Round The World

New Delhi, 10 September 2008

NSG Clearance To India

END OF NUCLEAR APARTHEID

By Prof. Chintamani Mahapatra

School of International Studies, JNU

After a hard diplomatic struggle, the Nuclear Suppliers Group reportedly gave a clean waiver to India to the full satisfaction of the Manmohan Singh Government. The opponents of the Indo-US civilian nuclear cooperation initiative, however, continued to find fault with the outcome of the NSG deliberations.

The main point of contention at Vienna among the NSG members was, of course, related to a possible nuclear test by India in the future. The group of six, consisting of Austria, New Zealand, the Netherlands, Switzerland, Ireland and Norway wanted strict conditionality in the waiver provisions to prevent any further nuclear test by India.

It was actually not easy for either India or the United States to convince these countries to give a clean waiver to India and accept the draft prepared by the US in consultation with India. Austria and Switzerland, for instance, are industrially developed countries which have traditionally followed a policy of neutrality even during the prolonged Cold War.  They are not members of the North Atlantic Treaty Organization nor are they great economic partners of the United States.

The Netherlands is a NATO member, yet a promoter of strict non-proliferation and Amsterdam decided to side with the minority of holdout countries opposing the US draft. Ireland is a close trade and investment partner of the United States. American investment in Ireland is more in dollar terms than India, China, Russia and Brazil combined. It was still not easy for the US to use its leverage until the last moment. Norway has minimal stake in India. It is not an energy starving nation and hardly realizes the energy requirements of India.

New Zealand was the real tough nut to crack. It entered into a trilateral strategic alliance with Australia and the US in 1951. The Labour government in 1985 used its non-proliferation principle and demanded that the US ships passing through its territorial waters must declare the nuclear status. The US, as a matter of principle neither affirms nor denies information about its carrying nuclear weapons. New Zealand was prepared to lose the benefits of the ANZUS alliance rather than alter its non-proliferation policy. It has not returned to ANZUS until now.

There is little doubt that hard bargaining and skillful diplomacy by the US and the UPA Government’s cooperation brought out the consensus at Vienna. One of the important developments that impacted upon the deliberations was the leak of a letter written by the White House to the Congress in reply to a host of questions raised by the American legislators regarding the nuclear deal. A large number of questions were on the credibility of the 123 agreement in promoting non-proliferation. There were apprehensions that the nuclear deal with India would enhance India's nuclear weapon capability.

The 26-page letter tried to convince the US legislators that the Presidency was committed to non-proliferation; that the 123 agreement with India would in no way increase India's weapon capability; that US civilian nuclear cooperation would end in the eventuality of an Indian nuclear weapon test. Expectedly, when this letter was made open to public, Indian opponents of the nuclear deal raised a hue and cry. Their main argument being that the Prime Minister's assurances to Parliament were negated by this letter.

Ironically, the same letter worked wonders at the 45-member NSG meet. It convinced many suspicious members that the Bush Administration was in no way rewarding India with sophisticated technology to improve its nuclear arsenals. It facilitated negotiations with the members by highlighting the non-proliferation and environmental aspects of the nuclear deal and the need to security clean energy.

Meanwhile, the Manmohan Singh government explained to its public that it was not bound by the content of a letter exchanged between the two branches of the US Government and reiterated that what mattered was the letter and the spirit of the 123 agreement. Around the same time, Foreign Minister Pranab Mukherjee issued a suo moto statement on the country’s nuclear policy aimed at the NSG member countries. He reiterated the no-first use of the nuclear weapon pledge. He also re-emphasized the self-imposed moratorium on nuclear testing. Moreover, Mukherjee stressed the export control mechanism put in place through appropriate legislations and also indicated that despite being a non-signatory to the NPT, India has had a robust non-proliferation record.

Clearly, these two developments had an impact on a large number of NSG members, but a few holdouts appeared headstrong. It was argued that the NSG waivers to India should have more explicit provisions to ensure against any future nuclear test by India; and that any nuclear explosion by India would automatically end nuclear cooperation of member countries with it.  

Every one knew that such provisions would be considered in India as a red rag to a bull. That implies that some interested parties were seeking to derail the whole process to the disadvantage of India and the US. One such suspect turned out to be China. A report on the Chinese government-sponsored People's Daily first made a critical comment on the Indo-US nuclear deal. At one time, the Chinese delegate in Vienna threatened to stage a walk out. Another source of opposition came from the non-proliferation lobby of the United States. Pakistan was most likely lobbying against the deal, though relatively quietly.

Once the consensus was reached after top-level political interventions by Washington, there was expected unhappiness in certain quarters. What was not expected was yet another round of strong reactions against the nuclear deal by the opponents of the deal in India. In the end, the communists and the nationalists should have respected the majority support in Parliament to the deal. To the contrary, some of them continue to call it a sell-out. Others characterized it as surrender of national sovereignty. None other than the Government could point out that the NSG waiver spelled the end of nuclear apartheid against India after a span of more than three decades! ---INFA

 (Copyright, India News and Feature Alliance)

Round The States

New Delhi, 10 September 2008

Small Nano, Big Hurdle

INDUSTRY WARY OF POLITICAL SHENANIGANS

By Insaf

The Singur siege may well be over officially, but it has done its damage and set a bad precedent for the industry, at least in West Bengal if not elsewhere. For one, it is uncertain whether the Tatas will still roll out the wonder car, Nano from there or go to other plants in Uttarakhand, Karnataka or Maharashtra. Two, IT major Infosys technologies is “rethinking” its maiden investment plan in the State as it has seen the “political parties intimidating top businessmen, stopping people from work, blocking national highways and even non-enforcement of high court order…” Three, there is bound to be resistance to land acquisition for future plants, particularly power plants in the backdrop of the nuclear deal going through. On Monday last, Bengal Governor Gopal Krishna Gandhi brokered a deal between Chief Minister Buddhadeb Bhattacharjee and Trinamool Congress leader Mamata Banerjee, ending the Singur siege by the latter.

The compromise, “land-for-land” worked out is: land would be given to farmers who did not take financial compensation for the land acquired for the Nano plant and the Vendor’s Park. The Government would part with 47.11 acres land belonging to the West Bengal Industrial Development Corporation within the factory compound. And, this according to the Government would in no way affect the Tata factory or the Park. However, the Tata’s are firm that they will not part with any land from within the Nano complex. Moreover, they want a firm assurance that there would be no more political blackmailing and disruption of work before they resume production at the factory premises. Else, this would be the end of the road for the Nano in West Bengal.

Other than Singur, three other States, Orissa, Meghalaya and Andhra Pradesh have raised the ante on popular resistance to land acquisition. If a car project has the farmers of Bengal all ‘revved up’, the steel plant with South Korea’s Posco has disconnected the land-owners in Orissa, who refuse to part with their land. With land required for nuclear power plants the government will need to tread carefully, as there would be resistance from people because of the radiation risks. Thus, solar power plants could be an answer. However, they require huge areas--running into thousands of acres. Can either the States or the Centre acquire the requisite land easily? Andhra Pradesh and Meghalaya have already given the signal--opening of new uranium mines in these two States has been put on hold thanks to protesting villagers as they do not trust Government assurances. Looks like, the industrialists may join the no-confidence club. 

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Assam Angry With PM

Prime Minister Manmohan Singh’s recent visit to Assam with an eye on the next Lok Sabha poll has left the indigenous people of the State unhappy, even angry. They are glad that the PM laid the foundation stone of the Jorhat Medical College and announced an education package with proposals to create world-class educational institutions in the State --- a world-class university, an institute of petroleum technology and a national design institute on the pattern of the well-known National Institute of Design at Ahmedabad. Importantly, however, the PM failed to address the core issues facing the State: illegal infiltration, increasing terrorism sponsored by Bangladesh and initiation of the dialogue process with the ULFA. They expected the PM to deal with these issues against the backdrop of the recent observation by the Guwahati High Court that Bangladeshis had already become “kingmakers” in Assam. What is more, Pakistan’s ISI is pushing ahead with its design to establish a Greater Islamic State of Bangladesh including Assam. This, according to the Guwahati High Court, is a most serious threat that faces the State and its indigenous people.

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Will Sheila Dixit Create History? 

Is Delhi Chief Minister Sheila Dixit poised to create history? Political pundits answer may well be in the affirmative, given the possibility of her steering the Congress for another five-year rule in the Union Capital. Come November, Delhi along with five other States goes to the polls. The soothsayers’ confidence is based on three factors: One, Congressmen do need her given her sober image. Two, she is their best bet amidst the warring factions. Notwithstanding, daggers against her once elections are over. However, her ‘Party’ could well be over if her detractors within (Sonia’s Political Secretary Ahmed Patel) succeed in putting a spoke in her winning wheel. Three, the BJP is in total disarray. Its Prime Ministerial candidate Advani, has made no impact and it has yet to find a counter to Dixit.  All eyes are on which way the poll wheel turns!

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Madhya Pradesh too is abuzz with who will be Congress supremo Sonia Gandhi’s favourite for Chief Ministership in the forthcoming Assembly poll. Will it be the Union Commerce Minister Kamal Nath, who is backed by AICC General Secretary Digvijay Singh. The former two-terms Chief Minister has made plain that he is not in the running. Raising a moot point: Is it pay back time? Recall, without Nath’s backing Singh might not have been Chief Minister. However, Nath would need Sonia’s “compulsory blessings” After all, it was thanks to her that Diggy Raja, was ‘blessed’ with the all-important General Secretary-ship, despite losing the State elections. Not a few Congressmen aver that Sonia would plumb for MPCC Chief Suresh Pachouri, regardless of popular sentiment. As she did in Chhattisgarh, when Ajit Jogi was made CM despite open rebellion by State satraps. 

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Meghalaya Mosque Opens To Women

Meghalaya has earned the distinction of being the first State in the region to allow women into mosques to worship alongside men. Last Friday, the special Ramzan aazan in the Idgah Masjid in Lalban area of Shillong witnessed a mixed congregation, with a number of women with headscarves offering prayers. The mosque, which has been built by Shillong Muslim Union (SMU) divides the male and female section with a curtain. Many are happy that a beginning has been made. Said the Masjid’s General Secretary: “It was a distant dream for us, but we achieved it…So long women were given the status of a mother and daughter, but they should be given the right to pray.” The ball is now in the women’s court. Will this be followed in other matriarchal societies and elsewhere in the North-East?    

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Camel Care In Rajasthan

By year-end Rajasthan should have its first well-equipped hospital exclusively for the ‘ship of the desert’--the camel. A rescue centre, 24-hour free treatment, including hospitalization and operations, is envisaged at this hospital, to be set up at Bassi, on the Jaipur-Agra highway, by an animal welfare organization, Help in Suffering (HIS).   Camels, says the HIS are largely afflicted with saddle soars and nose peg wounds. Already, the NGO is busy educating camel owners on management practices to help keep their animals healthy. Other than distributing free plastic pegs to avoid the wounds and soars, a custom-made hydraulic ‘camel ambulance’ is doing the rounds. Besides, a Swiss and French NGOs have promised funds for camel welfare. It’s goodbye to the last straw that broke the camel’s back---INFA 

(Copyright, India News and Feature Alliance)

Economic Highlights

New Delhi, 11 September 2008

Pay Panel Gains

CUT  TAXES TO BENEFIT EMPLOYEES 

By Shivaji Sarkar

Government employees are upbeat over the Sixth Pay Commission report, little realizing that more than them it is the Government which is the main beneficiary. Of the Rs 16,000-crore benefit that the panel is supposed to give over Rs 5,300 crore would go back to the Government by way of income-tax at 33 per cent alone. In fact, some employees would now be subjected to an additional tax as their salaries would touch the Rs 10-lakh per annum mark.

In its latest report, the Reserve Bank of India has come up with the desired suggestion of reducing the income-tax rate and raising exemption limits, for increasing the disposable income and ease inflationary pressure. The high inflation rate, around 13 per cent on wholesale price index (more on the basis of consumer price index) has already eroded substantial part of the pay panel benefit. The taxes would eat up the rest.

It is well-known that wage revision is undertaken primarily to neutralise the effect of price rise. One, it is dearness allowance component which takes care of it marginally. Two, it keeps the market going at an even pace. For with higher wages one is expected to increase purchases and help other sectors of the market.

It is no secret that the market is highly depressed owing to high inflationary pressure. Industrial growth too has slid. “There are also some downside risks to the industrial growth momentum during 2008-09”, admits the RBI. Growth in other sectors too has fallen including infrastructure, power and the core sector. Thus raising, what RBI says are “apprehensions regarding sustainability of industrial and manufacturing growth”.

Clearly, the central bank is concerned that inflation has eroded the disposable income of the middle-class, supposedly the “engine” for overall growth. It has, in no uncertain terms, expressed concern that the Government has not taken any step to rectify this and is circumspect on the benefit to the market of the so-called ‘higher wages’ of Central Government employees. Moreover, the RBI is wary that as the salaried class is in a tight spot, it may default on repayment of EMIs and pose a risk to the banking system.

In the face of the above, the RBI has thus vociferously suggested “adjustment” – the bank’s euphemism for reduction – in the income tax and excise duty for increasing the disposable income of the middle-class. “It may have a possible impact on consumption demand for industrial goods,” is the RBI’s guess. 

In all fairness, higher salaries were expected to surge other economic activities. But with the government policy eating into the kitty itself, that opportunity is lost. Therefore, it is time the Government has a re-look at its tax policy. The taxes, be it corporate or personal income-tax, remain at a very high level. Over the years, big time industrialists--Rahul Bajaj, Arun Bharat Ram or Sanjiv Goenka, Nusli Wadia, or Ajay Piramal-- have expressed concern over the high tax regime. There is unanimity that high taxes only lead to avoidance and evasion. And yet our Government has unfortunately not tied up the taxes with its liberalisation policy.

Moreover, often taxes are unproductive and unimaginative. The answer lies in lowering the taxes and abolishing the personal income tax, which unfortunately has come to be known as the “impoverishing tax”. The Kelkar committee had estimated that 48 per cent of the direct tax collected goes into tax administration! It is certainly one of the most expensive systems of realisation of resources. Any corporate would simply go bust at this kind of a cost.

Let’s study the scenario. Today, there are more I-T commissioners and naturally the administration costs have gone up. In addition, the income-tax department has started spending on decorative and unrelated activities. As such, the Government not only needs to review the size of the department but also prune it. This apart, extra staff in a department means not so clean operations, as some instances have shown.

Many a times the large official force ends up causing harassment to the public simply because it is under pressure to justify its existence. This again adds up to the cost. Then there are the subsequent litigation and appeal processes, which too are a burden on the economy, other than causing loss to productive man hours. The cumbersome I-T rules only make the process more difficult. A Mahabharata of rules are eventually added every yea and each has several interpretations.

In the past, the Government has had the experience of overall higher tax accrual following tax rates being moderated from 97 per cent to 33 per cent. This meant an erosion of over one-third income in direct tax. And, there are umpteen cases of indirect taxes, which rob an average Indian of almost another 40 per cent of his/her income.

Thus, it is crystal clear: tax rates need to be cut. Finance Minister P Chidambaram must examine the pros and cons of a high tax regime carefully, so that all the money that is being generated is gainfully utilized and not burnt up. The Government should, in fact bring it down to the level of five per cent for an income up to Rs 5 lakh a year and beyond that to a maximum level of 10 per cent. Even the corporate incomes should not be taxed at more than 15 per cent.

Let’s face the fact that if the taxes were low, people would voluntarily prefer to pay rather than avoid these. At the same time, the Government’s coffers would get bulkier as more and more people would be integrated with the system. As of now most taxpayers are out of it and the taxmen are well aware. 

What is being suggested is no revolutionary step. It only makes the tax system more imaginative, less exploitative and interwoven with market realities. At the end, an affordable tax regime would reduce the cost of tax policing, boost the market and bury   inflation. –INFA

 (Copyright, India News and Feature Alliance)

Events & Issues

New Delhi, 16 September 2008

Acquisition of Land

Whose Interest Does it Serve?

By Dhurjati Mukherjee

The demand for land has been increasing with industrial projects and urbanization growing at a very fast pace. Many States have witnessed violent clashes over land acquisition and the recent-most case being that of Singur, in West Bengal. There have been protests in Mumbai and Pune as land was acquired at prices much below market rate for a 1,000 hectare multi-product special economic zone (SEZ) to be set up by Videocon.

Farmers’ struggles against SEZs have come to the fore also in Raigad, Rajuranagar, Karla and Aurangabad in Maharashtra and many other States. In fact, from Niyamgiri Hills in Orissa to the Western Ghats, from Punjab to Karnataka and West Bengal, huge industrial projects are fighting local resentment, bureaucratic bungling and political brinkmanship.

The States are desperate to carry forward the industrialization process and are vying with each other to make available the best possible land at cheap rates to corporate houses to attract them. Even fertile land is being acquired for the purpose and worse the compensation is far from satisfactory, in fact much below market rates. Moreover, in some cases the poor farmers and their families are deprived of not only their livelihood but are thrown out of their shelter, where they resided for decades.    

The SEZ syndrome has aggravated the problem further as corporate houses prefer setting up units in such zones where no law of the land applies – no labour law, no environmental law and no panchyati raj law. It may be mentioned that SEZs were created in 2006 through the SEZ Act of 2005 which allowed the government to appropriate farmers’ land and hand it over to corporations.  

The justification given for land acquisition by most States is to gear up industrial growth as agriculture has become unproductive and cannot look after the economic needs of such large population dependent on it. But though political leaders talk of acquiring of non-productive and barren land for industrial use, in practice, however, they acquire the land that the corporate house had identified which is obviously in a convenient location. 

The theory of increasing revenue from industrialization and achieving high growth of the GDP is the ultimate objective before the Government, even though it may have to be achieved by displacing and killing people. Though there is much talk of strengthening agriculture and eradicating poverty at various seminars and conferences, these seem only to misguide the people and make headlines in newspapers. The corporate lobby, which is hand-in-glove with the political leaders, is extremely strong and would go to any extent of acquiring land, even if it may be multi-crop.

A section of so-called western educated experts, who have little idea about rural India or the land-man ratio or the average income of rural households, justify the takeover of such land on grounds that it would facilitate faster industrialization and strengthen the State’s economy. Wanting to be magnanimous enough, they would talk of rehabilitation but have no practical idea of how difficult it is for a family, ousted from its roots, to earn its livelihood in a new place. In the global quest for globalization, for faster industrialization and for increase in profits, some people at the lowest rung of the ladder may have to sacrifice their lives, either due to starvation or hunger or because of displacement.           

The huge land requirement for SEZs all over the country obviously involves displacement of thousands of farmers, and this has become a subject of intense debate among politicians, businessmen and social activists. This has to be viewed in the present context of the need for using agricultural land for enhanced food production keeping in view the rapid growth of population and the somewhat stagnant growth of cereal production. Historian Sumit Sarkar aptly observed that SEZs could become “the biggest land grab movement in the history of modern India”. Both the Congress and the Left are perturbed with such a definition, since displacement of farmers could be politically costly, specially for the former, on the eve of ensuing elections.

The recent spurt in food prices in the Third World countries is a pointer to the emerging crisis. In India imports have been increasing and the chairman of the National Commission on Farmers, Dr. M. S. Swaminathan, in his report, has called to conserve farmland only for agriculture and not for diverting it for non-agricultural activities, such as setting up of SEZs. He has also rightly urged the formation of an expert committee at the State level to identify waste and non-fallow land, which can be used for industrial purposes. Regrettably, nothing has been done so far.

The Parliamentary Standing Committee on Industry’s report last year (August 2007) suggested that the Government should explicitly ban the acquisition of double-crop land for building zones in the rules to the SEZ Act. Even single-crop rain-fed land should account for 20 per cent of the area covered by a multi-product zone, the panel, headed by Murli Manohar Joshi observed. It significantly also recommended that the ceiling on cultivable land be reduced to 2000 hectares and there should be a freeze on notification of new duty-free enclaves till the policy is reviewed. This apart, it sought that 50 per cent of the area be used for as processing zone.  

One may mention here that, according to the Central Statistical Organization (2002), India has 18 million hectares (44.5 million acres) of cultivable wasteland and 25 million hectares (61.7 million acres) of fallow land. Taken together, it accounts for 43 million hectares (106.2 million acres) of both cultivable waste and fallow land. Obviously, there is enough such land available for industrialization. Instead of setting up SEZs on multi-cropped land, it would be judicious to use waste and fallow land.

But probably gauging the defiant mood being manifest in Bengal, Haryana, Maharashtra and Orissa, the Government has taken a few steps to help its own case. The Centre has announced that all land has to be acquired with the consent of owners and the ceiling for all SEZs would be 5,000 hectares (12,500 acres). But it needs to be further reduced to 2,000 hectares, as recommended by the Parliamentary Standing Committee on Industry. Moreover, the minimum processing area for SEZs has been raised to 50 per cent (from the earlier 35 per cent). However, what is most significant is the decision that “no State can compulsorily acquire land (for an SEZ) from farmers through the Land Acquisition Act”. However, we see acquisition of land continues unabated. 

Worse, no serious thought has been given to the actual plan of rehabilitation of farmers and of ensuring sustainable livelihood for the displaced families. Though Dr Swaminathan and various development experts and planners expressed apprehensions, little has been done. It is now imperative that recommendations on land acquisition should clearly include: fallow or wetland acquisition instead of farmlands for takeover purposes; a ban on multi-crop land takeover; single crop land preferably should also not be taken unless really needed; no State government would ever acquire any land for private industry/SEZ; and a final rehabilitation and resettlement Act following the policy would have to be implemented at the earliest before making any move to acquire land in rural (or even urban) areas for industrialization/urbanization purposes.

Clearly, the trouble over land acquisition is becoming more acute as days pass by.  The political parties and the industry need to sit together and work out a decent formula to ensure that everyone turns out to be a beneficiary—the farmer, the industrialist and the State. ---INFA

(Copyright, India News and Feature Alliance)