governance, political economy, institutional development and economic regulation

Posts tagged ‘Government of India’

Don’t demonise diesel

car jam

photo credit: indiatoday.com. How many 2000 cc plus private diesel cars can you spot in this randomly selected grid lock? Imposing a green cess on large diesel cars is populism at its worst. Less than 5% of private cars fall in this category and they have fairly competitive exhaust parameters because diesel engine technology has come a long way from the 1990s. The real culprit is the dirty fuel supplied in India. 

The practiced ease with which the Supreme Court settled the Uttarakhand political snafu and restored constitutional propriety and federalism there, with President’s Rule being lifted, compares unfavourably with its dilatory proceedings on the use of diesel for fuelling cars in Delhi.

To recap, the Supreme Court banned the registration of diesel cars with engine capacity of and above 2000cc in December 2015 at the height of the smog scare in Delhi. Earlier this month, it tried to enforce its April 1 deadline for all taxis in Delhi to convert from diesel to CNG, but later backed down due to the economic dislocation it would cause.

The court’s association with the micro-management of fuel, technology and urban air pollution in Delhi dates back to 1993, when it acted on a PIL to clean Delhi’s polluted air. Thereafter, the government practically ceded ground to the Supreme Court as the prime mover for preserving clean air in the nation’s capital. Citizens still applaud its historic 1998 order making CNG mandatory for all public transport in Delhi.

The Supreme Court didn’t like diesel as a fuel then, and its views today remain the same, though the technology and circumstance have changed considerably. It is generally accepted that bringing Indian fuel standards on par with Europe is the best option to lower urban pollution from motorised transport. The government has plans to upgrade fuel standards to European levels (Bharat VI) by 2019. But the government lacks credibility in making such promises, given its past record. This implies the need to monitor how well the government is working towards that goal.

Why diesel?

diesel

photo credit: greencarreports.com

Globally, diesel has become the fuel of choice in the past two decades since the Kyoto Protocol on climate change imposed carbon emission targets on developed nations in the 1990s. Diesel cars produce considerably less carbon emissions than petrol cars, but have higher particulate and NO2 emissions. Improving the quality of diesel supplied — along the lines of city diesel, that is low-sulphur, clean diesel developed in Sweden — reduces the particulate and NO2 emissions to acceptable levels. This is what Europe has done. India can and should do the same.

Why ignore the low hanging fruits of rationalising fuel price incentives?

In the short term, the Union government should equalise customs and excise duty on diesel and petrol. The Delhi government should do the same for value added tax. This will remove the artificial retail price advantage of 20 per cent enjoyed by diesel.

The fatal preference for diesel versus petrol goes back to our ersatz socialist past, when the lazy rich drove petrol cars while others used tractors, agricultural pumps, buses and trucks running on diesel, which was thus subsidised.

Today, the rich use large diesel cars while the growing middle class uses petrol-based scooters, motorcycles and cars and small cars running on diesel.

All public transport has converted to CNG and there is negligible agricultural activity in Delhi. These are ideal conditions for scrapping the preferential tax structure on diesel.

Correcting a tax-based market distortion will not attract eyeballs, nor does it appear as high-minded as imposing a “green cess”. But this is the right thing to do. Expenditure on fuel comprises around 25 per cent of the life cycle cost of running a car. So getting the price of fuel right is a key step to change consumer preferences. If a litre of petrol comes at the same retail price as diesel, much of the demand for diesel cars — particularly in the sub 2000cc segment — will simply vanish.

Green cess on large cars- populism at its worst.

The wrong thing to do would be to put a “green cess” on the registration of large, private diesel cars in Delhi as the Supreme Court seems to prefer. First, if a “green cess” is to be imposed, then in the interest of equity, it should be imposed on all “polluting” passenger vehicles that are not fueled by CNG or electricity.

Second, prescribing engine capacity as a metric for punitive taxation encourages gaming. Manufacturers will go marginally under the radar by “cheating” on capacity calibration with no benefit in emissions.

Third, imposing a selective “green cess” on engine capacity rather than emissions, which is a better, albeit easy to cheat metric, can be misread as populism and just bleeding the rich. Large diesel cars are just around five per cent of the car stock in Delhi. The cheapest large diesel car comes at a price of `20 lakhs-plus on the road. Of this, 45 per cent is tax and other government levies collected by the Union and state governments. Budget 2016 imposed an additional cess on large cars on top of the existing high excise duty.

If the intention is to penalise the use of large cars per-se — defensible environmentally on multiple counts — then the green cess should be imposed on all large motorised vehicles and not just diesel cars. The excise duty structure does that already. Excise duty on large cars is three times higher as compared to the duty on small cars. The real question is why make large cars unaffordable? What are the economic consequences thereof on jobs and economic growth versus the environmental benefits?

Going back to ersatz socialism?

Prior to the 1990s, the government used to dictate to industry what to produce and thereby constrain consumer demand. The government abandoned its policy of invasive ersatz socialism for good reasons. Why revisit a model which penalises wealth creation that is rightly dead and buried?

Banning the registration of large diesel cars in Delhi is an avoidable knee-jerk administrative response with unfortunate economic consequences. It disrupts economic activity (car production and consumer choice); puts people (taxi owners, drivers and consumers) in financial jeopardy and creates uncertainty through a rule-by-fiat approach.

There was never much to be gained from this ban in terms of cleaning Delhi’s air even in the short term. The bulk of air pollution is from point sources other than diesel cars. Aggregate pollution from motorcycles and scooters that run on petrol far exceeds the pollution from cars. Dust, agricultural residue, industrial stack emissions and soot from coal comprise the bulk of particulate emissions.

Citizens welcome judicial activism in the supply of public goods like clean air as the government routinely failed to provide them in the past. But all governments are not the same. Should not the principle of “judicial forbearance” prevail till a government fails? Let the government do its job. But keep a sharp eye out for citizen rights. Economic policy is about experimenting with trade offs, across multiple objectives and options, for which the law provides no real answers.

Adapted from the authors article in Asian Age May 17, 2016 http://www.asianage.com/columnists/don-t-demonise-diesel-955

Government peons: nuts and bolts of a rusted steel framework

It all began 300 years ago with the ringing command of “Koi hai?” — Is anyone there? This being how the ruling, colonial elite announced their arrival at home, in the office or, indeed, anywhere, if there was no one to receive them. The immediate response was a servant at home, or a peon in the office, scurrying out with folded hands to acknowledge the master’s presence with “hazoor — at your service, Lord”.

colonial

photo credit: dailymail.co.uk

The services required could vary: Pulling the giant, overhead canvas fan to and fro with a rope; fetching a refreshing drink for the master; gently slipping off his riding boots whilst the master is sprawled on a “planter’s chair”; bringing in voluminous, cloth-bound, paper “files” or taking out those “disposed-off” by the master.

Becoming a peon was also, usually, the entry point in government service for most “natives”. You first got a job as a handy man around the master’s house, courtesy a trusted relative, and then graduated to the office, as a peon, if you were passably literate and could inveigle yourself into the master’s trust.

Things have changed somewhat, but not much, over the nearly seven decades of Independence, since 1947. The corridors of power are still lined with peons sitting outside the rooms of their officers, fetching tea or samosas, carrying “files” as they wind their serpentine way up, down and sideways amongst the officials who rule India today.

All this is accomplished without the “master” even uttering a word. Peons know their masters better than they know their own spouse or children. A glass of water or tea miraculously appears, visitors and even office staff are carefully screened for “priority” before they can meet the master. Lunch is unpacked from the “tiffin”, heated and served on time. Peons even take on the task of ensuring that sahib eats his medicines!

babutoday

photo credit: thehindu.com

Peons have long work days. Those attached to senior officers reach the officer’s home early to carry the files which have been worked on overnight, to the office. Their day ends only after they have carefully placed a new lot of files for “overnight disposal” on the sahib’s desk at home. In between they might have been instructed by the memsahib or, more likely today, mataji or behnji, to bring along some urgently required domestic ingredient that has run short, pick up the clothes ordered with the tailor or go by the Central Public Works Department office to check when they are likely to repair the fan in the bedroom.

For all the routinised drudgery of the job there are compensations:

The pay and dearness allowance (Rs 12,000 increasing gradually to Rs 20,000 per month) is twice what they’d get in a similar job in the private sector. Unlike the private sector, the job is permanent till you retire at the age of 60. 45 days of leave and 120 days on which the office is officially shut in a year along with medical and half pay leave.

Pay is 100 per cent indexed to inflation. Government contributes equally to your provident fund and pension and provides a handsome gratuity on retirement.

The job is not transferable, so you can grow deep roots where you belong.

Even if you goof-off, you are attached to a less important officer or an office where there is no public contact and, hence, very little prestige.

In 2006-07, nearly 26 per cent of the 3.2 million employees of the Union government and Union Territories were in the lowest grade — D, which applied to peons, safaiwalas, watchmen, mallis, packers or records sorters. An additional 67 per cent were in the higher grade, C.

By 2012-13, grade C (into which the lower grade D was merged in 2006) comprised 90 per cent of the 4.4 million Union government employees. 88 per cent of grade D positions were in departments which are spread all over the country — the railways, police, defence, civilian employment and the post office. These departments are physically spread across the country and therefore natural “sinks” for those seeking employment in grade C jobs which account for 90% of civilian employment.

It is not surprising that the demand for grade C jobs far outstrips the supply — sometimes up to 5,000 applications for every advertised vacancy. In comparison, for a grade A or B job (IAS, IPS and other central services), the number of applicants is a measly 1,000 per vacancy. Why this skew?

First, only 44 per cent of Indian students clear the secondary school stage of class 10, which is the bare minimum to apply for a grade C job of a peon. The completion rate falls dramatically in high school. Only 20 per cent of students enrol for tertiary levels. Consequently, the available pool of applicants is the highest for low skill jobs in grade C, particularly in Tier II and III towns and rural areas.

Second, officials in the lowest, merged grade C are compensated much higher than their private sector comparators, whereas grades A and B, which require higher minimum academic qualification of BA/BSc and are recruited through the extremely demanding Union Public Service Commission examination, are paid much less than their private sector comparators.

This irrationality is a throwback to our socialist past when “vulgar” income disparity between the highest and the lowest was frowned upon.

Third, as recommended by the 6th Pay Commission, 2006, grade D was merged into the higher grade C. Direct recruitment into the cadre of lower division clerk — a grade C entry level position — was discontinued and the vacancies reserved for promotion from the erstwhile grade D employees. This opened up promotion prospects for grade D employees via internal examinations to eventually become an assistant section officer through the “back door”.

Fourth, unlike in the past, the selection process is more inclusive and transparent. The Staff Selection Commission conducts an examination and an interview. This incentivises even those without patronage networks but with merit to hope for a grade C job.

But the new, over-qualified, hunting for fast promotions peons are unlikely to remain humble supplicants, as in the past, catering to their master’s every whim and fancy in a pale recreation of colonial grandeur. Once peons become “uppity” they will cease to have utility as well-paid extras in a period play. Low-skill jobs will be eventually outsourced, once government decides to restructure the public workplace. But till that happens, the rusted public sector “steel frame” will be held together by highly over-specified, grade C peons — the “nuts and bolts” of the government.

Adapted from the authors article in Asian Age September 23, 2015 http://www.asianage.com/columnists/paean-peons-647

Hypocritical India

 

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Indians are affably argumentative (Amartya Sen, 2005). Less likably, the Indian State is intensely hypocritical. It remains very medieval despite its veneer of modernism.

Examples of medievalism abound. We value Indian lives very low. No minister has ever resigned because citizens, in their charge, starved to death or died due to lack of emergency medical aid or if large numbers of students fail to pass in public schools. Corruption is a leitmotif of even the simplest public transaction like lodging a First Information Report at a police station (this is something which should even be possible by email or sms or whatsapp); avoiding getting arrested for drunk driving; getting a copy of case records from the lower courts or seeking protection from physical harassment and assault.

The best illustration of lingering medievalism and nascent modernism is the conscious use of hypocrisy by the State, to keep alive the hope of change without disturbing the status quo. There are many such State hypocrisies but five major ones stand out.

The biggest hypocrisy is the Constitutional provision that religion does not matter for State policy formulation and execution. Everything points to a different truth. The Shah Bano episode (1986) is the best example of how religion and politics have been inseparable. In this case the Supreme Court granted maintenance to a divorced Muslim woman (as is the right of any Indian woman) but the government rescinded this progressive judgment through a perverse, new law to appease orthodox Muslim sentiment. Meanwhile, to placate orthodox Hindu sentiment, which was being fanned by the Vishwa Hindu Parishad (a Hindu rights outfit), it also opened the gates of the disputed site of the Babri Masjid which had been locked by the government since 1885 to preserve the status quo on counter claims to possession rights by Muslims and Hindus. Incidentally 1885 is also the year the Indian National Congress was founded. By 1986 (a century later) the Congress was not averse to play the communal card with an eye to the 1989 elections.

Other more visible “red flags” of regressive religious politics are the low pan-Indian representation of Muslims in government; the increasing ghettoization of Muslims even in new urban areas; blatantly pro-Muslim or Hindu political parties and decreasing levels of productive social interaction between the two major communities since 1947. Let’s face it. The religious cleavage exists in an antagonistic form and is increasing. It is only once we accept this that we can get to talk about how to bridge it.

The second big hypocrisy is that all Indians are created equal. Democracy and the positive affirmation (reservations) policy have solidified caste much more than the dilution effect from urbanization. If Pandit Nehru saw Sardar Patel as a biased Hindu he would be shocked at the manner in which political leaders today pander to narrow interests of backward caste and Dalit vote banks. After religion, caste is the next most significant political identity of Indians. The majority of Indians wed within their caste and vote for caste candidates. Indians are not born equal. They struggle to overcome the inherited, rigid social and economic barriers of caste and very few succeed, despite the Constitution and a range of laws prohibiting caste based biases.

The third big hypocrisy (which we share with much of the World) is that women are treated equal to men. They are not and never have been. The good news here is that since this is an international problem, the state of play is fairly advanced. Policy, law and programs are working to empower women economically in the hope that social change will follow; to measure their levels of satisfaction; to assess results and to provide special protection to them in the transition period.

The fourth big hypocrisy is that poverty is reducing at a satisfactory rate. This is far from true. Even worse, asserting this statistically, as the government does, lulls us into believing that following the current path and simply doing more of what we do already, will get us to a poverty free India. It cannot.

Average per capita income needs to triple in real terms and inequality to reduce significantly before we can even claim to have found the correct direction. Some measurable indicators are a consistent growth above 8% per year; a more equal sharing between the rich and 70% of the rest, of the benefits of incremental growth (we don’t monitor this periodically) and the rate of job creation in the formal economy.

The fifth hypocrisy is that the existing governance architecture of Parliamentary Democracy is suitable for India. It is not. Both Parliament and Cabinet have ceased to play their intended role as checks on personal aggrandizement and protecting minority interests. This has been true for State Governments over the last three decades but over the past decade even the GOI Cabinet has become the poodle of Party bosses. The sanctity and effectiveness of Parliament is eroded by the behavior of lumpen elements, more familiar with brute force than reasoned argument or moral persuasion. Corruption vitiates executive decision making to the extent that the judiciary becomes the aam admi’s “de-facto government” for seeking redress.

How can this familiar tale of woe be altered?

First what is not measured and recorded cannot be dealt with. Enumerate caste/tribe and religion in the census so we know the numbers; the spatial distribution and their wellbeing. Map caste and religion data on a publicly available GIS down to the village and urban ward level so that government interventions can be calibrated to local social norms and results assessed by third parties. Assess poverty levels bi-annually using mobile based rapid data collection instruments to better relate schemes (like the Right to Food or the Right to Work) to poverty reduction outcomes.

Second review the existing incentive structures for diluting religion, caste, gender inequality, poverty and improving the functioning of the executive, parliament and judiciary.

Caste based affirmative action (reservations) clearly perpetuates an “us versus them” psychology. Diluting it by adding poverty criterion, requires more data and monitoring, but can lead to the dominance of more modern pressure groups like professional affiliations (farmers, business owners, employees), locational interests (Biharis or Mumbaikars) or ideological solidarity (environmentalists, big or small government advocates, gay rights advocates).

All government programs and projects should be evaluated for their poverty reduction potential before approval by the government and income enhancement targets fixed. Achievement against targets must be monitored by third parties with the results made public. This will reduce pork (roads to nowhere) and gold plating (capital heavy projects which do nothing for jobs-why not let private business do these?).

The Constitution should be revised to completely separate the Executive from Parliament. The PM and her deputy to be directly elected with minimum vote shares prescribed in each constituency to ensure inclusion. The ministerial executive team to be nominated by the PM and endorsed by the Parliament. The internal emergency provisions should similarly require the endorsement of parliament to protect state government autonomy from an aggressive PM. The 2014 elections are being fought in any case on the basis of “US President like” identities.

This simple change can ensure that the PM is popularly elected and is not just a “shoo-in”. It can also  improve the quality of MPs by getting rid of those who contest for Parliament seats (often by paying for them) only as an avenue for eventually getting into lucrative executive positions. Legislative ability requires skills in law and social sciences apart from a feel for the local interests an MP represents. Executive ability requires specialization and narrow experience. The system must present separate choices to the electorate and to those desiring to enter politics.

The bottom line is to transit from being an affable but hypocritical India to a more results oriented and honest India. In the modern world time is money and the long route to poverty reduction whilst changing incrementally is costly. Social stability is a merit good in the Indian plural context. But the price for social stability must be paid by the rich and not the poor or the marginalized.   

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