EDITORIAL
HM’s posture
One has not
been able to fully understand the euphoria generated by
Hizbul Mujahideen’s recent assertions. In some
quarters these have been interpreted to mean as if the
militant organisation is prepared for the talks because
“war and dialogue can go together”. There are
well-meaning observers who have taken them as signalling
a change of heart on the part of HM. They expect New
Delhi to take HM on its word and extend an invitation to
it for joining the negotiations. It has not been
explicitly stated but the undercurrent seems to be that
it will be a major breakthrough if HM joins the Prime
Minister’s scheduled second roundtable in May in
Srinagar. There is no doubt that HM’s return to
peaceful ways will be good not only for it but also the
entire State. For our part we have always pleaded with HM
in these columns to mend its approach. There are two
reasons that have influenced our thinking. First, HM does
not achieve anything by setting its own house on fire.
Secondly, the loss of young persons under its banner in
encounters with the security forces makes the State
poorer. Therefore, a better course for it will be to test
its ideology by sitting across the table. Unfortunately,
however, its latest statements don’t vary in any
significant way from its previous declarations. If one
has a close look one will find that HM supremo Syed
Salahuddin has repeated all that he had said in the past.
It is not, for instance, for the first time that he has
remarked: “Not only Hizbul Mujahideen but also the
entire militant leadership would consider truce only if
the Indian Government acknowledges the disputed and
tripartite nature of Kashmir issue.” This is the
basic premise on which he has built his theory of
possible decline in violence with the progress in
dialogue process.
His view is: “In Afghanistan, Vietnam and other
conflict areas war and dialogue have run side by side.
Armed confrontation would automatically recede as serious
dialogue process moves forward.” How does this
indicate noteworthy difference in its fundamental
approach? Is it because he has hinted at carrying out an
exchange of ideas along with the “armed
struggle”? What can’t be overlooked is that
within a short span of Mr Salahuddin’s observations
HM has virtually reiterated its familiar stance. Its
spokesman Saleem Hashmi has described the ongoing
exercise between India and Pakistan as “useless,
futile and a waste of time”. He has expressed a
categorical view: “Those Kashmiri politicians who
have joined this process are not going to get anything
except breakfast, tours and media coverage because India
is not sincere in resolving this issue.”
It is only well known that HM is terribly cut up with
Pakistan at this juncture after having enjoyed its
hospitality and patronage for long. It has been taken
aback that Pakistan should have arrested its boss even
though for a brief period. This has followed
Pakistan’s clear instructions to its leadership to
maintain a low profile. We have never appreciated why a
“homespun” outfit should allow its wires to be
pulled from remote. One does not want to revel in
HM’s current discomfiture. It must move in the right
direction. But it can do that only if ceases to find
justification in violence.
Much ado
Certain
situations become clear in retrospect. The People’s
Democratic Party (PDP) was quite aggressive in the
Legislature in demanding the tabling of the inquiry
report on the Ghulam Nabi Lone assassination case. It was
quite understandable. There was a needle of suspicion
raised in the direction of its leadership. At least one
of its estranged leaders had suspected foul play and
openly aired his doubts which were echoed by members of
the family of the slain Minister of State for Education.
It is possible that the PDP had got a whiff of contents
and conclusion of the 100-page report prepared by Finance
Secretary Bharat Bhushan Vyas. Hence, its anxiety to
ensure that the air was cleared of stink the soonest
possible. It must be greatly relieved now that the report
is a public document. The timing of its release is also
opportune for, Lone’s Sangrama assembly constituency
is one of the four in the State where by-elections are
being held on April 24. The Vyas panel has ruled out a
political conspiracy in Lone’s killing at his
official residence in the high-security Tulsi Bagh area
in Srinagar on October 18 last year. Instead, it has
confirmed the popular impression that prevailed even at
the time that the primary target was Communist Party of
India (Marxist) legislator Mohammad Yusuf Tarigami. Of
course, there are no two opinions that there has been a
serious security lapse. How the well-armed militants
could have otherwise breached the cordon and headed
straight for Mr Tarigami’s office adjacent to
Lone’s official accommodation. The attack on the
CPI-M leader was repulsed but the assassins were able to
find another important target. It is on this point that
certain available observations made in the report assume
significance. For instance, it has indicated that the
situation could have been effectively tackled in the
beginning but the “Central Reserve Police Force
could not handle it as the degree and quality of response
was not adequate”. In spite of Tulsi Bagh being a
sensitive area “the outer wall of the colony was
broken, the personal security officers of VIPs had been
moving around in civvies making the distinction between
militants and policemen difficult and that the frisking
at Lone's residence was done by the CRPF when the job was
to be done by the security wing of the J&K
police.” The report has also pointed out that there
has been lack of coordination among various security
forces. Very rightly it has proposed that one specified
battalion of police or paramilitary forces should be
deployed for the security of one particular colony. It is
a sound suggestion and needs to be considered seriously
to make it easy to identify suspects.
There is another significant lesson to be drawn from this
episode. The temptation must be avoided to kick up dust
and jump to unsubstantiated opinions as and when a
dastardly murder takes place. The members of the
political class especially will do well to adopt a sober
approach. They must aim to address the core of the
issue.. The blame game in the absence of requisite
details is best avoided. Such precaution is called for
all the more in the suspicion-charged Kashmir region.
Pre-judging a case can be counter-productive and lead to
the creation of unhelpful haze.
Synergising
the energy sector
By P.S. Wahi
Newspaper reports
indicate that restructuring of
the petroleum industry has been
cleared by the prime minister a
high-level 'Synergy for Energy'
Committee has been constituted to
examine the issues in detail. It
is reported that the committee
has been asked to examine the
synergy aspects from among eight
options, namely, geographic
division based on the Chinese
model, companies stick to their
respective core competences, a la
the Japanese model, formation of
a holding company (with
representation from all oil
companies) that would act as an
international front for the
Indian oil industry, formation of
one large monolithic company by
merging all the existing
undertakings, setting up of two
giant undertakings, one led by
ONGC and the other by IOC,
formation of three large
conglomerates, two of them
dealing with oil and the third
handling gas and transport
infrastructure, the government,
as the primary shareholder,
taking on its pre-APM
(administered pricing mechanism)
role, specifically telling
individual corporations where to
invest; and continue with the
existing set-up.
The six-member advisory committee
constituted to look into the
restructuring is chaired by V.
Krishnamurthy and includes G.V.
Ramakrishna (former petroleum
secretary), Dr. Vijay Khelkar
(former petroleum secretary,
finance secretary), B.C. Bora
(former ONGC chairman), U.
Sundarajan (former BPCL chairman)
and G.K. Arora (former finance
secretary and India's
representative in the IMF). With
such high-profile persons in the
advisory committee, one is bound
to expect some well-thought-out
recommendations for adoption by
the government.
The option of dividing the
operational areas based on
geography is unlikely to result
in equitable distribution of
production and marketing assets.
As the volumes, sales and asset
values, revenues and profit
cannot be equitably divided, they
are not comparable. Whereas the
Western region, comprising mainly
Gujarat and Mharashtra,
contribute substantially to the
production and marketing assets,
the Northeast and Rajasthan would
not make significant
contributions.
Cross-border marketing, an
essential feature of competitive
oil marketing, is likely to lead
to undesirable practices, even if
not at the corporate level,
certainly at the operating and
point of sale levels. Arbitration
and litigation by government and
judicial authorities will rise.
The Japanese model appears most
relevant in the context of the
current level of operations. In
fact, in the past this model has
been adopted in some form and has
contributed significantly to the
growth of the industry, in
general, and improvement in
customer service, in particular.
One can argue that some sections,
such as exploration and
production (E&P), have not
performed well enough. In this
context one should not forget
that the Oil Coordination
Committee (OCC) played a
significant role in ensuring that
infructuous investments, at times
involving expensive duplication
of facilities, did not take
place. No one can claim that this
system was the perfect regulatory
mechanism. But so long it
existed; the OCC certainly played
an important role in ensuring
judicious distribution of scarce
resources.
The option of forming a holding
company can be introduced even if
the core competency model is
selected. This company can play a
similar and, perhaps, a more
effective role than what the OCC
did in the past. Every
participant in the holding
company will have the freedom to
express his/her views on any
proposal, be it investment,
expansion or diversification.
This will ensure that valuable
resources are put to judicious
use. The option of forming a
monolithic company is best
avoided. Currently, PSUs,
international players and the
Indian private sector are in
operation. More are likely to
emerge on the scene. Both
internal and international
competition will be the order of
the day, and to respond
effectively to the market needs,
speedy interventions on various
operational fronts, such as
production, distribution, sales,
pricing, packaging and
promotions, will be required. A
monolithic set-up can hardly be
expected to respond quickly
enough. In the past, there used
to be seven-eight levels through
which a file progressed before
approval was given and action
taken. Such delays will only
increase if a large oil company
is formed through the merger of
all existing players. What is
required is a lean organisation
with fewer levels of reporting.
Also, the number of regional,
divisional and area offices have
to be reduced and the remaining
restructured. With improved
communication facilities, the
existing organisational set-up is
redundant.
A more or less similar situation
will prevail if two big oil
giants, led by ONGC and IOC, are
formed. Private sector companies
will not be interested in such a
set-up, and this may also run
contrary to the established
principles of PSU management,
where public interest and social
responsibility is of utmost
importance.
Notwithstanding the option
finally selected, formation of
such an enterprise is an
excellent idea.
While the option of having a
holding company deserves serious
consideration, the last one of
continuing with the existing
set-up is best avoided,
particularly in the context of
"meaningless rivalry"
as the petroleum minister
recently highlighted. If this
option is exercised, rivalry
among the PSUs will continue,
leading to dilution of competence
and infructuous expenditure. The
image of the Indian oil industry
will take a beating
internationally too. INAV
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Service
Sector to the Rescue
Dr
Bharat Jhunjhunwala
India
was once an agricultural
country. No longer. The
share of services in our
national income is
54%--and increasing-while
that of agriculture is
22%--and declining. The
main reason is the
decline in prices of
agricultural produce.
Global population is
expanding slowly. The
demand for wheat and
coffee is stagnant. But
technological advances
like that of drip- and
sprinkler irrigation
systems and Bt Cotton
seeds have led to
increased production.
Furthermore, new
countries are entering
the global market with
their products. For
example, Vietnam has
emerged as a major
supplier of coffee and
pepper in the last
decade. Stagnant demand
along with ever expanding
supply has led to low
prices and decline in the
fortunes of agriculture.
Farmers in developed
countries have managed to
avert this fate to some
extent by using more
capital. One farmer may
cultivate hundreds of
acres of crops using
large tractors,
harvesters and
computerized irrigation
systems. It is not
economic to use similar
machinery in India
because labour is cheap.
The use of less capital
leads to lower
productivity of labour
and low wages for
agricultural workers in
India.
The incomes of those
dependent on agriculture
cannot rise for these
reasons. It is time to
shift them into the
services sector which
suffers less from these
problems. The potential
of the services sector
can perhaps be assessed
by comparison with
manufacturing. Presently
Varanasi and Kanchipuram
are famous for silk
sarees, Moradabad for
brassware, Jaipur for
jems and jewelry, Surat
for diamonds, Sivakasi
for firecrackers and
Kolkata for jute bags.
Any one of these
industries may not
provide employment to
more than a few lakh
persons. But the combined
employment in all such
industries is large. Our
agricultural sector has
made a similar
specialization-Bengal has
specialized in the
production of tea, Ranchi
of papaya, Nasik of
onions, Khandwa of soya
beans, Mandya of silk,
Gulbarga of grapes, Solan
of flowers, Kalimpong of
orchids and Wayanad for
the production of pepper.
The services sector
follows the same pattern.
Dehra Dun, Pune and Ooty
have become centers of
education, Chennai of
health care, Bangalore
and Hyderabad of software
programming, Rishikesh of
yoga, Goa and Jodhpur of
tourism, Mumbai of films
and music, Gurgaon of
call centers and Varanasi
of religious rituals. It
is necessary to take this
specialization deeper
into the hinterland. A
master plan for each of
the 600-odd district
headquarters for the
provision of a specific
service such as
education, health, legal
research, medical
transcription,
architectural design,
entertainment, night
clubs, masseur services,
fashion design, space
tourism, etc. This is
likely to be successful
because the demand for
services is increasing
while that of
agricultural and
manufactured goods is
stagnant. The consumption
of services increases
with income. A poor
person spends about
ninety percent of his
income on goods-food,
clothes, house and
electricity. But a rich
person spends hardly five
percent on these items
and more on services like
tourism, movies and
beauty parlours. Thus the
share of services in the
production of rich
countries stands at about
75% today. The
conventional wisdom,
especially of Gandhians,
is that villages are
dying not because of
these economic
compulsions but because
of wrong government
policies. It is possible
to establish a mini-rice
mill in every village
instead of a huge rice
mill in the city. The
government must provide
facilities like roads and
electricity to enable
industries to locate in
the villages. The
problem, it is contended,
is not that villages have
become obsolete. The
problem is that we have
not organized our supply
chain properly.
This approach fails
economic logic. The cost
of production is less in
the cities because of
availability of skilled
job workers, machinery
parts such as bearings,
and services such as
banks, post office,
courier and insurance.
Gas welding service is
easily available in the
city to repair the milk
damaged container of the
milkman. Take the example
of production of rice.
Paddy can be converted
into rice in the village
and rice transported to
the city or,
alternatively, paddy can
be transported to the
city and converted into
rice there. Of these,
transporting paddy to the
city is cheaper because
other facilities are
easily available here.
The concept of 'critical
mass' is applicable in
economics as well. Just
as the missile needs a
critical speed to break
through earth's
gravitation and attain an
orbit, likewise
industries need a
critical level of support
infrastructure to become
successful.
Village-based industries
are successful only in
few commodities which
have large volume of raw
materials and small
volume of finished
products such as mentha
oil or sugar. The high
cost of locating in the
village is setoff against
lower cost of
transportation of raw
materials. But the number
of such commodities is
limited. Notably,
services are more easily
located in the small
towns. The cost of
transportation of
software programme to New
York by telephone line or
satellite is equal from
Gwalior and Delhi.
Another argument in
favour of the village is
that of culture. It is
said that our scriptures
such as the Rig Veda were
composed in the rural
areas-forests or
villages. The villages
must be protected in
order to maintain our
rich cultural heritage
even if they have become
economically unviable.
The argument is valid-but
only for the spiritually
oriented. Most people,
however, are pursuing
wealth. Cities are more
suitable for them. They
may turn to the villages
and forests after their
desires of wealth have
been fulfilled.
Illustrious kings like
Rishabha and Bharata
lived in the villages or
forests towards the end
of their life after they
had fulfilled their
worldly desires such as
kingship, war and harems.
Likewise our people have
to first fulfill their
worldly desires before
they graduate to the
spiritual pursuits.
Psychologist Abraham
Maslow says there is a
hierarchy among the needs
of human beings.
Fulfillment of lower
needs is necessary for
reaching to higher needs
like spiritual
enlightenment. It is not
advisable to force the
forest life upon the
people who have not yet
tasted the pleasures of
the city. In fact,
relocation of people into
the cities will remove
the pressure from the
villages and enable the
spiritually oriented to
obtain solitude more
easily.
Another argument is that
villages have greater
mutuality and humanness
than the impersonal
connections in the
cities. This is
debatable. Dr Ambedkar,
for example, felt that
the villages were
backward and
debilitating. Tribal
youth accuse urban people
of glorifying their
tribal culture in order
to keep them locked into
backwardness and to
reduce their claims on
urban facilities. We
should not embrace such
inequity in the name of
preserving our culture.
We should instead focus
on humanizing our cities.
Ayodhya and Mathura were
cities, after all. Let us
celebrate the advent of
the services and the city
and liberate our people
from the backwardness of
the village.
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The
true ‘heroes’ of our times
By S.V. Vaidyanathan
Unlike the
economic establishment in India that comprises
economic bureaucrats, journalists, academics
(Indian and non-resident Indians) and is all gung
ho about the emergence of neoliberal economic
globalisation since the beginnings of the 1980s,
the World Bank has taken criticisms of this model
much more seriously, even if not seriously
enough. Its annual World Development Reports over
the last decade have reflected this, taking up
themes, going well beyond the idea of markets as
the ‘ideal allocator’, such as
governance, health, education, and most recently
in its WDR 2006, the issue of ‘Equity and
Development”.
Inequality of incomes and wealth as well as other
kinds of inequalities (social and cultural) are
bad, it says, for development and even for
growth, leaving aside its more profound political
implications recently highlighted, not by the
WDR, but by the renowned scholar, Brian Barry, in
his book Why Social Justice Matters. Increasing
commodification of health and education, growing
inequalities of income and wealth and, therefore,
of power, systematically undermine democracy and
the basic principles of justice. This should be
simple and obvious enough, but tell this to
global and national elites for whom the
super-rich are the true ‘heroes’ of our
times. Let us take some accepted, indeed
indisputable, facts. One, the combined wealth of
the world’s three richest people is greater
than the total gross domestic product of the 48
poorest countries. Two, in 1960, the average
income of the richest 20 per cent of the world’s
population was 30 times higher than that of the
poorest 20 per cent. By 1995, this had become 82
times greater (United Nations Development
Programme Report 1998). Three, in 1970, the gap
between the per capita GDP of the richest
country, the United States of America ($5070) and
of the poorest, Bangladesh ($57) was 88:1. In
2000, the gap between he richest, Luxembourg
($45,917) and the poorest, Guinea Bissau ($161)
was 267:1. Four, a study of 77 countries (with 82
per cent of the world’s population) showed
that between the 1950s and the 1990s,
inequalities rose in 45 countries and fell in 16
countries.
Now surely all this indicates that inequalities
of income (which strongly determines the levels
of consumption and wealth) increased greatly in
the neoliberal era, and that this must count as a
severe indictment of the current economic model.
Defenders of this model, however, from The
Economist to Jagdish Bhagwati, author of In
Defense of Globalisation, would insist, not at
all. Even the World Bank, which has done so much
to promote and justify neoliberalism, and despite
its partial backtracking, is not about to throw
in the towel. Defenders have three responses.
First, they acknowledge that there has been an
acceleration or at least a steady and continuing
increase in inequality but claim that this is the
necessary price to pay for having greater
prosperity overall. Understandably, this is not
the kind of response that is likely to prove
persuasive to others or comforting to defenders.
The second response generally carries the most
authority and is present in the WDR 2006 itself.
This is to point out that since we only have
country-wise statistics for income inequality,
and leaving aside the comparability problems of
such data (some countries use more reliable
income data from tax records, others use more
unreliable consumption data to make income
estimates), such data cannot give us true
estimates for global inequality. This we could
only get if we could treat the world as one
country and properly measure the distribution of
income within it, which so far we haven’t
been able to do. So the jury must remain out
about whether global inequality has increased or
decreased though inter-country inequalities have
undeniably increased and within-country
inequalities have varied, increasing and
decreasing in different countries, even if there
are more countries in the former category.
What do The Economist and Bhagwati say? The
former (June 26, 2003) acknowledges that the gap
between the richest and the poorest segments of
the world’s population has been growing.
Instead, The Economist claims that the high and
sustained growth rates of China, above all
(though the Indian performance also contributes),
have pulled up the ‘in-betweens’ of
hundreds of millions closer to the world average
for annual incomes, and therefore actually
reduced global inequality. That is to say, the
differences between average incomes in the richer
and poorer parts of the world have lessened.
Bhagwati’s response is equally interesting.
In a book of over 300 pages, he devotes less than
two full pages to a sustained discussion of this
issue of global inequality, only to first claim
that since we only have country-wise data,
cross-country comparisons are inherently
misleading and so there is “just so much
irrelevant data-mongering”. This more
cautious initial judgement, based on a
recognition of a genuine statistical problem,
quickly gives way (without any serious survey,
let alone analysis, of a vast literature on this
subject) to a more ambitious conclusion that the
“evidence points in just the opposite
direction”. Global inequality, according to
Bhagwati, is decreasing in the neoliberal era.
Given the statistical complications prevailing,
is there a way of reaching an informed and
authoritative judgement about whether global
inequality has risen or fallen? Yes there is.
According to the International Monetary Fund’s
own database, we have the undisputed fact that if
we divide the world into advanced countries on
the one hand and the rest of the world (including
China and India) on the other, then we see that
in 1980, the 18 per cent of the world’s
population that lived in the advanced countries
had 71 per cent of the world’s income. In
2000, the proportion of the world’s
population living in the advanced countries had
come down to 16 per cent but they now shared
among themselves 81 per cent of the world’s
income. So in 1980, 82 per cent got 29 per cent
of the world’s income cake, while in 2000,
84 per cent had to share 19 per cent of the cake,
albeit a bigger one. This means that contrary to
the claim of The Economist, the average incomes
in the two parts of the world have diverged not
converged. Nothing else is statistically possible
even if there are difficulties in making exact
measurements from existing country wide data.
Moreover, in so far as neoliberals claim that the
incomes of many people in the developing world
have risen significantly, given that the average
incomes in the two parts have diverged over the
last 20-years, then clearly this category of
‘richer people’ in the developing world
simply cannot be very big.
Defenders of neoliberalism can either claim that
neoliberalism has greatly benefited some people
or widely benefited people in the developing
world but cannot claim both. If a group has
become much richer, then it cannot be that big.
If it is big then it cannot have become that much
richer. Thus, despite all problems of date
comparison, the most informed and authoritative
judgement that one can make is that global
inequality of incomes, wealth and consumption
have risen dramatically in the era of neoliberal
economic globalisation. INAV
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