Economic Highlights

New Delhi, 9 July 2010

FDI In Retail

HIT SOCIAL DYNAMICS, PENURY, JOB LOSS

By Shivaji Sarkar

A growing economy has its challenges and anxieties. The challenge it faces is the attraction and the anxiety whether it would be a boon or a bane. The proposal of opening up of the retail sector in toto --- multi-brand ---- has once again raked up the old question. More so, when an Industry Ministry discussion paper, subsequent to Commerce Minister Anand Sharma’s US visit, states: “Foreign direct investment (FDI) in retail may be an efficient means of addressing the concerns of farmers and consumers”.

A question the country has been discussing for over a decade. Gradually it opened FDI in single brand retail products and part of the wholesale trade. The multi-national giants are now on to expanding their empire in India as it assures them not only a large market but also very high profits with least regulations. They want to have the maximum benefits in an economy that is tipped to be the third largest in terms of GDP by 2050.

In recent years, the destination sectors in FDI have became more varied.  FDI inflows have shifted from infrastructure, natural resources and export- driven manufacturing to other areas such as retailing, tourism, construction and off-shore services. 

A World Bank study showed that cumulative FDI inflows to the retail sector in the 20 largest developing countries amounted to US$ 45 billion in 1998-2002 (about 7% of the total of these countries). The study showed that after liberalization; countries such as Brazil, Poland and Thailand have received significant FDI in retailing. 

The lure of FDI is potential bait. Those in favour say that it would spruce up the retail sector, make the prices competitive, standardize products and free the people of many “unscrupulous” small retailers. The organised retailing comprises 2% of the country’s business. It has grown to 40% in Brazil and 20% in China in the last 10 years with the injection of foreign money and operations of MNC chains.

India has the largest number of retail traders, 1.5 crore. This may not look organised in MNC terms but the trading community has evolved an ethos that controls and serves the consumers even in the remotest parts of the country. These are largely self-employed family units, which employ up to 10 persons. According to varied estimates about 3 to 4 crore people are employed in the sector. They cater to 98% of the retail business worth Rs 382,000 crore as per Government estimates in 2002-03.

Some experts aver the figures could be more. Most of the employed persons are not highly educated and are semi-skilled. But together they are estimated to support about 20 crore people, 1/5 of the population.

The biggest concern dogging this community is whether the large organised chains would be able to support such a large section of the population. The large chains are known to economise on their operations, mechanise and employ fewer people.

Those who argue that retailers who close their shops would be employed by the big chains is a myth. It is a pernicious idea to turn self-employed entrepreneurs into salaried employees.

A US study, Wal-Mart and Rural Poverty by Stephan J Goetz and Hema Swaminathan of Pensylvania State University’s  Agricultural Economics and Rural Sociology department, found that Wal-Mart unequivocally raised family poverty rates in US counties (districts)  during the 1990s. Another researcher E Basker, after studying the Wal-Mart effect on 1749 counties, noted, “Wal-Mart entry has a small positive effect on retail employment at the county level while reducing the number of small retail establishments in the county.”

A similar study by the Economic and Political Weekly’s Anuradha Kalhan in Mumbai found that shops and establishments close to malls or large retail chains suffered fall in sales. The small retailers also sacked their employees. Importantly, it is not the number of people retrenched but the fall in family income where a decline in sales is not matched by retrenchment and results in shrinking earnings per head. “If the downward pressures continue to intensify, some more retrenchments may occur; however, closures seem imminent”, Kalhan observes.

Thus FDI in retail is not an economic or volatile political proposition. It is likely to impact social dynamics and reduce many self –employed people to penury. The US studies also noted that initially the MNCs provide more benefits to consumers but once small retail outlets closed down they fleece more. In India, it is well-known that an FMCG company has monopolized production to sales and is earning 40% profit. Is such high profit really in the interest of the farmer and consumer?

It was also observed that the big retail houses subtly cartelize and restrict competition to themselves. Studies in UK found that as large chains grew, the number of retail outlets during 1981-99 came down from 56862 to 25800.  In Europe, during 1970-80, about four lakh retail shops closed down. Some of the fast food chains captured almost all the business in Norway 99%, Switzerland 88%, Sweden 94%; UK 64% and Portugal 57%.

The impact of limited FDI in the retail sector has produced the results of the Mumbai study. If it is allowed freely, the impact may be devastating for society and would extend to the farm sector.

The lure and need of foreign investment has to be weighed in terms of the actual benefits along-with probable damages to the society. The benefits cannot and should not be viewed in monetized terms. Many benefits do not have a direct monetary aspect. But its loss is tremendous in terms of psychological, physical, self-esteem et al. Even China is facing social upheaval as small shops are closing down in various cities.

Before taking a decision let the country not merely see the growth of organized retail but also evaluate the contribution of the unorganized retail sector to the organised growth of the country. As it takes the crucial decision, the powers-that-be might institute a study on the impact of organized retail entry in China. ---- INFA

(Copyright, India News and Feature Alliance)

Economic Highlights

New Delhi, 3 July 2010

Oil Slick Cases  

INDIA SAILING IN DANGER ZONE 

By Shivaji Sarkar

The world is too occupied with the British Petroleum’s failure to check one of the world’s biggest oil slicks in the Gulf of Mexico after a blast at its offshore oil rig in April. But few bother to know about the dangers oil slicks are regularly causing to India’s marine life and ecology.

The slicks are not caused by oil rigs alone. Most major slicks in the high seas in India, Europe or the Mediterranean are caused by leakages from tankers and other vessels. In April, MV Malavika, a cargo ship off the Essar Shipping leaked oil near Gopalpur in Orissa affecting the Live Ridley turtle nesting beaches.

Since 1988 there have been 60 oil slicks of different dimensions in India, according to the Coast Guard records. The figures of the quantity of oil spilled are available for 33 cases. Till 2006, in 16 cases, which were properly assessed, 76409 tonnes of oil, naptha, crude, furnace oil and other petroleum products spilled into the coastal seas across the country from Bombay High, Mumbai Port, Goa, Haldia, Gopalpur and even Andaman.  In 17 cases, the quantity of the spill was not even assessed. In all likelihood that would be another 80,000 tonnes or more.

Most major spills had occurred in the Western coast. Bombay Harbour and its neighbourhood had seen 15 spills from different vessels. Most of the spills were in the range of 100 to around 1300 tonnes but in two of these 6000 tonnes of naptha and 5500 tonnes of diesel spilled into the sea.

With the intense effort at being self-reliant in petroleum production, NELP VIII seeks $ 3 billion investment and offers deepwater blocks. Only one block each is in offer in Krishna-Godavari basin, five in Kerala-Konkan basin and the maximum 18 blocks are in the Andaman Sea. Operation methodology in most of these is similar to BP’s Gulf of Mexico operations.

The US is known to apply the most stringent safeguards to make the oil companies conduct themselves in the most responsible manner. But even the Obama government has failed to check the erring BP and compromised on demanding the $ 20 billion compensation. The oil companies wield significant political clout and have even earlier escaped strong US laws.

India does not have such strong regulations. Besides, as was evidenced in the Union Carbide case, safety is not the paramount aspect governing hazardous industries in this country. The latest Government steps are a grave threat to the pristine ecology, clear blue waters and mangrove forests of Andaman & Nicobar Islands. One of the biggest oil spills in Indian waters was off the Andaman and Nicobar Islands in 1993 when about 40,000 tonnes were emptied from the M.V. Maersk Navigator. Such spills damage coral reefs as well, a rich source of food

In the past several accidents have occurred onboard offshore oil drilling /production platforms. Some of these were due to human errors leading to collision between the oil rig and a vessel. The Bombay High is often touted as the safest oil platform. Even this has suffered five major disasters, including a major fire in 2005. It claimed 11 lives. The platform produces 80,000 barrels of oil per day. But officially “only 80 tonnes of oil was stated to have spilled” till the fire was doused after several days. In two other leaks from vessels, at Bombay High 46000 tonnes of oil had spilled and in two cases of gas leak the quantity was not assessed.

Clearly, India is sitting over a lake of disasters and this fact has not been reported in as much detail as is needed. The magnitude of the impending disaster is likely to grow as explorations have started in the Bay of Bengal. It has emerged as an important source of gas to meet the Asian need.

Significantly, Bangladesh and Myanmar are sitting over a gas lake. Bangladesh has recoverable reserves of 15.51 trillion cubic feet (tcf) of which 4.07 tcf have been already produced. Myanmar has 81.03 tcf of natural gas in offshore blocks that stretch over 270,000 sq km in the Bay of Bengal. Sri Lanka has offered China and India nine blocks in the Mannar Basin.

How dangerous these operations could become may be understood by a January 1993 incident, when the ICG undertook Operation Safai to control the oil-spill resulting from a collision between two super tankers off the Straits of Malacca. The spill had spread over 8000 square nautical miles and was observed as close as 10 nautical miles from the Nicobar Islands. The National Institute of Oceanography reports that pollution surveys along the oil tanker routes in the Arabian Sea and in the southern Bay of Bengal from south of Sri Lanka to the head of the Malacca Strait showed an abundance of oil slicks amounting to nearly 3700 tonnes and 1100 tonnes of floating tar balls in the Arabian Sea and the Bay of Bengal respectively.

India’s rising demands for energy resources have led to aggressive oil exploration activities at sea to locate new oil and gas fields. India’s EEZ is dotted with offshore platforms engaged in offshore exploration for oil and gas in various basins--Cambay/Mumbai, Cauvery, Krishna-Godavari, Kutch, Mahanadi and West Bengal, Andaman and Nicobar Islands and Kerala basin.

Another matter of concern is that the cleaning up of the slicks caused by corporate activities or failure is the responsibility of the Government. In all the 60 cases, the Coast Guard is known to have borne the expenses. Oil and shipping companies merrily sail through the disasters.

Indeed, the BP disaster has opened up a debate over the responsibility of the companies. The Oil and Natural Gas Corporation (ONGC) chairman RS Sharma has stated: “The BP oil spill has been a game changer for the industry. Going forward, I see a very difficult and very challenging time for us to operate within India and outside”.

However, sadly the industry has yet not developed any module. Southeast Asia which is the growing hub for oil exploration and production has not yet mulled over this threat. It is time that India wakes up to the threat. ---INFA

(Copyright, India News and Feature Alliance)

Economic Highlights

New Delhi, 18 June 2010

Integrated Water Policy

CAN ECONOMY GROW SANS IT?

By Shivaji Sarkar

The death of the Sultanpur lake in Haryana has raised a national debate. The focus is over water availability in the country as also its uses particularly in industry and agriculture. The big concern is if water bodies go on dying like that would the industry, agriculture and economy grow as projected?

Consensus largely is that it would not. Besides, it is just not the case of an isolated lake but that countrywide there has been a concern over training and tunneling of river streams, changing river courses and high-irrigation backed agriculture. Industry has not only been a water guzzler but also the worst polluter turning many major and minor streams into caustic nullahs.

The green revolution has largely ignored low-water using plants and created a kind of mono-culture in terms of food. The low-water using foods like millet, jowar and bajra are less cultivated. Only last year owing to severe rainfall shortage there have been reports of higher millet cultivation.

The World Bank and the United Nations have come out with many studies stressing backing up crops that could use less water. The statistics that rice and wheat use staggering quantity of water has added to the concern. The reports have backed cultivation of crops and also varieties of wheat and rice that are less water demanding.

It is just not in India, worldwide too many fresh and brackish water lakes are either drying up or shrinking including the Dead Sea and Aral Sea. Even evaporation from the Aswan Dam lake in Egypt has accelerated.

Thus experts have given a call for a change in agricultural practices not only to conserve water but also to increase food yields for a population growing beyond a billion. India has to evolve a policy not only for itself but also for global food security. Any imbalance as it has been witnessed during the past few years leads to global food shortage and severe inflationary situation. However, it is difficult to ascribe the food inflation in the country to this alone.

There are other reasons including manipulation of food stocks, hoarding and practices of large MNC retail chains that lead to severe wastage of packed foods. Stress on processed and packed foods has also deleterious effect on the food availability as well as its impact on ecology and water bodies.

Though largely the discussion has been centred on high water uses in agriculture less has been talked about the industry. While agriculture definitely has to match the changing climatic pattern, there has been little debate on the industry that not only is increasing its water needs but also is polluting the fresh water sources across the country

In the past several decades, industrial production has increased in India owing to an increasingly open economy and greater emphasis on industrial development and international trade. Water consumption for this sector has consequently risen and will continue growing at a rate of 4.2 per cent per year (World Bank, 1999). According to the World Bank, demand for industrial, energy production and other uses will rise from 67 billion cubic metre to 228 billion cubic metre by 2025.

The industry which has entrenched itself deeply into politics has not tried to come out with a low-water use policy. High profit motives have driven it leading to unsustainable health and hygiene conditions across industrial belts. The impact goes beyond and has known to have sullied farms, irrigation sources and major water bodies. Ultimately, it affects agriculture and food yields.

Policy formulations have been isolated for pollution norms and never been looked at in an integrated manner. The approach that industry has little to do with agriculture is faulted. It is dependent for its survival on a good crop and it has been witnessed across the world that farm yields decide consumption and industrial production pattern.

It also requires a river basin/watershed and/or irrigation system perspective for resource management decisions. This would help to avoid situations where, although individual operations on a given farm may be very efficient, the cumulative effects of many farms undermine the capacity of freshwater resources and ecosystems to provide long-term, sustainable services for people. A river basin perspective also enables ecological flow regimes to be defined that conserve biodiversity and ensure continued related goods and services for human population.

The Comprehensive Assessment of Water Management in Agriculture (CA), an ambitious programme co-sponsored by the Consultative Group on International Agriculture Research (CGIAR) pulled together the work of 700 experts over a five year period. The programme took stock of the past 50 years of water development to determine what future actions would be needed for the next 50 years.

Fresh water usage from existing river basins has already been stretched to the limits, with no possibility of more of it being available to produce the additional food the world may need over the next decades. This future scenario looks gloomy as population in the region is food insecure even at the current levels of food production; raising their consumption levels would itself entail considerable additional need for fresh water, the report finds.

Policy impetus for watershed management hasn't translated into effective results during the past three decades. A case in point is the finding of the Parthasarathy Committee, constituted by India's Ministry of Rural Development. The committee's report, released in January 2006, concluded that “watershed programmes have been bureaucratically driven and mechanically implemented with focus on 'outlays rather than outcomes' and 'accounting rather than accountability”. The Food & Agriculture Organisation (FAO), in its recent regional assessments of watershed programmes, argues that many watershed programmes suffer from inherent inertia to transform the rain-fed areas. What it does not say is that many of the programmes have failed due to collusion between bureaucrats and industrialists.

Interestingly, many of these issues are becoming international as the recent controversies on Chenab and Sutlej waters between India and Pakistan is slated to be turned into international disputes.

Somehow, neither the Planning Commission nor any other Government agency has started treating controversies on water in a holistic manner. Industry, agriculture, food practices and pollution are all treated separately. Bureaucracy in each ministry tries to protect the interests of each of the different groups.

The Government therefore has to change its approach and evolve a policy on water which takes the primary interest of agriculture but must stress on the efficient use and diversified low-water use crops. Industrial, urban, rural and all other needs have to be taken into account so that the nation progresses as targeted beyond 2050, when most of us would not be around. ---INFA

(Copyright, India News and Feature Alliance)

Open Forum

New Delhi, 28 July 2010                                        

Politicians and Their Speeches

MEANINGLESS WORDS, SANS CONTENT

By Deepak Thimaya

Listening to political speeches these days, one gets a feeling that today’s politicians still live in the sixties. Most speeches by our netagan are grating on the aam aadmi’s ears with scant regard for the audience’s interest and attention span. While most speeches are delivered in shrill voices and a monotonous style, the politicians’ gumption that their speeches are interesting and well-appreciated is indeed laudable.

Sadly, politicians don’t know how boring they are as speakers. Some shamelessly fail to read the audience reaction. Why do they continue to repeat themselves ad nauseum knowing that their words are neither funny nor revolution-making? What to speak of political speeches belted out at lunch-time to listeners already reeling under the blazing sun, who would be happier gorging free food.

At a recent BJP event a senior leader who was screaming lost his voice mid-way, desperately looking for a glass of water to ease his vocal chords!  He spoke like he was revealing secrets, no matter that his audience were uninterested in his revelations. Asking the spectators to voice their support to his demands, pin-drop silence greeted him. By the third time he was actually pleading with them, beginning to realize that something was amiss.

Indeed, something was wrong. His audience were certainly not BJP supporters. In the present day rent-a-crowd milieu, most speakers fail to realise that the attendees have come either out of curiosity or to satisfy someone or else simply for the money paid. Certainly not to listen to speeches. Worse, all political speeches sound similar. Not only are they long, repetitive but each leader parrot’s another’s sermon. Sometimes even reiterate their opponent’s lines!

Questionably, when are our politicians going to learn that in an age of TV and ‘breaking news’, their age-old rhetoric has lost value? One Chief Minister who gave a big speech recently, failed to fathom that the only thing that made news was his copious shedding of tears.

Arguably, it seems the time has come for frustrated leaders to tear their hair and rip clothes to get some attention and reaction. However, even this might not work. Politicians know they cannot influence the voters anymore. Most audiences are not impressed by a political speech.

Sometime back, a Union Minister asked the spectators to forthwith apply for a loan to buy cattle. Nobody did. Everybody knew only to well that getting a loan is not as easy as the Minister’s promises.

Not only that. Most speeches are in fact directed at the Opposition or rivals and are bereft of purpose. In fact, most politicians know that their monologues do not work.  In a world where each line is interpreted and every speech analysed (if it is worthy and spoken by someone who matters) a politician wasting his energy, making a spectacle of himself and mockery of public influence is difficult to understand.

Invariably, leaders use speeches to provoke, explain, plead, threaten or announce their plans and schemes. But none of these stir the audience anymore as they have lost faith in the power of the spoken word to change things. Once an influential State Minister ordered the city authorities to put a speed-breaker on a busy road immediately as requested by an agitating group. But nothing happened even after two years. Nothing works and nothing moves as nobody believes a Minister’s words.

There is no gainsaying, that political speeches are emotional dramas that have stopped making any impact. Old-timers nostalgically recall former Prime Minister Indira Gandhi’s speeches. Though her voice was nasal and high pitched, her utterances worked magic. People believed her and there was no opposition to contend with.

Another former Prime Minister Vajpayee’s speeches were akin to the Chinese story, the Emperor’s new clothes. Everybody said that his speeches were good and one concurred, notwithstanding that one did not comprehend his chaste Hindi!

Who can forget the Father of the Nation Mahatma Gandhi’s speeches? He neither had a great voice nor made any grand gestures, yet people loved what he said. Citizens walked long distances, any opportunity to see and listen to him.

Rajiv Gandhi inherited his mother’s nasal twang and spoke loudly but what he said was widely appreciated. He was feted not for his speaking skills but because his speeches were different from the run-of-the-mill. There were replete with fresh ideas, newsworthy and some things he promised transformed into reality.

But when it comes to Hindi speeches delivered in South India the less said the better. Most of which are translated by a ‘leader of stature’ who is conversant in the local language. Many times taking advantage  of the speaker’s ignorance of the local language and the audience’s unfamiliarity with Hindi, the translator adds his own gyaan and spice to the translation without the speaker being any wiser.

The classic example was when Rajiv Gandhi delivered a Hindi speech to a large gathering in Mysore. The then Karnataka Congress Chief Minister Bangarappa doubled up as translator and added his own ideas and opinions. Rajiv figured out that the translation was longer than his speech and openly asked Bangarappa to stick to a formal translation.

Sadly, nowadays speeches are devoid of honesty, a quality that people look for in a leader. They are just meaningless words, some downright silly, not a few pure rhetoric and others full of malice and hatred. Words which make no sense for the speaker too. Be it Sonia Gandhi, Manmohan Singh, Advani, Sushma Swaraj, Lalu, Mulayam, Mayawati, Gadkari etc. Words, words and more words sans content. Leaving one wondering whether are politicians exchange notes on who should say what and how much.  

Funny that a politician who claims to be working 24/7 for the people has not found the time to know what people think and what exactly amuses them. It is time for our netagan to watch TV more regularly! ---- INFA

(Copyright, India News and Feature Alliance)