupt in both cases since in both cases the earlier policy was changed (in 3G in telecom) or proposed to be changed (in coal mining) by the government, and hence – his intelligent argument went – this is proof that there “must have been” corruption earlier. Such a joker would be very funny if he was performing in a birthday party or as a stand-up comedian on TV, but as the anchor of a major news TV channel, he should be considered to be an element dangerous to our democracy.

To explain the subject matter of this post, let me take the example of the fuel subsidy that the government has been giving forever. Take diesel subsidy….at present some Rs 15 per litre or so. Let’s say, this comes to Rs 1 lac crore per annum. The government has been discussing for many years now (but lets say only since 2011) that even diesel should be de-regulated, and its prices should be determined by the oilcos themselves. Within the government, there are ministers who feel diesel should be de-regulated (say Jairam Ramesh, Pranab Mukherjee, the PM etc) and those who feel it should still be regulated (say the rest of the pack including the Congress President Sonia Gandhi). Every three months, they have discussions on this subject. Often, the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, as well as the Secretaries of various ministries including finance, transport, commerce and others have joined the discussion and expressed their views on the subject. Again, some believe diesel pricing should be freed up; some think otherwise. All said that there were no legal limitationsno need for a new law or an amendment to an existing one – to freeing up diesel pricing. The PM finally expresses his views that he believes diesel prices should be de-regulated, but political “compulsions”, the proximity of certain important political events, the reality of certain state elections on the horizon compel the government to do nothing about freeing up diesel pricing. For another four years, the pricing continues to be regulated and highly subsidized. Eventually (say in 2015), the government frees up the pricing. This is the background to the points I want to make regarding both 2G and Coalgate:

1)    Merely because the government has discussed freeing up diesel pricing in the past does not make the act of providing subsidies thereafter as corrupt. One cannot argue in 2015 that “See, the government discussed freeing up diesel pricing in 2011. Why did they not do it then? Surely, this is a sign of corruption”.
2)    The fact that different ministers had different points of view does not mean that the one who took the final call – say the PM – is corrupt. If that were the case, then what one is effectively saying is that if there is a difference of opinions within the government, the government should take the most conservative cover-your-ass decision. It should keep one eye on the wise anchor on this TV channel, another on the CAG, a 3rd on the Supreme Court, a 4th on the opposition, and then decide which decision will draw the least ire. In effect, a political decision such as freeing up diesel pricing would be taken by a concoction of unelected wise men in media, the auditor and the judiciary. Why have political parties then? Why not just let these wise men run the country?
3)    The fact that certain secretaries to the government were involved in discussions, and felt that diesel pricing should be freed up – without looking at the political or legal environment – does not make the government is corrupt. At the end of the day, the secretary is just that…..a secretary. The secretary cannot take political decisions. The secretary only brings a rational point of view forward; not a political one. Ultimately, all decisions are political decisions. Diesel pricing is a political decision. One party may decide to free it up (I cannot think of any party right now!); another one may decide to increase the subsidies on it. If decision making were to be taken purely on rational grounds, then we would be talking of the private sector, not the government.
4)    The government eventually frees up petrol pricing (not diesel) and the prices climb up to Rs 80 per litre. This “conserves” (stanches losses) of the government to the extent of Rs 50,000 crores per annum (say). This does not mean that petrol pricing earlier was a “scam”. Nor that diesel pricing today is a “scam”. Trust media to brand it “dieselgate” or some such inane thing! The government moves in baby steps, tests the political waters, and then decides whether to push forward or backtrack. If it can handle the political fall-out, it will try to increase diesel pricing a small bit and again test the waters; if it works, it will be encouraged to continue; else it will beat a hasty retreat. This is politics, not rationality. But this cannot be called corruption.

Let’s now come to the 2G and Coalgate “scams”. I always put the word scam in quotes, because I don’t think they were scams at all. 2G certainly was not. Yes, it looks like there was corruption that Raja indulged in, but the rest of it was just a policy that evolved with 3G. Likewise, Coalgate is mostly a policy matter, which is now evolving.

In 2G, the older regime was to give spectrum cheap. It doesn’t matter than post-3G auctions, this older policy looks odd. But that same older policy was followed by both NDA and UPA right until 2008. Just around then, the government tested waters with 3G auctions and found that it gave it great results. In fact, it got praise from one and all. It helped it contain the fiscal deficit. But it increased 3G pricing drastically. The 3G business is all but finished. Telecom operators have lost money hand over fist (their own fault!). 3G penetration is one-tenth of what their plans were. The government’s objective of high broadband penetration has not been met. The success with 3G was only financial; not social. Clearly, neither should the 3G experience compel the government (or the Supreme Court which has no expertise in economic matters) to auction 2G airwaves (since it doesn’t want penetration to fall and prices to rise), nor should it be inferred that the no-auctions earlier policy was corrupt. What were corrupt (if proven) were Raja’s shenanigans and that is what the court should restrict itself to.

In Coalgate, the fact that the UPA first considered auctioning coal blocks, later felt that legislative reforms were required…..the fact that the Coal Secretary felt that legislative reforms were not required….the decision got delayed by many years…..etc etc does not prove that earlier policies were corrupt. The earlier policy of “allocations” rather than auctions was followed since independence, including by the happy-to-claim-high-moral-ground BJP. In fact, one can argue why the BJP did not even think of 2G auctions or Coal block auctions…..leave alone implement. Policies evolve over time and newer ones make the older ones look suspect. Mamata Banerjee refuses to increase railway prices. But is this also “corruption” or is it just a flawed political policy? We still allocate land at concessional rates to SEZs. Is this corruption or policy? The various tax sops given to the IT industry in its early days and then later extended till today….is that corruption or an encouraging government policy? Branding everything as corruption is sensationalist; but also very stupid.

The ultimate test of corruption has to be if some person or some company gained personally. Check our the financial results of different private sector power companies. Tata Power: Revenue Rs 8496 crores. Net Profit Rs 1170 (13.7% margin). Bhushan Power: Revenue Rs 9941 crores. NP Rs 1024 crores (10.3%). Lanco: Revenue Rs 8605 crores. NP Rs 116 crores (1.3%). Jindal: Revenue Rs 13334 crores. NP Rs 2110 crores (15.8%). Adani Power: Revenue Rs 3949 crorese. Net loss Rs 294 crores (-7.4%). Check out the public sector NTPC for a benchmark: Revenue Rs 62053 crores. NP Rs 9223 (14.8%). So which private sector company has been making super-normal profits? If the “proof” of corruption is that these companies benefitted from the government’s “gift”, surely their margins should have been far higher???? Or does it prove the government’s point that the cheap coal was used to give power cheap to the poor? Just for the information of readers of this blog, there are still 300 million Indians who don’t have a power connection. Power consumption in rural India is just 64 KWH and in urban India just 288 KWH per annum, compared to a worldwide average of 2600 KWH. The European countries average is 6200 KWH. Does this sector need government encouragement or not????

The real truth is that giving national resources free or cheap has always been a conscious government strategy. We’ve always been socialistic in approach; never capitalistic. The end result of such policies has always been cheaper end consumer pricing. In a poor country, that should be the primary objective of government policy; not maximizing revenue as some capitalist zealots seem to now be professing. No company makes supernormal profits in telecom; no company is doing it in the power sector. Clearly the Coalgate discussion is nothing but a political one…..the wise and oversmart TV anchor’s views notwithstanding!