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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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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National Shame

Police and authorities need to get serious about rape, instead of blaming the victim

    Shocking instances of rape continue to hit the headlines, along with the tendency of police and administrators to blame the victim. The two trends reinforce each other. If the system gives the rapist a reasonable chance to get away with his crime, then it is unable to deter rape. The epidemic of rape incidents across the country once again draws attention to the urgent need to transform our legal and police systems. Five men raped a 17-year-old girl in a moving car in Noida last Friday, while earlier this month a 37-year-old mother of two was raped in the heart of Kolkata’s upscale Park Street. Another woman has been gangraped trying to resist dacoits looting passengers of a local train in West Bengal’s Burdwan district. UP witnesses at least two rapes every day. 
    What gives cause for dismay is the police’s cavalier attitude towards victims. More often than not, traumatised victims have to battle law enforcers’ social and gender prejudices, manifest in loaded comments about the victims’ moral character and lifestyle. While the police, and even Bengal’s transport minister, made humiliating and suggestive remarks about the Park Street rape victim’s late-night pub drinking, the Noida police made insinuating comments about the minor victim. Worse still, in a complete breach of protocol, the police revealed the victim’s name and address to the media. 
    Given this sweeping gender bias and insensitivity, victims are more often than not reluctant to seek police intervention – making it easy for the rapist to get away. Police and political authorities across the country need to start treating rape as a heinous crime, and put in place some serious deterrents. A start can be made by instituting a fair number of dedicated rape cells, staffed mainly by policewomen. Victims would find it easier to share information with women officers, rather than be interrogated by their male counterparts. Additionally, gender sensitisation must be a part of police training itself. 
    It must be stressed here that the answer is not more legislation that merely scales up the quantum of punishment. The answer, rather, is to give teeth to the law by enforcing it. Let’s not forget that conviction rate of crimes against women, despite many legislative amendments, is still a depressing 27% for rape and molestation. Reforming police and judicial procedures in ways that allow speedy and consistent enforcement of existing laws, will go a long way towards assuring justice to victims and deterring further crimes against women.

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Honour The Mandate

Honour The Mandate

Congress is making a mistake by projecting President’s rule in UP

    Union coal minister and Congress leader Sriprakash Jaiswal’s recent statement that the Congress will seek imposition of President’s rule in UP, if his party fails to secure a majority in the state, sends a negative signal to the electorate. Even Digvijay Singh recently underlined the possibility of President’s rule in UP, while Rahul Gandhi said during his campaign that the Congress would have no post-poll truck with any party. If the Congress leadership is contemplating imposition of President’s rule in UP in case of a hung assembly, nothing could be more disastrous. 
    The game plan that’s reportedly being advocated by a section of Congress leaders is to declare President’s rule, push in good bureaucrats, pump money into the state, and fuel fast-paced development that will stand the Congress in good stead around the time of the next Lok Sabha polls. That surely is desperate counsel. Congress already has a stake in governing many states, why can’t it pursue this strategy in the states it controls? What are the chances it will be able to do in UP what it can’t do in other states? 
    Besides, if President’s rule comes because the current Congress-RLD alliance is reluctant to share power with SP, the latter too would spurn the UPA government at the Centre, leaving it wholly at the mercy of the mercurial Mamata. That will, in all likelihood, disable the UPA from carrying out any significant policy initiatives in the run-up to the next Lok Sabha polls. Also, let’s not forget that elections are still underway in UP and massive voter turnouts reflect people’s aspirations for change and better governance. By holding out the prospect of President’s rule Congress is hurting its own cause, besides undermining electoral democracy. 
    The fundamental problem could be that Congress is still stuck in its 1998 Pachmarhi resolution mode, according to which it should eschew alliances and build its own strength. That is hardly advisable now, given Congress’s dipping popularity due to big-ticket scams as well as stagflationary conditions in the economy. What makes things worse is Congress’s inability to project a definite chief ministerial candidate in UP, behind whom support for the party can consolidate. The party needs to realise that it has no alternative other than building coalitions at the state level. RLD is too minor a player to matter.
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Federal Fetish

The term shouldn’t mean knee-jerk opposition to anything emanating from the Centre

The objection to the establishment of the National Counter Terrorism Centre by as many as 12 chief ministers highlights a common theme that has been plaguing governance. For the last six months, ‘federalism’ has been the war cry used to stymie policy decisions and important legislations ranging from the Lokpal Bill and FDI in multi-brand retail to the goods and services tax (GST), the Teesta water-sharing agreement with Bangladesh, amending the RPF Act to give some police powers to the Railway Protection Force. While federalism is indeed a fundamental pillar of the Constitution, it shouldn’t be misused for scoring political points. The framers of the Constitution envisaged the Centre and the states as two co-dependent wheels of the nation. If they are to constantly move in opposite directions, governance paralysis rather than federalism is the most likely outcome.
Under the constitutional scheme of things, states have certain legislative prerogatives as enumerated in the state list. In addition, they also have a say on subjects in the concurrent list. But given 21st century realities such as global terrorism, treating law and order as an exclusive state subject is imprudent. Faced with well-networked international jihadi groups, a credible national security policy demands a coordinated mechanism wherein the states and the Centre work in tandem. Similarly, corruption is a malaise affecting the administrative structure from top to bottom. If a Lokpal is rightly demanded at the Centre, could the fight against graft be effective without Lokayuktas in the states?
The current state of affairs partly stems from an underlying lack of trust in the UPA leadership. Wracked by a series of scams implicating top government officials as well as by skyrocketing prices, the central government appears ineffectual and infirm. But the states too stand guilty of failing to see the big picture. Their intransigence on positive policies such as GST and FDI in retail – which can boost revenue collection, increase investments and cut prices – is cynical. Surely if the Centre isn’t allowed to do its job, then states will fail as well.
In this respect the BJP’s obstructionist role stands out, as it’s a national party. That hasn’t stopped it from using its state governments to stoke the federalism fire, in order to stonewall policies it would have supported if it was in power. But it must realise that if it were to form the next government at the Centre, the same problem would boomerang on it as states would refuse to cooperate with the Centre, making it difficult to govern effectively.
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Step Back Now

Step Back Now

Government shouldn’t tamper with the Election Commission’s powers

    The government’s assurance that it’s not considering a proposal to whittle down the Election Commission’s powers is welcome. We hope it means that the move to curb the EC’s powers of enforcing its model code of electoral conduct is definitively scuttled. The clarification comes on the back of a spiralling controversy over a government proposal to give statutory shape to the code of conduct, strongly opposed by the EC as well as opposition parties as it would take enforcement out of the EC’s hands. It’s good that all-round outrage has forced the government to clear the air. But it also needs to abide by its public assurance, and desist from any move that would debilitate a vibrant and effective institution like the EC. 
    At the heart of the controversy is the EC’s high-profile model code of conduct, effectively leveraged to rein in political parties and leaders from conducting extravagant poll campaigns or making snappy policy announcements in the midst of electoral canvassing. Consider the EC’s recent censure of UPA cabinet ministers Salman Khurshid and Beni Prasad Verma, following their violation of the code by announcing new sops for Muslims in the midst of UP’s poll campaign. That the ministers subsequently dared the EC to make good its reprimand was bad enough. But any plans that the government may have up its sleeves to clip the EC’s wings would be much worse. 
    Providing statutory backing to the electoral code of conduct is a bad idea that shouldn’t be entertained. What it would mean is that the EC wouldn’t be able to look at violations of the code. Instead they would be tried in a court of law, making them a long-drawn-out, dilatory affair that would further weigh down an already overburdened judiciary. It would be a drastic departure from present norms, under which the EC hands out swift orders against unruly and irresponsible politicians in the midst of hectic electioneering. 
    At a time when the nation is exercised over the failure of institutions to deliver, any attempt to diminish the efficacy of the EC, one of the few institutions that’s delivering what it’s supposed to, is inexplicable. By ensuring safe conditions for voters to turn out in maximum numbers and conducting free and fair elections even in politically sensitive parts of the country, the EC has won nationwide prestige and acclaim. One of the things Indians can be genuinely proud of is that the country has an independent and effective Election Commission. Let’s keep it that way.

Save The Ghats

Save The Ghats

Ecologically sensitive zones should be left alone

    The Western Ghats Ecology Expert Panel (WGEEP) report, suppressed by the Union ministry of environment & forests for almost six months, has finally come into the public domain – albeit unofficially. And its contents show why MoEF was so reluctant to release it all this time. In an example of admirable forthrightness the panel – headed by eminent ecologist Madhav Gadgil – has lambasted policymakers for putting the Western Ghats, one of the world’s richest areas in terms of biodiversity, in danger of devastation from controversial projects. These include the mining projects in Sindhudurg and Goa, the proposed nuclear power plant at Jaitapur in Ratnagiri and the Gundiya hydel project in Karnataka. 
    With huge commercial gains accruing from the projects, it is little wonder that politicians have tied up with vested interests in suppressing the voice of dissenting locals. The WGEEP report highlights how in every state (the 16,000-km Ghats run through the six states of Maharashtra, Gujarat, Goa, Karnataka, Tamil Nadu and Kerala), attempts have been, and are being, made to stifle opposition in a variety of ways, from not holding or manipulating public hearings to manufacturing fraudulent Environmental Impact Assessment reports. It also highlights the negative role played by some forest departments, which have not only allowed forest lands to be exploited but also played the role of tyrant with local communities, who have been consistently excluded from the decision-making process. 
    The recommendations of the panel are radical and undoubtedly dismaying for the powers that be. Recommending a categorisation of the Ghats into three zones of ecological sensitivity – ESZ I, II and III – the panel has called for a complete moratorium on new mining licences in ESZ I. In Goa, a state where, it notes, mining has crossed the social and environmental carrying capacity, the moratorium has been recommended for ESZ II as well. Other suggestions include no new hill stations and SEZs, a total ban on converting public land to private use and the setting up of a Western Ghats Ecology Authority at the Centre and state level to monitor development. Needless to say, the recommendations have been opposed by the governments of all six states. 
    The WGEEP report brings to mind Eduardo Galeano’s book, Open Veins of Latin America, about the greed of the western world that completely destroyed a land rich in natural resources. The tragedy of India lies in the fact that it does not require outsiders to brutalise its natural wealth – its compromised political class, in league with vested interests, has always done a splendid job of this.

Poll Vault

Poll Vault

High voter turnouts may signal high popular aspiration

    Democracy is on a high. With over 57% polling recorded, the fourth round of UP’s seven-phase election matched the general trend of high voter turnouts in 2012’s assembly polls so far. Punjab saw an eye-popping 77% and Uttarakhand an impressive 70%. In UP, the first, second and third phases notched 63%, 59% and 57.2% respectively. All four turnouts till now have been interpreted in various ways. The ruling BSP predicts a wave favouring Mayawati. Opposition parties sniff a strong popular desire for change. 
    Traditionally, high polling compared to previous elections suggests antiincumbency. But, as Delhi in 2008 or Bihar in 2010 showed, they may also signal support for incumbents. In 2010, the overall turnout of Bihar’s sixphase poll – 52.43% compared to 46% in 2005 – saw Nitish Kumar back in the saddle. But note that he won on the development plank, having delivered on 2005’s pledge to bring socio-economic change. In 2011, the Congress’s return for the third time in Assam too was viewed as a mandate for peace and development. If, the same year, the slogan of change helped Mamata Banerjee encash antiincumbency in Bengal, the mandate was broadly similar. It called for a development-oriented Bengal, free of Nandigram-style political violence. 
    Linking low turnouts with continuity and high turnouts with anti-incumbency may not work in all cases. But what’s clearly discernible is the aspirational mandates that voters have been delivering, including in successive elections in Kashmir. If UP’s healthy voter participation does signal anti-incumbency, Mayawati’s challengers may have bigger reason to regret not highlighting bread-and-butter issues – education, health, infrastructure – as much as they’ve shouted about castebased patronage. More so, since Sunday’s phase saw women and youth vote in sizable numbers, including in Lucknow whose turnout rose to 55% from 2007’s all-time low of 36%. Both are likelier to want improved quality of life than caste-based sops that patronise and divide people. 
    Clearly, Indians are increasingly realising that the right political choice can help them fashion their own destinies. No small credit for this goes to the Election Commission. Voter demoralisation was widespread in the past, with poll processes marred by rigging, booth capture and other malpractices. By carrying out voter education and enrolment campaigns, checking and cleaning up electoral rolls, rapping model code violations and thwarting bids to disrupt or manipulate polls via intimidation or money power, the EC has enthused voters. Thanks also to well-deployed security personnel, elections have largely been violence-free, be it in trouble-prone Bihar and Bengal in the past or Manipur and UP in this round of state polls. All of this boosts people’s faith in the electoral system – and, ultimately, in the power of their vote.

Strangelove’s Shado

Strangelove’s Shadow

As Iran approaches the nuclear threshold, the only way out is to co-opt it

    As Iranian president Mahmoud Ahmadinejad showed off what purported to be fourth generation nuclear centrifuges at Natanz – which can enrich uranium to 20% – the world should react by staying calm. If the Iranian claim is correct, then it has exploited a paradox in the international non-proliferation order, which allows enrichment to 20% for civilian purposes. But the technology used to enrich uranium to this level can easily be tweaked to go higher, up to weapons-grade uranium. 
    The UN Security Council has asked Iran to stop enrichment, but Ahmadinejad’s latest announcement shows Tehran is in no mood to listen. Since not just the West but also Gulf Arab states are dead set against Iran’s acquisition of nuclear weapons, this will ratchet up tensions in the Gulf. But New Delhi ought to be telling everyone involved – Tehran, Tel Aviv, Washington – that a war will prove calamitous for all parties. A much better option is to co-opt Iran into the global security and economic order, for which all sides need to be diplomatically flexible. 
    A war could arise from two sources. Iran has threatened to close the Strait of Hormuz, through which much of the world’s oil supplies flow. If it tries to enforce this by military means, it runs the risk of its navy being blown out of the water. Alternatively, Israel has been threatening to mount an attack on Iran’s nuclear sites. It may be tempted by this being election year in the US, which will constrain President Obama from stopping the Israelis. But it would be a serious mistake on the part of Tel Aviv to act on such a calculation. Since Iran has not actually broken any law, it would be an illegitimate war and most of world opinion would be against it. Even in practical terms, Iran has many asymmetrical means to retaliate against Israel and the US. Above all, a war would rally most of Iran’s population around its unpopular government. Given that Iran has already acquired significant nuclear capability, nothing would then stop it from getting the bomb. 
    It would help if the West were inclined to throw some significant carrots Iran’s way – such as cast-iron security guarantees and full WTO membership. After all, time is on the West’s side. Iran has a young population and a large middle class. A policy of engagement is bound to yield better results in weaning Iran off its belligerence.

Taking Wing

Taking Wing

Government should play facilitator in aviation sector

    The government’s done well to scrap Air India’s (AI) exclusive privilege over foreign routes. The national carrier’s stranglehold on bilateral air traffic rights meant private domestic airlines could operate international flights only after AI had exercised its right of first refusal. The policy coddled the ailing state-owned Maharaja by shielding it against competition on lucrative international routes. As a result, many routes and flying slots remained unutilised. Incredibly, AI could deny private players overseas flights even if it didn’t operate them. With its monopoly ending, private airlines will be able to expand their overseas operations. 
    Today, with many western carriers facing crisis, Asian economies are anticipated to buoy global aviation, with considerable buzz around Chinese airlines and low-cost carriers of Southeast Asian countries like Malaysia and Indonesia. The news from India, in contrast, is gloomy. To be fair, the authorities now realise that all carriers, not just AI, are in deep financial trouble which, worryingly, has been seen to impact safety. This explains a group of ministers backing the proposal to allow foreign airlines 49% stake in domestic carriers. If implemented, it’ll mean capital infusion for cash-strapped firms. There’s also the nod to direct import of aviation turbine fuel (ATF), which accounts for about 40% of an airline’s costs. 
    However, while liberalising the industry as proposed would indeed be an investor-friendly signal, domestic airlines have to get into better financial shape in order to attract interest in equity sale. In this context, logistical issues may cancel out the benefits of ATF import. Airline operators will have to create storage facilities at ports besides transporting jet fuel to airports, of which only a few allow refuelling infrastructure on an open access basis. Surely it makes more practical sense to slash the steep taxes on jet fuel that direct import is meant to help avoid. High airport landing, parking and other charges should also be reduced. 
    Top voices at the International Air Transport Association feel high taxes, inadequate capacity in Mumbai and rising infrastructure costs in Delhi hold back Indian aviation’s potential. We clearly need a culture of competition to help the industry grow and generate resources for capacity-building. To boost business confidence, the authorities must stop propping up AI at huge taxpayer cost and by skewing rules in its favour. The government must play facilitator, not rescue act for airlines marred by inefficient resource management and reckless business policies. Eased regulations and tax structures must be geared to creating a level playing field wherein airlines compete to succeed or fail according to commercial logic. The sector can do with AI’s privatisation as well as a shakeout. Consumer interests will be best safeguarded when professionally run carriers get to profit and expand.