Water: While North East reels under flood, Punjab faces a major crisis

News from The Hindu

North Eastern states including Bihar, Assam, West Bengal and Arunachal Pradesh are reeling under a bad flood situation. Several human lives are lost; Kaziranga wildlife sanctuary is apparently 90% under water. As of now, the Central Government has sanctioned 212 crores to Assam and Bihar. Army helicopters are pressed into service in Bihar to save lives and distribute food packets in regions cut off from the mainland. West Bengal also has serious problems. Two of its districts are under water. Arunachal Pradesh rivers are touching the danger mark.

In neighbouring country Bangladesh, floods have taken a serious toll as well.

In the Northern Front, Punjab state legislature has forced a major crisis, by revoking a water sharing accord signed between Punjab, Haryana and Rajasthan in 1983. The story is very similar to the Kaveri water sharing problem between the states of Karnataka and Tamil Nadu. A detailed presentation of the problem is available in a Frontline story written in 2002. In short, India and Pakistan entered into an agreement for sharing water in the Sind rivers, in 1960. Despite three wars subsequently between the two countries and constant problems across-the-border, the two countries have abide by the agreement properly. There are some unresolved disputes here too, but they pale in comparison to the ugly way in which the states within the Indian Union fight with each other. Subsequent to the India-Pakistan river water sharing accord, the unified Punjab province received a certain quantity of water. When Punjab was split into Punjab and Haryana, the central government determined in 1976 that both states will receive equal amounts of water. Punjab went to court against this in 1978. However, in 1983, with both the states Punjab and Haryana ruled by Congress (I), the chief ministers worked out a reasonable formula sharing the water between the two states as well as giving some to Rajasthan, Delhi and Jammu & Kashmir.

Then Punjab went through insurgency problems, because of perceived (and possibly real) issues relating to Hindu-Sikh, Hindi-Gurmukhi conflicts. Rajiv Gandhi-Longowal (Longowal was killed by Sikh militants, while Rajiv Gandhi by LTTE suicide bomber) accord in 1985 allowed for construction of Sutlej-Yamuna Link canal and through this water was to go to Haryana. However because of intractable stance of Punjab, whose job it was to construct the canal, work on SYL canal was stalled. Haryana had gone to court against this, and the Supreme Court handed an order last month asking Punjab to hand over the construction of the canal to the central government. So, Punjab legislature came up with an innovative model - to convene a special session of the assembly to nullify the 1983 accord signed by the chief ministers of Punjab and Haryana. It is unclear to me whether the subsequent legislatures have the power to nullify the agreement signed by head of two states.

Capt. Amarinder Singh, Chief Minister of Punjab nonchalantly says "Every State has to protect its interests. If others are not happy, they can go to court. The Supreme Court can strike down the Act. The final decision is a judicial review. I have to hand over the SYL site to the Centre the day after tomorrow. We were legally advised to take this course.". Chautala correctly responds that "Then, different States would enact their own laws to terminate all water agreements and projects." The result will be chaos. Even when the courts have ruled on water sharing, states such as Karnataka have not followed them. Already politicians in Punjab are demanding the same.

The central government, to avoid problems such as this, should nationalise the rivers and take complete ownership of them and should be the final arbiter of who should get how much of water. This may also be abused by unscrupulous elements in the central government, but at least in such cases judiciary can step in to correct the injustice. In the current case, the states have shown that they are unstable and devoid of thinking clearly and show scant regard for judicial process and hence should be stripped of powers to manage such a crucial resource as water.

Agriculture: Rediff interview with Dr Raja Jesudas Chelliah

From Rediff

An interesting interview and viewpoints. The one that interested me a lot was the answer to the following question.

Do you feel the NDA government neglected the agricultural sector?

It is partly true. I think the weakness of the NDA government was that nobody really knew the economy except the prime minister. (Deputy Prime Minister L K) Advani had no knowledge, so he did not interfere. The finance minister, poor fellow, he was an army man (Jaswant Singh, who retired as a major from the army and who was finance minister from 2002 to 2004), what did he know about economy? He is a good, intelligent, honest man but didn't know much about economy.

One mistake the NDA government made, mainly because of opposition from the lower rungs of the BJP and the Rashtriya Swayamsevak Sangh, was to throw out Yashwant Sinha [who was finance minister from 1999 to 2002]. He was following the correct policies, exactly the policies that are opposite to what the Communists want. The BJP thought they lost some by-elections because of him, but that is not true. So there was no one knowledgeable about agriculture. They didn't put enough investment in agriculture.

Then, you must in all fairness also say that it has to be done by the state governments. It is the deterioration at the level of the state governance that was partly responsible for the rural people not getting enough. We should not blame the Centre too much.

As an economist, I would say the NDA did not lose because they carried out reforms. Maybe reforms did not benefit the poor or the ordinary person sufficiently; maybe it is true. But it certainly improved his position because of the lower rate in inflation, food availability, etc.

Going by this answer, what would the current government, which is full of economists, do? So far, the Government has not come up with any detailed policy for growth in agriculture. The only announcement has been in making more rural credit available. There is no clarity on how we are going to manage the drought years since the monsoons are not in our control. Though we produce significant amount of food grains now, there is no clarity on whether we will continue to increase our food production to cope up with the rising population. Food distribution is still predominantly controlled by the Government. The state governments have not seriously looked at water preservation, changing crops in low water areas etc. Our agriculture sector is also highly inefficient because of serious fragmentation and lack of mechanised production. So we will never be in a position to increase our agricultural income by going to global market and selling our food there. Someone out there has lower cost of production. Likewise, we will be forced to safeguard our farmers from an onslaught by outsiders. We have to impose major tariff on agri imports, or massive subsidy to local farmers. How this will affect our involvement in WTO is another major issue.

And the states, which will have to implement several measures to help agriculture sector, continue to have the same, poor administration. How can the centre force the states to get good administrators?

How exactly will our economist PM and FM solve these problems?

States: P. Sainath on Chandrababu Naidu misrule

Opinion in The Hindu

P. Sainath has been a vocal critic of Chandrababu Naidu administration over the last few years. This, even while the Indian and the world press had been singing hosannas to Naidu.

The above opinion piece has been severe on Naidu and hold him responsible for all the ills Andhra Pradesh has faced. I can't somehow accept this. Perhaps I have been just as seduced by the newspapers and Naidu that I can't see the truth in this.

Sainath says:

Economists C. Mahendra Dev and C. Ravi show that "in the 1980s, A.P. was one of the top performing states in terms of Gross State Domestic Product (GSDP) growth. Only three states, Rajasthan, Haryana and Maharashtra, showed higher growth than A.P. in the 1980s." However, this rank sank from number four to eight in the next decade. "Seven states showed higher growth than A.P. in the 1990s." The State was overtaken by Gujarat, Karnataka, Tamil Nadu and West Bengal.

I am still puzzled by how Tamil Nadu ruled by Karunanidhi and Jayalalitha, prone to nepotism, corrupt to the core and whimsical (certainly the latter) could push the state ahead of another state ruled by a man who seemed intelligent, honest, focused, charming and powerful (as he controlled the Government at the centre).

As to whether Naidu is corrupt or not, Sainath's final paragraph is quite revealing.

The media bios of Naidu called him the son of a "poor agriculturist." Or of a "small farmer." Or of a "modest farmer." How the modest farmer and his spouse came to be worth Rs. 21 crores after nine years in power is a mystery no one wants to solve. That's the figure you'll find in his poll-time declaration of assets. But no questions. The king could do no wrong.

Food: Amul to set up co-operative milk movement in Sri Lanka

Wanted to blog this last week, but forgot the source. I think it was in Economic Times. Can't find it in Google.

Amul will be setting up a Anand, Gujarat type experiment in Sri Lanka. They will invest about Rs. 10 crores to set up a co-operative milk procurement movement. Initially, milk from Tamil Nadu will be taken via sea and sold in Sri Lanka under the Amul brand. In due course, proper co-operative set up will be built and then the venture will be trasferred to the local co-operatives. This venture will be allowed to decide their own brand, or use Amul brand by paying royalty to Gujarat Co-operative Milk Marketing Federation (GCMMF) that owns the Amul brand.

As of now Sri Lanka imports milk powder from outside the country.

Previous item: Food: M.S.Swaminathan appointed head of National Commission on Farmers

Power: Balachandran writes on Nuclear Power Generation

G Balachandran writing in The Financial Express talks about the problems in private participation in nuclear power generation.

Previous relevant item: Power: Nuclear power sector may be opened up for private participation

Previous item: Power: Reliance Energy and Power Trading Corporation bag power trading licenses

Power: Reliance Energy and Power Trading Corporation bag power trading licenses

News from The Financial Express

After Adani Exports Limited and Tata Power Trading Company Limited, two more companies - Reliance Energy and Power Trading Corporation have been awarded power trading licenses by The Central Electricity Regulatory Commission (CERC). NTPC's subsidiary NTPC Vidyut Vyapar Nigam Ltd is also going to be awarded this license subject to certain procedural issues.

The applications from two other companies - Amalgamated Transpower Ltd and Global Energy Ltd - have been put on hold for lack of full details.

Previous item: Power: Nuclear power sector may be opened up for private participation

The policy-execution disconnect - N.Vittal

Opinion in The Hindu

There is an interesting article by N.Vittal, ex-bureaucrat, on where governments falter, despite coming up with - at least in their own minds - people-friendly policies.

N.Vittal concludes that the problem is in poor implementation, and talks about four specific points that policy makers should think about.

1. Bureaucrats at the top have a fairly clear idea of what needs to be implemented. However down the line, those in the field have very poor idea and end up executing something by the letter rather than the spirit. If the 'letter' is messy, the implementation is messy as well. So problem number one is improper communication of the vision down the line.
2. Problem number two is, as anyone would have guessed, corruption. This is something that we have to mostly put up with and hope to keep chipping it away and reduce the scale considerably.
3. Top civil servants not going to the field to see for themselves where the problem is. This is closely related to problem one.
4. Lack of accountability. Public servants are rarely prosecuted, and anti-corruption laws are poorly implemented. Hence there is no incentive for anyone to be honest and accountable at the implementation level.

Now what can be done?

Dealing with corruption is a major issue in itself. The Prime Minister can perhaps take up accountability and de-centralisation as priorities. Otherwise, whatever policies his government comes up with will always be poorly implemented. Key part of decentralisation is giving power to local bodies to implement certain important civic functions - such as primary and secondary education, quality primary healthcare and locality development. There should be strong laws to remove the control state governments have over the local bodies. Central government should ensure distribution of funds to local bodies directly. There will be corruption, as there has always been, but local bodies are likely to be more responsive to local needs than centralised corruption.

The next thing that can be done is to create an effective administrative model where the top civil servants meet staff at the implementation level on a regular basis. Now, this could be easier said than done. Some of the retired bureaucrats should come up with a paper on specific examples of where things are going wrong in the administration and how it can be improved.

Telecom: Consolidation in the telecom market

News from The Hindu

The latest mega acquisition in the mobile telecom space is Hutch acquiring Aircel (Chennai and Tamil Nadu circles) for supposedly Rs. 1,600 crores.

Since the liberalisation of the mobile telecom space in terms of mergers and acquisitions, there have been a few smaller deals. Bharti acquired Hexacom in Rajasthan circle and Idea Cellular acquired Escotel in Uttar Pradesh West, Haryana and Kerala. Aircel itself acquired RPC in Chennai and thereby enhanced its value, when Bharti, Idea and Hutch aggressively tried to buy Aircel. In the end Hutch has won, but at a fairly high premium.

The telecom space is getting clearer now with these acquisitions. The dominant players in the GSM based mobile delivery are Bharti's AirTel, Hutch and Idea, with Govt. controlled BSNL/MTNL. In the CDMA space, Reliance and Tata Teleservices rule. These six together will be fighting a pitched battle for the supremacy of the mobile space.

They are only two other players outside the above six who still continue: BPL in Mumbai, Maharashtra, Tamil Nadu and Kerala circles; Spice Telecom in Karnataka and Punjab circles. BPL groups mobile operation has been loss making (despite their Mumbai circle operation), and Spice may also not be making any profits. They would do well to quit as soon as they can if they get a good price.

Even amongst the six dominant players, Idea will be hamstrung by Tata group's involvement who are aggressively pushing their CDMA based Tala Teleservices, while BSNL/MTNL will always struggle with Govt. decision making process and the inherent delays in that.

Hutch may struggle a bit from its pure play mobile operator model. Reliance seems to have clearly decided on an organic growth model.

Issues to look at in future:

- IPO of Hutch
- Idea's future plans and whether Birlas and Tatas will exit. Idea is also planning an IPO
- Reliance's growth plans. Reliance Infocomm may look at a listing as well in future
- Tata Teleservices - VSNL - Tata Teleservices Maharashtra merger?
- Bharti's acquisition plans

Opinion pieces in The Business Line and Business Standard

There are some thought provoking opinion pieces in The Business Line and Business Standard today. Worth reading.

Sharad Joshi's advice to Sharad Pawar, Union Minister for Food and Agriculture, asking Pawar to initiate reforms in the agricutural marketing system and restore property rights for the farmers.

KP Prabhakaran Nair on Exporting food, losing water, where he says with poor productivity in India, exporting of food out of India also implies considerable 'export' of water resources as well.

S Padmanabhan discusses the power crisis in India and suggests ways by which the power sector can be made investor friendly. Discusses in details steps to be taken by the state and central government in terms of guarantees they have given in the past, and asks the governments to stick to the guarantees.

A K Bhattacharya discusses what the Government should do with Public Sector companies. Given that privatising them is not going to happen, the least the Government should do is to get a strong management at the top.

Michael Pinto on why the states should not be investing in sectors which are already well served by private capital. Shows the example of Shipping Corporation of India, where the decision to buy a ship takes more than 2 years, whereas in a private company all it takes is a single board meeting. Despite this, SCI is profitable, at least as of now. But Pinto asks whether it is worthwhile for the state to park its funds in SCI when it could be using this money elsewhere - in education and healthcare. [Couldn't find the URL for this article on the web.]

Power: Nuclear power sector may be opened up for private participation

News from The Business Line

Changes to Atomic Energy Act awaits Cabinet nod, which if accepted and passed in the Parliament would result in private participation - both Indian and Foreign - in nuclear power generation, according to Mr. SK Jain, Chairman and Managing Director, Nuclear Power Corporation of India Ltd (NPCIL).

Even a 100% private participation in building nuclear power plants could be a reality says Mr. Jain.

However, even if such amendments to Atomic Energy Act are made, private investment in nuclear power plants may not be easy. Invariably organizations and individuals have shown serious resistance to nuclear power plants coming up in their vicinity. Currently NPCIL operates the following power stations:

• Tarapur Atomic Power Station
• Rajasthan Atomic Power Station
• Madras Atomic Power Station
• Narora Atomic Power Station
• Kakrapar Atomic Power Station
• Kaiga Atomic Power Station

The project at Kudankulam is probably almost completed and ready.

To my knowledge, there were (and are) opposition to plants constructed at Kalpakkam, Chennai (Madras); Kaiga and Kudankulam. Private investors will be worried about the cost of delays, since their capital gets locked up.

Unless NPCIL comes up with a better model, they won;t attract private participation in nuclear power plants in India.

Previous item: Power: Tata Power gets trading license