Round The States

New Delhi, 26 November 2009

Babri Masid Revisited

LIBERHAN IGNITES U.P. POLITICS

By Insaf

Babri Masjid is once again dominating the political scene in Uttar Pradesh--- and beyond. All the key players in the State are trying to get maximum political mileage out of the Liberhan Commission report tabled in Parliament last Tuesday. UP Chief Minister and BSP supremo Mayawati has been quick to dismiss the Action Taken Report as leepa poti (hush up). At a press conference in Lucknow, she accused the Congress of being “equally responsible for the demolition of the Babri Masjid.” It was a result of “active connivance of the then Congress government at the Centre with the BJP,” she said and warned the people to be aware of both the parties “divisive politics.” Likewise, rival Samajwadi Party has not wasted any time to woo back the Muslim voters in the State. Its General Secretary Amar Singh took strong exception to BJP benches shouting “Jai Shri Ram” when the report was tabled in the Rajya Sabha (Council of States). He walked across and not only accosted its Chief Whip SS Ahluwalia but later started yelling: “Ya Ali”. Remember, the House proceedings are live on TV.

In the meantime, Samajwadi Chief Mulayam Singh Yadav has launched a massive exercise to regain the support of the Muslim community, a section of which has ditched him and turned back to the Congress. For one, “Maulana Mulayam” has directed the presidents of his party units to hold meetings in Muslims-dominated areas and demand the reconstruction of the Babri Masjid among other issues such as lifting of the ban on SIMI and publishing of the Sri Krishna Commission report. This is in addition to sending the message across the State that he has distanced himself from former UP Chief Minister and BJP leader Kalyan Singh, the man behind the demolition of the Babri Masjid. On its part the Congress has questioned Mayawati’s moral right to accuse it of hushing up the Babri case saying she had taken help of the BJP to become Chief Minister. In all this the BJP is keeping an aggressive posture and is unapologetic. Guess, the Babri Masjid will play a major role in the UP Assembly elections in 2012. 

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Jharkhand Goes To Polls

Jharkhand, reeling under a Rs-2000 crore scam by its former Chief Minister Madhu Koda has finally gone to the polls. On Wednesday last, the first phase of elections for 26 Assembly seats passed off peacefully despite a poll boycott call by the CPI (Maoists).  About 54 per cent voter turnout was recorded amidst tight security involving about 60,000 security personnel. Other than the Maoists threat, the State has the dubious reputation of having had six chief ministers in a span of just nine years. This time around the major players are in a three-corner fight-- the BJP-led NDA, which had 36 seats in the 81-member Assembly, the Congress-Jharkhand Vikas Morcha (of former CM Babulal Marandi) combine and former Chief Minister Shibhu Soren’s Jharkhand Mukti Morcha. Lalu Prasad’s RJD is fighting the polls in alliance with Ram Vilas Paswan’s LJP after the two failed to convince the Congress to join hands. To top it all, Madhu Koda isn’t giving up. He has put up six candidates, including his wife Gita, on behalf of Jharkhand Navanirman Morcha. The next phase of polling is on December 2.   

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Relief For Bundelkhand

Drought-hit Bundelkhand region has caught the Centre’s attention at long last. On Thursday last, the Union Cabinet cleared a special package worth Rs 7,266 crore for its integrated development beginning 2009-10. Thanks to Rahul Gandhi and his determined bid to revive the Congerss in UP. The three-year package will cover seven districts of Uttar Pradesh and six of Madhya Pradesh. It envisages optimization of water resources through rain harvesting and proper utilization of the river systems. Animal husbandry and dairy activities are to be expanded as an ancillary activity to enhance the farmers’ income. Besides, to meet the gaps in availability of funds and to give a boost to the drought mitigation package an additional Rs 3,450 crore assistance will be provided to the two States. But the State governments will need to identify their agencies to draw up the project proposals. That done, a monitoring group headed by the Planning Commission members of the two States will oversee the package’s implementation.    

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Punjab, Himachal Look To Israel

Israel appears to be the hot destination for NDA-ruled States this season. Chief Ministers Parkash Singh Badal of Punjab and Prem Kumar Dhumal of Himachal Pradesh have taken a high-level delegation to get first-hand knowledge about agricultural irrigation technology on display at the International Water Technologies and Environmental Control Exhibition there. Apparently, the severe drought this year has underlined the need for improving water use in the country, especially Punjab which is one of the largest producers in the country, and Himachal which leads all others in horticulture. In 2006, former Rajasthan CM Vasundhara Raje had visited Israel and subsequently the State took up olive cultivation with its assistance. Gujarat and Haryana governments too are in touch with Israeli experts. 

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Bihar Gets Good Chit

Backward Bihar has reason to be happy. It’s got a pat on its back from unexpected quarters. On Wednesday last, Planning Commission Deputy Chairman Montek Singh Ahluwalia noted with satisfaction that the State had made progress in infrastructure, education and health sectors and “recorded desired economic growth” in the past four years. And, if it kept the momentum, the State could achieve 8-9 per cent growth, he added at a book release function in Patna. However, for Chief Minister Nitish Kumar the kind words were not enough. He cautioned that a State government can chalk out plan but the real power was vested with the Centre. He hoped that separate coalition regimes at the Centre and Bihar would not have any bearing on Central assistance to the State! Using the UPA Government’s favorite jargon he said: “let there be inclusive growth,” prompting Ahluwalia to commit: “whatever promises UPA-I could not fulfil, UPA-II will.” Well done Nitish!

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Goodbye To Delhi Tongas

Delhi roads shall soon bid goodbye to its traditional tongas. Its Municipal Corporation has decided to phase out the horse-drawn carriages in the next two months. The rationale: there is no demand or space for these slow-moving vehicles in the city in today’s age and time. Besides, the animals are subjected to cruelty by their owners —long hours of work with no proper food. But what happens to the 232 licensed tonga owners and 26 others who have been plying without permission? The MCD has an answer: it has earmarked Rs 35 lakhs for rehabilitation and shall provide tehbazari (mobile temporary vendors) rights other than financial aid to purchase auto-rickshaws. Some owners, however, suggest an alternate-- rather than banning them, “why can’t some stretches be dedicated to offer joy rides like the Victorias in Mumbai?” After all the tongas were introduced during emperor Shahjahan’s rule and with the ban wouldn’t the country’s capital lose a slice of its heritage? ---INFA

(Copyright, India News and Feature Alliance)

Events & Issues

New Delhi, 23 November 2009

Competition Regulator

NEEDLESS DEBATE OVER TURF

By Dr PK Vasudeva

In a surprise move, the Government is considering whether the Competition Commission of India’s (CCI) mandate to regulate corporate mergers, acquisitions and amalgamations should be restricted to sectors where the new regulator does not come in conflict with other sectoral regulators already in existence such as the Reserve Bank of India (RBI) and the Telephone Regulatory Authority of India (Trai). Following powerful sections within the Government expressing divergent views, the Cabinet Secretary is reviewing the fledgling regulator’s role.

As per the Competition Act 2007, prior approval from the Commission is required for mergers, acquisitions and amalgamations above specified thresholds. The idea is to ensure that the combined entity’s market power should not harm competition in the relevant market. Acquisition plans involving Indian and foreign entities would also come under its lens if a strong domestic nexus in terms of market share is established.

A number of experts and agencies have expressed divergent views on the CCI’s mandate. They largely speak about the undesirability of the Commission’s proposed role in the matter, even as things would look different from the broader perspective of competition law. Hence, there are pros and cons of the CCI being an M&A regulator across sectors.  

It is over seven years since the Competition Act 2002 came into force. But certain key provisions of the amended Act 2007, meant to give full powers to the anti-monopoly watchdog, the CCI, are yet to be notified. This is so as the Government is yet to address the concerns on some of the issues such as combination - mergers and acquisitions (M&As).

India is perhaps the only country that is bringing into force its Competition Act in bits and pieces by notifying section by section. This is one of the reasons that unfair trade practices are going on unabated and corruption is increasing. In contrast, China notified its anti-monopoly law in August 2008 in one go.

Among the key areas in the amended Competition Act of India are Section 3 (on cartels and anti-competitive pacts regarding production, storage, distribution, and supply), Section 4 (abuse of dominant position by companies), Sections 5 and 6 combinations (pertaining to M&A regulations). While Sections 3 and 4 were notified this May, the Government has yet to notify Sections 5 and 6. On its part, the regulator is awaiting for the Government to act, before it finalises the detailed M&A regulations.

It is also learnt that the Government is also examining “legal issues” that overlapping jurisdictions emanating from different laws could create. The RBI, Trai and the shipping ministry have expressed reservations over the plan to give the Commission wide powers to scrutinise “combinations.”

While the RBI has suggested that the CCI keep out of the banking sector, the latter had said the apex bank would do well to restrict its role to prudential regulation and leave competition issues to it. As it is, public sector banks have certain unfair advantages over private banks because of various entry barriers, according to the CCI. 

Similarly, the Commission had opposed Trai’s proposal to put a cap of 40% market share and no less than four players in each “telecom circle “ as part of its merger regulations, saying it would create confusion and inflate compliance costs. Also, the Petroleum and Natural Gas Regulatory Board Act has a clause on restrictive trade practices. Trai defines mergers merely in terms of acquisition of equity and merging of licences, whereas the CCI looks at “acquisition of control, shares, voting rights or assets.” It also looks at many other forms of combinations—such as acquisition of assets like market presence in a given geographical territory.

M&A guidelines are in-built in the telecom licensing policy and according to Trai it is best to keep the sector out of the CCI’s purview. Although the DoT is the licensor in its sector, it seeks recommendation from Trai under the Act. The situation in the electricity sector is unique as the need is to create competitive markets where none exists. Even though the Electricity Act 2003 envisages competition in all areas, the country has national monopolies in power generation, transmission and trading. 

In the case of banks, an opinion is that unlike other sectors, bank mergers don’t need the concerned High Court’s approval. This is because of the special nature of the banking sector. In such cases, the global practice is that the special would override the general. The industry thus had vehemently opposed the Competition Act provision for prior notification of M&As above the prescribed threshold. It said the provision would scupper corporate mergers that are often done in haste, and amid uncertainties. The CCI had given verbal assurance that 90% of M&A proposals put up for its approval would be cleared within 60 days, although the upper limit is 210 days.

Internationally, competition regulators under Sherman Act 1890 and Clayton Act 1914 would clear 80-85% of M&As within 30-60 days. However, longer timelines are prescribed in laws considering that some cases could be complex enough to demand longer scrutiny time. The issue of multiple regulatory agencies was not unanticipated. In fact, the Competition Act, which draws the best from international models (Sherman Act), is equipped to tackle and solve these questions. 

A key feature of advanced capitalist economies is an independent and competent competition regulatory body. And India can be no different. Not surprisingly, then the immediate controversy surrounds turf. Apparently, sectoral regulators are resisting the Commission’s jurisdiction in their spheres of influence. So, we find the RBI arguing that the Commission has no right to comment on whether public sector banks have an unfair advantage over private sector banks. Trai too argues that the CCI cannot recommend how many operators per circle the regulator should grant licences to.

Both sides have a point. The CCI cannot and should not pronounce on what are essentially policy decisions for a sector as a whole. That should be left to the Government or to the sectoral regulator. However, that is not the same as arguing that the CCI should not have any jurisdiction at all in consolidation/ M&A activity in sectors where there are independent regulators in any case.

Following global best practices, the CCI should consider individual cases (of consolidation, merger or acquisition, or even collusion) from every industry and judge them in the context of maintaining a competitive market. Competition is a complex issue and it isn’t always the case that having more players in a particular market is a guarantee for fair competition.

The airline industry, in different parts of the world, has often been guilty of cartelisation despite numbers. On the other hand, some heavily concentrated industries can be brutally competitive—look at Coca-Cola and Pepsi, or the near duopoly of Boeing and Airbus. So, if Coca-Cola acquires a smaller soft drink company other than Pepsi, it need not be an anti-competitive move. Even when Boeing bought out McDonnell Douglas, a competitor, it was allowed to do so as competition was ensured by Airbus. In fact, the aircraft manufacturing industry needed consolidation for economies of scale. Many other industries need that too and consolidation per se isn’t necessarily against competition.

The CCI would, therefore, have its hands full just examining various individual cases thoroughly. It doesn’t need to get entangled in broader policy issues. Actually, the controversy over turf is needless because just like everywhere else, competition authorities and sectoral regulators co-exist peacefully and effectively. It’s simply a matter of each sticking to its own area of expertise. --INFA

(Copyright, India News and Feature Alliance)

Economic Highlights

New Delhi, 20 November 2009

High Food Prices

NO MONEY LEFT FOR GOODIES  

By Shivaji Sarkar

The common man may not get to enjoy the benefits of India’s projected stellar show as food inflation has reached alarming levels of almost 14 per cent (13.68 per cent). The figures show that prices have been rising every week robbing people of their purchasing power. It has a direct impact on the industry and a fall-out on tax payments.

The indirect tax collection, according to official figures, has hit the Government once again. It has dropped by 21 per cent – Rs 1.21 lakh crore during the first seven months of the financial year against Rs 1.61 lakh crore a year ago. This may lead to a severe budgetary crisis and the Government may remain far off the target in revenue collection.

It is not the first time that indirect tax collections are falling. It has been dropping for over a year. In  December last too, it had taken a hit of Rs 40,000 crore. Clearly, this is a pointer to a grim situation. Tax collections increase during a buoyant economic phase. Indirect taxes comprise excise, customs and service tax. A fall in the collection reveals that activities in almost all the spheres of economy have slowed down. Indirect tax revenues have taken a big hit due to lower imports and a sharp fall in excise duty revenues. The decline in these taxes, on both the customs and excise duty front, must be a source of concern for policymakers.

A part of the fall is attributed to the stimulus package granted to the industry in tax sops. But that the slowdown is continuing is evident from a lower collection in service tax ( 5.4 per cent) at Rs 28,926 crore. Service tax signifies the purchasing trend and the present level of collections indicate that far fewer people are going out for shopping.

Customs duty declined by 31.8 per cent at Rs 45,412 crore indicating lower imports. Excise duty collection was also down by 18.8 per cent at Rs 52,566 crore. Clear trends that the stimulus is not working and the slowdown continues. The Government may not agree that this is linked to high prices.  But the items of daily consumption like potatoes and onions have been primarily responsible for pushing the food inflation up. This is because the two items are the staple food, particularly the poor. On an annual basis, the prices of potato have doubled in a year, whereas onion was expensive by 43 per cent and pulses by 23 per cent, according to the wholesale price index (WPI).

The wage hike given by the Government is regrettably not helping to revive the economy as the outflow of incomes has increased to sustain the family. A World Bank study in nine low-income countries  - Pakistan, Vietnam, Peru, Cambodia, Nicaragua, Malawi, Zambia, Madagascar and Bolivia - shows  that  the recent large increases in food prices are likely to raise overall poverty. A particular reason for the concern about the impacts of high food prices on poor countries arises from the fact that the poorest people spend roughly three-quarters of the their income on staple food.  

World Bank President Robert B Zoellick has recently said that the crisis of surging food prices could mean “seven lost years” in the fight against worldwide poverty. The bank’s study should be true for India as well. But it seems that the Government does not have an effective policy to tackle the issue. Food and Agriculture Minister Sharad Pawar’s statement that prices would continue to rise speaks of a mindset i.e.  nobody is serious about bringing down the prices. Many of our political leaders represent lobbies and couldn’t care much about the poor in a country where an average family spends 60 per cent of its income on food. And, the poorer spend 80 per cent of their income on food.

If all the income goes into buying food, other sectors of the economy have to take the hit. This is exactly what is happening. Adhering to the principles of a market economy is all very well but it has been observed that the market thrives when there is easy and affordable food availability. This is what the country witnessed for a few years till 2004.

Till such time the public distribution system (PDS) had remained universal. Soon the situation changed. It was restricted to the below poverty line people and the rest of the PDS was gradually demolished, the Government lost an important intervening tool. Else how would it justify what it claims as a comfortable buffer stock, and the surging market prices?

A free economy does not mean abdication of the duties by the Government. On the contrary, it imposes on it the duty to regulate and effectively oversee the prices so that the system does not go awry. In the Indian context, the Government wants to get out of all those responsibilities for which the State itself was formed. Reneging on these basics would not only create problem for the projected growth but also might lead to anarchical situations as the anti-price rise demonstrations, sugarcane farmers protest, suicide by families and Maoist violence has so far indicated. This is how Somalia has gradually got into its present lawlessness.

The Government has to effectively and strongly intervene to bring down the prices not only as a poverty alleviation measure but also to boost the industry by way of generating a demand. Food prices should not be treated in isolation. For at the end these decide the basic industrial pricing strategy, wages and demand generation, which are vital for the sustenance of both industry and trade. The Government is keen on high growth trajectory. It can be achieved only if the prices are affordable.

Indeed, the Government has to recognize the threat of high food prices. It must usher in a regime wherein  these do not threaten the economy. Can this be achieved? Only if there is a political will. The next big question is: Do we have it?---INFA

(Copyright, India News and Feature Alliance)

Open Forum

New Delhi,  19 November 2009

Judicial Reforms

TAKING JUSTICE TO VILLAGES

By Dhurjati Mukherjee

The Law Ministry has pointed out that judicial reforms are on the anvil, which will reduce the life of litigation from an average 15 years to a year within the next three years and make justice speedy and affordable. The ‘Mission Document’, under preparation is to be the roadmap for reforms with back up plans of strategy such as setting up 5000 new courts across the country that will work in three shifts – morning, day and evening.

The measures to be taken are aimed at tackling over three crore pending cases in the trial courts and high courts which would ensure that these are liquidated by the year 2012.  To reach its target, it is also proposed to reduce the average life of litigation by appointing a large number of ad hoc judges only to tackle the 2.64 crore pending cases in trial courts and 30 lakh cases in the High Courts. Even the Supreme Court had crossed the mark of 50,000 pending cases in August. The Solicitor General, who announced this recently before a Bench of Chief Justice, K. G. Balakrishnan and Justice P. Sathaisvam, said that the Government was agreeable to the usefulness of fast track courts but regretted the fact that some States were yet to provide proper infrastructure to these despite it being a centrally-sponsored scheme.

To start with, there will be Gram Nyayalays, which will be functioning shortly and Parliament has already enacted the Gramin Nyayalayas Act. Accordingly, in the coming three years, the Ministry proposes to set up 5,000 more courts with a clear mandate that from the time of filing a case till its decision, no more than six months should be taken. These additional courts will be backed by a solid case management plan that includes clubbing identical cases. Moreover, a judge cannot keep his/her judgement reserved for a long time.

It is understood that retired judges will be requisitioned both in trial courts and High Courts. A retired district judge, whose services will be requisitioned, will expect a fixed pay of around Rs 50,000 per month though this appears quite high, specially for village courts. Apparently, the Ministry plans to train and equip trial court judges, provide them laptops for faster disposal of cases.

Another significant measure will be that a policy would need to be evolved wherein the question whether the Government should file an appeal in higher courts or not would be addressed. Once the criteria for filing an appeal is evolved, which would be a little conservative towards moving higher courts, the Ministry expects a drastic fall in governmental litigation. It may be pointed that most government departments have the habit of unnecessarily going in for appeal, even up to the Supreme Court when there is no merit in the case and the litigant has already won two rounds in the Central Administrative Tribunal (CAT) and the High Court.

Another notable plan of the law ministry is to set up four regional institutes of excellence to equip lawyers and bring them on par with IT professionals. The Planning Commission has been approached for approval of the plan to set up these institutes, which is expected to match the best law institutes in the world.   

Though these judicial reforms are imperative at this juncture, questions arise about the resources required to make it a reality. In the current year, a meagre sum of Rs 90 lakhs has been earmarked for setting up these courts. According to ministry officials, the cost of setting up a village court alone has been estimated at around Rs 18 lakhs (Rs 1.8 million). This is apart from the expenditure required to keep the courts running. The law ministry has agreed to bear the cost of setting up the courts and pay for basic infrastructure during the first three years.

But the States, though have shown appreciation in setting up village courts, they are not quite willing to bear the expenditure from the fourth year onwards. Moreover, the Government needs around Rs 20 crores to set up 100 such courts but current trends indicate that not more than 25 to 50 may become functional during this financial year.

The proposed village courts should be of great help to the rural masses as they can expect to get justice within a specific time frame as the famous saying “justice delayed is justice denied”. However, the cost of litigation has to be kept at a minimum level and, in this connection, the government would have to intervene. It should also be explored if the villagers can make their own submissions (like in the Central Administrative Tribunals) possibly through a written statement in the local/vernacular language. Moreover, the Legal Aid Services would have to extend help to people from the lower echelons of society with free or nominal charges for legal help.

It is understood that the village courts will decide petty criminal cases where there can be a maximum imprisonment of two years and civil disputes arising out of purchase of village property. Judges will have the powers of judicial magistrates and appeals against their orders can be filed only in district courts. It is pertinent to mention here that some methodology should be evolved whereby all cases cannot be allowed to go beyond the district court so that the litigation dos not become unending.  

The critical need for justice reaching all segments of society cannot be doubted but the modus operandi of implementing the plan as early as possible remains to be seen. Let us not forget that the law has by and large favoured the rich and the powerful and that it is time to reverse the trend.  In this endevour, the reforms envisaged are very welcome as these would help the common man to settle the problems at the grass-root level expeditiously and spare himself the harassment of lengthy litigation.

Moreover, at a time when IT has reached all corners of the world, there can be no justification of cases hanging fire for years together. Litigations need to be solved within two-three months so that the benefits of justice reach the people. Judges would too need to make that extra effort in ensuring prompt decisions to help repose the people’s faith in the country’s judiciary.   

The reforms in the judicial system should truly reflect what Prime Minister recently pointed out at a conference of Chief Justices: “Like Gandhiji’s common man, the focus of the judicial system should be to wipe every tear of every waiting litigant”. Thus, in tackling the huge problem of pending cases, “the entire legal system and each rung of it has to function as a seamless web and an indivisible whole” so that major changes could be affected and the marginalized sections assured of justice.  -- INFA

 (Copyright, India News and Feature Alliance)