Good Goals, Wrong Policies, Incremental Implementation

When there are signs of income not meeting expenditure what would we do? Cut down on luxuries, reduce the quantities that we consume and spend efficiently. But what if we continue splurging on movies and beer but cut down on food, education and in case of those with families, their own children's education and health? As if it this wasn't enough, all assets that can produce any income are given away for free and those that produce income are sold in bits and pieces to sustain the family. That is exactly what the government is doing right now. It signs multi-billion dollar defence contracts (a & b), has set up an aid agency with a fund of over 15billion US dollars (c), sells of stake in profit making PSUs and sustains loss making ones (Air India) and throws away resources to crony capitalists. In addition, it is also increasing inefficiency in its spending and is like buying a rickety worn out,leaky petrol vehicle, always filling it to the full and roaming around without going anywhere near the objectives simply because the head of the family is being promised more years at the head by a few loyalists. These loyalists would do the same to any other from the family who is willing to undertake more spending measures.

When considered on their own, these policies have merit. Coal blocks were allotted to increase power production and cement manufacturing, but no one bothered to regulate the pricing of coal and cement produced. Revenue maximisation was not the government's goal, but that was the only goal for several companies who kept hoarding spectrum and coal without exploiting it for prices to rise and sold off stakes in these companies which mean that benefit of low cost access to resources were cornered by these fake companies that were allotted resources. The government's response to the Supreme Court judgement on the Presidential reference related auctioning of resources point to more such instances of resources being available for grabbing by those with sufficient contacts.

Selling shares in PSU is fine- government should keep its head out of business, promote competition and involve only in essential services to the people like public transport, education and health. But government simply wants to withdraw from every such service- 25% reservation for socially and economically backward children is a fine step, but that does not absolve the government of its responsibilities to run and maintain schools to protect the Right to Education. By providing managed care, euphemism for private control of the healthcare sector, it is disregarding its own duties. It should also mean preserving profit making entities and disposing off liabilities. But crippling profit making bodies and then selling them for scrap or pouring money down the drain is not sound economics- the highly profit making routes to the middle east available during prime time was allotted to private carriers. The government also regularly withdraws and cancels Air India services without prior information to this sector thereby stranding passengers and prompting them to distrust the national carrier.

There is little doubt about the dieselisation of motor vehicles and its use by fuel guzzling SUVs and mobile towers, but across the board increase of prices without measures like increased vehicle taxes, compulsory use of renewable energy for mobile towers etc to discourage increasing sales of diesel vehicles is non-effective and only adds to inflation. Even after price hike, diesel price is lower than petrol and so all it does is reduce the fiscal deficit. Tax on non-commercial vehicles, differential pricing and adding renewable energy for mobile towers would have been more effective and would have tackled more issues like environment concerns as well.

By allowing FDI in retail, government has only opened the sector for exploitation by foreing MNCs. Do we not have the capital and technology to track, transport, store and preserve our agricultural produce? Flipkart and dozens of courier services trace all its packages and give advanced estimate of delivery dates. If these organisations, with a fraction of the government's and existing Indian retailer's capabilities and networks can do it, why can't it be implemented by us? The goal can be met by our own efforts. Moreover, why will a foreign investor be interested in helping our agricultural sector if we cannot do it ourselves?

The goals are fine, but the decisions taken to implement them are flawed and will not even contribute in the slightest to achieving these goals. In fact, it will only favour a small section of the population, address problems only incrementally and leave out the larger issues of concern. So, since decisive action is absent, what can be done is decisive withdrawal. By simply withdrawing from all activities, in agreeing to the neo-liberal, market-oriented, minimalist state and new public management shibboleths, the government is condemning people to the vicissitudes of economy whereas it provides stability to multi-national corporations through Bilateral Investment Promotion and Protection Agreements(e).

This withdrawal also means policies like withdrawing subsidies and support mechanisms to the people. As I have mentioned in previous posts, many of these subsidies involve high leakages and many who require support are excluded from benefits whereas the real beneficiaries are the middle-men and traders and administration- diversion of grain to open market, black marketing and hoarding facilitated by appeasement of officials. By claiming to cut down, government tries to raise public voice for the maintenance of a system that does little benefit to the public but sustains a huge machinery of corruption. It is a bluff, it would not want to shut down a system that so nicely ensures steady income for many and generates figures that can impress development activists.

But there are no attempts to reform and make sure the benefits reach the targets, set up adequate storage for times of dire need, reduce rotting of stored grain and make sure it is not exported simply because we do not have adequate storage capacity. Right now, huge quantities are rotting due to pathetic storage conditions and millions go hungry. Yet India was one of the highest exporters of rice (f & g) and the drought-like in situation of 2012 could hit rice output. Not possessing adequate storage facilities is used as excuse to export rice which will drive prices up in a critical year and drive millions into starvation.

It is unfortunate that the real issues are not tackled and there are only attempts to attain goals through contorted, incremental measures which rarely benefit the target population. If this continues, it is not just the economy and stock-exchanges that will take a nose-dive, but the many who claim to protect the aam admi while actually fooling them might just find themselves out of jobs.

FDI in Retail- The Grand Game and its Winners

A slew of reform measures announced on Big Bang Friday is still dizzying to some and perhaps that was the intention too. The most contentious has been the FDI in retail which was put into cold storage in November 2011 due to protest from UPA allies and opposition parties. The retail sector in India is worth 411.28billion US dollars in 2011, is still growing and is expected to reach 804billion dollars by 2015. Current proposal aims at opening of retail sector to FDI in 50 cities with a population of over 1million and for stores that have large space requirements, they will be allowed to operate within 10km of cities.

Proposed Conditions on FDI
1) 50% to be spend on back-end infrastructure, logistics, agro-processing- to ensure it promotes development of infrastructure and logistics. This is one of the main reasons to allow FDI in retail as about 1/3 of agricultural produce is wasted due to lack of storage facilities (space and cold storage) and transport facilities
2) Sourcing of 30% of the products of SME sector in India (This might not possible due to WTO rules and so the  30% sector could be sourced from anywhere in the world)
3) 50% of jobs to set aside for rural youth (it says that the stores will be in urban areas and offering job opportunities for rural youth seems ambiguous)

Advantages-
1) Foreign exchange earner (16billion in the next 3 years according to some estimates)
2) Investment in logistics and supply chain will reduce wastage and reduce prices for consumers
3) Better prices for farmers as they can sell directly to stores or engage in contract farming
4) Technology in logistics
5) Lower price for consumers as wastage and middle men are reduced

Disadvantages-
1) Foreign retail giants like Walmart, Tesco, Danone etc have a history of actually leading to unemployment in the neighbourhood as they create price wars and bankrupt nearby stores. Walmart alone has revenues of 450billion dollars worldwide, putting it at around 20th place based on revenue if it was a country.
2) After other stores are closed, they have a monopoly and can jack up prices
3) Due to removal of other buyers of produce, retailers become the only buyers of farmer produce and hence can determine terms of trade
4) Difficult to track the condition sourcing of SMEs and restricting to India might not be possible. Also difficult to track the investment requirement in logistics
5) 16 billion USD is the expected FDI in retail over a period of 5 years. India’s trade deficit is 185 billion dollars and current account deficit is 4% of GDP (almost 78billion dollars) so the foreign exchange argument falls flat
6) Walmart is known for driving up unemployment in areas that it operates by closing down other stores in its neighbourhood

Uncertainties-
1) Since states have the freedom to decide FDI in retail, it respects India’s federal structure. But most of the Bilateral Investment Promotion Agreements (BIPA) provide uniform treatment of all investors across the country and due to this, investors can force states to open up their markets.
2) Kirana stores or the usual stores that we use provide many facilities door delivery, credit and also have friendly relations with customers. Large scale retailers might not be able to replicate this
3) Lack of quality retail space in the large scale format and the high rent for such outlets might reduce profitability and the fact that they can operate only in cities will mean that rents will always be high.
4) Indian organised retailers are suffering large losses currently with Reliance losing Rs.247 crores, More losing Rs.423 crores and so asking questions about the viability
5) Inability of large retailers to turn a profit in places like China also makes their future uncertain
6) India is not a uniform market as tastes and preferences change even within the state and so responding to this would be huge challenge that top-down management of large retailers might not be able to respond to

The impact is limited by the fact that only 9 states are going to permit FDI in retail and restriction to cities with population above 1million. And so, if restricted to current levels, their impact would be minimal. But this is perhaps only the first step to a larger freedom that will be given to FDI in retail as far as geographical spread and investment caps are concerned and if that expansion happens, it will be definitely negative for our neighbourhood stores, farmers and consumers. The simple fact that foreign retailers are highly interested in the Indian market is alone enough proof that they intend use the opportunity and get a slice of the huge Indian retail market pie but whether the pie is big enough for all or not and whether they will add to the pie is something to be seen. In such a situation, for the government, it would have been wiser to let retailers open stores only in a smaller number of cities. Perhaps that is exactly what retailers will do, test the waters first instead diving deep and choking, considering the high uncertainty in the sector and challenges. Due to the cap of 51%, foreign investors would in all probability resort to Joint Ventures with existing organised retailers (Walmart has wholesale partnership with Bharti and Tesco with Trent from Tata). This would provide these retailers with much needed cash, technology and logistics expertise.

Although a leftist ideology, Walmart chains spread a consumerist culture under the shadow of consumer choice, whereas consumers are really left with just an illusion of choice ( http://www.ritholtz.com/blog/2012/05/the-illusion-of-choice/ ).

But it is not just about the actual policy that one must consider. A few questions must be asked about the purpose of such a step. Hillary Clinton met with Mamta Banerji on her visit to India and the purpose of such an act is not yet clear. Although officially nothing was discussed, the US Secretary of State meeting a Chief Minister must have some heavier interests than just congratulating a woman on reaching the post and reading this with the fact that Walmart sought US government help in entering India raises some questions (a, b). The Joint Ventures will also allow large Indian retailers sell off part of their stake in ventures that are loss-making. It will also have to be seen whether this will lead to opening of more stores or just expansion of existing ones and streamlining the process which could actually result in direct job loss through downsizing.

The biggest beneficiaries of the current policy will be foreign investors in the long term, Indian organised retailers in the short term and the government since its shock and awe tactics have diverted attention from the coalgate scandal. The possible losers are farmers who will lose any bargaining power they had, smaller stores that employed a large number of people and consumers who will face higher prices in the long run and who will have to bear the brunt of products forced on their pockets.

References
http://www.thehindubusinessline.com/opinion/article3911207.ece?homepage=true
http://www.firstpost.com/business/kirana-vs-wal-mart-busting-the-big-myths-of-big-retail-459490.html
http://www.business-standard.com/india/news/wal-mart-facts-fdi-lobbyists-may-not-like-you-to-know/183849/on

Smart Politics and Living Under Foreign Rule

What do you do when you have your backs to the wall and you have no way to escape? What would you do when you are facing the truth that you have been corrupt, unfair and favoured the wrong people? You wait for the right time to fight back. That is exactly what the UPA has done and it has displayed some brilliant political acumen in these games.

It didn't make any proper statement in the Coal scam except an excuse of a statement by the PM, allowed Parliament session to be washed out and heaped blame on constitutional authorities and shifted the blame on to states for recommending how to allocate coal mines. It handled 2G by sending A.Raja and Kanimozhi too was in jail on related charges. Kalmadi was in jail on the commonwealth games scam and now they are out and we know that their trials will not happen in the near future. Who knows, they might be excused for lack of evidence or because none of the witnesses or the accused are alive after 30 years and even the report might be missing due to termite action or just corrupted computer files. This is an altogether different issue though.

It waited till the ash and dirt from Coal became unbearable and started the smokescreen with Diesel and added LPG to fuel the fire and inflation too. I admit, some amount of price rise in Diesel and LPG was inevitable but it seems increasing taxes on luxury cars and dual pricing for diesel would just be too harmful for the Society for Indian Automobile Manufacturers who asked the government for support due to falling sales in vehicles ( a ). This is inspite the evidence that SUVs are outselling normal passenger cars ( b ). Gensets, SUVs and mobile towers total to about 22% of diesel consumption and add to it passenger cars and you get the segment of dieself consumers who do not deserve subsidised diesel ( c ). It is transport vehicles that require subsidised diesel especially with State owned Transport Corporations being stressed as it is and yet they serve an important public purpose. Subsidising SUVs owned by the super-rich and Public Transport needed by the masses is not an equal policy, subsidy should be given to those who need it. I have no qualms about LPG cylinder subsidy limit and implementing gas pipeline projects and exploring resources might just stem the price rise here. But maintaining subsidy for MPs and MLAs is unfair, although it really does not matter though most of them do have other under the table sources of income and a puny increase LPG prices will not be of much impact for them in the reality.

FDI in retail is being hailed by Indian corporates, the american investors and the US President. Previously I had suggested that rating agency downgrades, Hillary Clinton's visit to India (d & e) and Obama's speeches (f & g)  were all aimed at only pressuring India to adopt policies favourable to USA. They have got what we wanted but due to the inability or perhaps the vested interests of the powerful in our country, we get nothing in return. A strict visa regime exists, US still subsidises its agriculture heavily, aids Pakistan and sees us nothing more than a consumer.


It seems Imperialism is happening from the inside out, our powers are handing our country on a platter for the world powers to conquer. During the colonial era, we were only a market to source raw materials and to dump their products which destroyed our indigenous industry, agriculture, trade and crafts. The same thing will happen again and we are doing this to ourselves.

The political acumen of this bold ploy is clear when we consider the fact that there is little chance of allies putting the government in trouble. The main allies are Tamil Nadu's DMK, TMC from West Bengal and NCP mainly from Maharashtra with SP from Uttar Pradesh supporting it from outside. The condition of none of these allies are secure except maybe that of SP but already people are not happy with the rule and the difference between SP and Mayawati's BSP was just 3% in vote share, an extremely narrow difference which can shift. TMC is now a joke in West Bengal with everyone who raises a voice automatically becoming a maoist. NCP -Congress alliance in Maharashtra is in trouble as issues like Adarsh scam and farmer suicides have dimmed their prospects. DMK is not in power in TN now and so for all these parties, their only salvation lies in continuing the status quo since a change in it will only mean loss of position without chance of any gains.

Our Government did all this to rid itself of the policy paralysis tag, but none of these commentators, rating agencies, foreign heads of states are interested in the pathetic condition of human life in this country. None of those who hail the reform measures (h) have a stake in that, they are only bothered about themselves and this is a fact that government should realise. Perhaps the government knows this but it easier to hand over everything to private companies, both foreign and domestic, and then say it was forced by market or coalition compulsions. It is easier to let free the animal spirits of those who clamour for reforms for their sake and the so called experts and industry and market voices are concerned only about their growth, profits and share prices. They are not even remotely bothered about the enormous human cost of their growth and accepting this voice as the voice of India is exclusion that no amount of hot-air concepts like participative and inclusive governance and aam admi can compensate for.

This government is for the rich, by the rich and of the rich alone and if it does take steps to address other issues, it is mere tokenism. Take issues like Lokpal, Women reservation, Land acquisition, Food Security which are in pending in parliament. Take issues like child and maternal health- India is nowhere near reaching the millenium development goals (i & j) and our poverty is more than that of sub-Saharan Africa (k & l) . International Food Policy Research Institute's Global Hunger Index ranks India 67th out of 81, worse than Pakistan, Myanmar and riot-torn Sudan (m). It is here that governance deficit and policy paralysis has its greatest impact. This is where the government should act and act without hesitation rather than just signing over everything to market forces.

The government will ride on the wave of these reforms to the next election- 18months away when the impact of these reforms would only have started to be felt but it will bury the issue of scams and corruption, pathetic governance and development for the people and policies tailor made to suit the interests of corporates and made under pressure from foreign governments.

Coalgate- Part 2: Analysis and CAG of India

The previous post talked about the actual facts behind what has become infamous as the Coalgate scam. It is similar to the 2G spectrum as a natural resource was handed out cheaply to private entities who made profits selling it and did not, as the government claims, result in lower price to the consumer and went against governments own declared intentions and goals and there were favours given to a chosen few. The difference lie only in the specifics of how it happened.

The similarity continues in the government claiming Zero loss and blasting the CAG for sensationalising the entire issue. I just do not get it. Don't these people have even common sense required of politicians? The CAG did not announce these in a press conference! He submitted his report, which is his constitutional duty, to the President. Our previous President kept it with her till the last day in office and then placed it before Parliament. Due process was followed and nothing was out of the line and irresponsible comments against a constitutional authority is irresponsible and childish.

There were also claims that the CAG figures are wrong and exaggerated. Let us assume that the CAG figures are wrong to the tune of 99%. So, there was a loss of only 1,860 crore. Cheap money?? It is our money and the government is responsible to us and must explain why it threw away this much money! Another fact is, the CAG has not said that this is the exact loss to the exchequer, this is based on calculations merely to give a sense of the magnitude of the issue and can be off by some margin. Rather than giving a lot of explanations on possibilities, it is the responsibility of the CAG to bring more clarity into the picture and say what is the potential loss and the CAG must be lauded for this work.

Next comes the issue of whether CAG crossed his constitutional mandate. The CAG was called the most important constitutional authority by Dr.Ambedkar and that too for a reason. This is the only institution that scrutinises the governments work, generates over 70,000 audit reports along with Principal Accountant Generals in the states, detects procedural and financial irregularities and in case when financial irregularity is high, detect administrative irregularity as well. It is being alleged that CAG cannot delve into policy matters and he can only audit the accounts. If the CAG is only an auditor who has to ensure the balance sheets match, then he does not have to take an oath to uphold the Constitution and law whereas ministers take an  oath to bear faith and allegiance to the Constitution and work in accordance with the Constitution. The CAG is an independent Constitutional authority and can be impeached only in the manner of a Judge of the Supreme Court. It is highly unlikely that a mere accountant or auditor would require such freedom and high constitutional status.

What separates the CAG from normal auditors is not mere accounting but its audit of propriety and audit of efficiency, economy and effectiveness. This is not mentioned in the constitution but this is the worldwide practice of Supreme Audit Institutions and also the legacy of colonial rule. The CAG can ensure whether the expenditure was necessary, whether it attained its goals and whether it did so at lowest expense. Its reports can also go into whether the governmental action is improper even if it is legal (like arbitrary allocation of coal blocks). Thus, it can go into whether a decision was correct and this has been the accepted practice so far.
(Arora and Goyal, Indian Public Administration Institutions and Issues, Part8,The Accountability System,"Comptroller and Auditor General of India"
http://www.thehindu.com/opinion/lead/article2568360.ece
http://www.thehindu.com/opinion/lead/article2568360.ece )

A popular misconception is that CAG has fixed government's corruption and indicted individuals in the case. CAG reports are meant as a tool of self-correction in departments and to rectify these errors. The hearings of Public Accounts Committee, which uses the CAG report and is assisted by the CAG, are not meant to act as hearings on disciplinary actions or court hearings but meant to fix the system and correct flaws. Therefore, a personal attack on the CAG is uncalled for and if it does happen, it is just like what we all would do when someone points out our mistakes- we go on the defensive and the best defense is to attack the individual.

If the government intended to rectify the errors, it would have recognised the report and accepted that there were errors in the system and we would rectify it. But this can happen only if these were errors in policy and system because accepting these errors would also mean admitting that individuals are responsible for these errors. Therefore, the only viable defense for the guilty is accuse and attack.

These are the facts and these are the issues. I leave it to you to judge. I hope it does more than become a brand building exercise for P&G.

full disclosure- I have been preparing for civil service exams and most of what I have written about CAG come from the books and newspaper articles I have read and from my father who works in the Indian Audit and Accounts Department headed by the CAG

Coalgate- Part-1: The Basic Facts

What is important- All the people in the country or the country's perception in the eyes of a few who will decide and certify the government as investor friendly, pro-active and supportive of development? What is the function of government- to protect the interests of the people or the interests of those who intend to destroy the environment for their private profit? What is development- a growth that delivers riches to the riches and misery to the poorest?

Let us not judge them without facts. So these are the facts-
The reason for allotting coal blocks to private companies was to boost coal production as Coal India Limited was unable to meet the huge demand in the country. Rather than allowing companies to become miners, the government decided to allot captive coal blocks, i.e, it allowed companies own and operate mines to meet their need for coal, the main industries being power and cement manufacturing. It is a wise decision since our power plants are working at low plant load factors due to unavailability of fuels. The government's decision not to auction coal blocks was to ensure low price for electricity.

So how did it determine who would get these coal blocks? A logical way would be to judge them on their ability to develop mining projects (since coal mining was nationalised, there is no point in considering coal mining experience or expertise), grant them without bias, take them back if fields are not utilised by the allottee and impose conditions on the price at which the output from coal is sold (electricity or cement) since they are getting the resource for free, make these conditions clear and keep them unchanged.

What actually happened was this- there was no logical way of choosing who should get these coal blocks. It was allotted in a completely opaque manner by a screening committee which has not made public the criteria it used to allot coal blocks. Therefore, the coal block allocation was arbitrary and opaque. Something that cannot be allowed in a democracy. The Government's defence- it used a screening committee and it was done by the state government. But how the screening committee decided who should be given coal blocks is also not clear.
http://www.frontlineonnet.com/stories/20120921291803600.htm

Reliance power was allotted a captive coal block for its Sasan Ultra Mega Power Plant(UMPP), which means the coal from the Moher and Moher-Amlohri extension and Chhatrasal blocks should be used for generating power at Sasan and this was the condition on which all companies submitted applications for coal block allotment. After the block was allotted, government allowed Reliance power to divert the coal from this block to another of its power plant. This has 2 major issues-

1)This power plant supplied power to highest bidder and so the defence of low electricity price goes out the window. This means that Reliance made money out of it, whereas the government loses revenue.
2)Permission to divert coal to other locations was granted after it was allotted and so it is an undue benefit granted to Reliance since there would have been more applicants and others suitable to get the block had they known that such an option existed
http://www.thehindu.com/news/national/article3784810.ece

Coal is a major mineral and central government has jurisdiction to decide policy on this matter. It had recommended auctioning as the route to allocating coal blocks as it was aware of windfall gains to private parties. Inspite of this, auctioning was not done and the government hides behind the "state government compulsion", perhaps a welcome change from "coal"ition compulsion.
 http://www.thehindu.com/news/national/article3251983.ece

Since the reason for granting coal blocks without bidding was to ensure low electricity prices, there should have been the condition that those running power plants with coal from captive fields sell power at low rates. The government seems to have realised only now that such a step was necessary, in spite of it being so obvious. It is only going to regulate the price at which electricity is supplied by these companies.

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-tariff-charged-by-captive-coal-block-owners-to-be-regulated/articleshow/16360164.cms

http://articles.economictimes.indiatimes.com/2012-09-09/news/33713621_1_coal-blocks-power-projects-jindal-power

The government has itself admitted that 57 blocks were allotted and only one has been developed so far and this means zero loss to the government.If the purpose was to meet the demand of industries, then not meeting this demand is a mistake and maladministration in itself. By not mining the coal, there is low capacity utilisation in power plants(remember the largest black-out in the world?) and thus loss of money to everyone!
http://www.thehindu.com/news/national/article3815701.ece?homepage=true

I am yet to find out whether those who were granted coal blocks to manufacture cement made cement at lower prices. Since only 1mine has been developed, perhaps this has not happened. If this happens, there are issues galore.
1)If they sell cement at market prices, they are getting huge profit since others have to pay market price for coal and they get it almost for free
2)If they sell cement at lower prices, they have an unfair advantage of cheap raw material.

These are the issues CAG has brought out in its report about what is now the infamous Coalgate scam

Our World Should Not Be Owned

Gina Rinehart, one of the world's richest women, said that mining in Australia is becoming too costly and Africans are ready to work for 2 dollars a day. This shows the attitude of capital, it is only concerned about its profits and not about the well being of its workers or the country of the owners origin, let alone the country in which they work. All the management techniques that speak about employee motivation and satisfaction come to nothing because labour is essentially cheap and so workers can simply quit or are fired if not satisfied and hence not working to the satisfaction of supervisors, since there is always more labour available.

The only thing capital chases is profits which can be obtained through cheap labour, cheap resources like land, water, power, lower taxes and maximum subsidies and prices for its products. The flight of capital into the BRIC countries was simply because of the growth in economy of these nations, not out of any interest in developing these nations and we now know that this growth was boosted through free transfer of resources like coal, land, water and airwaves. Once the free lunch ran out, capital is also flooding out of these countries and according to international rating agencies, the guiding angels of capital, unless these countries resort to more reforms which transfer more resources to the hands of private profit makers, they will pull their capital out. This is the scenario we are witnessing now.

To these corporates, a country consists only of consumers who will shell out money for their products and then natural resources which can be used to make products that can be pushed down the throats of millions which will become billions in profit. India is becoming a fantasy land for such investors and it is not just foreign investors who are to blame. The only change from License-Permit Raj is Crony Capitalism and a middle class emerging on the back of those exploited for less than $2 a day, driven out of their homes to gain access to coal, bauxite and to establish SEZs and swanky super highways.

It is a win-win game for the parties involved. International investors spend money in profit making enterprises or set up their own organisations- banks, subsidiaries and retail chains. They are assured of profits by the powers that be who in turn receive their sustenance through these international locusts for favours done. They can also highlight various growth rates, increase in spending for public purposes- most of these projects again go to crony capitalists who corner resources or through the new panacea for all governmental shortcomings "Public Private Partnerships".

What can be done against such institutionalised exploitation which is the basis of the modern world? Our entire economy depends on preventing access to those without money from the essentials of life- only those with money can buy goods and services, essential services like health and education are being privatised and controlled by profit motives. We do have strong laws in India, but it remains only on paper. The fact that laws are observed only in their breach is not news, but what is surprising is framing rules and policies to favour exploitation and crony capitalism- what else can explain the post-bid benefits provided to certain corporates in the DIAL and Coal scam, what else can explain the interest corporates are now showing in opening up mines that were allocatted to them more than 5 years ago?

The more I learn about these, the more I realise that things will always remain the way the are. We have mountains of reports- on reforms in administration and defence, on starvation and malnutrition, maternal and child mortality, exploitation of poor and poor defence preparedness, commissions on accidents and disasters- but nothing being done about them. It will take time, effort and intelligence to make a change or perhaps a change that is beyond the control of everyone, perhaps a violent shaking down of things.

There is not doubt that we need to change, but how it will come I do not know. Are we too powerless to do anything about? Perhaps we can be the change, change ourselves slowly and just be good, responsible, responsive citizens and cast-off the regular attitude of cynicism and I have better things to do. One question I always hear what will I get out of discussing and knowing about all this, well you might just get better roads, better hospitals, schools and an environment to live in or if you want to just leave the country, better airports, flight services and a faster and better way to get your passport. I still do not know how it will happen, but it will happen if enough of us can try or atleast want to change.

A "Fishy" Story of Empowerment

"Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime". This famous saying talks about the importance of building long-term capabilities that are more effective than giving short-term relief, but in spite of this being highly famous and so overused that a friend remarked give a mallu a fish, he will ask for two more, this seems to have escaped the ears of our policy makers.

Ours is a nation that spends nearly 1.9lakh crores on subsidies, mostly on fuel, food and fertilizer. Then there are dole-outs like free electricity to farmers and no tax on agricultural income, the benefits of which hardly reach the intended population. This is the fate of most affirmative action programmes, with reservations benefitting only the comparatively well-off among these sections and they alone perpetually flourish as the less fortunate in their own community continue to live without any improvement in their lives.

With beneficiaries not being reached, schemes being riddled with corruption and leakages and clamour for fiscal discipline from corporates, international organisations and trade bodies, subsidies are the first to face the axe. A cause exists in reducing fuel subsidies, but not completely and only under certain conditions. These conditions include providing the poor who use kerosene for lighting and cooking with alternative methods like solar lanterns and cookers, higher tax on diesel vehicles, better roads and public transport, prohibiting use of diesel in mobile towers, reducing the high taxes and a clear explanation of how these tax revenues are spend. There is a need to provide food subsidy and fertilizer subsidy to some extent because we have the worlds largest number of poor even by conservative estimates and we are not self-sufficient in fertilizer production and we need to import it.

But doesn't it all sound so simple that a person with just basic common sense and knowledge without any political experience can come up with these? It seems obvious that these facts could not have escaped the attention of economists from Cambridge. So why do they continue on this is an obvious question and this is where the 'fishy' saying matters. If you teach him to fish, he no longer needs you and you would be out of the picture. But if you (contractors, Public Private Partnerships, Panchayats) continue to give him a fish and extract a fee for that from the government in the name of poverty alleviation or even better, continue to claim you are giving him a fish, but keep it for yourself and keep taking the fee, it is a highly profitable long term venture.

Should subsidies be totally be done away with? No. Some of it should be reduced, regulated with the use of technology like sensors in personal diesel vehicles and some done away with like diesel generators to run mobile communication towers. The case for food subsidy is strong because inspite of the growth our economy has witnessed, we have also seen depreciation in wages, rise in rich-poor divide and fall in purchasing power due to inflation. The first function of the government is to protect the lives of its citizens, not just the rich or those who want to trade with the west, but each and every citizen. Food is still a basic human requirement and cannot be replaced with Rs.10 recharge coupons or smart phones. Ensuring this basic need is met is the function of the government, especially in a time when we have lop-sided development. Some subsidies should be restructured, as in the case of fertilizers where nutrient based subsidies should be implemented completely in which use of fertilizer is determined on the base of condition of soil, climate, irrigation, requirement etc. Though in some cases, like food, a basic necessity for all, there should be universal coverage to ensure no one is left out.

By offering development and favours of subsidies and loan write-offs, government builds for itself a better image but benefit only the well-off. It gives hope to the poor which will translate as votes. If all our aspirations are met, if all our basic needs are satisfied, then we will start holding the government accountable and expect more from it. It is easier to manage a population that requires only the most basic of needs since they can be lured in with the most basic of campaign promises.

Therefore, all these schemes, in spite of being well-conceived and well thought out with good intentions, are being manipulated to keep people poor for economic and political profit and we will never grow out of it unless the poor take their destiny into their own hands. The anti-development thesis is especially about the poor coming together, organising themselves into a system that goes against the current form of development that benefits only those with money to make more money while there is little trickle down to the poorer sections.

Schemes should be reinvented to provide assistance, encourage self-empowerment, self-employment and formation of self-help groups. As I mentioned before, I am not talking about completely removing subsidies and poverty alleviation schemes or always going against loan write-offs, these may be necessary due to existing situations and also if there are unexpected occurances like droughts, floods etc. These are ad hoc measures to be pursued in the short term till the people are ready to take control of their own lives. For example, unless the society and government as a whole ensure protection, equality of opportunities and fair treatment for women and girl children, they cannot expect to empower themselves through education and attain financial independence.

Skill development, electricity, roads, communication technology and providing the basic services to all individuals should be the priority. The purpose of the scheme should be to enable individuals to take their fate into their own hands and overcome their dependence on the government for sustenance, become responsible individuals and hold the government accountable for its actions. It is not a minimalist government, but it is a government that provides the environment for individuals to become better citizens that we need.

Theory of Perpetual Instability

In a new organisation, the organisation itself is trying to find its feet, adjust and respond to situations that keep changing or situations that it is only becoming aware of. Therefore, just like employees, the organisation too goes through Immature-Mature phase.

The growth of organistaion is similar to growth of individuals and their needs. Starting from 'Break-Even Point' and getting the first profit which is similar to the physiological needs, it goes through phases of establishing itself in the market, gains market share, gains loyalty of consumers and tries to make its products better. These correspond to various steps in Maslow's hierarchy of needs.

As the organisation grows, it faces immense challenges and it has a small workforce. Therefore, there is not just division of work, but also division of responsibilities. This leads to participative management, decision making that involves all workers, bottom to top communication and all this means decisions and orders are outcomes of exigencies, not command from an authority. This also follows McGregor's Theory Y where individuals can contribute their creativity, intelligence to solve problems, utilise their potential and seek responsibility and also addresses the concerns raised by Mary Parker Follett about decision making, control, power and authority in an organisation.

But once the organisation has established itself, due to shareholders' interests it goes back to basic physiological need of profit. This might happen even at an earlier stange. Therefore, there is a distortion of growth and self-actualisation of organisation.

This applies for private organisations and in gorvernment organisations too. Once the tradition is set, it stays there. Whether private or government organisations, their paths diverge from that of individuals. This creates a conflict of interest. This is what happens when organisations have consolidated their working. The goals become mere words as they lose their meaning or the intention of framing the words (the spirit) is lost, enthusiasm wanes, complacency creeps in- all due to lack of participation and responsibility.

This might also happen with new government programmes, legislations, orders etc. Here, during the initial phase of these systems, it could be the initial shock, surprise and destabilisation along with optimism that spurs on the system. But complacency, external pressure in the form of protest by affected individuals, corruption, resistance etc can retard it and make it ineffective gradually.

Therefore, we might never reach a stable society. We might have to go through the process of initiation, growth and decay continuously. We might have to continuously reinvent our institutions, redefine our freedom and our world. We might be in a continuous state of flux, always changing and the purpose of change is not stability but merely prevent us from losing sight of our purpose, our rights, freedoms and the meaning of everything that we hold dear.

Generalist Administration In India

The debate on Generalist versus Specialist in the administrative hierarchy of India has been on since the time of independence. We place the generalist IAS office above specialists in almost all departments and rare is the occasion when an outsider occupies a Secretary post in the Union and State governments and the promotion to the post of Joint Secretary is virtually assured to all in the IAS. This has lead to discontent among the specialists as, for example, the Indian Audit and Accounts Service is headed by the CAG who is an IAS officer, department made of IA&AS officers lead by an IAS officer. Complaints of civilian administrators not heeding the demands of the armed forces chief are common. The question has come up again in my mind due to an article in the Economic Times and the book 'The Honest Always Stand Alone' (by C.G.Somiah who joined IAS in the early 1950s and was the CAG from 1990 to 1996).

I have read about the disagreement artists, writers, social activists and intelligentsia have against banning of certain books and works of art. I have always thought artistic freedom should be absolutely uninhibited and only then will we have a free country. But while reading C.G.Somiah's book, I got a perspective of the other side that has to take the decision on whether to ban the book or not, when he narrated the banning of 'Satanic Verses' in India before it was even banned in Pakistan. To say that administrators are pandering to wishes of fundamentalists and pretentious religious sentiments would border on the blasphemous and be totally unfair to them. Artists, while trying to defend freedom of expression, do not realise that it is not their freedom that is being restricted by the government on behalf of narrow-minded sentiments nor are these sentiments attempting to attack this freedom. What happens is an attempt to defend a blind belief based on false and uninformed interpretation.

I would like to explain using an example. During the Anna Hazare strike in August 2011, there were several individuals who took part in processions and wore support badges for Anna Hazare. But very few of them had taken the effort to go through the Jan Lokpal Bill and the Bill introduced by the government in Parliament. These individuals were also mistaken in their understanding of the bill as they thought this would end everyday corruption that we as the common man experienced. They were also unaware of the severe deficiencies in the bill civil society had come up with. What this shows is that, individuals follow the herd, we accept popular opinion and this may or not be correct and this becomes the voice of the masses, which may or may not reasonable. (I do not attempt to tarnish the power and importance of mass opinion, but I am merely trying to show the dynamics of what happens and how)

Based on this understanding and acceptance, it becomes clear that the demands to ban books and other creative works do not stem always from a reasonable, informed and logical demand but a mass opinion. So the demand is not against artistic freedom but against hurt to their beliefs and we all know that in India and elsewhere in the world, religion is an emotional subject which can get out of control. In the interest of maintaining law and order and protecting society from such out of control interests, the government has had to act at times. Only administrators and government can take a whole view of the situation and come to a decision. Only a generalist can come to such a decision and that is why they are important to any administration as it deals with multitudes of divergent interests that can come into conflict with each other, which if not contained or settled at the earliest, can spread causing widespread chaos and uncertainty. The basic purpose of any administration is to maintain law and order in the country and it is merely fulfilling its duties while taking such decisions on sensitive issues.

Yet, I must add that such decisions must only be sparingly be used in situations like the one I mentioned. Frequently conceding to such demands would give the impression of a weak administration that has little authority over the country or state. It must be used only when situations can spread out of control over an area  beyond the capacity of our law enforcement agencies. Politically twisting such situations for petty gains are also common, as we saw when Salman Rushdie had to withdraw from Jaipur Literary Festival as a death threat was purported to have been issued against him by some religious factions. This was merely done to avoid a law and order issue, which although could be interpreted as a smart way to avert a crisis. It was the threat of violence that prohibited the screening of the movie 'Dam 999' in Tamil Nadu, whereas the Supreme Court in its judgement in the case related to prohibition of the screening of the movie 'Oru Gramathinte Katha' had said that possibility of law and order issues is not a valid reason for such bans. Such ad hoc measures would not do, the government must assert its authority over such issues and should be able to control law and order issues and not be held hostage by threats of violence, law and order and politics.

This is a justification as well as an explanation for the need for generalist administrators in our country. Administrators are in a position to take a neutral view of issues only because of their generalist specialisation and this is absolutely important in a country as diverse geographically, culturally and linguistically as ours. But there definitely is a need to overcome politics, vulnerabilities in enforcing the rule of law and authority over mob mentality and all the facts on the ground must be considered while taking a balanced decision which is what the IAS is meant to do and has been doing (albeit with a few exceptions and individual misfits) in its history.


http://economictimes.indiatimes.com/opinion/editorial/ias-officials-expertise-is-administration-not-finance-banking-technicalities/articleshow/15176674.cms - article in ET blasting IAS officers who are not specialists and the comments show a certain degree of animosity towards them from the public, albeit misinformed and unreasonable

Emotional Authority and Fraternity

The infant mortality rate is 47 in India, that is, 47 children out of 1000 die within 42 days of their birth. 212, the number of maternal deaths per lakh live births. 237 million or one fifth of the whole of India remain hungry, 29.8% or 36 crore Indians are classified officially as poor by the planning commission. 44%, proportion of children under five who are underweight in India and only 4 countries outside of Africa have figures worse than India. Global Hunger Index ranks India 67th out of 88 developing nations. I could go on and on with numbers and statistics, they never end as each day brings more than I can ever comprehend.

Under this flood of numbers, I am losing my sense of reality. Sufferings and situations become mere numbers, numbers to be analysed, quoted and used to make a point. The fact that these numbers correspond to individuals- each and every one of them with the same set of feelings and emotions as me, all of them with parents and perhaps brothers and sisters, all of them suffering in ways I can hardly imagine- is seldom registered. It simply cannot be comprehended since it is too huge and too frequent that my brain does not have the ability to see beyond the numbers.

This is what happens to everyone beyond a certain point, a numbness at first and perhaps indifference and then they merely stay as numbers. They become an end in itself, to change those numbers we can modify their measurements, throw in some money hoping that it will change and we merely chase results. Our intension change to merely changing the numbers without understanding what lies beneath- the pain and suffering is too deep to be ever realised.

When policies are made under such circumstances, by those with no understanding of the true meaning of those numbers, then their impact too will be limited. We can talk on and on about developing administrative mindset to be more people-friendly and people-oriented, we can build complex policies to wish away these numbers, there can be reforms in the structure of administration to take it to the grassroots and more responsive to the people's needs, but if they lack the commitment to eradicate the underlying cause of suffering- which can happen only if the policy makers have some humanity and kindness in them along with the ability to realise the extent of the pain and suffering- then these become merely an exercise in futility.


Max Weber's legal rational theory of Authority is the model of administration and government we follow- a set of rules that prescribe the relationship between those who rule, those who are ruled and the system that implements these rules. Initially it was merely about implementing rules and regulations and we have now reached development administration where it is about delivery of services and ensuring socio-economic development. In theory, these are given as objective goals to be achieved, but I find the lack of emotion quite disturbing.

The need to ensure political-social-economic development is not just to make it a fair deal so that everyone has a set of basic rights, access to health, safety, education and purchasing power. I believe what should drive us is an acceptance and understanding that when there is even one person left on this planet who is suffering, the entire human race cannot be free of that pain and suffering. It might be emotional, but then that is what we are, social and emotional beings which cannot be denied. If our siblings or parents are in pain, we too are affected and we try to relieve that pain. It must be the same with all human beings, see them as our own self and as part of our lives.

It is with such emotions that we need to work, one could say it lacks the objectivity needed to work without succumbing to weaknesses, for sympathy and fraternity is exactly what we need to better our world. I say it is better to understand the need, purpose and impact of our actions than to deal in cold, detached and indifferent observations, recommendations and proposals. Policies for development should be made and implemented with such feelings and understanding of its purpose, this will surely achieve results.

A humanistic attitude towards life, towards everything we do is all I am talking about. But then, it is too silly to expect it from everyone because if everyone thought like this, we would never have had to make rules and regulations in the first place. The answer to those who do not think of humanity as one family lies in those who believe in "Vasudhaiva Kudumbakam" and lives accordingly. The answer to all the problems of the world lie in us, in each of us becoming better individuals and enabling others to be the same too. It is naive and simple and so the practical way is to deal with the good, poor and nice people in the world in simple terms (or even naively) but use our brains and all its devious learnings while dealing with the devious.