Round The States

New Delhi, 16 July 2009

Maoists’ Chhattisgarh Strike

CENTRE SHOOTS FRESH ADVISORY

By Insaf

The Maoists bloody strike in Chhattisgarh has once again brought into focus the glaring communication gap between the Centre and States, other than suggesting that the war against Naxalism is far from over. Scoffing at the UPA Government’s recent ban, the Maoists laid siege on Rajnandgaon district, killing 36 security personnel, including an SP, on Sunday last. While Chief Minister Raman Singh, announced a relief package for the families of those killed and extra allowance for the security forces, the Union Home Ministry averred the killings could have been averted had its standard operating procedures (SOPs) been followed. It thus dashed off a fresh advisory to all Naxal-affected States asking their police to guard against walking into death traps and carry out operations according to their own plans rather than those of the Naxals, as was the case in Rajnandgaon.

With security forces invariably becoming sitting ducks for the Maoists cadres, the Centre insists that the States ensure that its SOPs be strictly followed. These include: the counter-Naxal forces tread on foot or cycles instead of vehicles in extremist-infested jungles to steer clear of landmines; avoid reinforcements during a Naxal attack for fear of subsequent ambushes, adopt multiple-attack strategy; stick to guerrilla warfare only; use different approach and return routes through a Naxalite stronghold. The standard drill sounds good on paper, but can it win the war? After Lalgarh and now Chhattisgarh, the latest take on the Maoists plan is scary -- they are building a corridor through three States, Andhra Pradesh-Orissa and Chhattisgarh, allowing the cadres and arms to travel freely from the coast to the deep inland.  

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Darjeeling On Boil Again

West Bengal’s picturesque Darjeeling Hills are on the boil again, with the militant Gorkha Janamukti Morcha (GJM) flexing its muscles and launching an indefinite bandh since Monday last. Initially the stir was to force the State Government to take action against culprits, two senior police officers and 35 GNLF cadres for alleged violence against its activists in Panighatta during a rally. However, with the bandh picking up steam, the agitation is back to its demand for a separate Gorkhaland. The GJM has asked schools to send boarders back and tourists to leave.  Worse, the blockade in Siliguri and the NH31A has hit normal life in adjoining Sikkim, forcing the civil administration to take stock of vegetables, fuel, grocery etc, which can at best last only a week. While Kolkata has informed the GJM about New Delhi’s willing to talk and to call off the strike, its chief Bimal Gurung has turned down the offer asserting, “mere invitation for talks is not enough, there have to be positive results.” What now?    

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States Told To Reserve Land

All States have been asked to add a new entrant to their list of ‘reservations’ by the Centre to make the country slum-free. Kick starting its latest scheme, Rajiv Awas Yojana, the Union Housing and Urban Poverty Alleviation Minister Selja Kumari has written to all Chief Ministers “to consider amending town planning, urban area development, municipal and other related laws to provide for reservation of land for affordable housing, basic amenities and informal sector activities of the poor.”  Thus, within the next three months while the CMs are expected to create a database of slums in their cities, the Centre is to work on a legal framework wherein property rights are accorded to slum-dwellers and the urban poor. The Centre expects to complete this “inclusive cities” project in its “five-year period” rule.    

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CPM’s Kerala Mess Sorted?

The curtain has finally come down on Kerala’s long-drawn unsavoury CPM faction feud with Chief Minister V S Achutanandan having to pay a price for sounding the bugle against corruption. The Central Committee removed him from the Politburo on Sunday last on charges of ‘indiscipline” and violating organizational principle. Adding insult to injury it gave a clean chit to State Secretary Pinarayi Vijayan saying he “was not involved in any corrupt practice whatsoever, and that the Party would fight the case politically and legally” (SNC Lavalin power deal). Achutanandan mercifully has been allowed to continue as CM on grounds of being “the senior-most leader who has made a big contribution to the party in Kerala.” Obviously, the CPM top brass has made a note of the pro-Achutanandan demonstrations held in parts of State and does not want to start another controversy.    

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Delhi Metro Setback

Delhi’s Metro pride took a beating last week when five workers and an engineer were killed and 15 others injured after a launching girder gave way at a construction site in the South district. Worse, three cranes collapsed the next day while clearing the debris injuring another five workers. Clearly, it was the worst-ever mishap in the history of Delhi Metro, which in these past 10 years has maintained high standards of work. Another casualty was inflicted when the much-venerated “Metro Man” Delhi Metro Rail Corporation Chief E Sreedharan resigned within hours taking “full moral responsibility,” upholding the best traditions of personal probity. His resignation was rightly rejected. Back at work, he is now busy investigating what went wrong. Equally crucial is whether the project will roll out successfully for the Commonwealth Games next year.  

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Gujarat To Amend Prohibition Law

Under severe attack for the worst-ever hooch tragedy in Gandhi’s land, Gujarat Chief Minister Narendra Modi proposes to toughen the prohibition law. After 150 deaths in the “dry” State last week, his Cabinet has approved “The Bombay Prohibition (Gujarat Amendment) Bill, 2009,” wherein in case of deaths, anyone found manufacturing or distributing the spurious liquor, shall on conviction be punished with death or imprisonment for life, among other changes. However, the amendments are soft on bootleggers supplying Indian Made Foreign Liquor. Therefore, even as the Bill is all set to be introduced in the ongoing Assembly session, Modi should note that a piece of legislation alone will not suffice. He must address the basic question: How can illicit liquor trade flourish in a State, where prohibition is under force?  

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Booming Liquor Business In J&K

Meanwhile, as Gujarat grapples with its illicit liquor trade business, Jammu & Kashmir is witnessing the mushrooming of wine shops and bars in hotels and restaurants. According to official figures, liquor business is emerging as the major source of income for the State Government. In 2006-2007 it earned Rs 212.08 crore which rose to about Rs 245 crore last year. Needless to say, the consumption of liquor in Kashmir has increased with the tally being 4 lakh bottles in 2007-2008. The Jammu region, however, appears to be the big guzzler, with 191.51 lakh bottles including 53.81 lakh beer bottles being consumed in 2007. Thus, keeping the State Government Excise Department on its toes, issuing more and more new licenses. Hic!

 
(Copyright, India News and Feature Alliance)

Defence Notes  

New Delhi, 13 July 2009

Defence Spending

NO CHEERS FOR EX-SERVICE OFFICERS

Aimed at fast-tracking procurement of defence equipment, Finance Minister Pranab Mukherjee confirmed the increase in the country’s defence outlay by 34 per cent during 2009-10 to Rs.1,41,703 crore up from Rs 1,14,600 allocated during 2008-09 (revised estimates). The budget also allocates Rs.4,757 crore for the Defence Research and Development Organisation (DRDO) and Rs. 832 crore for defence ordnance factories.

Noticeably, the three Services will see Rs.43,811 crore or nearly 54 per cent going towards pay and allowances, as a result of the Sixth Pay Commission award. While the Army will spend a whopping Rs.36,081 crore or 64 per cent under this head, the Navy and Air Force have set aside 34 per cent each-- Rs.2,850 crore and Rs.4,880 crore repectively. From the budget estimate in 2008-09, the near-Rs 15,600 crore pensions went up to Rs 20,232 crore in the revised estimates, and have been allocated Rs 21,790 crore in the current budget.

Thus, it is not wrongly observed that over 55 per cent of the defence outlay is being spent on pay, allowances and pensions alone and only 46 per cent is left for the modernisation of the Forces and training purpose, which is grossly inadequate in view of the  neighbourhood becoming increasingly hostile.  

Of the allocation for the fiscal that began April 1, plan expenditure for defence has been pegged at Rs.86,879 crore against Rs.73,600 crore for the financial year just ended March 31. This includes Rs.54,824 crore for capital expenditure as against Rs.41,000 crore in the revised estimates for 2008-09.

The Army’s allocation is even larger than the Rs.54,824 crore that has been set aside for capital expenditure for all three Services. However, in the case of capital expenditure, the bulk, almost Rs.20,000 crore, has been set aside for the Air Force, against Rs.17,767.95 crore for the Army and Rs.11,873.73 crore for the Navy.

Less than a year ago, in October 2008, the Comptroller and Auditor General (CAG) report had slammed the Government on its poor naval fleet. It said that no more than 48 per cent of India’s submarine fleet was available for waging a war with some of the submarines having already outlived their lives. Thus, we should be thankful to Russia for finalizing the Gorshkov (aircraft carrier) deal for about $2.2 billion, which should give the much-needed boost to the Navy.

Importantly, it would be a worthwhile exercise to see how much of this will actually be spent. Shockingly, the Armed Forces returned Rs.7,000 crore of the Rs.48,007 allocated for capital expenditure for 2008-09. As always, the Army and the Air Force were responsible for the biggest quantum of money allocated towards equipment but it was returned unspent because they could not purchase the much-needed light utility helicopters and 155mm artillery guns. The Army was allocated Rs 8,345 crore for equipment, but spent only Rs 6,268 crore, whereas the Air Force allocated Rs 6,290 crore could spend nearly Rs 1,000 crore less at Rs 5,151 crore.

This only goes to show the apathy in the Armed Forces about utilizing the amount, even if its meager for the acquiring the latest defence equipment. The shortage of arms, equipment, aircrafts and guns will only affect the fighting capability of the Forces which is a very serious concern. Thus, top priority should be given to streamline the defence procurement system by the Raksha Mantralaya to ensure that the funds allocated are properly utilized and don’t go waste. This lethargy on the part of the Ministry of Defence can let down the country in case of a war in the future.  

Besides, the defence spending is still at about two per cent of the GDP, compared to our neighbours—China’s seven per cent and Pakistan’s five per cent. The defence expenditure should at least be a minimum three per cent of the GDP to keep the Armed Forces well-equipped and god forbid fit for war.

On another front, Mukherjee said enhanced pensions had been approved and that this would annually cost the Government Rs.2,100 crore. The decision, he further added “will benefit more than 12 lakh jawans (soldiers) and JCOs. Certain benefits being extended to war wounded and other disabled pensioners are also being liberalized.” The minister also said the committee headed by the Cabinet Secretary on One-Rank-One- Pension (OROP) had submitted its report and its recommendations have been accepted.

However, the skillfully-crafted statement by Mukherjee on the Defence Forces’ demand for OROP, has created a wholly erroneous impression i.e. that the UPA Government has finally granted it. Nothing could be farther from the truth. In fact, available information indicates that the issue of OROP has not been even remotely addressed.

What Mukherjee said in Parliament was: Further: “On the basis of these recommendations, the Government has decided to substantially improve the pension of pre-1.1. 2006 defence pensioners below officer rank (PBOR) and bring pre-10.10.1997 pensioners on par with post 10.10.1997 pensioners. Both these decisions will be implemented from 1st July 2009, resulting in enhanced pension for more than 12 lakh jawans and Junior Commissioned Officers (JCOs).”

By bringing the pre-1996 pensioners at par with the post-1996 pensioners, the Finance Minister has only rectified a 13-year-old anomaly, which should have been done long ago. Revised pensions announced after the VI CPC had created three distinct classes of pensioners: pre-1996 retirees, 01 Jan 1996 to 31 Dec 2005 retirees and post 01 Jan 2006 retirees. As a result, similar personnel in each class received widely differing pensions.

Equity and natural justice demanded that these artificial distinctions should have been removed whenever pensions were revised; post V and VI CPCs. In a litigation relating to equity between pre and post 1996 defence pensioners, even the Supreme Court had ruled in September last that such distinctions violated Article 14 of the Constitution. In fact, one may argue that Mukherjee’s reported magnanimity is guided more by the Apex court judgment than any serious concern for the Defence Pensioners.

Importantly, the division between pre and post 2006 pensioners remains unaddressed. It needs reminding that the demand of the Defence Forces and Defence Pensioners for OROP was, in fact, only for removal of this division. Such indifference of the Centre for the Defence Forces and veterans is all the more galling, when viewed against the President’s address, assuring early resolution of OROP, to both Houses of Parliament.

And, what is one to make of repeated statements of the Ministry of Defence and its Minister Antony that the gap in pensions between the old and new pensioners will be substantially reduced and pensionary benefits of officers and jawans brought as close to OROP as possible? Sadly, for the ex-service officers there is nothing to cheer about. –INFA

 (Copyright, India News and Feature Alliance)

Economic Highlights

New Delhi, 9 July 2009

                                                     Aam Budget Review

TOO MANY TARGETS, NO SOLUTION

By Shivaji Sarkar

It is a record Rs 10-lakh crore expenditure budget, Finance Minister (FM) Pranab Mukherjee has told the nation. If at all, it is a record for borrowing and debt servicing. The FM borrows Rs 400996 crore and pays back Rs 568402 crore as repayment of debt. Sadly, it signifies a severe malaise – the country is in a debt trap.

The actual budget is virtually reduced to Rs 452436 crore, about 55 per cent less than projected. No wonder the UN has warned that India is unlikely to achieve the all-inclusive Millennium Development Goals (MDG) by the target date of 2015. The International Labour Organisation has expressed concern over the growing unemployment worldwide and India is no exception. The MDG points at an increase in vulnerable employment. The budget does not provide for either job protection or job generation.

The country needs to feel concerned at this ‘aam aadmi’ budget. Indeed, it has too many targets but lacks a focus. It reads more like a manifesto than a road map for development. The only positive aspect is that it goes slow on public sector disinvestments. The FM’s euphoria that the first budget, 60 years ago was a mere Rs 193 crore is also misplaced. During these six decades prices have increased around 100 times and the population has almost quadrupled. Thus, there has been only a minor increase in the budget size in real terms and per capita allocation has reduced.

That is statistics. The budget, as the FM says, is beyond statistics and is also not the lone tool for spurring development. It is also a fact that this FM has the most difficult task. He draws flak for what he has done and what he hasn’t. He is not responsible for the high debt but inherited it from his predecessor. But the burden has to be borne by the nation.

The total revenue collected is Rs 614497 crore. Thus after debt servicing only Rs 46095 is left for the expenses. The rest, over Rs 4-lakh crore – shown as fiscal deficit, comes from the borrowings. So the government does what Charvak, not Chanakya, had advised long back: “borrow to feed yourself,” – a prescription the Americans followed at the behest of their merchant bankers. Today, the US economy is struggling to find a way out for recovery. Last week’s figure only indicated further job losses and deepening of the crisis in the US. The European Union is not far behind with 9 per cent more job losses.

The budget’s projected dependence for the export-oriented industries for a revival of the western market is not in sync with reality. It also does not try to create a demand generating economy. There are many flagship programmes. But these are long-term solutions. In a crises-ridden situation there should have been direct incentives, perhaps through reduction of taxes, to add to the growth process. The nation hopes that the professed nine per cent growth, as advisers to the finance minister say is achieved. The Reserve Bank, however, is not hopeful of more than 5.7 per cent growth.

Basically there are two fallouts of the high borrowings by the government. The total deficit along with that of the States is likely to be around 11 per cent. As governments at all levels borrow it would contract supply of money to the private sector – corporate and individuals, and consequently raise the cost. In reality it means that the low-interest finance would remain just a dream.

Industry associations – the CII, FICCI and ASSOCHAM– have rightly expressed concern. The CII’s President Venu Srinivasan has suggested partial monetization for tiding over the crisis, but one only hopes that the FM does not listen to such suggestions. If adhered to, it would result in an uncontrollable inflationary situation.

Moreover, the budget also does not provide a solution for food inflation, which is almost at 10 per cent, as per the consumer price index. While there are provisions for the food security Act and promise of 25 kg rice at Rs 3 a kg to those below poverty line (BPL), some States are giving the rice it at Re 1 or Rs 2. Thus, the new food law looks appealing but does not have a solution for all. In fact, the government should have widened the food security network through the PDS route and every needy person should have been allowed access. This could also work as a market interventionist tool, which could have checked prices and put inflation under control. It only required a little imagination and administrative effort. Mere legislations don’t solve such critical problems.

It is worth noting that the UN has remarked that a decrease in international food prices fails to translate into more affordable food at local markets. The MDG Report 2009 says consumer access to food in India, Brazil, Nigeria and China did not improve as expected. While it calls for addressing effects of higher food prices, the FM’s sectarian approach doesn’t invite the much-needed solution.

Mukherjee’s speech sets Rs 325,000 crore for agricultural credit up from Rs 287,000 crore last year. (This is not government funding). But the Rs 71,000-crore loan waiver announced last year is certain to add to the woes of the farmers, who take advantage of this waiver. They are not considered creditworthy by either banks or lending agencies, thus falling again into the trap of private money lenders. The FM too has made a note that farmers of Vidarbha and some other regions of Maharashtra who had taken loans from money lenders are still in distress. The loan waiver may create distress for others too. What was considered a solution has virtually saddled the Government with a huge debt with little benefit to anyone.

The Government could have used that money as direct investment in agriculture. It could have boosted production and also created jobs irrespective of the NREGS. The allocation for agriculture has been increased by only Rs 500 crore to Rs 10,060 crore. The FM’s budget speech and reality does not match. The agricultural growth would remain stymied.

The hope of a western recovery is distant. Even if it does it would be more protectionist. The FM has still time to revise his budget to give it the unique India-specific growth programmes, particularly for its dejected youth. Mere growth has not ensured the well-being of all. The Budget should be reshaped to give it a sharp focus. It should also modify the globalised and multi-target approach. ---INFA

(Copyright, India News and Feature Alliance)

Open Forum

New Delhi, 10 July 2009

Ban On ‘Big’ Retail Trade

GOVT MUST HONOUR REPORT

By Dhurjati Mukherjee

The strongly-worded parliamentary standing committee report on retail recommending “a blanket ban on domestic corporate heavyweights and foreign retailers (to prevent them) from entering into retail trade in grocery, fruits and vegetables”, is very welcome. Equally important is its recommendation that restrictions be put on them for opening large malls for selling other consumer products. In addition, the Government must pay heed to the committee’s suggestion of setting up a regulator and bringing an Act to reserve some areas for small and medium players.

As of now, our laws permit 51 per cent foreign equity in single brand retail. Multinationals are not allowed in multi-brand retail though they can set up cash-and-carry establishments having 100 per cent ownership. This has not only come in for severe criticism but there have been widespread protests in the country because of the impact on the unorganized retail, which incidentally happens to employ a whopping 40 million people or roughly eight per cent of the total employment generated.

The country’s retail market is estimated at over $350 billion with organized retail accounting for just 4-5 per cent of it. The remaining is accounted by the unorganized retail sector. Early last year, an Indian economic think-tank optimistically estimated that the market size of organized retail could grow to $590 billion by 2012, which would mean 16 per cent of the total trade. This would obviously mean that unorganized retail would come down, thereby affecting the prospects of small and medium traders.

Of the total growth of organized retail, 60-61 per cent of all investments are expected to go towards food and grocery, which means direct corporate investment in agriculture. Most analysts have been of the firm view that India is attempting to do in 10 years what took other global major markets 25-30 years.

Unfortunately, there has been little understanding of the impact corporate retail would have on the existing retail and agricultural sectors – the country’s two largest sources of employment. India has the highest shop density in the world with 11 outlets per 1,000 people. It is the high level of decentralization in the market that keeps all these businesses running and providing high employment levels.

Clearly, the entry of the giant corporate retail in the country’s food market would have a direct impact on the 650 million farmers and 40 million people employed in retail. It has been found that nowhere have these corporations given a thought to the welfare of the people, society and ecology. Therefore, restrictions have been imposed on MNCs in many countries of Asia, which include Chine, Malaysia, Indonesia, Thailand and Japan.

Notwithstanding that cities and smaller towns may look beautiful with shopping malls, the fact is that entry of giants would have a cascading effect on the small retailers, most of them uneducated, who would be out of employment, thereby endangering the livelihood security of their families along with their own.

Related studies conducted in both Delhi and Mumbai by Navdanya Research Foundation and Prof. Anuradha Kalhan of Jai Hind College respectively on small retailers have come out with some revelations: there has been a drop in sales and drastic decline in profits since the malls have come up; highest concentration in decline sales by business-type experienced in grocery stores and that majority of the hawkers felt threatened and were contemplating leaving their age-old business.

Besides, big business houses would be sourcing cheap goods from China, Thailand, ASEAN countries, which could lead to unfair competition and livelihood losses in the foreseeable future. It is pertinent to mention that Walmart is China’s 6^th largest trading partner and with their entry into India, it is quite obvious that foreign goods would be sold on a largescale. These large corporations would be at a distinct advantage as they would able to buy in bulk quantities, specially branded products and thus ensure economies of scale.

In India, it is well-known that fresh fruits and vegetables suffer damage and deterioration of around 40 per cent as these are transported from distant rural areas. The farmers receives a fraction of the retail price while the middlemen, who collect the produce from them make a lot more. Absence of cold storage facilities for preservation and of refrigerated transportation normally causes huge losses.

In the above scenario, the Reliance Fresh model is being argued as the best alternative. Here the role of the middlemen is curtailed, the food losses are minimized and standard products reach the consumer. It is also being said that the company would give scientific agricultural advice and support to the farmers to improve productivity, quality and uniformity in size and taste.

However, a number of questions are worth putting across to those who feel that such a model would benefit the country. The first is obviously the employment aspect and the drop in sales of small retailers which is the main objection. The second is that of middlemen – instead of individuals the company would take over that role. In this case, there is no data to show that the company would pay more to the farmers, when in the city malls they are exploiting the workforce with 10-11 hours duty with no extra pay.

The third aspect relates to the setting up of cold chains in towns and villages, which of course, is a social responsibility of the Government and which the food processing ministry has agreed to set up to minimize the losses. The last aspect is of providing scientific guidance, which rests entirely with the Government. It has the Indian Council of Agricultural Research (ICAR) specifically for this purpose with huge financial outlay. Which private company, either Indian or foreign, has such accounts for agricultural research? However, the only problem is how much the ICAR has succeeded in translating the benefits to the field or to the small farmers in particular.

Keeping in view the above facts, it may easily be concluded that allowing corporate houses, whether Indian or foreign, to set up malls is in no way justified. The Government should be proactive and draw up a plan of action to help the farming community by setting up cold chains and other necessary infrastructure so that they could get the maximum returns for their produce. Moreover, the ICAR too has to take a major step forward, specially in Eastern and North Eastern States, to help increase the productivity and quality of crops.  

Clearly, there is no need for allowing the corporates entry into the retail trade of agricultural produce. More importantly, not at this juncture when employment generation is a big problem and the livelihood and security of farmers and small retailers need to be protected at all cost. The parliamentary standing committee, headed by BJP’s Murli Manohar Joshi, must guard ensure compliance of its report. --INFA

 (Copyright, India News and Feature Alliance)