The engine is politics

Given India's fractious politics, a Railway budget wouldn't be a Railway budget if the Opposition didn't accuse it of being “anti-people.” But when the charge comes from the Treasury benches — and from the coalition partner to which the hapless minister belongs, whose leader then goes on to demand his sacking — the signals this sends out about the state of the government are not at all encouraging. Considering the financial crisis the Indian Railways is passing through, Railway Minister Dinesh Trivedi has tried to arrest the slide. But the method he has chosen hits poor citizens the hardest. Ironically, it was his predecessor, Mamata Banerjee's pursuit of a political agenda in West Bengal that sent the railways down a dangerous financial track. The problem with populism is that it is impossible to sustain indefinitely. For eight years, successive Railway ministers took pride in never raising fares. Of course, when the deferred rise eventually comes, the one-shot hike hurts more than if there had been continuous but marginal increases over a longer period. So while Ms. Banerjee is obliged to decry Mr. Trivedi's fare increases — which range from 20 per cent to 150 per cent depending on the fare class and distance travelled — she must share the blame for this kind of crisis budgeting. The Minister tried to soften the blow by a major pre-budget revision and rationalisation of freight tariffs that should raise Rs. 20,000 crore a year. But the opposition to his budget makes a fare hike rollback for the poorest of passengers inevitable.

Where Mr. Trivedi has scored is in his focus on safety. Besides setting up a Railway Safety Authority as a statutory regulatory body as recommended by the Kadkodkar Committee, tracks, bridges, signalling and telecommunications, rolling stock, stations, level crossings and freight terminals will all be focus areas. Mr. Trivedi's decision to pursue the redevelopment of stations through the PPP mode may help upgrade passenger facilities but the contracts and projects must be carefully audited. He also said a Logistics Corporation will take on freight, and a national High Speed Railway Authority will be set up to look at the six corridors identified for development. However, the key index the Railways has to look at is the Operating Ratio — the amount spent to generate Rs. 100 in revenue — which has climbed to 95 per cent. Mr. Trivedi intends to bring this indicator down to 84 per cent in the coming year. The long-term health of the Railways depends on meeting that efficiency target and going beyond it; squeezing a few extra rupees from those passengers who may least be able to afford it is hardly the answer.

Keywords: Railway Budget, Dinesh Trivedi, Kadkodkar Committee, railway fare hike, Railway Safety Authority, railway safety

http://www.thehindu.com/opinion/editorial/article2995520.ece

Indian, not TMC, Railways

What should be a surprise isn’t that the first real hike in railway fares in the last 10 years has been opposed by the party to which railway minister Dinesh Trivedi belongs, but that it took so long for someone to instal the first steps to save a great Indian institution from certain penury. Mr Trivedi, in his bold Railway Budget speech on Wednesday, proposed an across-the-board hike in passenger fares in order to raise a much-needed extra Rs 4,000 crore this year. For far too long, the Indian Railways has subsisted on a self-destructive diet of runaway expenditures tied to plummeting income.

The usual practice of robbing Paul (the Indian exchequer) to pay Peter (the Indian Railways) had to halted, especially since a desperate modernisation programme including the installation of safety measures is non-negotiable while at the same time to be accounted for. Which is why, for too long, short-term gains were trumpeted as feathers in the railway minister’s (read: his or her party’s) cap at the cost of the railways. Rising above myopic party political considerations, Mr Trivedi has underlined the fact that his responsibility as Union minister is first to the Indian Railways and then to his party. With Trinamool Congress (TMC) chief Mamata Banerjee openly opposing the railway fare hike, what we see is a regional leader vehemently opposing this basic prioritisation of nation over party.

The open opposition of the TMC to the budget proposals set by one of its own MPs has let the cat out of the bag. If Ms Bane-rjee’s autocratic ways of dealing with Centre-state relations see-med parochial when it came to her opposition to UPA policies such as FDI in retail and the setting up of the National Counter-Terr-orism Centre, her public proclamation that her party ‘won’t allow the fare hike’ confirms our worst fears of her style of politics. As a former railway minister herself, she should have known better than to showcase her displeasure about “not knowing about the fare hike”. The railway minister’s boss in Delhi is Prime Minister Manmohan Singh and not chief minister Mamata Banerjee. To get her approval for a Railway Budget is as preposterous as a West Bengal budget being approved by a central minister.

The TMC is well within its right to oppose Mr Trivedi’s laudable budget proposals — even as it makes it look ludicrous politically even by Trinamool’s ‘opposing for the sake of opposing’ standards. But what its opposition — and especially the reason for it — has exposed is Ms Banerjee’s churlishness that she dresses up as populism and ‘pro-people’ politics. This should be a clear signal to the Congress-led UPA that one of its allies sees the nation and the state the latter rules locked in a zero sum game.
However imp-ortant an ally the TMC may be in terms of numbers for the upkeep of the central government, we — and one hopes the UPA — realise the dangers of having such self-serving allies. As for Mr Trivedi, we applaud not only his courage for presenting a budget that hasn’t gone down well with his knee-jerk-reacting party but also for presenting a budget that provides a roadmap ahead for the nation’s people — that of his home state, West Bengal, included.

http://www.hindustantimes.com/StoryPage/Print/825492.aspx

Derail Budget

Trivedi’s Railway plan shows courage — it’s a disgrace that his party wants him fired for that

Such Railway budgets happen rarely. Once in 10 years, literally. For Railway Minister Dinesh Trivedi of the Trinamool Congress, to muster courage and hike aam admi fares by up to 20 per cent, must have been a leap of faith. Because in India, general class passengers account for 95 per cent of total traffic. The balance 5 per cent is made up by those travelling in air conditioned coaches. The expert group for modernisation of Railways chaired by the prime minister’s adviser Sam Pitroda had recommended a one-time 25 per cent increase in fares to raise Rs 37,500 crore. Trivedi did not exactly do that but with an across-the-board passenger fare hike and a modest 5 per cent growth in traffic, the Railways projected earnings to go up by about Rs 7,000 crore in next year, 25 per cent more than the expected earnings in 2011-12.

The Railway Budget for 2012-13 is notable not just for the fare hike. It gives a much-needed fillip to public-private partnerships in railways by planning to induct a member in the Board who will specially pursue PPP projects. It also does not try to window-dress the Railways’ efficiency by accepting that the operating ratio (the ratio of amount spent to earn Rs 100) will slip to 95 this year. The budget also lays the groundwork for setting up a tariff regulatory authority, a move aimed at eventually depoliticising increases in passenger fares and freight rates. To do all this in one budget is commendable. Trivedi possibly anticipated that Railways was headed towards bankruptcy. He did not stop at just raising the alarm. He pulled the chain, but this time not to stop the engine, but to put the train back on track.

It does not require an economic genius to do all this, but definitely strong political will. Ideally, it would have made sense to spread the hike in fares over a period of time, especially for the bottom segment of passenger traffic. A modicum of increase every year since 2002-03 would have meant nothing to the aam admi. By effecting a sharp hike in one year, he provoked his party, rubbing it in with needless references to Bhagat Singh, God and the country. The capricious Mamata Banerjee has asked for his head — it will be a shame if she gets get it along with a rollback.

http://www.indianexpress.com/news/derail-budget/923760/0 

Well Done, Trivedi

Resist pressure to roll back much-needed hikes in passenger fares

    Railway minister Dinesh Trivedi has done a good job, even factoring in the advantage of low expectations. He has not surrendered completely to populism and presented a reform-oriented budget. His party boss, the mercurial Ms Mamata Banerjee, has threatened to force a rollback of the average 19.2% increase in passenger fares that have been proposed after a gap of 10 years. The UPA should not give in to this populist bluster. The reality is that no major party, save the Trinamool, is ready to destabilise the government and face mid-term elections. The UPA should stand by these proposals and call the Trinamool bluff. Mr Trivedi’s break from the tradition of freight and upper-class fares subsidising lower-class fares is wholly welcome. The plan to make automatic adjustments in tariffs to factor in rising fuel costs also makes eminent sense and would pave the way for deregulation of fares. Passenger fare hikes will yield an extra . 7,000 crore next fiscal. Freight earnings are projected to grow by a whopping 30%, with the Railways expecting to move 55 million tonnes more of goods. More than half of its plan outlay of . 60,100 crore for 2012-13 would be met from internal resources and market borrowings. So, revival of growth and removal of irrational bans on mining hold the key for the Railways. The good news is that the Railways has increased appropriation to the depreciation reserve fund, meant to replace old assets, and also pension fund to meet extra liabilities. The operating ratio, which measures how much of revenue is taken up by current running costs, has been estimated at 84.9% next fiscal against the dismal 95% this fiscal. Such financial improvement is imperative, if IR is to invest in safety and modernisation. 
Mr Trivedi has done well to accept recommendations of the Pitroda panel on modernisation and Kakodkar panel on safety. New rolling stock, reinforced bridges and tracks to enable higher speeds and better signalling are all required. Reforms on multiple fronts can be implemented only when the political class stops viewing the Railways as a platform for disbursing patronage. Surely, Mr Trivedi has broken new ground.


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Populist Flailings

Populist Flailings

They could de-train an innovative rail budget, and much else besides

    There can only be two takes on the storm raised by Mamata Banerjee over the railway budget presented by Union minister Dinesh Trivedi, who belongs to her own party. The first is that the fracas was orchestrated, so the Trinamool could play reformist and populist at the same time with an eye to courting two different constituencies. The second interpretation is even worse: Mamata genuinely opposes passenger fare hikes, a long-pending measure to raise resources for the cash-strapped national transporter and its much-needed modernisation. This would mean she’s inveterately populist – a position she, in misguided wisdom, associates with being pro-poor. 
    None of this augurs well for the upcoming general budget. There’ll be misgivings about Mamata playing to the gallery by bashing any reform the finance minister proposes in the budget. So, he might think it better to play safe than sorry. The upshot for the UPA is clear: Mamata as an ally has become a liability. On issues ranging from land acquisition revamp and the India-Bangladesh Teesta accord to multibrand retail FDI and the NCTC, she’d rather wreck coalition unity publicly than hold dialogue to resolve differences amicably. The railway budget controversy is merely the latest – and most absurd – example of her serial trouble-making. The UPA should begin to seek a replacement ally, in order to counter political instability at the national level. 
    Regardless of Trivedi’s fate as minister, he deserves credit for coming up with a bold and visionary budget. He sets an ambitious target on improving the operating ratio – percentage of expenditure to earnings – by almost 10 percentage points to 84.9% in 2012-13. He unveiled many smart plans, including establishment of a statutory railway safety authority, a railway research and development council to spur innovation, a body to target redevelopment of 100 stations through the PPP route on the pattern of new airports, as well as a logistics corporation to ensure last-mile delivery of freight traffic. 
    Trivedi does well to call for a body of experts and other stakeholders to study the need for an independent railway tariff regulatory authority to fix freight rates and passenger fares. Equally innovative is the proposal to link the fuel cost of passenger services to fuel prices, as is the case with airfares. The budget rightly focusses on improving passenger amenities, initiating moves to speed up trains and introducing a real-time train information system. However, there are many road bumps ahead, since funds for modernisation can’t be mobilised solely from freight and passenger fares. That’s a challenge the Railways will have to meet in innovative ways.


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The Buzz

Birthday bumps Congress general secretary Digvijaya Singh, the one with the gift of the gab and a dimpled smile, turned 65 on February 28. As all eyes are set on the outcome of the assembly elections in Uttar Pradesh, Singh, who is in charge of the politically important state for the Congress, celebrated his birthday while on the campaign trail. But he did not forget to thank all those who wished him. “Thanks to all those who abuse me. Keeps me in the news and in their minds,” he sweetly tweeted.

Too close for comfort
Actor Nagma may have encountered such situations onscreen many a times. But the behaviour of Congress candidate from Barhapur, Hussain Ahmed Ansari, during a public meeting in his constituency raised her hackles. She nearly walked out of the rally in a huff when Ansari tried to get close to her and read out a couplet that she found, well, offensive. Congress spokesman Rashid Alvi thankfully intervened and placated Nagma who then appealed to the gathering to vote for the Congress — if not for Ansari.
Look who’s being a BSY body
A battle of nerves between former Karnataka chief minister BS Yeddyurappa and his arch rival, BJP general secretary Ananth Kumar, is on the cards over the nomination to the Rajya Sabha from the state. Kumar is pushing for the renomination of Hema Malini, whose one-year term is expiring on April 2, along with four other members. BJP chief Nitin Gadkari, too, is keen that the ‘Dream Girl’ gets a full term. But BSY, upset that he has not been re-instated as CM, wants his loyalist Dhananjay Kumar to get the nomination. The big question is whether BSY will let BJP MLAs abide by the high command’s choice.

http://www.hindustantimes.com/StoryPage/Print/821342.aspx

One verdict is in

Record high turnout means deepening political participation — and a tough task for the winner

The high turnouts in the states that went to polls — four of these states registered their highest ever voting percentages — have announced that participatory democracy in our country stands enhanced. It will be known today what the message of the new voter is. Has she voted for change? In a multi-cornered contest as in Uttar Pradesh, for instance, will the larger turnout mean a more decisive, less fragmented outcome? Given that a large part of the increase is attributed to the young first-time voter, will it mean politics will now grow younger in ideas, and an older politics centred on identity and congealed resentments overtaken? Whichever way it goes after the ballot boxes are opened, this much is certain: today’s victors will have to settle down to a task more challenging. They will have to deal with many more dreams and aspirations, they will be subject to greater watchfulness than governments before them.

The increasing turnouts must be seen in a larger context. In several Western democracies, there is much agonising about the setting in of voters’ cynicism and indifference, reflected in their dwindling numbers. India does not just buck the trend with its healthy electorates, it sends out a yet more enviable message: here, past surveys have underlined, voter participation is known to go up as one moves down the ladder of caste and privilege. That is, the enduring character of India’s democracy and its sturdiness is made up of the fact that the poor and the disprivileged, by and large — in spite of pockets of apathy and disillusion as in Naxal-affected areas — continue to have hope from and trust in the system. This is a message important not just in a comparative context. It must also be heeded by those in India who have, especially in recent months, tried to work up a mood of anti-politics. The unprecedented turnouts in this round are a direct snub to those feverish exertions.

This is a moment to congratulate the Election Commission. As it ensured that voters’ slips are made easily available, relaxed norms related to access to polling booths, campaigned to enrol the new voter, and kept a strict vigil on expenditure and law-and-order in the poll-going states, the EC was a reassuring presence. It has sealed its formidable reputation as a neutral arbiter.

http://www.indianexpress.com/news/one-verdict-is-in/920526/0

Breakthrough in Nepal

Nepal's political transition has entered its final lap, with all parties signing a major peace agreement on November 1. The deal settles the future of combatants of the Maoist People's Liberation Army (PLA), who have been in cantonments across the country for over four years. A maximum of 6,500 of the 19,602 former fighters will be integrated into a special directorate under the Nepal Army. The rest would be offered attractive rehabilitation and cash packages. There is also an informal understanding that once the peace process commences, opposition parties would join the present government to give it an inclusive character. Once the constitution is promulgated, a new government under the Nepali Congress (NC) will supervise the next elections. The pact removes the single biggest obstacle in the process of constitution writing, as non-Maoist parties had refused to resolve the constitutional issues until what they saw as a Maoist instrument of coercion was not disbanded. Now that the Maoists have agreed to surrender their ‘advantage', the other parties can no longer cry wolf about the absence of a level playing field.

The breakthrough was made possible by the coming together of the original set of actors, primarily the Maoists and the NC, who had conceptualised the peace process in its early days. Maoist Chairman Prachanda and Prime Minister Baburam Bhattarai did well in standing up to pressure from dogmatists within the party, and being flexible on the modality of integration, norms, and ranks. The NC also deserves credit for not playing spoiler despite being in the opposition. India, which facilitated the 12-point agreement in 2005, played a constructive role as a non-partisan, behind-the-scenes interlocutor. There are two key challenges now. The first is implementing the agreement within the tight timelines that have been laid out. The parties have committed themselves to completing the regrouping of combatants into those to be integrated and rehabilitated by the third week of November, and preparing a draft constitution by November 30. This would enable another extension of the CA. The second is resolving constitutional issues, particularly the nature and shape of federalism. A longer term challenge is the democratisation of the Nepal Army, meaning institutionalising both civilian control and the respect for human rights. This goal was a part of the original peace agreement but has not been touched in the recent pact. Nepal's politicians have shown remarkable wisdom in shepherding the transformation of their country from a monarchy to a republic, from war to peace. In this final phase, they must direct all their energies towards writing a democratic, socially equitable, and federal constitution.

Keywords: Nepal politics, Nepal Maoists, Prachanda, Baburam Bhattarai http://www.thehindu.com/opinion/editorial/article2607181.ece

Putin Returns

Putin Returns

He should try the path of reform now, for the sake of his legacy

    Defying critics, Vladimir Putin won his third term as the president of Russia after a gap of four years. Putin’s return will mark continuity from New Delhi’s point of view. Even as prime minister during the last term, he held the effective reins of power. But his return to the Kremlin has hardly been smooth sailing. Whether it will lead to stability in Russia’s managed democracy, remains to be seen. Trouble started last year when the Russian strongman publicly announced his intention to swap places with outgoing president Dmitry Medvedev. With pro-democracy movements in the Arab world going on at the same time, the brazenness of the declaration riled the Russian public. Things went from bad to worse during the parliamentary elections in December. Marred by widespread allegations of vote rigging, Putin’s popularity took a plunge as protests against him intensified. 
    Against this backdrop, Russia’s presidential poll results can be read in two ways. First, the popular protests against Putin are being led by the disenchanted urban middle class. A decade of economic growth, fuelled mainly by gas and oil revenues, has also led to its growth in numbers. This in turn has heightened expectations of long-pending governance reforms. But Putin’s core constituency continues to be the working class in Russia’s hinterland. Indebted to Putin for pulling them out of the economic doldrums of the 1990s, as long as they have a stake in Russia’s managed democracy, Putin has nothing to worry about. 
    But the realities that face Putin today are very different from the last time he was in office. Europe, Russia’s largest energy export market, is in slowdown mode. Increase in energy prices comparable to the last decade is not assured. Failure to diversify the Russian economy will hurt Russians across the board, making it difficult to put a lid on popular frustrations. In such a scenario, Putin can’t continue with the old style of functioning. Along with initiating genuine political reforms, he must break the hold of the wealthy oligarchs and take on the crony capitalism that plagues Russian society. 
    This might appear counter-intuitive to Putin, but strong-arm tactics to maintain political stability are no longer feasible. Trying to muzzle popular protests in the era of growing internet penetration is subject to diminishing returns. Russia needs a new social contract between its people and the government. As Putin begins his third term, he must start thinking of his legacy. If he wants to be remembered as Russia’s saviour, he must push reforms now.
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Long-Term Gain

Long-Term Gain

Canad

a’s pension funds are a great model for India to learn from

    India’s pension funds should learn from Canada’s biggest public pension fund groups. The largest four have corpuses that range between $55 billion and $157 billion each and deliver returns that range between 12% and 14.5% annually. Though impressive, these numbers are not their most remarkable features. Unlike other funds, the Canadian funds do much of their investing themselves, rather than outsource the job, paying steep fees. A private equity fund can charge as much as 2% of assets and 20% of profits to run other people’s money. Hiring and retaining employees with the same skills is less costly. The Canadian funds can afford to invest longterm: so, along with highly-liquid equities, they also go for big bets in real estate, overseas utilities and the railway service through the Channel tunnel. They also partfund big-ticket leveraged buyouts of companies. They hold such assets for long periods — 10 years is not unusual — unlike mutual funds, whose holding horizons are determined by redemption pressures. To attract talent, these funds recruit professionals, paying them a base salary, annual bonus and a long-term performance award, which constitutes the largest chunk of the payout. This structure helps nurture a culture of optimising returns over the long term, instead of looking for quick trades. India’s largest pension fund, the Employees’ Provident Fund Organisation, run by a Union-dominated board of trustees, struggles to get a positive real return primarily because it refuses to invest in any asset class beyond sovereign debt. Its alternative and potential substitute, the National Pension System, too does not go beyond equity and debt. These pension funds and their regulator have much to learn from the Canadian example. Why shouldn’t they fund big-ticket projects directly, own power projects or a section of the Delhi-Mumbai Industrial Corridor? These investments are less liquid than stocks in the short run, but can yield massive payoffs in the long term. India’s fund managers and regulators have much to learn from the structure of compensation at Canadian pension funds as well. Linking reward to long-term risk is something they seem to have mastered.

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