Coalgate needs to be brushed away…..

The CAG created a sensation recently by stating that by not auctioning coal blocks since 2004, after having first mooted the idea itself in that year, the Government of India had caused a loss of Rs 10.67 lac crores to the country. It mattered little to the CAG that the policy of “allocations” was being followed since time immemorial….right till 2004 when the government first considered “auctions”. It was unable to adopt auctions for various reasons. Does the mere fact that the government considered changing the policy but could not do so constitute a scam?

The revelations in the TOI today show how the then Minister Of State for coal – Dasani Narayan Rao – and the PMO had had elaborate discussions on auctioning the coal blocks since 2004. But for one reason or the other, the auctions were not done. Rather, the “extant” policy of “allocating” coal blocks through a “screening committee” was continued. It wasn’t a slip-up or a goof-up or something done surreptitiously to make money on the side. It was merely continuation of an older policy till the time the new policy could be implemented. The delay itself was necessitated by special circumstances that existed then.

At worst, this could be a case of poor governance. Having mentally decided to auction the coal blocks, the bureaucracy and the political establishment should have been able to move quickly to make it happen. However, the many constraints the UPA-1 government faced must no doubt have played a role in making the implementation difficult. Remember, the Left was supporting the UPA government from the outside. A cabinet decision which did not have the Left’s backing could never be implemented. This is what appears to have stalled the auction process in 2004. The CAG report, as mentioned in the TOI says “it (the new policy) would invite further delay in the allocation of blocks considering that the Coal Mines (nationalization) amendment bill 2000 envisaging competitive bidding as a selection process for allocation of blocks for commercial purposes was pending in the Rajya Sabha with stiff opposition from trade unions and others concerned”. With the trade unions opposing it, there was no way the Left would have supported the auctions. This was in 2004-5. Again in 2006, it appears that the problem persisted and the PMO had allowed the department to proceed with the extant (existing) mechanism (through the selection committee).

Again in 2007, the PMO felt that it would be more appropriate to make an amendment in the Mines and Mineral (Development and Regulation) Act, 1957, so that the system of competitive bidding could be made applicable to all minerals covered under the said act. There was thus a further delay in the auctions for coal mines. So again, there was a re-think, rather than a “goof up” or “intentional scam”.

Like I mentioned in an earlier post on the same subject, coal blocks were never auctioned in this country. Auctioning everything has never been government policy. India is a socialist country and making money is not the sole priority of the government. Even during the 6 years of NDA rule, coal blocks were not auctioned. Maybe the NDA government thought of auctions as an appropriate mechanism and moved the amendments bill in 2000. But it could not get it approved on account of its own compulsions. The UPA-1 government could also not get it approved for reasons explained above.

There is one thing that is well known about India. Decision making is an extremely slow process; an attempt at generating adequate support for any piece of legislation takes too much time. Passing new laws takes years. Implementation of laws also takes time. But then no one really cares for governance in our country. If a minister, or an entire bureaucracy, delays decisions, no one asks them any questions. But if in the process of decision making, some mistakes – even innocent ones – are made, then the same are projected by bodies like the CAG as scams. We have created an environment in the country where sitting on one’s back-side is acceptable; but moving quickly is not. Not so long back, Praful Patel was hauled up because he took the decision to order the planes too soon; in just 17 months of discussions!

When the Government refuted the charges made by the CAG in its draft report, the CAG went on the defensive saying that they were very good accountants; of course they are. But good accountants can make big mistakes when they fail to understand their mandate. The CAG may be mathematically right – just about “maybe”. But that’s a silly way to approach a policy matter. The Government has been thinking of freeing up diesel pricing for a long time. Let’s say the first “thought” was ten years back. So if the CAG were to do an audit today, they would probably say that the country has lost many lacs of crores again because they did not implement what they thought! This is plain ludicrosity!

The real truth is that there is nothing called Coalgate. The media has branded it as such so as to generate more eyeballs for its content. The truth is that just one uses the venerable Colgate to brush the muck out of the teeth, it is time to brush the muck that is itself being called Coalgate…..

C’mon General…..give us the juice

General Singh has teased us the way TV channels tease us in their promos about the content following an ad break! But why is he only teasing us? When will he give us the real juice? Or will he suddenly start acting coy, remembering that he was a senior government official after all? Whatever he does…..in a drama-focused media and country….it is hardly fair that the General should stop short of a full disclosure now.

I am not quite sure which way this story is headed. The General himself has been accused by a few journalists on TV of wreaking vengeance on the Defence Minister, Antony. This is apparently, his way of getting even with the government after the age-row bombed in his face (he probably holds a grudge). But if this were true, why would he himself indicate that the minister was shocked, and held his head in his hands in surprise? Why would he then also say that it was not like a direct “ghoos” had been paid to him….it was only an indirect offer; hence he didn’t take it too seriously. Is this why he didn’t file an FIR? It’s strange – I wrote yesterday that any of Anna’s team members or the general public could file FIRs against any minister…..here is a case where the General failed to file an FIR also. What’s it with FIRs these days?!

The media (at least some sections of TV news media) have spun an interesting theory – full of drama. The story goes that the beneficiary of the General’s generosity (that rhymes well!) would be Bharat Earth Movers – a government owned PSU. And since the Defence Minister is the ultimate head of all Defence PSUs, he must be the one who bribed(!) or at least induced the bribe to happen. Truly fascinating. But these are times when anything goes.

This is as ridiculous as many of the CAG’s recent reports. In fact, one of the readers of my blog – Zephyrine Goveas – wrote on how ridiculous CAG can be: “Next the CAG may say that there has not been a war for quite some years and therefore all the expenditure on Armed Forces is a colossal scam and this scam will be bigger than any one can imagine!” And again, Antony may be held responsible for this scam! Ridiculous. The spin that some TV channels have given this is something similar. If there is one thing Antony has never been accused of, it is of corruption.

In the past, I have written that this country assigns no priority to decision making and action orientation. In my post of June 9^th, last year (We need efficiency, risk taking, quick decision making and big thinking in governance. Not just freedom from corruption......and a solution to the Lokpal logjam), I wrote: Who would you rather prefer? AK Antony – known as one of the cleanest ministers – but who hardly takes any decisions? Or Praful Patel – action oriented; functioning like a CEO; one who changed the look of the Indian aviation sector – but who has been unable to survive the charge of nepotism and perhaps corruption?” The context of that post was the charge made against Praful Patel for “speedy” decision making with respect to ordering planes for Air India.

AK Antony is clean; but inefficient. Under his watch, decision making has come to a standstill. Antony prefers not to take decisions since decisions can be controversial and he can be accused of playing god, indulging in corruption and many such things. How can a man like Antony be responsible for bribing the General?

And besides, at some level, I feel that if Antony wanted the General to take a particular decision, he would find other ways of getting his work done. At the end of the day, the Executive knows of ways known to all, but told officially to none, to get its work done.

In any case, now that the General has shed his coyness and broken the bribe offer made to him, why is he holding back? Why not go the whole hog and make the ultimate revelation? Will he open his heart up to the CBI, now that an enquiry has been ordered? We’ll need to wait and watch. Hopefully, he’ll decide something while still serving in the army, rather than when he’s become a retired General!

The real truth is that the story has more layers to it than anyone understands right now. If it had been any other minister, I would have believed what the General claimed. Considering that it is Antony (whose personal credibility is similar to the PM’s), I am very circumspect….

Anna’s bark is worse than his bite….

I am not even sure if another post is required on this very tired movement…..a movement that got wrecked by a bad team and wrongful leadership. Coming after a 3 month hiatus, the one-day fast by Anna at Jantar Mantar was more of the same stale fare that this country has got fed up with and discarded.

From media reports, one learns that there were not even 4000 people at the fast; this on a balmy spring day in a very politically aware and savvy capital. Of these, it can be safely assumed that a thousand odd would be media people; another thousand odd would be the show organizers, event managers, security personnel and the like. Where does that leave the actual crowd support? Less than what Anna got in Mumbai? Is this real bite??

And what was the issue that was being raised this time? The demand for a “strong” whistleblower bill? A “strong” Lokpal bill also perhaps? And while we are making demands, why not demand the resignation of the UPA government also? Ooops, would that be going too far? Let the BJP do that. Anna will limit himself to asking for some FIRs to be registered against some politicians – not surprisingly most of them part of the anti-BJP brigade.

Register FIRs? Why should the government register FIRs against its own ministers? Anyone can do that. Why can’t the common public file an FIR? Why can’t Prashant Bhushan – the hot shot PIL expert and leading anti-Congress light – file an FIR? But then, this is not the only ludicrous part of the demands that was made yesterday. How come there were no BJP leaders named against whom FIRs should be filed, except Yeddy, who everyone knows has become a thorn in the flesh of the BJP? Why not against the MP CM Shivraj Chauhan against whom enough and more accusations have been made of late with respect to illegal mining? Why not against Modi against whom the CAG has made several accusations over the years? Why only against Congress leaders, and other anti-BJP crusaders like Mayawati?

If Anna’s fight is against corruption, then why not against Baba Ramdev, who has enough to account for in terms of hawala transactions and illegal assets held abroad? If we are going by mere accusations (and I have no idea if the accusations are right or wrong), then surely an FIR against Baba Ramdev is justified? In fact, not only did Anna not demand an FIR against Baba Ramdev; he exhorted his supporters (who were where?) to support his movement. Great.

In case Anna forgot, the Whistleblower bill has already been introduced in Parliament and is with the Standing Committee where his favority party will have the chance to add value if it deems fit. Hopefully, it will not do a “Lok Ayukta” kind of trick with this bill. Even if it does, it needn’t worry about attacks from Anna. Anna was most understanding of the BJP’s volte face on the Lok Ayukta issue after all. Not once has Anna demanded that the BJP explain this volte face. Not once has Anna taken the BJP to task. But then, the Lok Ayukta turnaround is not the only point where Anna has been kind to the BJP. When the Bihar legislature adopted a Lok Ayukta Act which was way below Anna’s expectations, there was nothing more than a mere whimper of a protest. When Modi sat on the appointment of a Lok Ayukta in Gujarat for so long and when the Governor finally chose one, Anna never criticized Modi.

Nor has Anna demanded answersfrom the Left parties on the weak Lok Ayukta Act that they introduced in WB and Tripura when they were ruling. If one thought that Anna had learnt a lesson and had changed tracks, yesterday’s event shows that that was not true.

Frankly I had written about this earlier; and I will write this again. The only party that is pushing for the Lokpal is the Congress. Maybe it’s because it’s been hit black and blue and wants to prevent any more damage. Maybe because it sees an opportunity to gain some lost ground. People may disagree with how strong the bill passed in the Lok Sabha is – and there will always be differing viewpoints in a democracy – but at least something has been passed. After waiting for 42 years, I think it is important to first secure some law. It can always be amended in due course of time. There can be no denying that that bill was passed only because of the Congress’s push; and in spite of the BJP’s resistance. Had the BJP had its way, it would have blocked it in the Lok Sabha also.

The real truth is that much of Anna’s threats are just that…..threats. There is hardly anything new; and hardly anything that lifts the movement from the mess it got into. The people of this country are horrified with the corruption; and they want action; but they are equally disillusioned with the movement that promised the earth and the moon but could not even deliver the most rudimentary form of the requisite legislation. Anna’s movement doesn’t deserve the front pages of the newspapers or the prime slot on the 9 pm news bulletins any longer….

The Lok Ayukta clause exposes the true colors of all political parties…..

The meeting called by the PM yesterday brings out the truth about the status of the Lokpal Bill and the positions of various parties vis-à-vis the bill and Anna Hazare. Today’s papers are worth a read. None of the issues matters to the political class except one: The prescription of a Lok Ayukta law under the central Lok Pal bill. One would have thought that that clause was at the heart of the understanding the Parliament had given Anna late last year. What happened to that commitment? And why is Anna still not attacking the duplicity of certain political parties on this key aspect of the Bill?

In the heated moments of the last stretch of Anna’s fast, every political party strained itself to be seen on his side. In a ridiculous display of political opportunism and desperation, several top leaders of these parties even shared a public platform with Anna in Delhi. And when each of them spoke, the only points they touched upon were the points on which they agreed with Anna. Not one of them raised the issues where they disagreed with Anna. After all, who wanted to get booed out by the crowds there? But as soon as the tempers cooled down, the real colors of the parties have started to show.

The sense of the House resolution passed “unanimously” by Parliament read as under: "This House agrees 'in principle' on following issues -- (i) citizens' charter, (ii) lower bureaucracy under Lokpal through an appropriate mechanism, and (iii) establishment of Lokayukta in the states."

The Central government in December introduced the “Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011” to cover the first commitment of the Sense of the House resolution. The only point of disagreement with Anna on this is on whether it should be an independent act (as proposed by the Government) or a part of the Lokpal Act (as Anna would like it to be). While some people may keep debating it, the fact is that the subject is largely getting addressed. Likewise, the lower bureaucracy has been brought under the Lokpal through an “appropriate mechanism” – via an indirect mechanism through the CVC. That leaves only the 3^rd point open.

The 3^rd point was introduced by the Central government as part of the Lokpal Bill – the bill that was passed by the Lok Sabha. The same bill that got jammed in the Rajya Sabha. The Rajya Sabha is where the opposition gets to play its cards the best – since it’s a house that the ruling dispensation doesn’t control. And just see what’s emerging from the Rajya Sabha.

The BJP, the Left, and virtually all regional parties are opposed to the Lok Ayukta clause being there in the Lokpal Bill. Weren’t these the same parties that had resolutely supported Anna and the Sense of the House Resolution? Wasn’t the Congress supposedly the only party that was opposed to Anna and the Lokpal construct? What’s going on here? Are we reading the reports wrong or what? Is it the BJP that is opposing the Lok Ayukta clause? Never before had the party said this. Jaitley never mentioned it on the public platform he shared with Anna. In Parliament, when the Sense of the House Resolution was being passed, it was the BJP that wanted the resolution to include these three specific points. Wasn’t it Sharad Yadav of the JD(U) who had said that “every word, every comma, every full stop” of the resolution will be included in the Bill?

Political parties are known to be turncoats. And the Congress is no exception either. But for the people of this country, it is important to be able to dissect issues and put the blame appropriately on those who deserve it. The Congress deserved the blame for the way it initially tried to steamroll the movement. But now the BJP and the opposition need to be blamed for their complete U-turn on the Lok Ayukta issue.

But has Anna put the blame on the BJP? No. Not once has Anna or his team squarely blamed the BJP or the Left. If this was political smartness (befriending the opposition to put pressure on the ruling dispensation), that would be understandable to a point. But if the befriending is causing the entire objective to get diluted, then why continue with it any further? In fact, by blindly supporting the BJP and opposing the Congress, Anna is responsible for having derailed the movement. Had it been a citizens v/s politicians battle, there would have been far more support for the movement. It would also have been more sustainable. I doubt now if the movement can ever be resuscitated. Timing is everything in politics. And being smart about making the right compromises is part of every successful struggle. Gandhiji made several compromises with the British – but he moved towards the ultimate goal with patience and determination. The Anna movement on the other hand wanted it all in one step. Now the country may get nothing at all.

The moot question is: Why is Anna not making a frontal attack on the BJP and the Left? Is it to do with the kind of team he has? Isn’t there more to the attack on the Congress than just a keen desire to put pressure on the ruling dispensation? Are Arvind Kejriwal, Kiran Bedi and Prashant Bhushan more anti-Congress than pro-Lokpal? Is there a clash of objectives taking place here? Is Anna not savvy enough to see through this? Or is he trapped in an organization structure that he is unable to break?

It’s only been in bits and pieces that Anna has moved on from his acute anti-Congress stance. After fighting the Congress in Hisar, he directed his workers not to make the fight party specific in UP. He does appear to be a lot less vitriolic compared to six months back, but is that because of his own personal health reasons? Or does he realize all political parties are alike? But till date, Anna hasn’t been able to reclaim the high ground that being apolitical make available.

Will the Lokpal Bill ever get passed or will it become a long lasting political issue between parties? Going by the goings-on, I doubt it will ever become a reality. And if it doesn’t, the political class (all parties included) would have outsmarted Anna. The next crucader may want to learn from this entire episode.

The real truth is that Anna made a fatal mistake by making his movement political. By doing so, he lost the opportunity to give the country a Lokpal Bill – no matter how weak or strong. Acts can be amended. But getting the first one in place takes a lot of effort. That important first move has been missed…..

CAG at its ridiculous best again…..

The story in TOI and the drama that followed – with the CAG denying the story through a letter to the PMO, the PMO releasing a part of it and then a subsequent publication of the full letter by TOI – shows the bizarre way constitutional authorities have started to think and function these days. At the end of all this, it is not clear whether the CAG is standing by this alleged report or denying it. It appears to be denying it. But if there is even an iota of truth in this report, the CAG needs to pause and think where it is going with all this.

Even in the most generous defence of the CAG, one would still have to agree that if the CAG had its way India would have to become a totally capitalistic country. Where everything is sold at the highest price – the poor who cannot pay high prices be damned. Maybe the CAG has forgotten that India is a “welfare state”. The word “socialism” is built into the preamble to the Constitution. No political party can be set up if it does not agree to be a socialistic party. The allocation of coal fields without auctions is just another example of such a welfare practice. If the CAG wants to take a capitalistic approach, there are thousands of other areas that it will find that “have led to a loss to the exchequer”. By that token, the entire $2 trillion economy is a scam! Or maybe perhaps the CAG needs a lesson in the basic polity of the country.

I can imagine a day when the CAG brings out a report that says that the GOI loses lacs of crores of rupees every single year because of “over employment”. In making this observation, the CAG would be entirely right. But it would also be “clerical”, as has been its method recently. The CAG could compare every Government department with a similar private sector company – and bring out a startling report of this type. Take two examples that come to mind immediately. Prasar Bharati employs some 18000 engineers in its total staff of some 45000 odd. It generates revenues of some Rs 1200 crores or so per annum. These engineers take care of the technical requirements of AIR and DD. The number of such engineers in any private sector broadcaster – either in TV or radio – despite being bigger in revenues than DD and AIR respectively – would perhaps be less than 25. Even considering the outsourcing that private companies do, the number of engineers employed would be less than 100. Technology is a commodity and its upkeep simply does not require so many people. Yet Prasar Bharati has 18000 engineers on its rolls. Take the example of Air India. Its employee strength is many times of a private airline of similar size.

The moot question is: Does this make a “scam”? Does this constitute a loss to the exchequer? In one way – the way the CAG has started looking – sure it does. If only 100 engineers were employed in Prasar Bharati, then surely Prasar Bharati would be a profitable company. So would Air India. But is that the way the polity of this country is designed? Can the Prasar Bharati afford to run with just 100 engineers, when another part of the Government’s mandate is to run like a “welfare state”? Isn’t employment generation – with all its consequent ill effects – almost mandated by the Constitution?

Just look at the CAG’s claims. Apparently, the GOI should have auctioned all the 155 coal blocks that it audited. Sure it could have. Then the price of coal would have shot up. Electricity costs would have shot up. The poor would not have been able to afford it. And since that would be politically unwise, the government would have had to heavily subsidize power. There are enough problems the power sector is facing –had the blocks been auctioned, the problems would have been even more. If the CAG had its way, that would be ok. It’s better to have no power at all (with all of us living in the dark ages) than to have a welfare state. Ridiculous at its best.

As one political commentator said on TV “Even if half this amount is correct” (meaning if the “scam” is just Rs 5 lac crores), it is shocking. But where is the “scam”? It’s all out in the open. The government has not surreptitiously avoided auctions. It has done so openly. We would like to hear from the CAG what the real scams are. Has someone made money on the side in implementing this welfare policy (very likely someone would have)? Obviously, the CAG is silent on that.

Besides, more than half the so called scam is towards helping PSUs. So is it the CAG’s point that the GOI lost, even though its 100% owned companies made “windfall profits”? (The CAG has apparently now stopped using this word in its report).

Sure, there may be a case today to charge taxes on windfall profits. And sure that would be a healthy public debate to start off. But to say that there was a loss to the exchequer is bizarre.

The exact same thing had happened in the 2G “scam”. The real scam was in what Raja allegedly did. There is an allegation that his party – the DMK – got Rs 200 crores in “deposits” from DB Realty. The CAG didn’t bring this out. The CBI did. The CAG preferred to bring out a sensational report accusing the government of having lost money. The CAG forgot that the 2G spectrum was no auctioned as a specific and thought-through policy decision. The same policy had been followed in this country since the beginning of the telecom revolution. Even the Supreme Court went overboard on this subject when it ordered against FCFS in totality. Thankfully, the Government has appealed that order.

It would be bizarre if the CAG and the Supreme Court were to start making policies. Neither of them is an elected body. Neither represents the people of the country. The SC can easily overturn the Government’s appeal with no explanation owed to anyone. Likewise, the fine balance between institutions is being challenged here by the CAG.

The CAG similarly put a sensationalized number of Rs 2 lac crores in the S-band Antrix “scam”. It had to beat a hasty retreat when it was clarified that the S-band spectrum cannot be compared with 3G spectrum. Did the CAG issue an apology? No way. What about the whole estimate of Rs 1.76 lac crores lost because auctions were not carried out in 2G spectrum? Wait and see….bankers and analysts are wondering if the government will realize even 10% of that number. And that entire 10% will be passed on to consumers. Telecom prices will go up. And we’ll all be forced to pay more to “enjoy” the fruits of the CAG’s labors.

This disastrous working of the CAG should not be made into a political battle. The CAG will devour whoever comes in its way – whether the NDA or the UPA or the Regional parties. The CAG needs to be tamed. It has a huge role to play. It cannot be let to malfunction in this manner.

The real truth is that the CAG has gone overboard yet again. It has forgotten that it has no role to play in policy making. It cannot say whether “no auctions” is good or bad. It can say that in the “no auctions” regime, there was violation of systems and procedures and some people made money or the exchequer lost money. In an environment of hyper-competitive media, the CAG’s callousness can be multiplied many times over. And the country can come to a grinding halt……

Weak national parties; weak national leaders….

The last few days have seen the two national parties – the Congress and the BJP – face acute embarassment. The Congress faced a revolt from within its ranks in Uttarakhand. The BJP is facing the same situation in Karnataka. A few weeks back, the two parties both suffered a drubbing in the state elections (ok….they can keep squabbling on who got a bigger drubbing!) while the regional parties surged ahead. So we now have a situation where not only have the national parties become relatively weaker, they are struggling even to keep their flock together.

So what’s going on here? Why is Yeddy revolting so openly and unashamedly against his party in Karnataka? Why is Harish Rawat doing the same against the Congress in Uttarakhand? Let’s first look at why the regional parties are doing better than the national parties.

Clearly, the SP and the BSP are more rooted in the politics of UP than the BJP and Congress are. They have nothing but UP to fight for. All their leaders are from the state; all of them have ambitions restricted largely to the state. They speak the language of the people; resonate with their complaints; and in short represent them much better than the national parties do. The national parties on the other hand look at the states as being the gateways to power at the center. UP is important because it represents 80 seats; not because of what it is per se. Each national party is happy to do (perfunctorily) whatever it takes to get those seats. Once the state is won, the focus shifts back to the Center.

Take the case of Maharashtra where Prithviraj Chavan (a good CM by any standards) failed to read the political opportunity afforded by 17 years of Shiv Sena – BJP rule in Mumbai. As far as he was concerned, the political opportunity was a mathematical one. Get into an alliance with the NCP and the battle is won! Maybe the Congress made the mistake of not fielding the right candidates; those who represented the people better. Maybe they forgot to get more of their supporters to vote; the Shiv Sena on the other hand is a strong cadre based party. Maybe the issues raised were wrong; the people were more focused on local issues. Whatever the reasons, the fact is that the drubbing in Mumbai highlighted the fact that Prithviraj Chavan was an “outsider”.

Take the debacle of both the Congress and the BJP in UP. Neither party had strong local leaders. Rita Bahuguna Joshi is a political lightweight and Uma Bharati an outsider. Both were guided by policies framed by their masters in Delhi.

The only exception to this general trend is seen in states where the national parties have propped up strong local leaders; Modi for the BJP and YSR in AP being two such examples. Now that YSR has gone and the Congress has anointed a lightweight as the CM, the Congress’s fortunes are bound to decline there. By this logic, the BJP would be better served by re-instating Yeddy as the CM – the general feeling of corruption against him notwithstanding. All said and done, the issue of corruption is a national issue – which engages people at an intellectual level; not really a local issue at all. At the level of the states, the issues are more related to “aata daal” – concerning the daily grind of life. In Karnataka’s state elections, Yeddy is a towering personality and he could win the BJP the state yet again. The problem that central leaders face is that such strong local leaders are seen as a threat.

So regional parties are having a field day in the states. And strong regional leaders of national parties are also having a field day. Now look at the Central leaders that we have today.

The seniormost leaders of the Congress are Sonia, Manmohan and Pranab Mukherjee. None of them is a “traditional” politician; a mass leader which can handle the politics. None of them have the gravitas of a Vajpayee or a Narasimha Rao or an Indira Gandhi. Remember the days when we had such PMs as Inder Gujral (a fine man otherwise, but a political lightweight). Look at the BJP. Two of their top three leaders are lightweight politically (Nitin Gadkari and Arun Jaitley). On their own, they couldn’t lead a small district unit of their party; and yet they are playing big roles at the Center. Only Sushma Swaraj is a true blooded politician and a charismatic person at that. The BJP has also muted out other political heavyweights like Murli Manohar Joshi and Rajnath Singh.

Why do central political parties feel compelled to mute out their regional leaders? The reason is not difficult to understand. In a coalition era, the regional parties are able to exert more than proportionate pressure on the central parties. Just look at Mamata and DMK under the UPA-2 rule and Mamata and Jayalalitha under NDA rule. If such allies have to be “adjusted”, then the central leadership necessarily has to be “flexible” (a euphemism for weak in politics). A Vajpayee is more suitable than an Advani; a Manmohan Singh than anyone else in the Congress. Pliable central leaders are part of the coalition regime it would appear.

There is one other reason why traditional politicians are not emerging at the center. The people of the country perhaps want to see more sophisticated leaders representing their country. Most of these (Arun Jaitley, Manmohan Singh, even Pranab Mukherjee for most of his life) are elected from the Rajya Sabha where political astuteness and dirty aggression is not a pre-requisite. State politics is dirty – and almost all regional leaders have to indulge in the dirty aspects. Some are accused of corruption; some of fanning religious sentiments; others of caste politics and yet others of parochial opposition to everything. At the center, this doesn’t work. So we have a situation where central leaders are intellectuals; while the state leaders are the real politicians. These politicians make the central intellectuals dance to their tunes! They often dictate policy; but have no concurrent responsibility for the same. The DMK can make India vote against Sri Lanka. It has a limited objective of catering to local sentiments. It’s not the DMK’s problem that a vote against Sri Lanka could give China an easy entry into that country; something that could have devastating consequences for the country.

Forget what state leaders claim. The truth is that we have far too much federalism in this country. We need less, not more federalism.

The real truth is that both the BJP and the Congress need to introspect. They need to think about who takes on the positions of power within their organizations. The much touted intra-party elections may be one solution. But more than that, it is the genuine conviction that only strong political leaders (and not intellectuals) can lead political parties that is needed. Till that happens, the center will keep getting weaker (even if it has a majority) and the states will keep getting stronger (even if ruled by a central party)…..

Nothing great about the budget…..except maybe the support for Aadhar

Most political commentators have been disappointed by the financial budget presented by Pranab Mukherjee on the 16^th. There were nothing “visionary” of the budget they said. However, most financial-world experts have praised the budget for being realistic, not too lofty, and making a sincere attempt to address the problems that the country (and the world) is facing.

There are hundreds of things that a budget tries to cover. However, for me the most important aspects of the budget relate to addressing the GDP slow-down, curtailing the fiscal deficit, controlling inflation and providing an impetus to the growth of infrastructure. Obviously, all of these are inter-linked and the Finance Minister has to decide what the relationships between them are likely to be. Beyond these important goals, the rest tends to be a little tinkering here, a little there.

Let’s look at how Pranab Mukherjee has handled the GDP slow-down issue. On the one hand, the government has increased the excise duties by 2% in most cases. If a reduction of 2% had had a positive impact on GDP growth, a 2% increase is bound to have the reverse effect. Growth could get cramped further in the industrial sector. Further, by increasing the scope of the Service Tax regime, there is a possibility (although this has not happened in the past even though the tax has been progressively applied to more and more service) that the Services sector could slow also down at least partially as well. The government had no options really – as the reduction in excise duty was only intended to be a temporary measure in the first place. While the excise and service tax will reduce GDP growth, there is nothing in the budget proposal really which is aimed directly at increasing the growth. The Finance Minister does however hope to increase GDP growth rates through indirectly.

Quite rightly, the Finance Minister appears to think that the growth rates in the industrial sector can be revived by a reduction in the interest rates. However, the RBI has clearly indicated that it would lower rates only if it saw sincere efforts by the government in reducing its own borrowing – or reducing the fiscal deficit in other words. The Finance Minister has made a plan for a lower fiscal deficit at 5.1% of GDP compared to the 5.9% that FY12 eventually saw. A reduction to 5.1% is hardly sensational; hence the disappointment in some sections of analysts. However, because of the same reason (that the reduction is hardly sensational), the budget has got applause from other sections – who believe that the goal is realistic given the many constraints the FM faces. So what Pranab Mukherjee hopes is that the RBI will see this as a sincere effort, and will oblige by reducing rates. Should that happen, the sentiment will lift, investments will increase and a higher GDP growth regime could kick in.

So again, GDP growth has been pegged to an easing of the monetary policy; there is hardly anything in the fiscal policy that the government directly controls.

What about the efforts at reducing fiscal deficit? I feel that the budget relies more on off-budget action than anything else. It is clear that the government wants to increase diesel prices. Will it have the political room to do so – in the face of a rampant and destructive ally Mamata? The government also wants to increase fertilizer prices, but again it will face major opposition. Will it be able to generate the Rs 58000 odd crores from 2G auctions? Most analysts think this is highly exaggerated; as the whole premise of the CAG in estimating the value of 2G licenses was flawed in the first place (all those who believe that the 2G scam was worth Rs 1.76 lac crores will be badly disappointed when the bidding finally happens). And yet, Pranab Mukherjee has budgeted for all of this to happen. That’s what makes the budget numbers wishy washy. Considering he suffers from a credibility issue after last year’s pompous claims, he could have been more forthright in addressing these issues within the budget itself.

Further, if diesel and fertilizer prices are indeed increased, then what about the effect on inflation? If inflation rises again (fuels have a 15% weightage in the inflation calculator and agriculture another 15% or so), then the RBI could refuse to reduce rates. The entire growth story would then come unstuck.

For me, the single most important aspect of the budget was the emphasis (for the first time) on the Aadhar scheme. Since very few people understand the revolutionary potential of this scheme, it didn’t find much mention in the media. Some Rs 14000 crores has been provided for extending the scheme from its present coverage of some 200 million people to more than double that number. The Aadhar scheme is a very ambitious one. Not only is it the biggest biometrics scheme anywhere in the world, it is also the one scheme that can have a seriously positive impact on curbing corruption (in the PDS system) and hence the subsidies budget (upwards of Rs 1 lac crores per annum; and set to go up further). If the targeted beneficiaries could be clearly and indisputably identified by an Aadhar number, then the subsidies that are being grabbed by ineligible people could be conserved. There are many other advantages of the Aadhar scheme. The Aadhar number can be used to open bank accounts; bringing much of the subsidies into the “white” measurable domain. The beneficiary wouldn’t have to take whatever trash the ration shops throw at him (selling the better quality in the market for high profits) – and would be able to use the cash in the bank to buy whatever he wants. And most importantly, financial benefits could be linked to other social goals as has been done in many Latin Americal countries – like forcing beneficiaries to enroll their children in schools, restricting the size of the family etc. This is the first budget that has made such an extensive allocation to the Aadhar scheme. This one measure alone can transform the way our economy works. This one measure alone can curb corruption like no Lokpal can.

The GDP growth can also get an impetus through some efforts made to grow the infrastructure in the country. The increase in the size of the tax-free infrastructure bond schemes from Rs 30000 crores to double that size should help plough more resources into this crucial sector. The import duty on coal has also been temporarily reduced to zero to tide over the crisis in the thermal power sector. Customs duties have been left intact in an effort to provide more resources (commodities) without raising their prices. So all this is good. But no where is there any effort to improve core “governance”. In the case of infrastructure, governance could simply mean implementing projects on time. If just this much could be ensured, the country would grow much faster. Resources wasted on delayed projects would be saved; and the gains from a faster developing infrastructure would propel the overall growth of the GDP much faster. Unfortunately, the PM’s much touted “formal appraisal” idea (appraisal of his ministers every six months) has been a non-starter. A budget is not the place for this discussion; but I do hope the government can show some will in improving the implementation of its plans.

The real truth is that the budget doesn’t address the GDP growth issue directly. It relies on an easier monetary policy for its growth. I would have liked to see more ambitious proposals on the fiscal side. Proposals that would spur growth directly. Like reforms in the FDI regime; stronger commitments on the infrastructure sector etc. But given the political scenario, we should be happy with what we got……