gfiles magazine

July 17, 2011

Holes in the growth story

Mismanaged globalization is backfiring on the economy

INDIA has reached a critical stage of growth, as a direct offshoot of embracing liberalization. If liberalization opened up the gigantic Indian market to foreign direct investment (FDI), it also cut the other way and facilitated huge investments by Indian companies abroad. While India Inc may celebrate this, economists and sociologists are deeply worried over the implied consequences of our escalating investments abroad, even as the country keeps sliding on every parameter of the human development index.
The process of liberalization was not roses all the way. Between 1995 and 2005, the modernization of Indian industry triggered the phenomenon of jobless growth. The employment elasticity to GDP growth is still not satisfactory. And the situation is compounded by legitimate and illegitimate siphoning off of funds from India into overseas investment channels.
When Dr Manmohan Singh, as Union Finance Minister, unveiled economic reforms in 1991, he revved the growth engine and put the Indian economy on the path of globalization. He perhaps did not visualize that, 20 years on, as Prime Minister, he would find globalization a double-edged sword. When the government opened the FDI floodgates in 1991, it unshackled Indian businessmen. It abolished monopoly regulations, industrial licensing controls, and phased manufacturing norms. It also embarked on a calibrated liberalization of foreign trade and foreign exchange controls. Many Indian businessmen, including professionals-turned-entrepreneurs, seized business opportunities abroad. The dubious ones realized that the reforms also meant an opportunity to launder their hidden wealth abroad through the Non-Resident Indian (NRI) route.
NRIs run empires with annual turnovers of millions and billions with the holding company operating from tax havens.

THE legal definition of the NRI and the operational flexibility conferred on NRIs by the Reserve Bank of India (RBI) have proved a boon for many Indian businessmen and professionals. Some own palatial houses abroad, run business empires with annual turnovers of millions and billions of dollars with the holding company or investment trust operating from tax havens, escaping the gaze of Indian sleuths as well as activists of different hues.

Trust Us!

All business runs on trust. And Indians rely on statutory trusts for all sorts of business, ranging from encashing the lay public’s religious faith to throwing a cloak of secrecy over their wealth stashed in tax havens.
Lakshmi Mittal chairs the Luxembourgheadquartered ArcelorMittal, the world’s largest steel group with manufacturing operations across the globe except India.

The advantage of operating under the cover of trusts lies in the virtual absence of transparency norms. Little wonder then that self-made godmen and global Indian citizens (NRIs and PIOs) have unflinching faith in trusts, both domestic and offshore. Such trusts serve as a platform from which they weave and control a web of companies and subsidiaries at home and abroad, leaving both the taxmen and the public bewildered.
Essar’s shareholders are Virgo and Triton Trusts whose beneficiaries include companies that are 100% owned by Shashi and Ravi Ruia of the promoter family, the Ruias.

Take the case of the Essar group that has a significant presence in steel, telecom, energy and logistics. The group’s holding company, Essar Global Ltd (EGL), is registered in the Cayman Islands, a tax haven. The Essar group’s overseas disclosures show that EGL’s shareholders are Virgo Trust and Triton Trust. These are discretionary trusts whose beneficiaries include, among others, companies that are 100% owned by two members of the promoter family, the Ruias. The duo is Ravi Ruia, younger brother of group Chairman Shashi Ruia, and the latter’s son, Prashant Ruia. The documents identify both Ravi and Prashant as NRIs.
The Anil Agarwal-led Vedanta group has a holding company, Vedanta Resources plc, that was listed on the LSE in December 2003 after a mega-IPO.

The documents relate to Essar Energy plc, flagship company of the group, that was listed on the London Stock Exchange (LSE) in May 2010 after it raised $1.95 billion through an initial public offering. The documents do not shed any light on their citizenship – whether they have retained Indian citizenship or acquired the citizenship of another country. Similarly, information on Virgo and Triton is not available online. In October 2006, the group had announced: “The Essar group is currently consolidating all its businesses in India and worldwide under a Cayman Islands-based global holding company, Essar Global. The restructuring process has been underway for the last six months and Ernst & Young has been guiding the group in this.”
Take a look at the Anil Agarwal-led Vedanta group, whose holding company, Vedanta Resources plc, was listed on the LSE in December 2003 after a mega-IPO. Vedanta Resources was originally incorporated as Angelchange Ltd in April 2003. The company’s controlling stake of 59.88% is held by Volcan Investments Ltd, a company registered in the Bahamas, another tax haven. Volcan is owned and controlled by the Anil Agarwal Discretionary Trust. Onclave PTC Ltd is the trustee and controls all voting and investment decisions of the Trust.
Again, information on whether Agarwal is an NRI or has acquired citizenship of another country is hard to come by. His official address shows he is based in London. Agarwal, who acquired the reins of a small family business in 1979, has had a meteoric rise in the metallurgical sector that includes acquiring two privatized companies – Hindustan Zinc Ltd and the Bharat Aluminium Company.
Vedanta is now repeating its growth story in the energy sector. It includes ongoing acquisition of the Indian oil and gas assets of Cairn Energy plc. Yet another NRI business empire that stands on trust is that of Lakshmi N Mittal (LNM), who chairs the Luxembourg-headquartered ArcelorMittal, the world’s largest steel group with manufacturing operations across the globe except India. LNM is the eldest of three sons of ML Mittal, who founded the Ispat group in 1952. In 1974, the group spread its wings abroad by setting up PT Ispat Indo in Indonesia. In the 1980s, the group embarked on acquisitions of overseas iron and steel companies. The international operations were managed by LNM, according to an Ispat group presentation.
In 1994, business interests within the Ispat group were demarcated with LNM continuing to manage the international operations. The younger brothers, Pramod Mittal and Vinod Mittal, focused on steel and other businesses in India. Since then LNM has carved out an independent identity with the Mittal Steel Corporation (MSC) and Ispat International. The MSC group grew into the world’s largest steel manufacturer before acquisition-cum-merger with European steel giant Arcelor. ArcelorMittal’s website says LNM formed MSC in 1976. It is not clear when LNM became an NRI and whether he is still an Indian passport holder or a British citizen.
Stock market disclosures by ArcelorMittal show a significant shareholder owns 41.15% stake in the company. “The term ‘significant shareholder’ means the trust (HSBC Trust (CI) Ltd, as trustee) of which LNM, his wife, Usha Mittal, and their children are the beneficiaries, holding ArcelorMittal shares through Ispat International Investment, SL and Lumen Investments Sàrl, according to a disclosure.
A search for this trust online takes one to the Channel Islands, a tax haven. The trust is part of the HSBC banking and financial services group. Additional information on the Trust is not available. Other successful Indians who became NRIs in the past 20 years have also made their overseas and/or domestic investments through tax havens with or without reliance on trusts.

They flaunt their Indian voter IDs, passports and driving licences when it comes to complying with Indian regulations. Today, an NRI can be a Member of the Indian Parliament! The system offers lucrative advantages to NRI businessmen, who can live abroad for part of the year. They are better placed to manage their ill-gotten wealth generated through invoice manipulations and kickbacks from companies to whom they award engineering, procurement and construction (EPC) contracts for implementation of projects. They can resort to tax treaty shopping for making investments. Even an honest businessman would be tempted by the ease of managing and multiplying earnings as an NRI.
Exports have become shallow. A 15% value addition to imported inputs is adequate to pass off any product as an export item.

Some NRIs have acquired citizenship abroad by investing in job-creating businesses, as mandated by certain countries that offer investment-linked citizenship. It is thus not surprising to find that the government has put full capital account convertibility of the rupee on the backburner. Even without such radical initiative, the flight of capital from India and the resulting forgoing of opportunities for economic growth and job creation is alarming.
RBI rules for direct investment abroad
THE RBI says overseas investments in joint ventures (JVs) and wholly-owned subsidiaries (WOSs) offer several benefits. These include promotion of exports, access to technologies and skills, and employment generation. There is, however, no study to estimate the comparative benefits of overseas investments and domestic investments from the standpoint of employment generation and multiple benefits to the economy. While certain investments abroad are essential and should be accelerated, other investments are dubious and largely benefit the companies making them. The essential areas include the natural resources that India lacks or is deficient in, such as oil and gas, uranium, potash and phosphates. Investment in these areas has, however, been inadequate especially in potash and phosphates. This, in turn, has made the Indian agriculture and fertilizer industry vulnerable to the machinations of global fertilizer and fertilizer raw material price cartels.
It hardly makes sense to sink a few billion dollars in overseas coal and iron mines because India is well endowed with these resources. It would obviously be better to generate millions of jobs in domestic mining rather than spending foreign exchange abroad first for developing a mine and then regularly on importing from it.
The overseas investments in the coal and iron segments appear bad ones if the expenditure on shipping, port logistics and rail transport to hinterland power plants and other bulk users of coal is factored in. It is ridiculous to burn diesel produced from imported coal to haul more imported coal to power plants in Haryana and Punjab!
Similar cautionary logic applies to the recent spate of investments in overseas oilseed and pulp-related plantations and other farming segments. This is an avoidable waste of foreign exchange on food and non-food commodities imports from such Indian-owned overseas plantations. It would be far better to offer millions of hectares of domestic wasteland to corporates for plantation of bio-diesel crops and pulp-related crops such as bamboo with the legal provision that jobs must be provided to tribals and other local people.
Similarly, it is debatable whether Indian companies should invest billions of dollars in providing telecom services and in generating power in other countries when there is so much work to do in these areas within India. As for investment regulations, the RBI allows companies to make direct investment abroad under the automatic route. The companies can also seek specific approvals from the RBI and other regulatory authorities in cases where the proposed investments are much larger than the ceiling specified under the automatic route.

Highlights of the regulations:

- A company can invest up to 400% of its net worth in overseas JVs and WOSs under the automatic route. Companies are exempted from this investment ceiling when they channel funds from the proceeds of overseas equity offers or from their exports-related exchange earners’ foreign currency (EEFC) account.

- Oil and gas public sector undertakings are allowed to invest without any ceiling in overseas blocks but with requisite approval from the Centre.

- Companies are allowed to capitalize the export dues and other foreign exchange earnings within the 400% investment cap.

- Software exporters are allowed to receive 25% of the value of their exports to an overseas software start-up company in the form of shares.

- Stock market-listed companies are allowed to invest up to 50% of their net worth in overseas shares and other securities.

- Mutual Funds are allowed to invest in securities of overseas entities or in the overseas equity offer of Indian companies within an overall ceiling of $7 billion.

RBI data shows that direct investment abroad (DIA) increased from $5.82 billion in March 2003 to $79.2 billion by March 2010. This includes reinvested earnings by Indian companies, subsidiaries and joint ventures operating overseas. One has to accept FDI with a pinch of salt as the data depends on what constitutes FDI. Moreover, FDI inflow and outflow data for the same period is hard to come by. And yearly comparisons can be misleading owing to the presence or absence of a big acquisition and underlying investment in a year. al">Notwithstanding these caveats, the DIA of $79.2 billion by March 2010 compares well with the cumulative FDI inflow of $129.4 billion over the longer period of January 2000 to February 2011.
THE rules relating to NRIs and overseas investments are quite liberal. This is confirmed by recent big-ticket acquisitions such as the $10.7-billion deal last year by Bharti Airtel to acquire the African operations (excluding Sudan and Morocco) of the Kuwait-based Mobile Telecommunications Company KSC – popularly known as Zain. Such acquisitions and investments in overseas projects are financed through a mix of funds – company savings and surpluses, forex loans from domestic banks, overseas borrowings and equity offers.The liability of servicing such forex expenditure partly or wholly devolves on the Indian economy.
The flight of both corporate and personal wealth is bound to gather momentum due to the growing unfavourable business environment. The trend is due to periodic bashing of businessmen by NGOs, the media and politicians who love to lecture them on austerity and simplicity. In addition, the emerging stiff policies relating to exploration and development of natural resources such as coal, iron, bauxite, oil and gas, and land acquisitions in general has triggered a trend of investing abroad among companies.
With an eye on the projected coal imports of 250 million tonnes in 2017-18, companies – from Coal India Ltd and NTPC to private biggies such as Tata Power, Reliance, Adani Energy, Lanco and JSW – have either acquired or are acquiring coal assets abroad. Some of them see opportunities in the imported coal logistics and shipping business and are thus making overseas investments in this sphere too.
None but the government is to blame for such policy-led imports and the consequent corporate investments abroad. The corporate sector does not like government diktats on corporate social responsibility and provision of jobs to those from the backward castes and communities. Snail-paced reforms in contract farming, commercial plantations, financial services and organized retail have also contributed to the rush abroad. Labour reforms have always been a hot potato for politicians.
Doing business has become a highly uncertain affair in India. The executive and judicial combine can halt implementation of any industrial project even when it is environmentally compliant. Public protests, managed by NGOs and the media, are what counts. The viability of any project can be threatened due to zero or preferential imports envisaged under free trade or a preferential trade pact. The government has been pursuing such bilateral and regional deals on geo-political considerations.
The World Bank’s private sector funding arm, the International Finance Corporation (IFC), ranked India 134 in the Doing Business 2011 global rankings, one notch above the DB 2010 rank. Governance reforms over the past 20 years have made hardly any difference to India’s ranking and performance report, published by the World Bank under its Worldwide Governance Indicators (WGI) Project. The project assesses 212 countries on six dimensions of governance, monitored since 1996 – voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law and control of corruption.
AMIDST the growing uncertainty, even potential foreign investors are cagey about taking the plunge in India. The FDI inflow lost steam a few years ago. There have been no big-ticket or big-name investments from abroad. The FDI investments do not reflect their intentions or perceptions about India as a good destination for FDI. Notwithstanding India’s manufacturing competitiveness, perceived by some multinational corporations, China and other countries are favoured for investments, especially in chemicals, natural resources development and infrastructure. The depth of manufacturing operations has decreased due to import liberalization. Companies prefer to minimize their risks by outsourcing components and sub-assemblies from overseas or domestic vendors. The government has been working on a national manufacturing policy since 2004! Exports have become equally shallow. A 15% value addition to imported inputs is adequate to pass off any product as an export item.
The frequent post-tender changes in contracts and the associated crony capitalism, corruption scandals, periodic sectarian and caste agitations and violence, and absence of a new phase of substantial reforms have all vitiated the business environment.
All this threatens to transform globalization into a passage out of India. As the imports dependency of economic growth increases along with the FDI outflow, the country’s financial stability will become more vulnerable. As the RBI’s Financial Stability Report of June 2011 states, “Availability of alternative channels of funding has reduced the dependence of firms on domestic bank credit over the years. Rising domestic yields are widening the interest rate differentials vis-à-vis AEs, resulting in a greater access to External Commercial Borrowings (ECB) by Indian firms. This trend is causing a build-up of currency mismatches in their balance sheets. India’s International Investment Position (IIP) statistics show that the currency risk exposure of India’s non-official sector has increased in the last few years, with an increasing net liability position. This means that the translation risk for the non-official sector arises from a depreciation of the Indian rupee.”
THE report adds: “Foreign claims on Indian assets denominated in Indian rupee is far greater than that of residents in foreign currency denominated overseas assets. India’s net external liabilities have increased from US$47 billion as on March 31, 2004 to US$158 billion as on March 31, 2010. It may be mentioned that these external liabilities include the foreign currency loans given by overseas branches of Indian banks to domestic corporates. There has been a consistent increase in such borrowings over the past few years.”

Who is an NRI?THE term “Non-Resident Indian” (NRI) is commonly used to refer to persons of Indian origin who have settled abroad or live overseas for substantial periods but retain Indian citizenship. The government, however, distinguishes between NRIs and Persons of Indian origin (PIOs). A lesser known term is Overseas Citizen of India (OCI).
An NRI is an Indian who lives overseas for studies, employment or business for at least 182 days in a year. The terms and conditions for being eligible to be treated as an NRI are specified separately by the Income Tax Act and the Foreign Exchange Management Act. An NRI can open a rupee bank account named Non-Resident Ordinary (NRO) deposit account for collecting his/her funds from domestic transactions. RBI regulations require banks to designate an existing rupee account as NRO when a resident becomes an NRI. He is allowed to repatriate abroad the current income and interest from this account but not the principal lying in the account.
The RBI also permits NRIs to remit up to $1 million per annum out of the balances held in NRO accounts or the proceeds accruing from sale of assets held/inherited in the country. For doing business through a corporate entity, an NRI can promote an overseas corporate body (OCB). It is defined as a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least 60% by NRIs. OCB includes overseas trusts in which not less than 60% beneficial interest is held by NRIs directly or indirectly but irrevocably, which was in existence as of September 16, 2003. A PIO is a citizen of any country (excluding Bangladesh and Pakistan) who earlier held an Indian passport or either of whose parents or grandparents were Indian citizens. An OCI is a person registered with the government as an Overseas Citizen of India (OCI) under Section 7A of the Citizenship Act.
Indian entrepreneurs who became NRIs during the last 20 years
Lakshmi N Mittal, ArcelorMittal
Anil Agarwal, Vedanta
Ravi Ruia, Essar
Prashant Ruia, Essar
Naresh Goyal (above right), Jet Airways
Vijay Mallya (above left), United Breweries
C Sivasankaran, Siva/Sterling Infotech

Signals that mismanaged globalization can backfire on the economy have also emanated from the Department of Commerce. It has pressed the alarm bell on the trade deficit in a paper titled “Strategy for doubling exports in next three years (2011-12 to 2013-14)”, released in May 2011. With imports outpacing exports, the trade deficit has increased from a meager $8.7 billion at the beginning of the Tenth Plan in 2002-03 to $118.3 billion in 2008-09. This may increase by nearly two and-a-half times to $282 billion in 2013-14, which would be 11.5% of GDP in 2013-14. This level of deficit is unsustainable. Whether a trade deficit is sustainable depends on the country’s current account. And this too turned into deficit in 2004-05. The current account deficit (CAD) has been rising since then.
Doing business in India has become uncertain. The government can halt any industrial project even if it is environmentally compliant.

The Department of Commerce strategy paper says: “Even if we expect a rebound in services, exports and invisible earnings rise, the CAD would widen substantially at the projected level of BoT (balance of trade) deficit. The large growth in the size of the BoT deficit on merchandise account will result in a significant expansion of the CAD, in turn, leading to a reliance on foreign capital inflows to finance the deficit. Foreign portfolio investment is still a major part of capital inflows and past experience suggests that such flows are indeed volatile. Hence, a large widening of the trade deficit can potentially result in payments difficulties. And, such a situation is simply unacceptable because it may jeopardize the entire growth process. It is, therefore, of paramount importance that the BoT deficit be kept within manageable bounds.

Citizens, be the change that you want to see!

The people must assert their sovereignty, which is the founding principle of democracy


IN Hindu mythology, the samudra manthan (churning of the ocean) is one of the central events in the constant struggle between the devas and the asuras. The gods, weakened by the curse of Sage Durvasas, invited the demons to help them recover the elixir of immortality, the amrita, from the depths of the cosmic ocean. Mount Mandaranchal was used as the dasher (churning tool). When, after a great deal of churning, the amrita appeared, the gods and demons fought over its possession and eventually the former won.
There are lots of similarities in the ongoing brashtachaar manthan or churning of corruption of which the drafting of the Jan Lokpal Bill is just one aspect. Weakened by the national revulsion against unbridled sleaze, the government enacted the drama of joining civil society to churn the ocean of macro-corruption and bring out the elixir of the Lokpal. This was done with great fanfare in full media glare.
Macro-corruption has indeed become an ocean: sub-optimisation of the allocation of scarce national resources and the loot thereof; encouragement of buccaneers instead of innovative entrepreneurs; bribe money deployed in luxurious and wasteful consumption, raising demand for luxury products and services and in turn distorting investment priorities; unaccounted bribe money lent to hoarders and speculators that causes artificial shortages, price rise, inflation and property bubbles; lax criminal investigation and prosecution, huge stashes of black money in tax havens and laundering of money to provide protection to criminal gangs resident abroad.
But the churning was confined to the Lokpal Bill and there was no “governance agenda” visible. Even this limited churning took place in an acrimonious and hostile atmosphere. The basic requirement of including the Prime Minister and MPs within the ambit of the Lokpal was scuttled. In the event, what appears to have emerged is “Jokepal”! This is only to be expected, given the total ignorance of the architecture of governance by those who constituted the “joint drafting committee” and the absence of a proper agendum.
The national revulsion against unbridled sleaze forced the government to join civil society to churn the ocean of macro-corruption and bring out the elixir of the Lokpal.

Though pompously called “India’s Second Freedom Struggle”, what occurred at the Jantar Mantar and the Ramlila grounds was nothing but a make-believe charade and, in the absence of a dasher, no real churning took place. Some years ago, the enactment of the Right to Information Act was also called a freedom movement.
In 1997, on the occasion of the golden jubilee of India’s independence, a “Second Freedom Struggle” was launched to end corruption, criminalization, casteism and communalism. It seems there is a deluge of “struggles” and “movements” but no freedom! JP, who got us the real “second freedom” in March 1977 by defeating the draconian Emergency dictatorship, must be wringing his hands!
Restoring democratic governance: A primer
Civil society should seek comprehensive governance agenda, including the following elements:  - Integrity and functional autonomy of all democratic institutions at the Centre and in the States from the President downwards;
-  Independent and autonomous Lokpal at the Centre and a Lokayukta in each State with the PM, CMs, MPs and MLAs within their ambits. These ombudsman institutions should have the powers to punish and confiscate/retrieve illicit assets;
-  Protection of the dignity of democracy by prohibiting criminals and the corrupt from contesting elections;
-  Rigorous and transparent processes to select high independent/Constitutional authorities;
-  A “Judicial Standards and Accountability Act” to bring about transparency and accountability in the selection and appointment of judges and speedy disciplinary action against the errant ones;
-  Bringing in political parties under Constitutional and legal rigour.

It seems the draconian days are back. Vituperative attacks against civil society leaders and the crude midnight swoop on Baba Ramdev followers are pointers to this. This time around, it appears to be driven by the Union Home Ministry with the complicity of the PMO. The reasons are not far to seek. Writing in a leading magazine, Arun Aggarwal has this to say: “If the Jan Lokpal comes into being, (Home Minister) Chidambaram’s political career is over! As Finance Minister he was responsible for generating the largest amount of black money through corruption....” Indeed so.
While Pranabda admitted that the current political situation bore “some similarity” to the pre-Emergency days in 1975, he asserted that Emergency would not be imposed again.

Participatory Notes, MNCs rampaging over natural resources, and 100% FDI in real estate are glaring examples. KN Govindacharya of the Rashtriya Swabhiman Andolan also smells the stink of pre-Emergency days: “It (government) is distorting facts and trying to run down the anti-corruption movements in the same way in which Indira Gandhi had tried to berate the JP movement before imposing Emergency. In order to belittle the people’s movement for change, the then government had termed JP a CIA agent! A divided, bewildered Congress faced with insecurity of losing power then imposed Emergency.”
CONGRESS veteran Pranab Mukherjee does not disagree, and is condescending. While he admitted that the current political situation bore “some similarity” to the pre-Emergency days in 1975, he assertedthat Emergency would not be imposed again. Thank God for small mercies! In the same breath, Pranabda accuses civil society of trying to weaken democratic institutions. Which “democratic institutions” is he talking about? Does he not remember that, under the Emergency regime, of which he was a part, all institutions of democracy in the country were ravaged and deliberately weakened? During the Emergency, governance was devastated by the imposition of a highly concentrated apparatus of power for personal survival and family aggrandizement. This style of centralized misgovernance, which persists today, is the root cause of corruption.
BE that as it may, the current discourse on corruption has brought out bizarre truths about political minions and worthies who run the government. They talk as if parliamentary democracy has dropped from heaven and civil society has no part in it. Some busybody called civil society representatives tyrants: “If this country and democracy has any threat, it is from the unelected tyrants. If democracy faces its greatest peril, it is from the tyranny of the unelected and unelectable.” The fact is that it is not democracy or its institutions that are facing any peril but the kleptocracy of the thieves, by the thieves and for the thieves that is under challenge. Hence the panic.
A Wikipedia definition of civil society makes things clear: “It is composed of the totality of voluntary social relationships, civic and social organizations, and institutions that form the basis of a functioning society, as distinct from the force-backed structures of a state and the commercial institutions of the market. Together, state, market and civil society constitute the entirety of a society, and the relations between these three components determine the character of a society and its structure.” Democracy is a form of government in which all citizens have an equal say in the decisions that affect their lives. This includes participation in the proposal, development and passage of legislation into law. The people’s sovereignty is the founding principle of such a system. A Parliamentary system is nothing more than representative democracy.
With the shadow of the Emergency looming over the country, civil society should change tack and go for fresh and stronger governance agenda than merely the Lokpal Bill or retrieval of stashed assets.

House of wax

MPs’ behaviour is fast reducing the value of the legislature in public perception


IF the media took hardly any notice of the latter half of Parliament’s Budget session, it was not because nothing of import was happening in the House but because far more interesting and dramatic developments were taking place outside. The issue of growing political and bureaucratic corruption was taken by the people into their own hands with their support to Anna Hazare’s demand for a different judicial body to look into corruption charges against holders of political and bureaucratic office.
However, whether fuelled by a genuine desire to eliminate corruption from the corridors of power or just to show the ruling dispensation in a bad light, Parliamentarians have been busy since charges of corruption surfaced in the Thal-Vaishet fertilizer project and the Hajira pipeline project in 1982.
The Opposition welcomed the opportunity to disfigure Rajiv’s image. The stalling of House proceedings, the JPC probe and, eventually, a CBI investigation yielded nothing.

In the eighth Lok Sabha, bedlam in the House occurred daily after Swedish radio reported a suspicion of kickbacks in the Bofors deal. At the time, Rajiv Gandhi had won an unprecedented majority in the December 1984 elections and enjoyed a clean image. The Opposition welcomed the opportunity to disfigure this image. Not a day passed without the Bofors deal figuring in the proceedings. The stalling of House proceedings, the Joint Parliamentary Committee probe and, eventually, a CBI investigation yielded nothing to either confirm or remove the suspicions. By then, the CBI had lost its credibility. The loss was not due to its inability to nab the culprits but because of a sustained campaign to portray it as amenable to pressure from political masters.
Parliament was devised as a forum to seek solutions to problems facing the country. The Opposition was to maintain vigilance over the functioning of the system and seek corrective processes when necessary. However, this objective was derailed when Parliamentarians sought to sustain and justify party interests rather than functioning as impartial arbiters.
Serious debate yielded place to noise and lung power over issues the Opposition believed would sully the image of the holders of office so that the tables could be turned in the next election. The purpose of strategy got reinvented to use the highest forum of debate for party interest and not application of minds to smoothen governance so that the administration would deliver on electoral promises.
The Opposition had no hesitation in seeking suspension of Question Hour, till then zealously guarded by the Opposition in previous Houses because it is the only hour when Parliamentarians can question Ministers and departments without party discipline standing in the way. It was the only time when MPs could highlight their constituents’ problems. Ministers had to do homework to face the barrage of embarrassing questions in two Houses. Many Ministers dreaded the hour, with the threat of privilege motions looming if they were caught deliberately covering up or misleading the House.
Even powerful ministers like TT Krishnamachari and, later, Morarji Desai faced many embarrassing moments during Question Hour. In 1963, Prime Minister Jawaharlal Nehru had to concede the demand to invite the Attorney General to the House when his Finance Minister, Desai, could not satisfy MPs over the issue of compulsory deposits that he had introduced. Jyotirmoy Bosu and Madhu Limaye were dreaded by all Ministers for their barrage of questions.
Now Ministers do not bother to prepare because Question Hour has itself got defamed after eight MPs were caught having accepted cash to raise issues of commercial interests of private firms. Starred and unstarred questions dwindled to one-tenth of the number that used to be listed in the Fourth Lok Sabha.
Question Hour and the subsequent Zero Hour would see full attendance in both Houses because it was the time when MPs had an upper hand over the Treasury benches. Calling Attention Notices on issues of urgent public interest were the highlights, drawing a full contingent in the press gallery. Calling Attention Notices are no longer used to raise issues. Instead, short representation of constituency problems take precedence over all issues as Parliamentarians want evidence to show their constituents that they raised their problems.
IT is difficult to pinpoint the stage when the main purpose of using the Parliamentary forum for raising issues of public importance and seeking answers from the government was transformed into a route for seeking advantage for the party rather than for the masses. The functioning of the administration has deteriorated steadily with the licence and permit Raj becoming the main source of corruption. Even then, fear of Parliamentary exposure acted as a check on corruption to a large extent. There was a need to account to Parliament over implementation of various welfare schemes.
Ramdev’s unsavoury past is of no import to the public —because he talks of an issue that intrigues the middle class, and his threat has embarrassed politicians.

But things began to change with Ministers taking it casually as they knew the Opposition would not allow functioning of Parliament due to their agitation over issues raised in the media. No one waited for confirmation of media reports. Everyone was in a rush to grab the credit for being the first to stand up in the House. Even Prime Minister Indira Gandhi did not hesitate to abstain from the monsoon session to visit the US in July 1982. She left the work of facing the no-confidence motion against her government to senior colleagues.
Even Parliamentary committees underwent a metamorphosis in their functioning from being impartial arbiter to serving party interests. The Parliamentary committee was an instrument devised to keep internal functioning above party interests by keeping its proceedings beyond media gaze so no member would be tempted to toe the party line. Now the chairman of the Public Accounts Committee sets out to prove (not investigate) the government’s guilt. He wants to do it not because he has verified information but because of the need of his party. The Treasury benches are determined to prove otherwise. Neither side abides by the ethics and discipline that appointment to a committee demands, not even in the case of Joint Parliamentary Committees. The probes are run along the lines of party interests and not to ferret out the truth, regardless of who gets affected by it.
THE issue of formation of a JPC that took the winter session of 2010 by storm showed how the game of politics between two sporting sides has been converted into a battle between two sworn enemies. The Opposition felt it could bring down the heavens over the government by getting a JPC to probe the 2G scam and the government was apparently afraid of facing it. Ultimately, the government conceded the demand –but after blunting the JPC’s capacity. The bigger tragedy is Parliament’s loss of humour, something that had always kept the relations between the two sides personable. The strain between them now is stark.
The loss of time owing to the preference for forcing adjournments rather than having meaningful debate has eroded Parliament’s value with Non-Government Organizations and their issue-based interests getting public attention. They are not bound by party discipline. Their failure to gauge the extent of the administrators’ ability to sidetrack them prevented effective results.
There is no amelioration of poverty, deprivation, social and economic disparity, and denial of justice. There is no end to the exploitation of the poor by the rich. Administrations remain insensitive to their needs. Even welfare schemes have been taken over by corruption with food for the poor finding its way into the shops of unscrupulous traders. Parliament does not offer any hope of a solution to their problems. The reach of NGOs is limited. But the administration is cowed down by gun-toting young men seeking justice for the poor. Forty years ago, the extremists’ bands were confined to a limited area in the Northeast. Now they are spread over nearly 159 districts in several states. They have different names in different states but the modus operandi is the same: terrorizing the rich and their guardians in the State administration. They are able to run a more efficient dispensing system for justice and attract support from the poor.
The momentum generated by the Anna Hazare threat has an element of danger – the urban middle class has also come to endorse a type of extremism. Hazare’s threat was not violent extremism but it was more potent because it forced the government to its knees. Now, even Baba Ramdev is determined to become a hero who rendered Parliament irrelevant. His unsavoury past and sudden rise as a yoga teacher and practitioner of Indian medicine is of no import to the public – because he talks of an issue that intrigues the middle class as his threat has put politicians in an embarrassing position. The growth of violent extremism across the country is not merely a law and order problem. It is not merely spreading and spawning bands of seekers of socioeconomic justice through violent means.
It is partly a consequence of Parliament’s failure to find solutions to problems. Parliamentarians seem to have zeroed in on those in office only for their corruption and not insensitivity, lack of compassion, inefficiency and inability to provide justice for the poor. The problems of the masses are not limited to political and bureaucratic corruption but are wider in range. By forcing adjournments, MPs are undermining their own importance and also their relevance in public perception.

School a pipe dream for 6 crore children

A year after its passage, the RTE Act has achieved precious little in changing ground realities
THE country’s performance regarding implementation of the Right to Education (RTE) in the year since the Bill was passed is not very encouraging. Although there has been a significant increase in budgetary allocation there are still serious challenges relating to access, inclusion and quality of education. India still bears the stigma of having the largest number of illiterate adults and out-of-school children. Every third illiterate person in the world is an Indian.
Education for all those between the ages of 6 and 14 became a legal right in April 2010. But the Union Minister for primary education himself concedes that enrolment rates in primary school classes have dropped, and independent research reveals that the quality and equity of education has also fallen.
Crores of them are engaged in child labour. Many are in bondage and trafficked. A large number is trapped in factories, mines and agriculture or forced to live as domestics.

Education was enshrined as a fundamental human right by the United Nations in 1949 but India amended its Constitution in this respect in 2001, thanks to a forceful and persistent civil society movement. It took nine years to translate this Constitutional provision into enforceable legislation. Yet, according to a recent study, only 6% of the people are aware that education is now a legal right. Regarding the decrease in primary school enrolment, three questions arise. Who are these out-of-school children? Where are they? And why are they not in school?
There is confusion regarding existing data. The government claims that 75,00,000 children are out of school (based on the 2001 census report). If the latest NSSO report is taken into account, the figure goes up to 2.1 crore. On the other hand, the demographic projection shows that India must have 22 crore children in 2011 out of which 16 crore attend school, which would mean that six crore are out of school. This figure tallies with the non-governmental estimates of five crore children engaged in various forms of child labour. Clarity on these statistics is urgently required because this has direct implications on state policies and budgetary allocations.
Regarding the decrease in primary school enrolment, three questions arise. Who are these out-of-school children? Where are they? And why are they not in school?

THE out-of-school children are not idle. They are the hardest to reach, or belong to socially, economically or politically excluded families, or are victims of age-old discriminatory cultural practices and gender bias. Crores of them are engaged in child labour. Many are in bondage and trafficked. A large number is trapped in factories, mines and agriculture or forced to live in domestic servitude.
Some are part of child prostitution and are child soldiers, some are pavement dwellers. Millions belong to displaced and migrant families, nomadic tribes and are victims of abject poverty. About 10% of India’s children are born with disabilities; this constitutes one-third of the country’s 60,000,000 disabled people. Studies reveal that children with disabilities are five times more likely to be out of school than the average child.
Similarly, around 22 lakh child victims of HIV and AIDS cannot be ignored. They require special attention and facilities for education. Girls, in general, but especially those belonging to minority groups and Scheduled Castes and Tribes are more likely to remain out of school, many being married off at an early age. Even if schools are built, teachers hired and other learning facilities provided, such hard-to-reach children are not going to appear magically inside classrooms and complete their education.
So far, no sincere effort has been made by the government to address this serious obstacle. It requires thorough identification, social and geographical mapping exercises, additional resources, innovative techniques such as preventive measures, engagement of communities through cultural and religious groups and so on. Moreover, an expansion of endeavour beyond the education sector is called for. Policy coherence and coordination among Ministries like Labour, Women and Child Welfare, Social Justice, Rural Development, Home Affairs, Health and Education are imperative because the Ministry of Education alone cannot ensure the freedom, withdrawal, repatriation, rehabilitation, health and safety of the hard-to-reach children.
Also, in the present context of a global economic recession, food crises, and environmental challenges, a broad multi stakeholder partnership is essential. So is a genuine public-private partnersip, with the rider that it should not lead to the privatization and commercialization of a fundamental right.
The second major obstacle in the enrolment and retention of children in school is the overall poor quality of the public education system. First, in spite of clear recommendations from all statesponsored commissions on education during the last several decades that at least 6% of the total GNP be invested in education, the government is still nowhere near this target. Neither the Central nor the State governments have ever considered education for poor children a political priority.
Second, the RTE law is silent on the common school system. State policies have reduced this fundamental right to a mere commodity. The rich can buy the best that is available and the poor are denied even the bare minimum. Third, it is the children that are the worst victims of poor and corrupt education governance.
According to the three most recent research projects and public hearings, conducted by Pratham (ASER 2010), BBA (Public Hearing on Education 2011) and National Coalition for Education (Edwatch report 2011), almost half of all fifth-grade children in government schools lack the reading skills expected in second grade. The ASER report also underlines a decline in overall maths skills in children between 2009 and 2010. Only 65% of first-grade children recognize the numbers 1-9, in comparison to almost 70% a year earlier. The ASER report also emphasizes the decrease in popularity of government schools over private ones in rural areas, which has resulted in a significant growth in enrolment in private schools (from 21.8% in 2009 to 24.3% in 2010).
The third hindrance to the provision of primary education is the lack of basic amenities and requirements in schools. The public hearings conducted by BBA in nine States reveal that only 60% of primary school-going children have access to clean drinking water. There are no functional toilets for more than 50% of students and, in the case of girls, the situation is even worse as only 30% have access to toilet facilities. This directly impacts the dropout rates substantially, especially among girls. Also, it was seen that only one-third of schools have playgrounds and only 10% of children are provided sports equipment and play material. Corruption regarding the midday meal was also seen everywhere, with both the quality and quantity of meals affected. The situation is compounded by inadequacy in the number of teachers hired, teacher absenteeism and long distances to schools.
According to the Edwatch report, more than half of upper primary schools are at distances ranging from three to 10 km away from children’s homes. The same report found that almost one-fourth of teachers are not full-time teachers but appointed as para teachers on an ad hoc basis. Also, shockingly, only 72% are able to perform classroom duties as they are often allocated non-teaching duties. Also, in spite of the fact that education has been mandated to be available free of cost, in a majority of cases students have to pay substantially in many other forms – infrastructure costs, extracurricular fees, uniform and stationery fees, and so on. This also contributes to a heavy dropout rate.
NONE of these problems is unsolvable. A sense of urgency, adequate political will and appropriate budgetary spending, as well as a comprehensive and time-bound action plan with conrete intra-agency coordination and a clear accountability framework would see effective enforcement of the new law and attainment of all internationally pledged goals for education.
Undoubtedly, India’s educated youth is largely to be credited for its fast and sustained economic growth, particularly in information technology, software engineering, medicine and other life sciences. In the present era of knowledge economies, the key to sustainable development, poverty reduction, economic empowerment of individual households, fighting climate change, attainment of social justice and gender equity lies in education. It is the best vaccination against epidemics such as HIV and AIDS and the best prevention against high maternal and infant mortality.

The writer is the founder of Bachpan Bachao Andolan.

Educating Nehru about black money

...And other funny tales about graft

A little corruption is good for one’s integrity, a French journalist once told me during Francois Mitterand’s 1988 re-election campaign. It sort of innoculates one against bigger corruption, he said. “This may be true of the French,” I told him, “In India, every little act of corruption, far from innoculating the corrupt, seems only to spur him to ever bigger acts of villainy.” Anyway, the makeshift adage trotted out by the French journalist did not seem to be true even for French politicians and businesses. Corruption scandals were tumbling out from every office bureau in the country. Two or three Paris municipal fathers were in prison. I think a former Mayor, too.
Some Ministers had been arraigned on serious corruption charges. So were several provincial political leaders. All sorts of charges were flying around. At a café near the Le Monde office in Paris, I was regaled with jokes about graft in France. “You know why the steering wheels of French cars are so small?” someone asked. “No,” I said. “Well, that’s because our Ministers have to drive with handcuffs on!”
A loud burst of laughter issued from even those who must have been hearing it for the umpteenth time. Elsewhere, someone said, “You know how much money such-and-such Minister in Paris is said to have made? No? I’ll tell you: enough so he can stand on the pile of banknotes he has amassed to see through the window of his bank in Zurich.”
France was not the only country in Europe so overrun with talk of corruption and illegal foreign accounts of politicos and tycoons. Italy, in some ways, felt worse and the people there were a lot more despondent. Spain and Portugal did not seem in such dire straits but conversation there was not altogether free of mention of corruption either. All talk in Greece and Yugoslavia soon veered to corrupt politicians feathering their nests.
People in Austria and Belgium admitted, even if reluctantly and grudgingly, that there was some corruption in public life, though not to the extent elsewhere. Only the Germans felt their country was, by and large, free from such corruption. The Finns, the Swedes, the Norwegians and the Danish I met at house parties, cafés or at business establishments did not seem to think any significant corruption existed in their countries. Later, I learnt that New Zealand, Canada and Singapore too were in that category. I bring up all this because Indians often tend to take these countries as benchmarks when lamenting corruption at home. If we compared ourselves with countries in Africa and Latin America, we would have reason enough to feel rather satisfied with ourselves. But then we do not see ourselves in the same category.
Nehru, Kaldor and Lady M...
SOON after assuming office, Nehru had constituted a tax investigation commission under Srinivasa Varadachari (1949). That did not seem to yield adequate results. Then, in the early 1950s, Nehru decided to bring a Leftist economist, Nicholas Kaldor, from his alma mater, Cambridge University, to advise him on taxation, black money and so on.
There is an anecdote about that which I heard from Babu Triloki Singh, a Socialist leader-turned-Congressman of Allahabad. He was a member of the Rajya Sabha in the 1970s and a great raconteur with a treasure trove of anecdotes about the politics and politicians of his younger days. It was a pleasure travelling with him in the Lucknow Mail from Delhi to Lucknow, a journey I had occasion to undertake often in those days as the Lucknow correspondent of a Delhi-based daily. According to Triloki Babu, when Nehru disclosed to some of his colleagues his desire to invite Kaldor to survey the Indian tax system and suggest improvements, Ministers and even bureaucrats were alarmed. They wondered what dirt Kaldor might turn up. So some of them said to Nehru that the government and Ministers were perhaps not yet prepared to handle a foreign economist’s intrusion in such administrative areas.
But Nehru was adamant. Then someone said, “Panditji, what do we know of issues like black money? We wonder if even you know anything of it. How are we going to frame terms of reference for Kaldor when we ourselves are so ignorant of high finance, working of businesses and the taxation system? Would it not be better if we first prepared ourselves for this?” “Yes, we must,” said Nehru. “Actually, I should do it first. Tell me, what shall I do?” The crafty Rafi Ahmed Kidwai, Minister for communications and one of Nehru’s favourites, suggested that he consult people from different walks of life such as business and media. Among those he suggested was Kanpur industrialist Laxmipat Singhania who was close to Nehru and the Congress in general. “Tell me, what is black money, how do you make it and who all do you give it to?” asked Nehru when Singhania arrived at his office a few days later. The conversation went as follows:
Singhania: But there is no such thing as black money, Panditji, that I know of.
Nehru: How can you say that? Everyone is saying that a lot of black money is stashed all over that is harming the economy. And you say there is no black money!
Singhania: Truly, there is no such thing as black money. All money is the money that you…I mean, the government… prints. When that money is with the government or in that bank it is called money and when it comes into our hands some people begin to call it black money which is very unjust.
Nehru: It can’t be so simple. I am told you don’t pay your taxes and the money so collected is black money.
Singhania: You may say so but money is money. When we get our money we save some for ourselves. Why should you call it black money?
Nehru: Alright, then, tell me what you do with that money. Who do you give such money to?
Singhania: I don’t keep accounts of such money because it is all spent in the family for good causes.
Nehru: But who do you give such money to?
Singhania: I don’t think you want to know about the money that I give to the Congress party…
Nehru: No, no. Not that.
Singhania: And, of course, you are not talking about the money that I donate to Bapu…
Nehru: Leave that.
Singhania: And not what I give to Vijaya (Nehru’s sister, Vijaya Lakshmi Pandit) whenever she needs some…
Nehru: Leave that.
Singhania: And as for what I used to send to Indu when she and Feroze were in Lucknow…but they are family, you know.
Nehru: That’s different…who else? I mean who have you given really big money… a big, big amount.
Singhania: If you are talking of a big amount, then the biggest I think I gave was some diamond jewellery and some big cash tucked under some fruit in a birthday dali (gift basket) to Lady Mountbatten on her birthday… At this, Nehru pounded the table and growled, “Shut up! You can’t say such a thing about her! Not her. Go away!”
However, this and similar encounters did not deter Nehru from his resolve to call in Kaldor, though his colleagues and the bureaucrats of the time ensured that the Cambridge economist’s efforts to radically reform the Indian taxation system or curb black money remained on paper. Kaldor’s survey report was buried amid paperwork. And Nehru, finding himself waging a lonely battle, recommended Kaldor to Sri Lankan Premier Dudley Senanayake and saw him off to Colombo.

So, corruption is not peculiar to India. Every other country suffers from graft to a limited or large extent. That is what Indira Gandhi used to tell us whenever the press, the people or the Parliamentarians howled about increasing corruption in public life. “There is corruption everywhere,” she would tell the nation. That might not have satisfied the people at large but there was something in the remark that made some people ponder.
Every other country suffers from graft to a limited or large extent. That is what Indira Gandhi used to tell us whenever the press, the people or the Parliamentarians howled about it.

YET, corruption tormented the people so much even then that a spark in Gujarat in 1974 soon led to such a conflagration that she had to eventually put the entire country under Emergency rule when, even on losing a court case, she refused to step down from office. Her refusal was seen throughout the country as an arrogant defiance of public opinion. If she bounced back to power within two years of the failure of the Janata Party coalition, it was only because those who had overthrown her were found to be utterly incapable of running a government. The people obviously chose order, stability, leadership and governance, and soon forgot all the talk of political corruption which had ousted her from office in the first place. If corruption was high under Mrs Gandhi, it was not invented by her. Allegations of corruption had become rampant long before Independence. Complaints against Ministers and Congress office bearers began reaching Mahatma Gandhi as early as 1937 when the first Congress Ministries were formed in several States after the election of 1936-37. By 1948, ie, within a year of Independence, Gandhi was writing to Sardar Vallabhbhai Patel and Jawaharlal Nehru that corruption had grown so much in some places that people were beginning to murmur that British rule, in this respect, had been better. Soon, the buzz about corruption exploded in major scams such as VK Krishna Menon’s Jeep scandal and the KD Malaviya-Sirajudin oil scandal.

Delay dogs big birds

DRDO suggests private sector entry into production of fighter planes

THE Defence Ministry is evaluating a proposal by the Defence Research and Development Organisation (DRDO) to take an urgent policy call on liberalizing and expanding production of fighter aircraft in the private sector. For five decades, the production of civil and military aircraft has remained the exclusive turf of the public sector Hindustan Aeronautics Ltd (HAL). The DRDO’s logic is simple: with several programmes for developing new aircraft on board, HAL will run aground in rolling out new combat and transport aircraft.
A policy decision may or may not be imminent on permission to a private sector company to establish production facilities for aircraft. But to cope with the increasing orders, DRDO and HAL have been scouting around the globe for setting up assembly line production facilities to step up their turnover.
Several rounds of negotiations have already been held with international vendors like Boeing, Lockheed, Saab, EADS and others. Big-ticket purchases of the C-130J Hercules, the P-3C Orion, and the C-17 Globemaster III, and the proposed purchase of 126 multi-role combat aircraft, all totalling $20 billion during this decade, involve offset riders worth $7-8 billion.
This means that, unless the production facilities are substantially stepped up, India will not be able to benefit from the offset rider. Further, over $3 billion has been sanctioned to develop the light combat aircraft (LCA) Tejas. The projected order includes two squadrons (40 fighters) of the LCA Mark-I that the IAF has already ordered, and an expected five squadrons (100 fighters) of the LCA Mark-II, and another two-three squadrons (40-60 fighters) for the Navy.
The Tejas Mark-I is scheduled to obtain Final Operational Clearance (FOC) by the end of 2012. A fighter is granted FOC when ready for combat missions, with all its weapons and sensors fitted, integrated and tested. The IAF is worried that Tejas, already long delayed, might not obtain its FOC on schedule.
The Tejas Mark-II, to be developed by 2014, will roll off production lines by 2018 and will reportedly perform 40% better than the Tejas-I.

The Tejas Mark-II, to be developed by 2014, will roll off production lines by 2018 and will reportedly perform 40% better than the Tejas-I. After this would come the Advanced Medium Combat Aircraft (AMCA), which the DRDO says will be a “fifth-generation plus” fighter, more formidable than anything flying today. The DRDO claims the AMCA will be technologically ahead of the FGFA when it enters service at the end of this decade.
All of these would require highly sophisticated and efficient platforms for production, which are not yet there. Even if the setting up of these platforms begins now, it will take three to four years to test and sort out their glitches. Aviation engineers say efficient platforms can help sort out design problems, too, in a short span. This is crucial because the DRDOHAL customers, the IAF and the Navy, have a number of complaints about Tejas, for example. However, the Aeronautical Development Agency (ADA) designers claim that the “maintainability” of Tejas has already been established. Maintainability refers to how quickly and easily technicians can service and repair the fighter and how quickly it can get out of a hangar and into combat.
Of 200 “requests for action” or suggestions from IAF pilots and technicians for design changes that would ease maintenance, most have reportedly been implemented. Just 12-15 changes await implementation in the Mark-II.
For Tejas Mark-II, India has signed a $700 million contract under which the highly sophisticated engine will be produced domestically. This too involves establishment of completely new production lines.
The agency has sought to put at rest apprehension of further delay of the Tejas-II project on this count. It is pointed out that since the main subsystems of Tejas Mark-II will remain unchanged, except for electronics components, it will not need extensive flight testing, as most of its sub-systems will already have been test-flown on the Mark-I.
Unfortunately, even if the agency is able to deliver on the deadline, there remains a big question about the sustainability of the operation when India goes for production of FGFA, AMCA, multi-role transport aircraft, and the Sitara intermediate jet trainer.

With malice towards all

Despite his venom, the erudite doctor has been a crusader against corruption and a foreign policy helmsman

IN political circles, Subramanian Swamy – intellectual, economist, teacher and political maverick – sends a chill up the spines of even the high and mighty. His adversaries have reason to be extremely guarded. His name has become synonymous with a sustained crusade against corruption and the plunderers of national wealth. Perhaps there is none more suitable than the five-time MP from Mumbai, Uttar Pradesh and his home state, Tamil Nadu, for writing a treatise on how to make enemies and antagonize people.
Yet, the septuagenarian Swamy, a former Union minister who is president of the Janata Party and professor of economics at Harvard University, is often said to be a personification of paradox. The Tam Bam (Delhi politics’ moniker for Tamil Brahmins) is intriguing, acerbic and startling in his comments. He fires straight from the hip. And he has an elephantine memory, especially for scribes who pen uncomplimentary articles.
Unlike the majority of those in the political spectrum who steer clear of getting enmeshed in controversy, he has not shied away from taking up public causes and knocking at court doors for redressal. He has an instinct for fighting injustice. An innate rebel, Swamy has never studied law but likes to argue cases himself. He instinctively backs the underdog and is fearless in taking on the powerful, more so if they are in the saddle. It is, therefore, unsurprising that he has been on a sustained campaign against Congress president and UPA Chairperson Sonia Gandhi in the 2G scam.
Swamy alleged that two of Sonia’s sisters received kickbacks and sought the PM’s permission to prosecute the NAC Chairperson in a number of graft cases.

In April, Swamy alleged that two of Sonia’s sisters received kickbacks and sought the PM’s permission to prosecute the NAC Chairperson in a number of graft cases under Sections 11 and 13 of the Prevention of Corruption Act. A month later, he repeated the allegations. Characteristically, he lists corruption charges against important leaders before scribes with a knowing grin, implying that he knows full well that they will not be able to publish them.
He has been spearheading the 2G corruption probe for long, writing to the Prime Minister in November 2008 and following it up with four more letters seeking sanction to prosecute former Communications Minister A Raja. When there was no response from the Prime Minister’s office, he went to the Supreme Court. On November 27, 2010, he announced he was filing a criminal case against Raja in the Special Court for corruption cases with regard to charges of irregularities in the 2G Spectrum allocation. He also spoke of naming other beneficiaries in the scam under Section 319 of the Criminal Procedure Code.
The Supreme Court took Swamy’s complaints on record. According to the Comptroller and Auditor General (CAG), the 2G scam caused the exchequer a loss of Rs 176,379 crore. But Swamy disputed the CAG’s methodology and said the amount would be about Rs 60,000 crore. He suggested the Centre reauction the 2G Spectrum licences after the Supreme Court issued notice to the Union government and the 11 firms involved.
The BJP did speak about the 2G affair but did nothing about it. Swamy felt he should move as it was a case of monumental corruption. And what followed is a historic development in independent India.
Another prominent aspect of his career has been his blow hot, blow cold relationship with AIADMK supremo and Tamil Nadu Chief Minister J Jayalalithaa. In the early 1990s, he ran a campaign to oust her from chief ministership. In June 1997 he put it behind him and struck an alliance with her, which culminated in his influencing her to send the BJP government packing. But the manoeuvre cost her dearly, and she distanced herself from him in July 1999. Once again, he became her sworn enemy.
The Tam Bam (a moniker for Tamil Brahmins) is intriguing, acerbic and startling in his comments. He fires from the hip. And he has an elephantine memory.

There was yet another instance of a volte face when he helped Jayalalithaa to fight corruption cases against her. Now he has made her order registration of a criminal case against former Chief Minister M Karunanidhi on allotment of plots beyond the CM’s discretionary quota.
As for other political friends, despite giving the impression of being anti-Congress, it is no secret that he respects and likes Prime Minister Manmohan Singh. He also supported Rajiv Gandhi when the latter’s popularity ratings as Prime Minister plummeted and enjoyed a good equation with PV Narasimha Rao when he was PM as well. He acknowledges Manmohan’s selection of him as a lecturer for the Indian Institute of Technology in New Delhi despite stiff resistance from the Left parties and rues the fact that the Left ultimately succeeded in ousting him from the post.
A maverick to beat all mavericks
BORN on September 15, 1939, Subramanian Swamy earned a doctorate in economics from Harvard University in 1964. Those in awe of him describe him as a political leader with a difference. He published his first book in 1971, presenting an alternative economic strategy for the country. He has jointly authored papers with Nobel Laureate Paul A Samuelson on the Theory of Index Numbers. Swamy was greatly influenced by Jayaprakash Narayan. His return to India was influenced by a chance meeting with JP, who spent three days with him at Harvard. He began his political career as a member of the Jana Sangh in 1973. Four years later, his party merged with the Janata Party. In 1979 and 1980, when the Janata Party split twice, Swamy became one of the few founding leaders who remained with the original party in the face of desertions, risking political exile. He has been in politics for nearly four decades, entering Parliament through the Rajya Sabha from UP the first time in 1974. In 1977, he made his debut in the Lok Sabha, representing North-East Bombay for two consecutive terms. He shot into prominence during the Emergency in 1976. Despite being Most Wanted by the police, he escaped abroad to organize overseas Indians against the authoritarian rule back home. In August that year he returned undetected and made a dramatic appearance in Parliament to make a “point of order”. He slipped out of the country again, demonstrating that the security system in even the authoritarian regime could be breached with impunity. Since 1990, he has been president of the Janata Party. He has also proved his administrative abilities, overseeing the Ministries of Commerce, and Law and Justice. He simplified trade procedures and formulated a new export strategy which became the forerunner of the trade reform adopted subsequently. In 1994, he was appointed by then Prime Minister PV Narasimha Rao as Chairman, Commission on Labour Standards and International Trade, with Cabinet Minister rank.

If he believes in Hindutva, it is not the hardcore variety pursued by the Rashtriya Swayamsewak Sangh (RSS) – which he calls anti-national and whose dissembling he seeks in the nation’s interest.
Swamy has also played a noteworthy role in reorienting India’s policy towards China from hostility to cordiality. He met Deng Xiaoping and was instrumental in persuading Beijing to allow Indians to travel to Mansarovar in Tibet. In 1982, he became the first Indian political leader to make a publicised visit to Israel where he met Yitzhak Rabin and then Prime Minister Menachem Begin. He took up the cause of having diplomatic relations with the Jewish state. It bore fruit in 1992, when India and Israel opened embassies in each other’s countries.
A prominent aspect of his career has been his blow hot, blow cold relationship with Jayalalithaa. In the 1990s, he ran a campaign to oust her from chief ministership.

IN 1978, Swamy was a member of the Group of Eminent Persons called to Geneva to prepare a United Nations Conference on Trade and Development (UNCTAD) report on Economic Co-operation between Developing Countries. Early in his career, in 1963, he had served for a few months at the United Nations Headquarters in New York as Assistant Economic Affairs Officer.
Even though politicians, across the spectrum, are wary of Swamy, they are quick to acknowledge that he is scholarly, sharp and a man with a purpose in life even if it means bashing one and all. Jurist Ram Jethmalani remarked last year that Swamy’s life has been one of character assassination, malicious mendacity, and sordid blackmail of anyone who happened to cross his path. Nobody had been able to deflect him from his criminal course of conduct, said Jethmalani, because few have the “inclination to take on the vicious viper”. To make mean attacks on those who, in good faith, had helped him in life had been Swamy’s speciality and behind all this evil was the frustration of not becoming Prime Minister, added Jethmalani. Swamy remains unfazed.

‘Grants have been utilized for visible development’

interviewed by Venu Gopalan

A 2001-batch IAS officer of the Karnataka cadre, Darpan Jain had qualified as a mechanical engineer. He was Assistant Commissioner in Yadgir and then Deputy Secretary (Budget & Resources) in the Finance Department of the Government of Karnataka. His association with Dharwad began when he was appointed Chief Executive Officer, Zilla Panchayat, Dharwad. He became Deputy Commissioner of Dharwad in June 2008.
gfiles: What major initiatives did you take after becoming Deputy Commissioner of the Hubli-Dharwad Municipal Corporation?
Darpan Jain: I came here as Deputy Commissioner in June 2008. Hubli-Dharwad is mostly an urban district. After Bengaluru, it is the biggest municipal corporation in Karnataka. It is big regarding both population and area. It is a city which has a good potential for trade, commerce, industry and agriculture. It is necessary to promote trading connectivity within the State and neighbouring Maharashtra. If we provide better facilities here, the investors will automatically turn here for investment. How to achieve this goal was an important question. While studying the infrastructural needs of the district, I found three or four major requirements. First, we decided to acquire sufficient land for upgradation of the airport, as it is the only airport in north Karnataka that links with Bengaluru. Recently, a Belgaum-bound flight has also been started to connect with Mumbai. Earlier, Dharwad used to be a part of Bombay Province. That is why the district has a good number of Marathi-speaking people. At present, this airport handles only ATR flights, which carry less passengers. The runway is very small, on only 300 acres. For Boeings to land, another 700 acres are required. The State government decided to acquire land. It is the first major achievement for us.

gfiles: The region is known as the business capital of Karnataka. Airport expansion is all very well but how will you develop infrastructure for the aam aadmi in this hitherto backward district?
DJ: The big airport will ensure better connectivity. Only one airline has ATR flights so traffic is limited now. After upgradation of the airport, cargo and large passenger aircraft can also land here. Air India is ready to provide services. This is an important spot, Goa is very near. The road to Goa is in bad shape. There is another route via Karvar, which requires a fivehour journey. There too the road is narrow and in bad shape. If those roads are upgraded, the journey will reduce to three hours. Another thing is that Goa has reached saturation point. There is shortage of parking space. The condition of hotels and lodges is pathetic. If Hubli airport is upgraded, it will boost the transportation business. This will also increase investment in hotels and other related business activities. Tourists will be able to utilize these facilities to reach Goa quickly and return here for stay.
Another important piece of work we have taken up is the beautification of the twin cities. They form the largest city after Bengaluru, even larger than Mysore. The State government provides huge funds for Mysore. However, the Hubli-Dharwad region is not getting any special funds. Whatever grant we have received from the government has been utilized for visible development. We did not go for small roads, as it would not benefit the maximum number of people. We started the renovation of major roads and parks. Most of the big roads were in poor condition.
The twin cities have a number of lakes, but they had been ruined due to encroachment and debris. They existed on maps, but virtually could not be seen. The people of Hubli and Dharwad get drinking water from two tanks – Unkal sand Kengari.

gfiles: Who maintains these lakes?

DJ: I want to tell you the advantage I had when the government sanctioned the city grant in 2008. The Deputy Commissioner was put in charge of the grant. The grant is basically utilised by the District Committee and the Deputy Commissioner is secretary and district in-charge. The Minister is chairperson of the Committee. I had freedom and flexibility to complete the task. I have reserved sufficient funds for these projects. The funds have not been diverted to small works. Two-thirds of the renovation and cleaning of the lakes is complete. The Tolan lake of Hubli has been desilted. We have cleared encroachment also from there. Jayanagar lake in Dharwad was also in the same condition. The lake in Patankere, the birthplace of Jnanpith awardee DR Bendre, had been converted into a garbage dump. Now it has also been desilted. We have built a musical fountain there, which was inaugurated by Chief Minister BS Yeddyurappa. The Merrakan betta hillock, from where one can see entire Hubli city, had also become a dumping yard for waste. We have developed it in association with the Tourism Department. Now people are enjoying this place. We have improved the condition of the Indira Gandhi Glass House Park also.
‘The twin cities have a number of lakes, but they had been ruined due to encroachment and debris. They existed on maps, but virtually could not be seen.’

gfiles: You say that most of Unkal lake is free of encroachment, but encroachment is still to be seen.
DJ: No, there is no encroachment there now. The lake has been improved not only for recreation, it also maintains the ground water level which has ecological advantage. The lake should not be treated as a drainage water store.

gfiles: What have you done to ensure that the lake’s water is not contaminated by drainage water?
DJ: We have diverted the drainage water out of the city and there is a two-level sewage pipeline now. This water will not go to the lake now. However, whenever there is heavy rain or a flood, the rainwater may flow towards the lake. Now we are planning to use the sewage water treatment technique. This will cost Rs 150 crore – Rs 100 crore for Hubli and Rs 45 crore for Dharwad. We also plan to cover the open drain. Both Hubli and Dharwad have an open drainage system, which is not good for the health of the peo le. It is due to this open sewage system that the urban development department of the Central government does not recognise it as a good city.

gfiles: You did beautification of the cities, resolved the sewage water problem, but the problem of drinking water is still unresolved. People get water only once a week. How will you resolve this problem?
DJ: Yes, this is a major problem. We are taking concrete steps to provide round the - clock drinking water. We are sure of getting water supply from Soudatti river (Belgaum) and Malcauva project. Now the main thing is to have the distribution network. We have constructed an overhead tank and ground reservoirs.
‘The big airport will ensure better connectivity. Only one airline has ATR flights so traffic is limited. After upgradation of the airport large passenger aircraft can also land here.’

gfiles: The condition of the roads is not up to the mark. Do you have any plans to widen them?
DJ: We plan to widen the road connecting the two cities into four lanes. The land acquisition process has begun.

gfiles: You are said to be acquiring agricultural land for it.
DJ: We have acquired both agricultural and non-agricultural land for it. We will not face much difficulty in this project as we do not require much land for it. Since this road is necessary for promoting trade and commerce, we have approached the Planning Commission for more funds. The cost is Rs 150 crore. There is another important problem, that of traffic decongestion. There is heavy traffic from Gadag and Bellary districts and it passes through Hubli. We plan to divert the traffic through a by-pass. At present, there is no by-pass from Gadag, Bellary and Bijapur. These are national highways. We are making Greenfield Road, NH 4, 218 and 63, which pass through Hubli.
Another requirement in Hubli is to minimize truck congestion. Hubli is a major trade centre and there is no truck terminal here. A truck terminal will be built in Dharwad on eight acres. We are also planning a truck terminal in Hubli. The required land has been located. The State government has also given the nod. We have developed infrastructure in smaller towns also.

gfiles: Hubli-Dharwad is famous for literary, art, music and cultural activities. What are you doing to promote them?
DJ: The district has a global identity in Hindustani music. Dharwad is the birthplace of the legendary vocalist, Gangubai Hangal. She was born and died here. We have so many projects. We have developed a Hindustani music centre in her name. It is run as a gurukul, following guru-shishya parampara. This institute has attracted international attention. It has nationally renowned scholars of Hindustani music and has 36 students.

gfiles:How did you develop the gurukul concept?
DJ: It was the dream of Dr Hangal. We have only turned it into reality. We have built so many art and culture bhavans in Dharwad. In Savankere we constructed a theatre. Two major parks have been built in Dharwad and Hubli. We are providing a platform for folk artistes also. This is the rich heritage of the city. Dharwad has had legends like Pandit Bhimsen Joshi, who hailed from Gadag, Basav Raj Rajguru, Sawai Gandharva, Mallikarjun Mansoor, and so on. We have built memorials to convey a message to future generations. In Navalgund taluka we are constructing an aadi kavi pampa smarak.

gfiles: What is being done for women’s empowerment?
DJ: Apart from taking steps to improve the male-female ratio in the district, we are imparting training for self-employment. The ratio of female births has subsequently improved. We are conducting several programmes to activate a selfhelp group. We are providing assistance so that they can stand on their own feet. We are trying to implement programmes relating to infant mortality and maternal mortality.

gfiles: When encroachments were removed, there was no opposition from political leaders and the affected people. Nobody approached the court. How did you manage that?
DJ: Usually, in such cases, people approach the court. However, in this development-oriented work no political hurdles were created and not a single person approached the court. Before starting any development work in this region, we maintained transparency between the people and the department. This mantra of transparency produced positive results.