Food Security Bill – Hope and Despair!

Though The Food Security Bill has been finally approved by a Group of Ministers to be presented before The Parliament, what might finally take shape as The National Food Security Act is being questioned. Will the entire idea of food security for all fructify?

Do you remember the pre-election days in 2009, when there was a lot of talk around ensuring the ‘food for all’ concept doing the rounds? After delays in the process of finalisation of a Food Security Bill for around two years, the government has now finally approved a draft of the proposed legislation to be put before the Parliament for discussion and subsequent approval. But will the expected bold measures effectively address problems causing hunger and starvation deaths? Also, will the bill in actuality ensure food for the most vulnerable classes of the Indian society?

The purpose of the bill, at the time when it was being conceptualised, was backed by the idea of protecting the human right to live in dignity, free of hunger, food insecurity and starvation deaths. The National Advisory Council (NAC), which had taken up the task of preparing a detailed framework on the National Food Security Act (NFSA) and had even come up with some radical measures earlier, now looks willing to compromise on some key fundamental issues. Says John Dreze, Economist and former member of the NAC, “The NAC has proposed a framework for the NFSA. But its potential could be wasted by a flawed approach to the Public Distribution System (PDS).” Dreze has been instrumental in drafting the NAC’s food security bill and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Dreze had quit the NAC soon after the Food Security Bill was formally adopted on June 22, 2011. He left the council formally on grounds that his work had ended with the adoption of the bill and that he saw no reason for his tenure (or that of the NAC members) to be renewed this year.

Yet, Dreze has been critical of the government draft of the Food Security Bill. Dreze fears that en route to meeting the basic requirements for a universalised system of public distribution, the draft may end up depriving people of existing rights on various counts – despite an opportunity created through huge buffer stocks. To that effect, there are a few reasons that could prove to be bottlenecks in the effective implementation of this critical policy. One issue lies with the government’s approach to minimise its own obligations by restricting the number of eligible households and the entitlement. At the Chief Ministers’ Conference in February 2010, the government’s agenda paper gave the total number of APL (above poverty line) and BPL (below poverty line) households across India, covered by the Targeted Public Distribution System (PDS) as 18.03 crore households, which effectively worked out to about 90% of the population based on the projections used by the Central government. However, the worrying factor is that the Bill sets a cap of 75% households in rural India and merely 50% in urban India. What this translates into is that many families holding APL cards would be excluded from the PDS. In this approach, the PDS rests on a three-way division of the population – priority, general and excluded households. Priority households, covering at least 46% of the rural population at the all-India level, are to get 35 kg of grain a month at Antyodaya prices (Rs.3 a kg for rice, Rs.2 for wheat and Re.1 for millets).

General households will get 20 kg at not more than half of the Minimum Support Price. And excluded households, which account for 10% of the rural population, will get nothing. Moreover, the coverage of ‘priority groups’ under the PDS is also restricted to households below the Planning Commission’s strange poverty line of Rs.30 per day.

Then there were also discussions on whether the benefits should be provided through a cash transfer system or subsidies. The Bill now allows the government to introduce a scheme of cash transfers in lieu of entitlements. The PDS in India has been defunct for long now and it is nothing new. However, an independent survey carried out by a group of student volunteers and research scholars, including Dreze, found that the PDS was in the process of recovery. “The issue is that the BPL list is totally defective. In many states, entire communities have been left out. There are massive inclusion errors which have reduced the effectiveness of the PDS as a tool for food security,” a communiqué sent to the PM by this group read, adding, “We support the case for a near universal PDS, whereby all households are entitled to food subsidies unless they meet well defined exclusion criteria.”

This has led to many respondents in the said survey opting for subsidies against the government’s cash transfer proposal. Fear of misuse of cash, traders raising prices if PDS were closed, and bitter experiences of the banking system in the context of NREGA wage payments have also prompted families to support the PDS.

At the heart of the debate is the difference between the Centre and the states, as is the case with most welfare schemes of the government. The Planning Commission’s poverty estimators are just one part of it. More importantly, the Bill ignores the State government’s estimation of BPL families. As opposed to 6.52 crore families recognised by the Central government as being poor, state governments, based on their own estimation, have extended BPL coverage to 11.03 crore households, comprising 56% of the population. The Bill, however, puts a cap on BPL households at 46% in the rural areas and just 28% in the urban areas. The government’s move to free itself of accountability may also become a major area of concern. “Full powers have been given to the Central government, including powers to modify or withdraw most entitlements, and to specify the sharing of costs with the state governments,” a critique of the government draft states. While the entitlements of the priority groups have been moved to a schedule (so that they can be modified at will), the general category, which is only entitled to 3 kg per person per month, is also at risk of losing these entitlements if the Centre wishes. Most of the transparency provisions in the NAC draft have also been excluded from the Bill.

To be fair to NAC, the purpose of the legislation on food security, which was earlier an exclusive premise of the NAC, actually lost its teeth soon after government bodies got involved in the process.

Debates began that unfortunately led to the NAC succumbing to political pressure. The whole case of ensuring ‘food for all’ was lost. However, there are still a few positives that emerge from this forward movement, says senior economic expert Suvrokamal Dutta. “Even if the legislation was to be approved in the current form, something which looks very unlikely, it is a big leap ahead. I agree there is a lot more that is to be done in this front... but target groups need to be clearly defined, and there should be a pan-India survey conducted for this purpose. The targeted PDS could prove as a bottleneck for the government while implementing the NFSA. Still, it is a significant move ahead,” he says.

Expecting NFSA to deliver the originally desired results is being too optimistic. But as said, the fact that there is a definite intent within the government to move along the philosophy of food for all, is itself one of the most noteworthy commitments of the political class.

Still, the politicisation of critical issues and the effects thereon, have started to show already. Just before the beginning of the Monsoon session of the Parliament, Food Minister K. V. Thomas declared that it was unlikely that the Bill would be introduced in the current session, adding that it would now be introduced in the winter session, extending the deadline for its implementation to sometime next year. With food inflation rising worldwide, experts are already worried not only about the delay in the bill, but also the funding required to support the same.

Many state governments will look to sort out their differences with the Bill, which is also set to take time. Even if the government is able to push the Bill through in the winter session, it’s not quite clear right now on how the project could include self-sustainability. In summary, it’s a great promise that has been shown to the Indian populace, yet it’s actual implementation remains a distant dream.

Truth Vs. Statistical Truth

The controversy over NSSO’s self-contradictory unemployment data not only highlights the drawbacks in the survey, but also raises a finger at policymakers who, for the first time, questioned the same.

Soon after the results of the 66th Round of the National Sample Survey Organisation (relating to data collected in FY2009-10) were declared, it became the subject of a huge controversy and debate. In an apparent change in the scheme of affairs, the controversy this time around was spurred not by the usual critics of the government and its statistical system, but from within the government circles itself. Deputy Chairperson of the Planning Commission Montek Singh Ahluwalia slammed the National Sample Survey Organisation (NSSO) report for indicating fall in both employment and unemployment rates at the same time. He ended up claiming that there has been a ‘gross misrepresentation’ of the NSSO data. And the whole system, rather than questioning the priors, decided that the data must be wrong, and the NSSO was reprimanded for its ‘faulty’ investigative methods – something that had been accepted without question and with a lot of pride on many occasions in the past decade or so.

The controversy began when the NSSO, in its survey report titled ‘Employment and Unemployment in India’ (which was conducted between July 2009 and June 2010 and included a sample of over 1,00,000 households), found that employment in labour force had fallen from 42% in 2004-05 to 39.2% in 2009-10 and the unemployment rate had fallen from 2.3% to 2% in the same period. What this essentially translated into was that despite more than an average of 8% economic growth during these five years, sufficient jobs had not been created, suggesting that the government’s economic policy was not inclusive. But countering the argument, Ahluwalia pulled up NSSO for the self contradictory figures saying that the data collection methodology used was faulty. Subsequently, Secretary, Ministry of Programme Implementation T. C. Ananth, went on record to admit that the data was ‘confusing’. “Once you break up labour force participation for women, children and subsidiary status it becomes clear that employment has increased,” he clarified, claiming that the computation of the unemployment rate was a problem as it failed to take into account people who may be self employed. But interestingly, the NSSO data also shows a consistent fall in self-employment – an indicator that more jobs were being created because of economic growth.

As amusing as these official interventions may seem, there is no denial in the fact that the results of the latest survey of the NSSO reveal some important shifts in India’s labour markets and the nature of the growth process that determines these changes. Policymakers, who currently choose to stay in denial, need to take note of these trends seriously and analyse them in detail. For instance, there was an addition of 40-45 million people in the age group of 15-59 between 2004-05 and 2009-10 and unemployment rate for that period has fallen from 2.3% to 2% of the labour force. Agrees Pronob Sen, Former Chief Statistician of India, as he explains, “It is because of the fact that the additional people in the working-age population and some past unemployed people were given jobs, the unemployment ratio has come down.”

At the same time, one must also keep in mind the very fact that the unemployment rate (referred to as the Usual Status Activity – USI – in technical jargon) is computed as the number of people in the age group of 15-59 who are willing to work but did not obtain paid employment for at least 180 days during the past 365 days. Going by this, there is possibility that though many got some or other employment failed to qualify the USI norm and was termed as unemployed in the survey. Supporting the view, Sen says, “The USI is a poor indicator of the employment rate, but it is a reliable indicator when it comes to knowing whether workers are finding jobs or not. For instance, between 2004-05 and 2009-10, the working-age population grew by an average of 2% per year, which is about 8-9 million individuals. They all got some jobs, as did few people previously unemployed.”

Adding to these viewpoints, Senior Economic Expert S. K. Dutta says, “The main issue (in relation to the report) is that while determining the actual status of employment, all factors have not been taken into account. It (the survey) should have looked more into the semi-disguised employment sector, the partially employed sector and then the actual scenario could have come out.”

Another problem cited with respect to the ‘faulty’ data collection in the 66th Round is excessive reliance on outsourced contract investigators. This, say highly placed government officials, is not a new problem and has, in fact, been a characteristic that has plagued several recent rounds of the NSSO.

The idea behind the NSSO coming out with such survey results was to assist the policymakers in formulating better and effective policies for the economy. However, recent developments, such as denial in accepting survey findings and completely ignoring the other findings with respect to trends in the labour market, have resulted in a complete shift of focus from more relevant issues in this context. Add to this the jargon and confusion associated with almost all government findings, and things turn out to be even more complicated. This brings us to further question – Is there really a need for such a mammoth exercise? Perhaps, it’s time to ask those who commission such a survey – Do they really plan to show some light to help improve the scenario of unemployment in India or just want the survey to end up being yet another tool to fool the nation?

Metals, Mines and Troubled Minds

After Nearly two years of Discussions and Delays, The revised MMDR Bill is likely to be placed in The Parliament. Will the protesting locals and industry elements finally find peace? Doubts remain.



After several rounds of deliberations, discussions and interactions, a Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee on July 7, 2011, cleared the draft Mines & Minerals (Development & Regulation) Bill. As per government sources privy to the development, the Mines ministry plans to introduce the bill in the Winter session of Parliament. If passed, the new Mines & Mineral Development & Regulation (MMDR) Act will replace the existing MMDR Act, 1957.

As per the Bill recently cleared by the GoM, the Centre and states can levy cess on all minerals – 2.5% of the royalty in case of the Centre and 10% in case of the states. In addition, mining companies will now have to pay four times the money they presently pay to the states as contribution towards sustainable mine closure plans. The 10-member ministerial panel has said that coal miners should pay 26% of their profits, while other mineral mining firms should give an equivalent of 100% of the royalty they pay the government to compensate people displaced by these projects. However, the mining firms want a royalty-based sharing formula wherein they will have to pay only 26% of the royalty equivalent to the displaced. Sources say the proposal will be discussed further.

Miners in India, who have recently come out of a commodity slump have always been wary that the provisions of the new MMDR Bill, if legislated into an act, will spell doom for the Indian mineral resource industry. If it was any indication, shares of mining firms fell sharply after the panel approved the draft mining Bill, indicating a negative sentiment that the proposed provision for profit-sharing would have a negative impact on the companies’ profits. While Coal India fell 8.2%, Jindal Steel and Power declined by 2.5%, Hindustan Zinc and Sesa Goa by 4.2% each, NMDC by 2.5%, SAIL by 3.7% and Tata Steel by 2%, soon after the GoM paved way for the Bill to be put before the Cabinet.

In an important development, the GoM which vetted the draft Bill, has also given its nod for authorising and incentivising state governments to take up “prospecting and exploration, so that adequately prospected ore bodies can be put on bid.” The new Mining bill will empower state governments to hand out leases, take up prospecting and exploration activities before mines and call for bids for commercial utilisation of mineral deposits such as coal and iron ore. If the proposals become law, companies would need to make an annual cash contribution of Rs.100,000 per hectare to the state government over the life of a mine. This amount would go as contribution for implementing the mine closure plan, key for environmental rehabilitation and in providing succour to workers and communities dependent on mining activity for sustenance. Additionally, the Bill also proposes to give the states a free hand to levy cess on both major and minor minerals by a sum not exceeding 10% of the amount of royalty paid by companies for a particular mineral. Several states including West Bengal were already levying cess and local taxes on minerals at differential rates. The Centre had initially challenged the West Bengal’s move to levy state-specific taxes on coal produced in the state, but a few years ago, a Supreme Court ruling had gone in favour of the state. The Centre therefore, does not share coal royalty proceeds with Bengal. It is pertinent to note here that although the royalty on minerals are levied and collected under the central law, the process of appropriation is actually carried out by the states. As per the GoM, the proposed central cess on minerals would be used for better administration of mining activities.

However, if industry analysts are to be believed, the implementation of the proposals of the MMDR Bill could erode profits of metal companies by 4-10% and the impact would be more on companies with more captive coal content. “The MMDR Bill is unfavourable to the metals and mining sector as miners will have to share 26% of their profits. If this happens, miners will lose around Rs.80 billion annually. In the short-to-medium term, the sector’s performance will become bleak due to the monsoons,” says SMC analyst Saurabh Jain. One more factor troubling the sector is the fear of an impending fall in Chinese zinc prices. “It is said that between June and August, smelters will sell stocks and cut output due to a lukewarm demand, which will reduce imports of concentrates,” adds Jain.

While most of the analysts contacted by B&E agreed on this, some also believed that it was too premature to forecast the exact impact on the companies. This line of thought is backed by the fact that there are many changes that are likely to happen after the draft Bill is presented before the Cabinet and Parliament. Also, given the discussions that are likely to be taken up while legislating this Bill, further delay cannot be ruled out.

However, there is a sentiment that in whatever form the Bill eventually becomes a law, the broad impact would eventually be negative for the companies. The passage of the new Bill has been delayed by close to two years now for want of consensus.

Miners, who are still unsure about the quantum of impact the new regulations would have, are scared, as their discussions suggest. They contest that the Indian mining industry is the most heavily taxed industry in the world consisting of various charges/levies under the old MMDR Act, Forest (Conservation) Act 1980, Environment (Protection) Act 1986, Labour Welfare Fund Act / Labour Welfare Cess, Income Tax Act 1961 (direct and indirect taxes) and other local tax as applicable. The present scenario suggests that there is an attempt in the draft MMDR Act, 2010, to make the levies heavier and make the sector appear unattractive to private investors, domestic or foreign. Agrees R.K.Sharma, Secretary General of the Federation of Indian Mineral Industries. “The proposals in the draft Bill will prevent much needed investments from flowing into the mining sector. Overseas companies will not be interested to invest in a highly-regulated and a highly-taxed sector,” he says. Also, the current government regulations permit 100% foreign direct investment (FDI) in most mining activities under the automatic route. However, the actual FDI flows (as per industry reports) have been a meagre $150-200 million. But this has not deterred the government from setting the ambitious target of increasing FDI in the sector to over $20 billion over the next few years. India has 85 billion tonne of mineral reserves, which are yet to be exploited. Encouraging FDI, many feel, can be important for the development of the Indian mining and minerals industry.

Mining and construction equipment industry volume is around 40,000 to 45,000 units per annum, amounting to a turnover of $2.6 billion to $3.1 billion, proving how the Indian industry is still at a nascent stage as compared to the $75 billion global market. Moreover, as per official estimates, out of the 5.75 lakh sq. km available in India with minerals, only 75,000 sq. km have been explored so far.

The government and the Mines ministry are today trying to send encouraging messages to the industry. While speaking to B&E, S.Vijay Kumar, Secretary, Department of Mines, said that mining in India was set to grow in a very different direction from the present times, where there is too much focus on iron ore and bauxite. “We really need to go deeper for rarer minerals. Focus will shift to base metals, non-ferrous metals and diamonds, uranium, nickel et al,” he said, while adding that the ministry also wants to try out the latest in technology with an equally high appetite for risk, while mooting for a scenario free of regulatory hurdles. “It’s my job to help the industry and we will do all we can. We have put in place a regulatory authority for a level playing field. There are time-frames for state governments to dispose applications. We have tried to make everything as efficient as possible, but the industry will have to pay,” he adds.

Battles fought between miners and the people displaced are responsible for the poor scenario of mining in India. While neither the existing government mechanism nor the mining industry has been able to provide any relief to the lives of those affected by earlier projects, there are questions that still remain. Will the new bill be able to resolve these battles? More importantly, looking at the long list of Bills that are set to hit the approaching Parliament session (including the Lokpal), will anything concrete surface?

Living on Presidential lethargy

Inordinate delay in deciding the fate of these mercy petitions raises concerns over the consistency, transparency and the very objective of these procedures. 

 Timely trial. Well, that sounds some sort of an oxymoron in the Indian judicial system. But 25 pending mercy petitions with the President with some since 2003 is certainly more than unbelievable. There is no doubt that the hype that surrounds sentencing of capital punishment to convicts and mercy pleas cause a lot of stress on the President’s ability to take an objective decision under Article 72 of the Constitution that empowers the President of India to grant pardon or commute the sentence of a convict found guilty by court. But holding it for as long as eight years, for sure, sets a bad example for the system as a whole.

Perhaps, this is exactly what the Supreme Court (SC) vacation bench comprising Justices G. S. Singhvi and C. K. Prasad might have felt when it expressed ‘surprise’ over the delay and sought an immediate reply from the Delhi government on the matter. “The counter filed by Delhi Government will clarify as to why the petition for pardon has not been disposed of for last more than eight years,” the SC bench said.

However, the subject of ‘inordinate delay’, which can amount to a ground for Court to commute the death penalty under section 433(a), has some other contours which also deserve ample attention. These include reasons behind what constitutes delay, the impact of delay on the death row convicts, applicability and scope of fundamental rights protection to death row convicts and whether death sentence can be commuted into life on account of delay. The inordinate delay in the execution of the sentence is one circumstance, which has to be taken into account while deciding whether the death sentence ought to be allowed to be executed in a given case.

Without going into the details of how prolonged delay in deciding on a mercy petition could translate for the case and convict in question, former Chief Justice of the Delhi High Court A. P. Shah speaks in favour of timely trials. “There should be no doubt that a reasonably expeditious trial is an integral and essential part of the fundamental right to life and liberty enshrined in Article 21,” Shah told B&E.

The issue has been a matter of debate for quite sometime and the politicisation of the case of Mohammad Afzal, who has been awarded the death sentence in the 2001 Parliament House attack case, only brought matters to fore. A. P. J. Abdul Kalam, as President, received Afzal’s mercy petition on October 4, 2006, and forwarded it to the Ministry of Home Affairs (MHA) for advice. Since then, the ministry has been examining the petition in consultation with the Government of Delhi. The MHA usually consults the state government concerned before submitting the mercy petition back to the President with its advice. The President’s powers under Article 72 are always exercised with the aid and advice of the Council of Ministers. The delay by the MHA to submit Afzal’s petition to the President with its advice indicates the dilemma the government faces in keeping the issue free of political considerations. Also, the apparent pick and choose policy adopted by the government (which is absolutely contrary to the stand maintained by the MHA) does not speak high volumes of the procedure in place as well. BJP has even termed the delay in deciding Afzal Guru’s petition (despite Guru himself asking for speeding up the process) as Congress party’s strategy to avoid a religious electoral backlash.

Irrespective of the interpretations and conclusions that one might derive in Afzal’s case, it is important that we first look at certain facts. As per information sought from the Government of India under the RTI Act on details of mercy petitions decided by and pending with the President in the last 15 years, the President decided 12 mercy petitions in the past 15 years, with clemency being granted in three cases. As many as 25 petitions, submitted by the MHA with its advice, are pending with the President for a final decision. The MHA is examining three petitions, in consultation with the respective State governments, to prepare its advice for the President’s final decision. Files pertaining to the cases that have already been decided upon reveal that the government has relied upon seven basic grounds for its advice to the President on the merit of each pending mercy petition. The guidelines, which are said to be based on facts, are easily verifiable, and leave the government with little discretion in the matter, include the personality of the convict (such as age, sex, or mental deficiency) or circumstances of the case (such as provocation or similar justification) and whether the court has expressed any doubt on the reliability of evidence but has nevertheless decided on conviction.

However, the absence of a time-bound mechanism to address these issues, which have already been decided upon by the Appellate court, only lends to the stress and pressure that could hamper the eventuality of these crucial decisions. Agrees Information Commissioner Shailesh Gandhi. “Any government procedure, be it for an ordinary ration card or a mercy petition, must be addressed in a time-bound manner. There has to be some time frame. The government needs to address all procedures within its realm with the same standards of governance,” he says, adding, “India always had the option of doing away with capital punishment, which we chose not to. The inordinate delay in deciding the fate of such petitions defeats the purpose of imposing such a severe punishment on perpetrators of heinous crimes”. But under the current environment, Ajmal Kasab, found guilty of the 26/11 attacks in Mumbai that claimed numerous lives, has almost a decade to live before he finally meets his fate. In such a scenario, the huge costs that the government incurs in maintaining such high profile prisoners is another point of deliberation.

While the progress in deciding on mercy petitions means a lot for convicts, the process needs to be immediately segregated from political pressures and other bindings that either cause inordinate delays or affect the usual course of procedure.

UP’s Land Acquisition Policy - Any Surprises?

After rounds of protests by farmers and opposition groups, the ruling UP govt. announced a new Land Acquisition Policy for the state. The improvements as most did not expect, took many by surprise. Is it a beginning-much-needed, or is it just another political gimmick?

Facing flak from the ruling coalition in the Centre over the stand-off between the Noida administration and residents of Bhatta-Parsaul village in Greater Noida, Mayawati, the Chief Minister (CM) of Uttar Pradesh, on June 2, 2011, announced a new policy for land acquisition in the state. Under the newly laid-out policy, all land transactions hereon, will now be struck using a consensual approach. This will happen through a direct dialogue between the private developers and the land owners.

“The role of the government now would be that of a facilitator only, limited to issuing a notification under Section 4 of the Land Acquisition Act, 1894,” said the Chief Minister while briefing the media in Lucknow at a press conference organised to announce the new Land Acquisition Policy of the state. This is the second such policy to be announced by the Mayawati regime in the past nine months. The previous one was declared on September 3, 2010. The new policy will be implemented with prospective effect and will not apply to land acquired during the time period when the previous policy was active. The announcement of the new policy followed a “kisan panchayat” addressed by the Chief Minister. The panchayat was attended by farmers’ representatives from Bharatiya Kisan Union, including its general secretary Rakesh Tikait, and those from Tappal and Bhatta-Parsaul.

According to Mayawati, the new policy had been devised after elaborate discussions with the farmers’ representatives. Describing the new policy, the CM claimed it would be better than the “proposed land acquisition policy of the UPA government”. The Congress, which a few days back had slammed the UP chief minister for alleged atrocities in the process of acquiring land for the Yamuna Expressway project and had spoken volumes against the state’s policy, did not respond to her claims. Mayawati claimed that the issue of land acquisition policy would be raised by the Bahujan Samaj Party (BSP) in the monsoon session of the Lok Sabha and if the Centre’s policy was not announced, the BSP would ‘gherao’ the Parliament.

Voices from the industry have been divided on this issue. The two major industry bodies, Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII), have expressed dissenting views on the matter. The major point of contention appears on the role of the government. While CII has found support with the National Advisory Council’s (NAC) suggestion that the government should play a prominent role in the process of all land acquisitions, FICCI believes otherwise. Speaking to B&E on the role of the government, Chetan Bijesure, FICCI’s Additional Director, says, “In the case of UP, the role of the government has changed from that of an acquirer to one of a facilitator. We are not saying that the government should be absolved of the entire process. We are advocating a model that ensures better results for farmers as they will have the option to negotiate better rates.” Further, he adds, “The past instances where the state government has acquired land, we have seen the [unsatisfactory] results (in West Bengal, UP, Orissa). Also, the option of the developer meeting the farmer directly reduces the possibility of vested interests influencing the process at any given stage.” B. Muthuraman, President of CII, however had a different explanation for recommending a greater government involvement. As per him, the government cannot absolve its responsibility in land acquisitions. “We are pleased to note that NAC is also of the similar view on this critical issue. The State must fulfil its responsibility for economic development and play a critical role in acquiring land for industrial projects, as planned industrialisation is essential for job creation and inclusive growth,” says Muthuraman.

The mass agitations which had become synonymous with land acquisitions in the state could only be dealt through innovative solutions, and the confidence with which the UP government has doled out the fresh land acquisition policy, is backed by the reforms that it proposes to bring out.

Government sources told B&E that the new policy on land acquisition has broadly been categorised into three parts. The first part deals with direct transfer of land from farmers to private developers, with the state (district administration) merely playing the role of a facilitator. The policy underlines that the compensation package against the acquisition of land will be prepared only after the terms and conditions have been approved by 80% of the farmers or land owners whose land is to be acquired for a particular project. Failure of the private parties to woo 80% of the farmers would result in reconsideration of the project proposal. Additionally, the farmers have been given the option of taking 16% of the land developed for the project along with annuity at the rate of Rs.23,000 per acre for a period of 33 years. The farmers will also have the option for cash component in lieu of a portion of the 16% developed land. Furthermore, farmers who wish to forgo annuity will be entitled to a rehabilitation grant at the rate of Rs.276,000 per acre. [The rehabilitation grant in the September 2010 policy was fixed at Rs.240,000 per acre.

The second part of the policy states that farmers whose agricultural land has been acquired for building state highways and canals will be entitled to all the benefits accruing under the state’s Relief and Rehabilitation (R&R) Policy, 2010. Apart from the rehabilitation grant, 25% shares of the developer company will be allotted to the farmer and one member of each farmer’s family will also be given employment in the company. In the third part of the policy, where land has been acquired by the development authorities under the master plan, the deal will be executed only abiding by the terms of agreement through a consensual approach, sources told B&E. Mayawati’s new land acquisition policy has definitely set a benchmark for the Centre to better (when it brings its bill to the monsoon session of Parliament). The events could also, actually translate into the UPA coming out with a more farmer-friendly Land Acquisition Bill.

An interesting point to note is that while framing the new land acquisition policy (and therefore deciding to remove the government’s role in the acquisition of land for private companies), Mayawati actually took a leaf out of Congress’s very own book. A similar formula stated in the original UPA bill, stated that the state could intervene in the buy out of only 20% of landowners holding, and that too if the private company has reached an agreement with the landowners on the rest 80% first. This was exactly what Congress had originally proposed at the Centre but its ally Trinamool Congress had shot down the Bill.

The Congress government, until now, had been banking on the popularity of the Haryana model to counter criticisms of not having come out with a national policy for acquisition of land yet. But the fact that Mayawati has improved on the ruling party’s formula in Haryana (even bettering the sops that the Haryana government offers to landowners) has made it a tad awkward for the Centre. The additional sops being provided by the UP government include empowering the farmers with an option of reclaiming 16% of the land developed for the project along with annuity, the option for cash component & an entitlement to a ‘rehabilitation grant’ for those who wish to forgo annuity, are some major areas where the UP model has scored over the state land acquisition policies of Haryana and even Gujarat. Though CSR cannot be a legal obligation, the UP government’s new policy has made it part of the package. So, developers will have to build model schools and a ‘kisan bhavans’ in the project area.

Ajit Singh, Chief of the Rashtriya Lok Dal, however, has a different take on the UP initiative. Raising doubts over the CM’s intentions about welfare of farmers, he said that if her concerns were true, all farmers in the state whose lands have been acquired during the last four years should be covered by this new acquisition policy and rehabilitation package. Terming the new land acquisition policy announced by Mayawati “just an eye wash”, Ajit Singh demanded that the effective date should be changed to four years back, the time when the state government had actually started land acquisitions in UP.

This major reform is likely to create quite a flutter at the Centre which is currently learnt to be contemplating options. Seemingly, of all the options that NAC has put forward, the BSP formula (of placing a floor price on acquisition and giving other benefits even as it removes the state’s role from the negotiations over land definitely) sounds a better deal. Senior CPM leader Nilotpal Basu, in converstaion with B&E, had said that there was no visible attempt by the state governments involved to ensure a reasonable rehabilitaion and resettlement policy. “The stand of the party is very clear. We believe that the Act is totally outdated and holds no relevance in today’s scenario. The most important factor is that it does not take into account the views of landowners, their livelihood and other corresponding issues related to land acquisition. As far as the new policy in UP is concerned, we will have to wait and watch,” Basu told B&E.

Well, the new state policy of UP is here, and whatever happens, it is almost certain now that this move by Mayawati will force the Centre to adopt a more farmer-friendly policy for acquiring land. Will this tussle between governments eventually translate into better models that work in favour of the farmers? We hope so.
 

Much Ado About Nothing?

The IA-AI merger does not seem to be working. And strikes at Air India are making matters worse. Worse – no party seems to be getting much out of the strikes. What’s there to gain from all the melodrama? 

As if accumulated losses of over $3 billion was not enough for India’s ailing nationalised carrier, the Air India (AI) management found itself on a sticky wicket yet again, after over 800 pilots (who belonged to the erstwhile Indian Airlines) went on strike from midnight April 27, 2011. Neither is this the first time in 12 months that such a situation has come to cause discomfort to Air India passengers (it was last May when about 25,000 employees went on a flash strike), nor is this the first time that the management of the airline has faced questions over wage inequalities. Only this time, it just got bigger and worse. The strike lasted 10 days, and towards the end of the strike period, on May 6, 2011, flight cancellations had risen to about 90%. And how much of a loss did the airline incur? Between Rs.1.5 billion to Rs.2 billion. But everybody knows. This scenario which has “again” occurred due to mismanagement by those at the helm of affairs at AI, is not a new sight. One more strike, one more submission by the government, and perhaps thousands of customers lost forever. Only, this fact is not official.

The merger of the erstwhile Indian Airlines with AI was undertaken on May 1, 2007, with the view to make the airline more profitable and efficient. It was felt during that time that combining the two state-run firms into a single entity would provide an opportunity to leverage combined assets to build a stronger, more sustainable business to fight the ever-rising competition and price wars in the sector. Four years since the merger (and two years after the integration has been completed), contrary to expectations, the Air India flight has failed to take off. Historically, mergers in the aviation sector have failed because the management could not or did not put in place a people integration strategy before the single operational licence date (which happens 18 months after the merger is signed). The AI case is a reflection of the failed US Airways and AmericaWest merger, in whose case, today, even 6 years later, the carriers are today operated uniquely by two different pilot groups. One merger, two ideologies? Doesn’t work. Also, you cannot have labour issues if you want a successful merger.

Air India topped the list of biggest State-owned loss-making firms for FY2009-10, according to a February 2011 survey titled, Public Enterprises Survey, conducted by a Government of India agency. And such strikes will not help alter such findings. It will also damage its market share, which is already getting slimmer with budget and private carriers enjoying greater patronage from the fliers. Surely, for the month of April and May 2011, the strike will impact the carrier’s share. [The airline currently has a 17% domestic market share, compared to Jet’s 26% & Kingfisher’s 18%.] As per DGCA, AI, which operates 320 flights daily to domestic & international destinations, cancelled a total of 1,470 flights during the strike days. Cancelled flights mean doubly-lost opportunity, because not only are you letting go of customers, you are actually sending them to competitors!

In a rather unusual response to the situation, Arvind Jadhav, CMD of Air India, decided to put the blame on his predecessors and the political leadership. Yes, he does not deserve all the blame for the situation in which AI finds itself today. But he is also no new guest to the party. The day the strike was called off, he had completed 2 years & 2 days as the top guy for the job to turn around AI. Are we to understand that all this while, for the past two years, he could not hear a single voice of request from the end of the Indian Commercial Pilots Association (ICPA; a body that represents the pilots of the erstwhile IA)?

Truth is – for the past four years, AI has been virtually sleeping over ICPA’s demands. Since May 1, 2007 – when the IA & AI merger was signed, and the National Aviation Company of India Ltd., NACIL was born – pilots of the erstwhile IA have been pleading for pay parity. According to the Chief Labour Commissioner’s (CLC) report on the failure of the reconciliation talks that led to the ongoing pilots’ strike, the airline management turned down the pilots’ demand for fixed flying hours and layover allowance. ICPA had demanded a fixed allowance for 75 flying hours a month and also sought a monthly layover allowance, which covers expenses incurred by a pilot in a foreign city between flights, of $1,600 for commanders and $1,300 for co-pilots for operating international flights. “The ICPA representative stated that despite giving repeated assurances, commitments to the union and CLC in past proceedings with definite deadlines, the management has repeatedly failed to present any concrete proposal on pay parity [with colleagues in the pre-merger AI],” the report said. In fact, the ICPA General Secretary Rishabh Kapur has claimed that AI is not actually making losses and demanded a CBI enquiry into what he called were corruption cases in the airline. [He may be right. But actually, airlines around the world made total losses of $9 billion in 2009 and another $2.8 billion in 2010 (as per IATA)]. ICPA leaders have also alleged that the AI management wants it to go belly up so that its huge assets can be sold at dirt prices. Whatever be the excuses, the allegations & the cross-allegations – truth is, mismanagement at AI is not a fact unknown. Illogical expansions, an untimely merger (just before the downturn), a book of account saddled with debt of Rs.400 billion & Rs.130 billion in accumulated losses – these are “big” signs of trouble.

The fact that the Delhi High Court was forced to intervene (it gave an order to the pilots to withdraw the strike, and also issued contempt notices upon non-compliance), is proof enough that the strike did put the flying public through great inconvenience. Where AI however deserves praise is the manner in which it firmly handled the pilot’s union. It initially derecognised the union for causing the disruption in service and fired its nine leaders from service (six were sacked on April 27 and three more by April 30). It was probably for the first time that the AI management took a sensible decision. But the government’s action spoilt the game. As per company sources, the AI management gave in only after the civil aviation ministry intervened. On May 3, 2011, Civil Aviation Minister Vayalar Ravi had said, “If the agitating pilots of Air India call off their strike, the airline management will take back the pilots who were terminated.” So were they taken back? Yes. But besides taking the trouble makers back, even their union was re-recognised.

We should note here that these pilots are not your illiterate daily-wagers who have the right to strike. They are a set of well-paid professionals who were angry because their bankrupt company was not overpaying them like some other professionals. There is also a larger question on whether pilots can be considered to be workmen and have the right to strike. Perhaps, we are talking of ethics here – a word which does not find a place in AI’s handbook.

So, after all this drama, there is nothing that has come out of the strike. The de-recognised unions were re-recognised, the sacked pilots were reinstated and the government promised to look into the pilots’ demands through the Dharmadhikari Committee which will submit its report in the next five months (which in any case, it was going to). Who will be held accountable for the losses and the customers lost? No one. Can the ministry guarantee that such an agitation will not get repeated? No. Was the High Court diktat followed? Not in the least. Does not the Civil Aviation Ministry understand that it is the Indian tax payers’ money that is being wasted through the highly inefficient organisation called Air India? Perhaps yes. But it doesn’t make a difference to them as till now, not many are making a connect between the massive wastage of national resources and Air India. What needs to be done now is a critical review of whether Air India should be continued or be simply sold off to the best bidder. There is no way that the Indian tax payers’ money should be thrown away anymore to benefit one of the worst benchmarks in the global aviation industry. 

BRICs: REAL NAME, VIRTUAL OPTIMISM

Why it is not easy for The BRIC bloc to beat the West

For many years now, the BRICs have been known as a consortium that was predicted to overtake the economic might of the developed nations. But there are issues which put doubts on the very Viability, the Workability and the long-term effectiveness of this ambitious bloc.
Ever since the term BRIC was coined by Goldman Sachs in their Global Economics Paper, ‘Building Better Global Economic BRICs’ in November 2001, it has often been used as a representative of the shift in global economic power from the West (or the developed nations), to the developing nations. More than anything else, the projection of this shift is said to have created a lot of ripples in the international order, and understandably, more so among the developed countries that constitute the industrialised group – the G7.

Economists worldwide have projected BRIC as a powerful bloc of emerging economies. Why not? Combined, the four economies recorded a total GDP (in PPP terms; because economists argue that China’s exchange rate is not determined by market forces, but by fiat currency) of over $18 trillion ($18.34 trillion to be precise; as of CY2010). According to the International Monetary Fund (IMF), the BRICs are set to account for 61% of global growth over the next three years. Even Goldman Sachs, in its report, had argued that since the BRIC countries – which today occupies over 25% of the world’s land and house 40% of the world’s population – are developing rapidly, their combined economies could eclipse the combined economies of the current richest countries of the world by 2050. Brazil, Russia, India & China were set to emerge as the four most dominant economies by 2050 on the basis of their huge economic potential.

But fears abound that the concept of BRICs is just an over hype. While the growth of these economies has been remarkably heartening, thanks to the projections acting as a huge booster for FDIs and FIIs flowing into these countries, there is danger that this coin too, has a flip side. Contrary to the argument that the combined economies of BRIC countries could surpass the world’s richest countries by 2050, the projections, while concealing much detail in terms of the distribution of that growth, are actually based upon mere assumptions and cannot be relied upon. Economists like Vrajlal K. Sapovadia, Director, National Insurance Academy (NIA), Pune, contend that deviation in assumptions, difficulty in assessing qualitative factors, undermining inherent threats like population pressure, illiteracy, corruption, social and political unrest may actually lead to unrealistic forecasts.

The ‘Doing Business 2011’ report by World Bank is an eye-opener. According to this recent report, BRIC economies – when compared with their western counterparts – have actually lost shine over the past year. In the category of ‘Ease of doing business’, of the BRICs, the best ranked is China, at #79 (it was #78 last year). The other three of course occupy three-digit ranks. While Russia stands at #123 (it was #116 in 2010), Brazil comes in at #127 (#124 in 2010) and India at #134 (#135 last year). The developed world is of course far ahead of this lot, with US at #5 and UK at #6. The fact that names like Rwanda, Tonga, Vanuata, Mongolia and others are better off than the BRICs is a hard pill to digest. But true. Even in terms of per capita income and human index ranking, all the BRIC countries are worse off this year than they were in 2010 (and surely worse-off as compared to the developed nations). Digest this: the highest per-capita income amongst the BRICs is held by Russia ($9,622), which is equivalent to 1/5th of that of US’ ($47,576). “In order to make this dream (of a prospering BRIC) a reality, each BRIC country needs to set its own house in order and boost its natural and human resources through proactive management,” says Sapovadia, adding that it is imperative that their hidden strengths and wealth, like agriculture & forest land, water reservoirs and human capital be utilised scientifically before we start comparing these economies with the powerful West.

Many also claim that for all projections regarding the exemplary growth expected by the BRIC economies, the very agenda is actually being pushed by US, to open the floodgates for its products and services into these emerging economies. As interesting as they sound, the veracity of these claims is yet to be ascertained.

There is another theory doing the rounds. Despite the abundance of ‘catch-up growth’ stories in the post-war period, growth starts to disappoint after a while and it is relatively easier to catch up with the leaders as compared to overtaking them. In reference to the robust growth that China has been experiencing in recent years, a recent article in The Economist cited references from a paper by Barry Eichengreen of the University of California, Donghyun Park of the Asian Development Bank (ADB) and Kwanho Shin of Korea University. The paper examines economic records of countries since 1957 to identify potential warning-signs, and contends that it would actually be wise for China to pursue “structural reforms” – which can help cushion the effects of a slowdown – in the current scenario, when it is growing remarkably, than wait for lean years which are bound to come.

India can learn too. Slowdown can hit it faster than expected. With many sectors in the economy already overheating, with scams and corruption plaguing the conduction of clean business, and with lack of proper infrastructure and human development facilities, the country may suddenly find itself struggling to run half as fast as it is now. It can also lose favour in the eyes of the global investors, signs of which are already showing – as per the Ministry of Commerce and Industry, the country has received only $18.35 billion in FDI in the first 11 months leading to February 2011, indicating a y-o-y fall of 25.5%. The current figure also represents the lowest ever, since FDI inflow first crossed the $15 billion mark for the first 11 months of the fiscal year in FY2006-07. So, the state of affairs in India definitely calls for immediate need of improving governance, a robust infrastructure and better provisions of human development (education, health et al). Even the long impending border issues with China need to be sorted out.

No doubt, the economic uprising of the BRICs could (and will) have unexpected negative consequences for the global environment. So, apart from boosting per capita income, the challenge for the emerging economies will be to improve social security and environment – in order to achieve a living standard comparable to that in advanced countries – as well as increase domestic consumer demand and spending in order to balance the fall in global consumption.

The idea here is not to raise doubts over the growth of the BRIC economies. However, the fact remains that the growth is more likely to occur on an individual level and not as a bloc, as the hype created around these economies suggest. The reason lies in the fact that there are no attempts to address key differences within this bloc that are likely to hamper the growth that is expected of these countries as a unit. The factor here is the absence of a strategic alliance or, for that matter, even an attempt to discuss differences between them. There is no denying that a strategic partnership between these strategically located nations, given their socio-political relevance in their regions, will be highly beneficial for the BRIC bloc. However, the absence of a willingness on the part of any of these nations to discuss and resolve aspects of security, territory et al, leaves the consortium looking like a statue which cares little about strong bilateral ties.

The BRIC economies, though on the right track, are truly far from posing any competition, leave apart being a threat to the alliance of the West. Dr. Suvrokamal Dutta, Economic and foreign policy expert comments that as for the viability of the BRIC alternative to the existing unipolar world order controlled and dominated by US, three power blocs could pose a real challenge to the existing world order, both in terms of political hegemony and economic supremacy – BRIC, IBSA (both of these are official now) and the troika consisting of India-China-Russia. “There were several secret meetings held between the foreign ministers of these three nations during the Vajpayee regime and these meetings had created ripples in Washington, which then used the Tibet issue to vitiate ties between India and China,” he says, adding that a major drawback of the forum is the lack of discussion on bilateral issues and issues of strategic, security and military concerns. It is known to all-and-one that at present, members of the bloc, discuss only economic, social and cultural issues; to have real teeth, business, strategic and military ties should be developed and discussed. While the troika proposition will take long to materialise, the need of the hour is to stop addressing BRIC as a competition or threat to the West, and address our internal and external differences as members of the bloc. The downturn has already shown the entire world what our strengths are. It is time now to work on our weaknesses and capitalise on the growth which is here to stay.

It is apparent that a strategic alliance between the member nations of the BRIC, which goes beyond commerce and trade and enters uncharted horizons, including defence – on the lines of say NATO – will not only tilt the balance of power in its favour, it will, in real terms, help them emerge an economic might. The contours of such futuristic thought-process would envisage a bipolar world, wherein the Troika and Brazil have a greater say in strategic issues pertaining to the landmass bordering Arctic Ocean, Atlantic Ocean and the Indian Ocean.

Not only this, the bloc will also benefit from India’s good economic and diplomatic ties with the Middle East nations. If Troika, or for that matter, BRIC is to see itself emerge as a mighty force at par with the present Western Alliance, it has to wake up to reality. How long can you live in a fool’s paradise?