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TheIndian EXPRESS
www.indianexpress.com

l WEDNESDAY l SEPTEMBER 26 l 2012

The Indian EXPRESS

BECAUSE THE TRUTH INVOLVES US ALL

N TUESDAY, the Congress Working Committee (CWC) declared clear support for the Manmohan Singh governments newly announced reforms. The partys endorsement of its prime ministers decisions should not ordinarily be remarkable. But years of a damaging dynamic between the Congress party and the UPA government, where welfare programmes are owned and trumpeted by the party and tough economic decisions are ascribed to, if not blamed on, the head of government, means that this support cannot be taken for granted. It is no secret that many senior Congress leaders and ministers were not on board with the decision to hike diesel prices or even to allow FDI in retail. So this show of collective endorsement was necessary. The prime ministers speech, which flatly asserted that money doesnt grow on trees, might as well have been directed at sections of his own party. The Congresss flagship programmes and the NACs expansive plans for the social sector depend on a solid, humming economy. Whilethecostsofthisdisagreement between party and government may have been less visible in UPA 1 and it could even be argued that it served a useful political purpose it is unsustainable now in the more strained economic circumstances. This is a moment to ignore ideological reflexes and look at the concrete

The Congress Working Committee backs the governments economic plans. About time
choices facing the nation. As the finance minister told the CWC, there is no option but to manage inflation, sharpen productivity, moderate subsidies and take action that will encourage investment. This is a commonsensical premise, shared by all those with a stake in the countrysfuture,whateverbethepolitical postures of the moment. The government has only just started resisting the slide. As Planning Commission Deputy Chairman Montek Singh Ahluwalia has acknowledged,someofitsdecisions, like the diesel hike, are merely good economicgovernance,whileothers, like FDI in retail and aviation, extend the logic of reforms. Much more remains to be accomplished intheimmediateterm,fromhoning land acquisition legislation to ensuring easier, more systematic environmental clearances. The Congress seems to realise that it is no longer tenable to carry on the notin-my-name approach not only does it corrode the PMs political capital at a time when it is needed, it also risks making the party seem oblivious to the economic situation. But it must strengthen that solidarity. The Congress must realise that there is no more profit in maintaining the impression that the government is at odds with the party, and should instead try and make sure that some of the shine from Manmohan Singhs new decisiveness rubs off on the party.

Party talk

The debt recast package must spur state utilities to break bad habits, not indulge them
state utilities were similarly restructured, two rounds of the Centres flagship Accelerated Power Development and Reforms Programme have been implemented, where similar commitments to reform and reduce losses were incorporated. Yet, distribution losses continue to stay at a high 27 per cent. The key to ensuring that the sector does not end up in need of another financial bailout in the coming years is that the conditionalities are made the main focus this time. The pitfalls are clear. Following a clean-upoftheirbooks,distribution utilitiescouldfallpreytothetemptation of borrowing afresh from the banks to meet working capital expensesinlieuofsettingrightthedistortionsintheirtariffstructures.Besides, it is a fact that tariff revision, based on the cost of service, is not easy to enforce unless there is the necessarypoliticalwill,especiallyas general elections loom closer. On a more optimistic note, however, over the last 20 months or so, some 19odd states have hiked electricity tariffs.Itisimperativethatthefinancial recast spurs the reform momentum instead of turning the clock back.

Lifeline for power

OR the second time in less thanadecade,thepowerdistribution sector has been handed a lifeline. Mondays cabinet decision to clear a Rs 1.9 lakh crore debtrecastpackageforstatedistribution utilities, most of which are reeling under the impact of mounting lossesandoperationalinefficiencies, primarily aims at restoring a modicumoffinancialviabilitytothesector. Investments in the upstream generationandtransmissionsectors are rendered unviable if the downstream distribution sector continues to leak like a sieve. The package does incorporate safeguards in the form of conditions the states need toobservehikingtariffsannually and undertaking prescribed reform measures in order to qualify for thedebtrestructuring.Butthereisa cleardangerthatthemistakesofthe past could be repeated yet again, especially given that such performance-based incentives to reimburse loans have been at the centre of all the major central government schemes in the power sector for more than a decade. Apart from the early part of the last decade, when the debts of the

HEprimeministers address to the nation, urging the people to say yes to hard economic decisions rather than go for soft options, couldnt have been more candid and direct. Of course, the home truths Manmohan Singh spoke could have been timed better, maybe last November itself, when diesel price correction was overdue and the policy on FDI in big retail was announced and then withdrawn. The Uttar Pradesh elections, which came a few months later, were cited as reason for the deferment of all politically contentious decisions. In retrospect, the Congresss performance in the UP elections would not have been worse than it was if some of these hard decisions had been taken in late 2011 itself. Our political class often misreads the possible response of the aam aadmi to economic reforms which obviously have the potential to create new gainers and losers. History tells us it is only in a highly state-led, dirigiste economic system that the gainers and losers remain largely static. We have opted for a more dynamic system. Just look at the utter confusion, deliberate or otherwise, among various political parties about who will be the new losers and who the new gainers from FDI in big retail. This debate, by itself, is healthy. Many BJP leaders and Lohiaites like Nitish Kumar and Sharad Yadav seem convinced that it will destroy the local economy. However, there are sections of the Akali Dal which say that FDI in retail will help farmers. Within the Congress, some leaders, especially from Kerala,havedoubtsabouttheeconomic and social outcome of FDI in retail. Prime Minister Manmohan Singh, therefore, was very emphatic inhisspeechthatpeoplemustnotbe misled by those who are spreading confusion about the real impact of such reforms. Please do not be misled by those who want to confuse youbyspreadingfearandfalseinformation. The same tactics were adopted in 1991. They did not succeed then. They will not succeed now.Ihavefullfaithinthewisdomof the people of India, he said. This invocation of 1991, several times in his national address, was very instructive. Ironically, just before the PMs speech was to begin,

A new aam aadmi

The political class continues to misread his response to economic reforms
M.K. VENU
Doordarshan showed a longish clip projecting the economic and developmental reforms implemented by all the prime ministers, starting from Jawaharlal Nehru and ending with Rajiv Gandhi. There was no mention of the Narasimha RaoManmohan Singh combines big economic liberalisation effort of 1991. Sometimes, one does get the feeling that the Congress too lacks a certain clarity about the profound impact of its own economic liberalisation programme on Indian society over the past 20 years. So the idea of economic reforms, aimed at releasing Indias entrepreneurial energies to actively engage with the globalisation process, still seems to be somewhat contentious within the political class. It is interesting how some of In a recent address at Princeton University, he argued that the economic liberalisation of the 1990s did not have to be imposed by authoritarian means. Something had clearly changed in Indian politics. Greater and greater sections of the people were developing a stake in the governmental regime and becoming aware of the instruments of electoral democracy. The arms of the administration were reaching deeper and wider into domains of everyday life hitherto untouched by the government. At the same time, corporate capital was gaining unprecedented legitimacy within urban civil society, displacing the status once enjoyed by the postcolonial developmental state, argues Chatterjee. If one simply decodes what

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Delivery efficiency remains inadequate. Seven to eight states distribute foodgrains to over 75 per cent of the population, virtually free of cost. All this has become possible only because the Central governments revenues have grown substantially, due to higher tax collections triggered by the national income or the GDP having increased over five times since 1992.
the BJP leaders and the Lohia socialists tend to fall back on appealing to what the well-known historian, Partha Chatterjee, describes as the postcolonial subaltern rebel. The subaltern rebel is a general reference to the protesting peasant whose anxieties multiplied during colonial rule, and the postcolonial developmental state did not greatly succeed in reducing these anxieties. Subaltern studies (bottom-up view of history) held, especially after the Emergency (1975), that the political order in India lacked foundation in popular consent. Several insurgent movements in Punjab, Assam etc were cited as proof by these scholars. However, Partha Chatterjee, a foremost subaltern scholar, says something changed after 1991, when economic liberalisation came. Chatterjee is saying, the economic liberalisation of the 1990s has indeed created a new politics, replacing the old subaltern rebel with possibly a new one whose aspirations are different. This needs to be understood by our political class. So those who rail against globalisation andinvokefearsofalatterdayEast India Company coming back in the guise of foreign retailers are barking up the wrong tree. As Chatterjee rightly points out, the new, post-reforms developmental state has reached out to a much wider section of rural populations with welfare schemes such as MNREGA. Of course, delivery efficiency remains inadequate. About seven to eight states are now distributing foodgrains to over 75 per cent of the population, virtually free of cost. All this has become possible

only because the Central governments revenues have grown substantially, due to higher tax collections triggered by the national income or the GDP having increased over five times since 1992. Congress MP and ardent proponent of higher social welfare spending, Mani Shankar Aiyer, often suggests in TV debates that the government needs to rethink how it should deliver the massive increase in the funding of centrally sponsored welfare schemes from some Rs 7,600 crore in 1994 to Rs 1,90,000 crore in 2011. That is more than a 25-fold increase in 16 years. In the first place, such a massive increase in funding for centrally sponsored welfare schemes has become possible only because of the dynamic way in which the economic structures were altered after the 1991 reforms. To not recognise this would be less than honest. Of course, the rightful criticism of the prime minister would be that after unleashing such profound changes in the economic system, which yielded massive dividends, he did not do enough to put in place transparent regulatory systems to ensure the continued credibility of subsequent reforms. This criticism waslevelledagainsttheprimeminister some months ago by his own honorary economic advisor Raghuram Rajan, now appointed chief economic advisor in the finance ministry, who bluntly told an audience in the prime ministers presence that the lack of transparent mechanisms for orderly and equitable exploitation of critical and scarce natural resources had resulted in the loss of credibility in implementing the second phase of reforms that might have ensured continued high growth. Manmohan Singhmayevenadmittothischarge, if not publicly. The Congress may be defeated in the 2014 elections. But it would be a mistake to read that as a vote against economic reforms. The new subaltern rebel wants more dynamic change in economic structures that provides greater opportunity to the people at large. He will brook neither status quo nor some return to the atavistic past. The writer is managing editor, The Financial Express
mk.venu@expressindia.com

Letters to the

EDITOR

Talking politicians

APROPOS The Mulayam

Touch by Shekhar Gupta (IE, September 22), Mulayam Singh Yadavs habit of talking to everyone reminds me of Sharad Pawar, at least, in earlier years, and of another wrestler whom I knew well, Devaraj Urs. But I wonder: Is Mulayam talking even occasionally to Mayawati? James Manor, University of London

THIS refers to The Mulayam touch. UPA 2 was jolted by the Trinamool Congress (TMC) and Mulayam bailed it out again. The shrewd politician, despite his differences with the UPA, has ensured dividends for himself at a later stage. As the article says: He is cleverer than the competition, 100 per cent politician, his open, accessible and thick-skinned style is an added asset. In this round of politics, Mulayam has won the match. Vijay D. Patil Pune WITH regard to the article,

Smooth operator

M.S. MENON
HE Cauvery water dispute is back in the news after the main co-basin states of Tamil Nadu and Karnataka rejecting the verdict given by the prime minister at the Cauvery River Authority (CRA) meeting held recently. The authoritys meeting was convened after a gap of nearly 10 years, that too after the Supreme Court pulled up the Centre on the Cauvery issue. The sharing of the Cauvery waters has been a contentious issue for decades. In 1990, the Centre set up the Cauvery Water Disputes Tribunal (CWDT) to adjudicate on the dispute. The tribunal had issued an interim order in 1991, directing Karnataka to make available to Tamil Nadu 205 thousand million cubic feet of water in a water year (June to May), following a monthly time table. As part of the scheme for implementing this order, the Centre constituted the CRA in 1998, chaired by the prime minister. Other members included the chief ministers of the basin states Tamil Nadu, Karnataka, Kerala and Pondicherry. The CRA is not entrusted with the task of deciding on water availability or planning and management of the river; it only ensures implementation as long as the interim order is in force. The CWDT order of 1991 did not provide a formula for sharing

With no platform for discussion among states, the Cauvery dispute drags on
waters in times of distress, when the rains fail. Although a group of experts at the Union ministry of water resources considered the issue in 2003, they could not arrive at a consensus. The Cauvery Monitoring Committee (CMC), a panel set up to assist the CRA, decided in 2009 to refer the matter to the authority for decision as and when such conditions arose. The CWDT gave its final award in 2007. As the Centre and the states needed further clarifications, the award has not been notified till now. Hence, the CRA continued to ensure the operation of drought in 40 years, giving water would mean its farmers suffering and its cities being deprived of drinking water. Both the states have indicated that they will be approaching the apex court for directions and the stalemate continues. Disputes in the sharing of interstate river water is not limited to the Cauvery. In many basins, there are states busy quarrelling with each other on their water rights. The solution is to have the concerned states hold talks and agree on a criterion to settle the dispute, but there are no institutions that could provide a platform for disof the states and administrators of the Union Territories as members. But the meetings are held many years apart and even then, decisions are seldom taken for want of time, so the forum has not served the purpose an RBO would have. Although the existing River Boards Act (1956) has provisions for setting up RBOs, it does not give the requisite authority to the Centre to regulate interstate rivers through such institutions. Unfortunately, the Centre has not amended the act so far to empower itself to set up such organisations. Although many high-powered bodies, such as the Sarkaria Commission, had advised the Centre that Entry 56, List 1, of the Seventh Schedule of the Constitution gave it ample powers to regulate interstate rivers, the Centre does not seem inclined to use such powers. It is therefore for the Centre to empower itself to regulate interstate rivers and constitute RBOs with a broad mandate and authority to disentangle the issues that complicate the process of negotiations. It must also provide for better management of the countrys water resources. The writer is former member secretary, Indian National Committee on Irrigation and Drainage
express@expressindia.com

Drawing lines in water

The Mulayam Touch, it cannot be disputed that the SP chief is the most political among the many unpredictables in the history of independent India. He knows where his pound of flesh lies. His adroitness and political pragmatism are beyond doubt. He never takes a political shortcut to ensure that his votebank is secure. The last of the true Lohiaites, Mulayam is going to play a much greater role in times to come. It was aptly said that he is an oldfashioned politician. C. Bhattacharyya Porbandar

Green signals

FREEZE FRAME

The Centre should empower itself to regulate interstate rivers and constitute organisations with a broad mandate.
the interim order. Since its implementation became difficult due to failed monsoons, the authority had to convene a meeting to decide on the releases to be made. With there being no consensus among the members, the PM ruled that Karnataka should release 9,000 cubic feet per second daily, till October 15, to Tamil Nadu. Tamil Nadu was not happy with the ruling as it did not meet the demands of sustaining the samba paddy crop, cultivated over 15 lakh acres in the Cauvery delta. Karnataka was not happy either; it had no water to spare from its dams. In a state facing its worst cussion. So the states rush to the courts seeking legal remedies and the dispute lingers on for years. A river basin organisation (RBO), constituted to represent the stakeholders, would have enabled frequent dialogue among the states to arrive at the needed consensus on critical water issues. It would also have encouraged them to look beyond water rights and concentrate on water needs for promoting joint ventures in areas like hydropower and flood control. The only forum for discussion available at present is the National Water Resources Council, chaired by the PM, with the chief ministers

nounced by Prime Minister Manmohan Singh have brought great praise for him and the markets show that at last UPA 2 has started doing something positive for India, rather than just for the Congress party (In his words, IE, September 22). These reforms came only after Pranab Mukherjee vacated the post of finance minister. It suggests, perhaps, that he was the one stalling such bold reform. Sadashiv S. Apte Pune
THE TMC seems to be mixed up in its agenda against the government (Mamata Banerjee announces withdrawal of support to UPA, IE, September 18). While the common man may appreciate its stand against the diesel price hike, the partys opposition to FDI seems have become mere habit. The TMC has a history of blocking any kind of proposal for economic development. Singur is a case in point. FDI brings with it great inflows of money, skills, job opportunities and intense competition, which will yield better products for consumers. The fastest growing economies in the world have been receiving huge amounts of FDI for decades now. To be on par with them, India needs some bold economic reforms. When UPA 2 has finally woken up to economic reforms, allies should support it instead of being opportunistic and abandoning the government in its hour of need. Megha Badoutiya Navi Mumbai

THE economic reforms an-

The naysayers

N SATURDAY tens of thousands of Libyans demonstrated in a rally in Benghazi against the Islamist militias which they blamed for the attack on the US consulate last week. Eleven people died in the fighting that ensued and for a while it was assumed by some that a corner had been turned, as several groups abandoned their bases... It did not take long before reality dawned. On Monday other Islamist militias, notably the Rafallah al-Sahati, claiming to operate under Tripolis authority, began a round up of the Benghazi protesters whom they accused of instigating violence. Among those detained were 30 military officers. Many of these militias played a key role in the uprising

Libya, the aftermath

PRINTLINE
which destroyed Muammar Gaddafis regime. The glue that held them together, the common cause of liberating Libya from a family-run tyranny, is now gone and it is left to thousands of volunteer mediators also armed to keep the peace between them. The death of Stevens has revealed the fault lines of this process. For while Libya has successfully navigated elections in July and the selection of a compromise candidate as prime minster, it is still far fromapproachingafunctioningstate.Securityisalocalfranchise held by firmly established militias. From a leader in The Guardian