governance, political economy, institutional development and economic regulation

Archive for October, 2013

Democracy’s Flabby Middle

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No, this is not about Modi’s expanding girth.

It’s about how archaic are our systems for “group think” on public affairs. It is not just about having to elect an MP, an MLA or a Councilor to represent us. “Group think” systems are institutionalized at various levels.  In business and industry we have the “federations and chambers” which presumably represent business and “trade unions” who represent labour; in politics we have political parties; in communities we have Civil Society Organisations who claim to represent specific interest groups and of course every religion has its own management hierarchy.

Most of us have neither the time nor the capacity to contribute full time to public affairs and hence the need for a set of intermediaries to manage interest groups in public affairs. The question really is do we have too many people doing too little for us? Are intermediaries distorting our messages? Are we victims of the “agency problem” where the representative becomes the boss of the owner?

Can direct democracy help? Yes it can. Direct democracy cuts out of the “noise” of middlemen by giving voice to citizens. Direct democracy can work, even in a continent sized, heterogeneous country like India, thanks to social media technology. In the world of IT the strategy for managing a social problem, like high crime rates, is developed by convening a “hackathon”. This is a gathering of concerned citizens, who define the problem; babus, who identify the administrative constraints and geeks, who create techie solutions like mapping crime spots on a street map to check if crime clusters around poorly lit streets or is time sensitive.

By defining the problem narrowly the solutions become simpler. The application “Ushahidi”, improves policing by crowd sourcing data to pinpoint violence (Kenya 2008) or enhances disaster management by identifying emergency hot spots (Haiti 2009).

Here are some options to cut the democratic flab:

  1. Why is it necessary for MPs and MLAs to attend Parliament/Assembly by being physically present? Why don’t they participate via video conferencing from their constituencies? Technologically, this presents no problems since most districts and blocks are now connected to broad band. Consider how this could solve the “agency problem”. MPs could not play hooky, as they do today, if she they were on camera. Imagine the sense of citizen participation, as MPs debate from their homes, whilst surrounded by their adoring and watchful constituents. This can cut the flab from Parliament by saving on travel cost and eliminate the time wasted in trooping into the well. Parliament would become as dry and efficient as a modern stock exchange, where people come to transact business not engage in theatrics. Also consider the number of productive jobs created across the country to expand the enabling IT eco-system.
  2. Many of the issues, which are debated in Parliament/Assemblies, can be better informed by mobile phone based surveys conducted by a third party. Currently, mobile ownership is at 70% of households (with rural HH lagging) but ownership is growing fast and should be encouraged for a variety of social purpose applications, including mobile money. What do Indians think about the need for a specific rape law? Should political parties come under the RTI? Should there be minimum academic qualifications for MPs? These matters are far too important, to rely on Rahul to intervene, on our behalf (as he did in the case of the criminal bachao ordinance) every time. In any case, we don’t want to “rely” on anything except our “group common sense” to guide babu actions via legislation
  3. Decisions are best taken closest to the people affected by them. This is the time tested management axiom of “subsidiarity”. This implies large scale decentralization of decision making powers and finance from the central and state government downwards to district and block level elected bodies, where 85% of the elected officials are located but who have less than 5% of the powers. Decisions become less complex and easier to implement as the extent of heterogeneity decreases. The options and trade-offs are easier to understand to take a rational decision. The level of citizen participation is always higher because the issues are more immediate and relevant. Decentralized decision making fosters “innovation” and creativity.  All these are good reasons for pushing decentralization without any enhanced fiduciary risk, which a technology enabled Public Financial Management system can ensure.

 The Right to Information Act was the first “breach in the Bastille” which improved “access to information”. The second barrier awaiting removal is the noise of flabby “agents/representatives”, via whom citizens are forced to voice their opinions in public debate. Technology can help us to reduce the transaction cost and enhance the prospects for direct participation.  Phone lagao, desh bachao.

Being Caesar’s Wife

Pompeia, Julius Caesar’s wife, must have turned in her urn, when Dr. Singh compared his need, as PM, to be above suspicion, as Caesar demanded of her. When Pompeia did not stand up to the test, she was gone in a second. With the serial disclosures on scams and the studied silence from the PMO, “Dr. Singh’s Caesar” must now be readying to get rid of him.

In fact the curious case of the lodging of the CBI charge against Kumaramanglam Birla and Parakh, in the coal allocation case this week, sounded the first warning that the PMs days were numbered. Neither Parakh nor Birla are the targets here. It is squarely the PM who has been targeted and Birla and Parakh are just collateral damage.

Politicians, like Rhino’s, have a thick skin. Possibly after more than two decades in political office, Dr. Singh has grown a politician hide and so is committed to continuing to “do his duty” and let “historians” judge him. What about the people of India? Do their views not matter at all?

Apparently not. Dr. Singh was never elected by the people. He is the third PM from the Rajya Sabha and so has never been constrained by what his constituents may think. His constituency, as for all Rajya Sabha members, is their respective party bosses.

The pity is that even the Congress would probably be relieved to see him step down. Now that he has, again curiously and needlessly, come out in the open and accepted responsibility as Minister Coal, for the Hindalco decision, he has opened himself to be questioned by the CBI. Can he then avoid being questioned for the larger political responsibility of turning a Nelson’s eye to the rampant crony capitalism going on under him?

The pity is that Dr. Singh is not a politician. That, in fact, was his USP. His supporters were hopeful that he would be able to shine a light on murky crony capitalism and minimize it; come up with feasible options for pushing growth and expand access to and the quality of public services. Instead we saw an enhancement of “pork barrel politics”, rampant corruption in the use of natural resources and little progress on every day matters of concern to citizens; law and order, inflation, jobs, affordable housing, basic public services and infrastructure.

A respected and knowledgeable economist and an honest and well intentioned man, Dr. Singh risks losing even this limited legacy completely, with scams unraveling around him like Draupadi’s robes. Unless a Lord Krishna steps in to save him he is lost.

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This is really when Rahul needs to step up to the plate and provide the leadership the Congress party expects of him. The time is right. Dr. Sigh has already publicly stated that he is merely keeping the seat warm for Rahul. Stepping down in favour of Rahul is no big deal then and very much in the fitness of the succession logic.

What are the options? Would Dr. Singh like midnight vigils on Rajpath, asking him to step down a la the Nirbhaya incident? With the Delhi elections a month away, it is only Rahul who could provide the diversion from the price of onions and the absence of babu-sense at the top.

“There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.”

Brutus in William Shakespeare’s: Julius Caesar Act 4, scene 3, 218–224

Babu-traps 101

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Are scams babu made? If a “competent authority” is hell bent on making money, generally, there is very little babus, even honest ones, can do to stop them. But many “scams” are just the outcomes of poor decision making and in these babus cannot escape the blame.

Personal honesty is never more than, at best, a mitigating circumstance when poor decisions are made whilst discharging the obligations of high public office. Effective babus are those who take decisions which neither get them, or anyone else, into trouble. Decisions in government, especially commercial ones, are never a routine application of rules. That is the job of the CAG, CVC and CBI. A routine application of rules actually ensures that no decision is ever taken. Yes, we should have better rules of course but then the same goes for our un-implementable laws. The law is an ass and shall remain so. Public decision making must go on.

The job of the effective public decision maker is to first carefully think through a “decision tree”. Text book, best practice methods require working down a “decision tree” with a decision arrived at as a last step. This stuff is only for consultants to remain perpetually employed. Effective public decision makers (as opposed to researchers) know the decision they need to make in public interest. The problem usually is how to get there.

When citizens were at risk from the cyclone in Ganjam, Orissa, Naveen Patnaik and his team knew what they had to do, as did the Government of Delhi and the Government of India, when the Commonwealth Games had to be hastily put together in the last few months. Both events passed successfully. The fall out for babus however, comes later and depends on the strength of the supporting decision tree analysis and actions taken.

Once we know what is to be decided the effective-public-decision-maker works backwards, up (not downwards as in best practice) the decision tree. The Effective Babu Decision Tree (EBDT) looks like this:

(1) Work out which sequential set of rules will bar you from taking and implementing the decision.

(2) Determine which of the following “Acceptable Rule Diluting Tools” (ARDT) are to be employed to surmount the obstacles: (a) Creation of a committee to dilute individual blame, build consensus and inter ministry commitment for the decision. (b) Legal precedents (opinion of Law Ministry) which could dilute the impact of the obstructive rule or differentiate its application away from the decision in question. (c) Identify potential regulatory vacuum, where no rules exist and fill this in with best practice application of the basic principles of competition, equity and transparency (d) Employ neutral third party experts to define best practice (eg. what should be the rate of discount while present valuing a future stream of revenue?)

(3) Always record a speaking order/note, carefully outlining why a particular decision is in public interest and indeed is the most feasible decision under the circumstances. Please note shortage of time, overload of work, cost of analysis not done, reliance on out of date or incomplete analysis, or the fact that your superior has asked you, whether in writing or verbally, to decide in a particular manner are poor and indeed no defense from personal blame.

(4) Look carefully at the set of actors who would support and oppose that decision and their relative “voice” in the media and on the streets.

(5) Tweak the decision to reduce the “spoilers” or “nay sayers” to the minimum, thereby reducing opposition.

Sounds logical doesn’t it. Why then doesn’t it happen routinely?

Five key babu traps operate to subvert the process.

First, most Mantris and babus are lazy or under work pressure, they neglect to record detailed “speaking orders/notes” which literally speak for themselves and are unambiguous. Failure to follow through the tedious decision tree process described earlier is fatal. This trap can be avoided. This is illustrated by the record of Arun Shourie, the Sun Tzu (author of the masterful Chinese classic: The Art of War) of India, as Minister Disinvestment from 1999 to 2004. He and his team of babus; Pradip Baijal, Pradeep Bhide, P.K.Basu and Amitabh Bhattacharya privatized Modern Foods, BALCO, HTL, CMC, VSNL, Paradeep Phosphates, HZL, IPCL and a bunch of publicly owned hotels even in the face of lack of popular support within the BJP. With the coming to power of UPA I in 2004 the “oversight wallahs” (CAG, CVC, CBI) took over with their “forensic audits” and tried desperately to find fault. The privatization team, Minister downwards, was personally clean as a whistle. This certainly helped. More importantly, the team, shepherded by the Minister, had been so diligent and wily in negotiating the EBDT that no institutional or personal, adverse comments could be made and the entire disbanded babu team went on to higher office.

Second, an astonishingly high number of babus fall into the “complacency ” trap of thinking that when a decision is reverted to them by a superior authority for a rethink,  they have already done their bit on file and the rethink on superior guidance, distances them personally from the outcome of the rethink. This clearly is contrary to EBDT rule 3 above. The buck always stops with you for what you have written on file. Citizens expect each babu in the decision making chain (usually there are three to four), to independently record their own opinion so that when the file reaches the “competent authority” she can benefit from the string of babu opinions.

Third, babus often fall into the trap of “domain inconsistency”. This includes independently rethinking and changing a decision, taken previously by a committee. This violation of the sanctity of committee work can spell trouble. Once you have created a committee to take a decision, any rethink must be reverted to that very same body. Even if a babu chaired the committee, she cannot abrogate to herself the right, or buckle under, to directions to personally rethink the original decision, which rightfully belongs to all the committee members. Remember, time pressure is no defense against violation of the basic principles of participation and transparency.

Fourth, babus often subvert their “high formal obligations” to their “low informal status” in Mantri-oriented ministries. They succumb to the “shock and awe effect” of directions from superiors. This is traceable to excessive interference by the Advisers in a Mantri’s office, public disenchantment with babus and systematic media “downgrading and disregard”. Recently a senior editor referred to a Joint Secretary, GOI- a position regarded in babu circles as the fulcrum of government, as a “middle level officer”.

Lastly retirement, especially from natural resource, Finance, Trade and Industry related Ministries, opens up mouth-watering options. The most correct and honest babu may, after a long 35 year, largely thankless career, spent protecting the public interest whilst practicing relative austerity at home, become susceptible to seeking a little material happiness. Whilst self-restraint and sensitivity to optics, is advisable, post retirement, golden parachutes are a trifling issue, if EBDT is religiously followed whilst in service.

The good news is that millions of babus in local government, district administration, state government secretariats and central government ministries religiously and successfully follow the EBDT in public interest during service and live happy and productive post-retirement lives. An efficient babu personnel management system would ensure that only the “greats” in the “efficient babu index” rise to the top. In its absence, too many of those who actively collaborate to subvert public interest or those who stoically remain personally clean, but succumb to being institutionally compliant, rise to the top. Neither category is of much use in taking decisions whilst avoiding scams.

Mouldy Growth Fundamentals

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Growth “wallahs” (RBI, MOF) routinely underestimate the interlinked role of land, water and housing in development. In India’s context, these are critical for a long term growth strategy. Our growth czars are disingenuous in routinely deriding the use of equity markets and foreign investment as valid indicators for economic health but are quick to play to only these two indicators for trumpeting economic health.

Sadly, our development vision remains limited to what foreign entities can do. This was illustrated by the recent Indian call for the World Bank to ensure development finance for Infrastructure.  Contrast this with China, which confidently mooted the idea of an Asian Investment Bank at the recent APEC jamboree. Full marks to the Indian contingent for realism but are we really that helpless.

The view from North Block invariably focuses on the availability of finance as the key constraint. This sounds odd for a country growing at 5%, or thereabouts. Surely international investors should be interested, if we have a saleable project profile, to invest an additional US$75 billion a year taking us from under 2% to a total share of 7% in world FDI (close to our share in world GDP growth over the last decade) and from an investment ratio of 35% to closer to 40% (China 48%).

Forget foreign investors. Why is it that large self-help groups, like Sahara, who reportedly raised INR 240 billion from 30 million investors don’t do something productive with the money in India. The asset value of the top 20 Indian realty companies is INR 700 billion.  Indian banks have made available an additional INR 1500 billion to pump up the land and realty market. 11 million apartments are lying empty and unused<http://forbesindia.com/blog/business-strategy/why-the-real-estate-market-could-crack-in-2013/>. Why perpetuating this bubble by allowing foreign investment in realty?

Here is where the importance of land, water and housing for the urban poor kick in. All three are scarce resources and hence the source of huge rents for the policracy. Take housing. If you are a migrant into Delhi the cheapest urban land available illegally in a slum would be @ INR 20,000 per square foot. Four months income just to be able to stand up. Is it any wonder that the paved sidewalks of Delhi are a better alternative despite the constant noise, pollution and danger from tipsy BMW drivers? Rent in urban slums is INR 15 per square foot per month. A substantial portion accrues either as a lump sum or as an annuity to those who are supposed to implement the rule of law. Is there any wonder them that nothing substantive is done to (a) control in-migration or (b) provide suitable transit or temporary housing at regulated rates for recent migrants and (c) suitable relocation into permanent homes. If incentives (tax rebates and cheap credit) are needed for realty, shouldn’t they be for social entrepreneurs who provide these facilities?

Slums cluster large masses of humanity together (1 person per 2 square feet) without regard for sanitation. Club this with the understandable preference of the recent migrant for open defecation rather than face the filth of public latrines and we have the mix for a health disaster. Rusted water pipes, passing through filth, with only intermittent water pressure to keep the filth out, shallow wells and the cohabitation of animals are the originators of the infamous “delly-belly”. If you set up an International Hotel or Health Facility, the lowly cleaners will all come from a slum. Unless management is very careful and delouses them daily, they will carry the bugs from their homes under their finger nails, in their shoes and into the shiny, sterilized exterior of their workplace. Welcome to an integrated and seamless world.

India has a per capita annual availability of around 1500 cubic meters of water. We use only around 500 cubic meters so we are a long way from being water stressed. The problem is in the poor manner in which we degrade and waste water and the skewed availability across regions. We do not for instance harness Arunachal Pradesh’s hydro power potential of 40,000 MW and let the water go waste. We fail to treat industrial effluents and sewage before discharging them raw into rivers. The Hindus amongst us, are not even able to encourage the use of crematoria and discourage the practice of burning our dead (around 85 million every year) on the banks of rivers and if the wood runs short just pushing the remains under water.

We have even forgotten the Garland Canal project of Rao and Dastur, proposed in 1972, when public investment was not a red rag. The idea then was to divert the surplus water in the East to the deficient areas in the South and the West. It was ambitious and well beyond the financial capacity of the foreign multilateral and bilateral funders, we are so reliant on, so we buried it. We should take a leaf from China which is pursuing exactly a similar project to transfer water from its surplus South to the North and ignore the “noise” from fundamentalist, do-gooders and narrow interests. Of course water harvesting and pricing water correctly is a must but supply constraints cannot be ignored either.

Land, its ownership and easy, contractual availability is crucial for business. It is never clear why governments, who court new investors, do not first utilize land owned by the government for the purpose, before resorting to acquiring privately owned land. After all, State action (even under the new Land Acquisition Act) is deemed to be in public interest and needs no justification. Once the governments land cache is exhausted, it can always renew it. Has anyone ever done an audit of land owned by government agencies against their foreseeable needs? I can find nothing on the website of the Comptroller and Auditor General of India (CAG), though one is hampered by the absence of a “search” function, on this otherwise informative website. The government’s functionality is frozen by its inability to take decisions within the existing regulations. Its latest strategy is to attack the messenger (the CAG) in a desperate last minute attempt to…..what else?…kick the ball elsewhere.

The PM shall shortly be on his way to China. One hopes that after the handshakes are done; the photo op. captured and the Mai Tais downed, his team would take the opportunity to talk with the people who are building the North-South Link Canal; check how Beijing manages its migrants; view their waterways and reflect on China’s land use strategy. This may be more useful that signing a no-trespass protocol. Instead, invite China to develop Arunachal’s Hydro Power; invite the Chinese to visit Varanasi and suggest what can be done to respect the Ganga, whose magic has not waned, despite the filth we are dumping in it. The dragon waiting to devour us is not in China, it lives in the “gallis” of Delhi.

Arvind Kejriwal: Disruptive Innovator

 

Disruptive innovation (DI) is a force multiplier in business and technology. Value creation is all about getting there ahead of the competition. DI annihilates the competition, not by doing the same things better but by doing them differently, thereby changing the rules of the game. The recent greats in this line of business are Steve Jobs, Bill Gates and Mark Zuckerberg.

The Mahatma and more recently Kejriwal, are our home grown disruptive innovators in the business of politics. Kejriwal’s tactics are uncannily Gandhian. Ram Guha would be well advised to jeep a close eye on him. A squeaky clean record based on public service; deft management of a mass outreach campaign and tactical choice of public interest issues. Whilst the two “big bulls” -BJP and Congress, are going hammer and tongs knocking each other out, Kejriwal is coasting to what is being rated as an outstanding electoral debut in Delhi. Erstwhile Aam Admis and Aurats who deserted him along the way, must be eating their hearts out and cursing their lack of political foresight.   

Of course Delhi is different and it is questionable whether Kejriwal’s tactics can be scaled up nationally. Still there are solid reasons why they could.

First, he is the only person in living memory who has stood up to Arnab Goswami’s harangue and given as good as he got. Last week Kejriwal cannily got onto a one-on-one “hard talk” with Goswami. When the time came for answering what the “nation” wanted to know, Arnab found only Kejriwal (as opposed to the usual circus of views to choose from) smiling sweetly at him, from behind his spectacles and pleading in an attractive, thin voice (similar to the Mahatmas) to please give him a chance to answer. Result knock out win for Kejriwal.

 

 

Second, Kejriwal is a babu with two decades of rich babu experience under his belt, and an additional decade now as a social activist, not a dyed-in-the-wool, clueless, “do-gooder”, like Anna. This makes him practical, administratively astute and flexible enough to be compatible with politics.

Third, there is a vacuum out there for sucking up the votes (young and old) fed up with poor governance and joblessness. Unfortunately, this vacuum exists primarily in urban areas and largely amongst the middle class who want to work their way upwards. This is quite different from the poor and marginalized in rural areas who are still acquiring the “escape velocity” to be sufficiently aspirational enough to demand opportunities for self-betterment. They are  yet to get beyond electoral gifts, like the NREGA and cheap food. Nevertheless, even the urban middle class accounts for around 120 million votes and (15% of the national vote). The key of course would be to leverage votes into seats through strategic alliances.

Kejriwal is likely to use Delhi as the testing ground for his brand before scaling up in 2014. He will also have to chart out whom of the two “bulls” he should support to form a government. One hopes he will not repeat the “historic blunder” of the CPI(M) in 1996 when it made itself irrelevant, by choosing not to lead the United Front national government. In the business of politics, when you get a chance, you have to play. It is only by playing that one chooses ones destiny. If Kejriwal chooses to “play”, as he must, he will have to keep his “young” flock of elected members in the incorruptible Gandhian mould, they are in today. Not an easy task, in the enticing “gallis” of Delhi.

He will need strong local collaborators in the states. The Kejriwal political machine may consequently look more like the Congress did prior to 1939; a coalition of regional forces and strong local leaders with a common brand identity. Of course there needs to be a good business reason for such political franchisees to hang together. Usually it is the future expectations from the brand value that keeps the flock together. The Kejriwal brand still has to be built.

The tool of self-denial (fasting) is passé. Irom Charu Sharmilla (Manipur) was on fast for almost two years against the Armed Forces (Special Powers) Act, but to no avail. More embarrassing was Chandrababu Naidu’s recent, short fast in Delhi and the subsequent desperate attempts by the faster to get someone to end the fast, so he could get on with life. Jagan Reddy’s competing short fast in Hyderabad got more press, but fasting as a political tool seems to have reached its expiry date.

Civil disobedience, Gandhi style, is incompatible with middle class aspirations. In any case the Indian State is so soft and yielding that beyond a short outburst of frustration (as in the Nirbhaya Rape case), continued agitation seems futile because the government looks even more helpless than the citizen. The favorite ploy of politicos and babus at parties, in plush Delhi homes, to which they are still invited, is invariably to play “victim” after the mandatory period spent listening to individual venom-spew or petitions, whilst usefully swiveling single malt all through.

Modi already occupies the “effective government” niche. Rahul is big on “religious inclusion and helping the poor”. This pushes Kejriwal into the boutique market for AAA concerns; urban jobs and livelihoods; succor from the land and slum mafia; social protection, especially for working women and children; targeted and speedy grievance redressal and the citizen’s need to have “reachable” leaders who live with the people they represent, whose families use the very same local facilities and who make a profession out of knowing their electorate.

Concrete steps in this direction would be AAP elected members to refuse government houses and the use of government cars and push instead for an allowance for all Delhi MPs and Ministers; once in power they keep the number of hangers-on, helpers and security at a minimal; expand outreach through social media and finally the adoption of a costed and feasible five year plan addressing no more than five key concerns of their boutique constituency. The “Bulls” pander to everyone and everything. Modi departed from this typically Congress strategy by not “appeasing Muslims” but got upped in the outreach war which projected it as exclusion, rather than even handedness. Kejriwal needs to focus his agenda for it to be credible.  

Start-ups with rapidly expanding “top lines” face the temptation of selling-out to global players. The AAP will likely be offered the same opportunities, if it is not already being wooed. Gandhi was pragmatic in taking what comfort came his way but steadfast in his objectives. Kejriwal needs to measure up to high standards. If he manages to do so it would probably be a first for a babu. We wait and watch. 

Wanted Political Principles

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The goonda raj, unleashed in Delhi from 1975, pulled the rug from under the principled politics of the previous three decades. Even the followers of Gandhian turned Socialist, JP Narayan and Lohiya succumbed to achieving ends without giving a thought to the means adopted, assiduously emulated and enhanced the bad practices of the sole national party of the times. This has been the leitmotif of politics since then and we are pretty much “adjusted”, as only an Indian aam admi or aurat can be, to corruption, dodgy political stratagems, nepotism and incompetence.   

 

Is this changing now? Some green shoots of the resurgence of “principle” are visible. Two key reasons are theorized here. First the new electorate is predominantly young. Young people are less influenced by rhetoric and tend to look towards real life models who walk the talk. Jay Panda the young Orissa politician, opposed the criminal bachao ordinance from the start, signaling his committment to principled politics. Modi comes across as another such role model, who reeks strength, effectiveness and moral integrity. The only chink, in his otherwise impregnable armor of personal, meritocratic achievement and state level development, is his ambivalence to the constitutional precept of insulating politics from religion.

 

Rahul Gandhi, for all his lack of experience and demonstrated competence, has shrewdly latched on to this chink and is hammering in the fact that he is personally and ideologically clean, has no religious preferences or hang ups and recognizes that religion and caste are the two main fault lines which need to be bridged. Rahul’s main chink is his political inheritance, which includes authoritarianism and dynasty (Indira Gandhi) and perceived corruption within his family (most recently the Vadra scam) while Modi has no such “familial” downsides.  

 

Can this dismal choice be fertile ground for the return of principled politics? Neither side will stake Principle above Power. However, symmetric steps on both sides may be agreeable to elevate the coming fight beyond the tired allegations of corruption and religious exclusion and enhance the stature of both leaders.

 

First, Rahul could publicly renounce his relationship with his compromised brother-in-law, thereby cutting away the latter’s incremental business potential and distancing himself from the dirt. This would also mean that Priyanka remains under wraps during 2014.  This “renunciation” of his family would elevate Rahul’s “principle” quotient. In return, Modi should publicly mourn the loss of lives in Godhra and strip dodgy characters away from his kitchen cabinet. Also he should pledge to cut down his fat. Have you noticed that BJP leaders tend to be fatter than Congress leaders and that they have become fatter over the last few years? This middle age spread dates them, in the eyes of the young, as people on the expiry path.

 

Second, Rahul should announce stricter proprietary norms within the Congress party than those required under the porous Representation of Peoples Act. In return Modi should pledge to give 15% of the BJP 2014 election seats to Muslims as a visible symbol of his commitment to secularism.

 

Modi loyalists would say that this bargain is better for Rahul. After all Indians are used to corruption and the sacrifice on Rahul’s part is trivial. However this “trivial” concession to propriety on Rahul’s part is accompanied by a very significant step towards cleansing the Congress of corruption.

 

Rahul loyalists would hold that the shedding of crocodile tears by Modi at election time is no sacrifice at all, since the Muslim sentiment is clearly not with him. However, this seemingly “trivial” concession is accompanied by the granting of BJP tickets to Muslims, in proportion to their population. A very major step for the BJP, towards becoming a secular party, as envisioned by the poet politician, Atalji.

 

Both sides are right and this is why these are two symmetric, symbolic but significant gestures which can elevate the election environment beyond corruption or religion. The big choice in 2014 is between (a) the BJP model of strong, centralized, executive led, economic growth and infrastructure development, with lower political levels managing social development and protection and (b) the Congress model of a mild central government, relying on pan-national consensus and periodic judicial guidance to push inclusive economic development.

 

The BJP path promises rapid growth and the reduction of income poverty but comes with the possibility of widening income inequity, the jettisoning of traditional occupations, cultural and social norms, the imposition of higher, change induced stress and social disruption. The Congress path is well known to Indians, as the fine art of muddling through whilst minimizing social disruption and retaining the status quo.

Our young electorate is likely to be quite confused by the choices offered. Jobs with social sacrifices like uniform codes and higher levels of adherence to the rule of law, on the one hand, or the continuation of multi model options on a self-select basis, but highly variable services and life styles across the country and a laid back “soft” State. Most voters are unlikely to be able to make an educated punt. They are likely therefore to go by the political symbols offered to them.

This is where the second reason for a return to principled politics becomes relevant. Voters can very easily detect the lack of sincerity, principle or commitment.  It’s all very well for the BJP to shout meritocracy and development for all but how does one explain the antipathy of the minorities (Muslims and Christians) towards them? The Congress extols social inclusion but by “excluding” development, it ends up offering only inclusive mediocrity and poverty. Rahul’s criticism of Behnji would go down better if he becomes “squeaky clean” himself. This is why the proponents of both strategies need to be personally clean and publicly committed, not only to their respective ideologies but also to serving the people of India without favor.  Jettisoning their unnecessary historical baggage can refine their respective images, help articulate these distinct strategies and attract a critical mass of supporters.

 

As Kalaripayattu dancers, gearing up for a fight, Rahul and Modi must limber up and improve their “teeth to tail” ratio. If they fail to do so, the NOTT (Neither Of The Two) vote will accrue to Arvind Kejriwal’s AAP (in Delhi) and state level parties elsewhere, who will then have the privilege of deciding, on behalf of the people of India, who should rule, thereby subjecting Indian democracy to the tyranny of the balancing few.

 

Gas and Power: shine a light please on “deals”.

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Elections are around the corner. Babus are petrified of taking decisions. But government is burning the midnight oil to grant “relief” to Reliance, Tata and Adanis to compensate for the poor planning and foresight of these companies under the guise of “protecting consumer interest”.

The Central Electricity Regulatory Commission (CERC) decided in April 2013 that Tata and Adani (coal based mega power plants in Gujarat) should be permitted to rupture their agreement with Gujarat and Haryana to supply electric power. The reasoning was that the cost of imported Indonesian coal had increased more than could not have been foreseen. A dissenting order by a member; Mr. Jayaraman points out that nothing in the bidding document compelled these companies to bid a fixed tariff. They could have opted to bid a variable tariff, which would have passed through the changes in fuel cost; both increase and decrease. They choose not to do so and hence forfeit their commercial rights to come back for a tariff revision. Other bidders whom they outbid did opt for variable costs and possibly were outbid on these grounds. We will never know for sure since bid details are not publicly shared on the net which incidentally is bad procurement practice.

The argument of acting in consumer interest is even more farcical. It states that since the bid tariff is no longer commercially viable, sticking to it would force the developers to abandon the project. No mention here of the penalty the developers would have to pay if they were to quit. No mention either that NTPC could happily buy the projects, just as it bought the ENRON project or Delhi Metro took over the Reliance Delhi Airport metro line when it did not make expected profits or that the National Highway Authority may have to take over the Gurgaon Expressway. The CERC argument is that the new developer would in any case have to charge more to consumers so why not just do a deal with the existing developers, since the poor consumer would have to pay more in any case. Sounds familiar to us aam admis and aurats (AAA) a circular argument which suits everyone except us. If a “deal” is to be done non-competitively then let us do it with the public sector. At least the resultant earnings will accrue indirectly to the MOF

Allowing such retro tariff revisions in competitive bidding not only knocks the concept out of the window, it is rich future pickings for CAG, CVC and CBI. To dilute this possibility the favorite ploy of babus has become to kick the problem over to an irreproachable, external entity; in this case Deepak Parekh of HDFC, who is in danger of fast becoming the MMS of Indian Gas and Power. Deepak apparently has headed (we don’t really know since neither the Gujarat nor the Haryana Government websites tell us about this) a committee, mutually agreed between the developers and the procuring state governments, to work out what should be done. This report has been submitted to the CERC in mid-September 2013, but is not on the website of CERC and even worse has not been made available to PRAYAS a NGO specializing in energy and water, which is on the Advisory Board of the CERC. See their plaintive cry for information:  http://www.livemint.com/Industry/9NOJM6JwuwPwAw2i2l0DFP/CERC-suggested-to-hold-public-hearing-on-tariff-issues.html.

The implication us AAAs will draw is that had Mr. Jayaram not dissented, the CERC would have meekly passed through the additional cost to consumers. My Jayaraman, consequently, whilst not a whistle blower, since there is no allegation of graft, is certainly a rudder for the Rule of Law prevailing over egregious commercial considerations. In September 2013 Ministry of Power amended its tariff guidelines by making fuel cost a pass through. The term “pass through” is intriguing because it seems to undercut the powers of the CERC to determine tariff in a holistic manner. The new guidelines only require the power developer to be prudent while purchasing fuel. Fuel cost can constitute 50 to 70% of the tariff. Well known transfer pricing tricks, especially in imported fuel, militate against relying on a broad test of “prudence”, to protect consumer interest sufficiently.

A similar tactic has been adopted in gas production, where the price at which Reliance will sell its gas has doubled (by the cabinet this time) on the argument that the government administered price is far lower than the prevailing international price for gas. This being true does not explain why Reliance has failed to meet its investment commitments which are the prime reason for a decrease in gas production way below the optimum levels. Even worse, the Ministry of Petroleum’s view is falling on deaf ears that retro advantage of gas price increase should not be given to Reliance on prior production commitments. All this again in the interest of consumers, ofcourse, who in the absence of a deal with Reliance, would have to pay imported prices for gas! Admittedly, Reliance (like Enron) has the disadvantage of its public image working against it. Any babu ruling in Reliance’s favor, is automatically suspect in the eyes of us AAA’s though, mysteriously, very few babus who have the guts to do so, live to regret their decisions.

 As in the case of power, a committee headed by Mr. Kelkar, aided by the hapless and overworked Mr. Parekh is meanwhile looking at the gas pricing regime. Oddly, as in power, the entire exercise is being conducted in the cozy confines of the government, CII, an NGO which ostensibly works on fuel studies and research (but for which not a single paper comes up in a Google search) and the Boston Consulting Group (BCG), a consultancy. Presumably BCG was appointed after a competitive bid. We will never know because such trivia is never shared with us AAA’s. The entire oil exploration and production process is kept tightly under wraps. Exploration, development and production contracts are never made available on the website and “commercial confidentiality” conditions of the developer are routinely cited as a reason.

 The international literature on natural resource management is rife with the need to introduce transparency and citizen participation in this sector. The reason is obvious. Oil and gas contracts involve huge sums paid and received between private developers and government. If AAA’s are not kept informed of what were the obligations of the developer versus actual delivery on the one hand and what was owed to the government and what was actually received, the instant apprehension is potential leakage of government revenue or of motivated bias in favor of the developer. Compare our non-transparent and secret regime for the oil and gas production sector with what even Ghana puts on the web: http://www.gnpcghana.com/_upload/general/saltpondfield_sopcl.pdf. Key details of the contracts and delivery on commitments, including penalties levied for shortfalls in developer obligations. In 2012 the EU made it compulsory for all extractive industries (including oil and gas firms) to share data publiclly on revenue and payments to governments. http://europa.eu/rapid/press-release_MEMO-13-541_en.htm.

The governments of India, Gujarat and Haryana all profess a commitment to “good governance”. The essence of good governance is to expand access to information for the public and to encourage their direct participation in decision making. True AAAs, like me, are clueless on technicalities like a Gas Production Sharing Contract but we sure like to be kept informed and we have technical experts who can work in our interest, independent of governments. Democracy is all about giving people a choice. Give us the information and let us use it the way we want to. Please don’t hide behind the shield of the RTI (which allows notional access to information) and force us AAA’s to seek hard copies of information from the relevant ministries. If the websites of governments have the space to trumpet their many achievements, surely they can also instantly share with us information on what contracts have been signed, with whom and the key obligations therein?

When you light a lamp, it illuminates everything around it. Please light a lamp in Indian power and gas deals. 

Enter Rahul the Rudder

There is an ill wind blowing in India which is sweeping away established institutional norms. This is a pity because the Indian political architecture is a copy of the UK system which has no constitution to guide it and works solely on the basis of conventions. Take the convention of sanctity of cabinet decisions or for that matter the broader issue of sanctity of agreement/contract. In the context of the criminal bachao ordinance neither means much. A cabinet decision is being overruled by someone outside the cabinet, albeit in public interest. An agreement between the UPA allies is being broken unilaterally. On the face of it, this is actually a very positive “jhadu” (broom) sweeping the denizens of Lutyens Delhi. Cabinet decisions and agreements, which are against public interest, clearly need to be reconsidered. So who are we aam admis and aurats to complain when this happens? And why?

The devil as usual is in the detail. Had the PM, or any member of the cabinet, done a group rethink and then moved to withdraw the criminal bachao ordinance on their own, we would all have applauded them. Now that they are doing so under the duress of Rahul illustrates two points. First Rahul should be a part of the cabinet if his personal opinion aired publicly is more important than the collective wisdom and integrity of the cabinet. Second, a cabinet which is led by the nose from outside and meekly abides by the decisions of external actors is no cabinet at all. Today the rethink is in public interest. Tomorrow it could be against the public interest. Who shall the national hold responsible for decision making? A puppet cabinet reduces us to the level of a banana republic not an emerging super power.

The Congress party is clearly going through tough times reconciling the sophisticated shadow play between power and position, devised by Mrs. Gandhi on the one hand and on the other the strengthening voice of the party’s natural heir: Rahul Gandhi. Shashi Tharoor, recently reverted to being a writer, rather than a politician, on a TV show when he admitted that the Congress has a special place for the Gandhi’s, no secret to anybody, and anyone who was uncomfortable with that bottom line should either leave or not join the Congress. Frank and forthright as he used to be, perhaps emboldened by Rahul’s “coming out” on the criminal bachao ordinance.

Who are we to quibble about how to manage the Congress party? Or any other party for that matter? The only problem is that we are not talking of Congress party here. The issue before the cabinet of the government is the oath sworn by any Minister in the Government of India. See the oath below

“….I will do right to all manner of people in accordance with the Constitution and the law, without fear or favor, affection or ill-will

If the cabinet acted in accordance with the oath in the first instance, when it decided to request the President to approve the ordinance, then it cannot now possibly convincingly argue that the withdrawal is also in the same spirit. Clearly public sentiment is against the ordinance and the President is unlikely to approve, it even if Rahul changes his mind. It is prudent therefore for the government to withdraw the ordinance. The question is what are the implications if it does so?

More significantly it is also clear that the entire cabinet has neglected to act “without fear or favor or affection” In fact it has blatantly acted in a partisan manner twice. Once by clearing the proposed ordinance it decided to protect the narrow interests of criminals in Parliament. Second by withdrawing the bill it acted not in exercise of its wisdom and in an impartial manner but at the behest of a non-statutory but clearly powerful entity. In bowing to the informal power of Rahul the entire cabinet is guilty of betraying the oath they took at the time of joining office.

The only honorable way out is for the entire cabinet to resign led by the PM and for the Congress and its UPA allies to reconstitute the government.

We are luckier than the US where they have a President but no government. We have an entire functioning government of babus working away at their tasks. Is it not time to give them Ministers they can trust and work with? It is difficult enough in government to attribute blame to anyone. The concept of effective sanctions to punish, but also to deter future transgressions, is missing in most governments. With an added shadow play of “informal” power the concept of sanctions disappears completely. More importantly if leaders in positions of authority are perceived to be powerless, “formal” governance systems freeze and its open season for tricksters, scamsters and much worse. This is clearly Rahul’s government. He must act now and take change formally. Dr Singh has already accepted that we would willingly work under Rahul since he is a professional without political ego. Sailing with the wind is pleasant and a good, environmentally friendly, principle but a sail boat needs a rudder steering it.   Image

Walking into Pak Trap

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The Indian Express walked into Pakistan’s familiar trap: equating Pakistan’s puppet, civilian regime with the Indian State and more shamefully equating their rogue army with our brave hearts in uniform. http://www.indianexpress.com/section/editorial/35/. See the last line of the editorial today. Similarly, Indian reporters are so desperate to get an “exclusive” that they let the oft repeated Pak assertion go un-rebutted, that military “parity” between Pak and India is a sensible notion. That is real cheek.
This follows on the unedifying spectacle of a senior TV anchor with an English channel “siring” and squirming before the Pak Prime Minister in New York on Sunday last while referring to her own Prime Minister by name “Manmohan Singh” as if he were an Under Secretary in the Ministry of Finance. We are thankful she did not refer to the PM by his first name, as many Indian TV anchors are now prone to do, to show that they are heavily networked. They need not do this because the Radia episode exposed them. Our top most anchors should learn from BBC and CNN (not imitate them blindly) where anchors do not refer to the “flag holders” from their own countries except after adding an honorific though they do not generally extend the same courtesy to leaders from developing countries. There is a sub-text to on-sceen informality which needs to be discerned. No one refers to the Queen of England by her name. American Presidents hang onto the “Mister President” name tag, long after they have left the post and are expected to live upto it also. In India also, the State provides ex-PMs and Presidents the such ce of continuation of the palatial life they get used to while in office. Why then tolerate and encourage such ritual downgrading by the Indian press?

Pronoy Roy and Vinod Dua should start a school for TV anchors so that such errors are not repeated. Call me old and old fashioned but I like listening to debate not a shouting match in a shrill tone. If I wanted that I would go to the local disco and listen to my son’s electronic music. Thank God for the likes of Vishnu Shom, Nidhi Razdan and Rajdeep Sardesia (who has learnt to listen rather than scream). Will others please follow deorum and decency. I am sure there are other stellar anchors in the Hindi channels as well but I get exhausted just watching the English ones.

 
 

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