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Decoding emission norms

Oil marketing companies will have to spend Rs 28,000 crore to upgrade to meet BS-VI norms. Business Standard explains the
refining process and what will change
Sudheer Pal Singh
January 18, 2016
Last Updated at 00:40 IST
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Decoding emission norms
BS VI norms could raise petrol production cost by Rs 1.40 a litre, diesel by 63 paise
Why OMC stocks aren't reacting to crude prices
Govt's extra dole gives OMCs buffer against price rise
Oil marketers in a sweet spot
Volatility in energy prices likely

Raw crude oil, which is stored in a tank farm, is passed through a desalter to eliminate salt as an impurity. The oil is then
poured into a crude distillation unit or CDU, which is a fractionating column. The CDU distils the incoming crude oil into various
fractions of different boiling ranges, each of which is then processed further in the other refinery processing units.
The fractions collected at the top of the column have a lower boiling point and are known as light distillates - liquefied
petroleum gas or LPG, petrol and naphtha. This is followed by middle distillates like kerosene, aviation turbine fuel or ATF and
diesel collected in the middle; and then heavy distillates like fuel oil, lubricating oil, wax and asphalt collected at the bottom of
the column.

The crude oil molecules also contain atoms of sulphur and nitrogen, which must be separated from the end products to
increase efficiency of engines and cut down pollution levels (both suphur and nitrogen form harmful sulphur dioxide and
nitrogen oxide molecules in contact with oxygen).
Therefore, both technical reasons and environment protection demand a very low sulphur content in products. Oil refineries
have hydro-desulphurisation (HDS) units in sulphur (S) recovery blocks. Here, sulphur is combined with hydrogen molecules
and removed from the product stream as hydrogen sulphide gas. This gas is transformed to elementary sulphur and sold to the
chemical industry. The volume of sulphur removed has to go up if the polluting elements in the refined petroleum products
have to be reduced.
BS-IV norms are currently followed across 63 Indian cities for petrol and diesel. The BS-IV compliant fuels have sulphur
concentration of 50 parts per million (ppm). This will come down to as low as 10 ppm in BS-VI compliant fuels and auto
engines. This means a lower level of harmful emissions and reduced incidence of lung diseases. Remember, most Indian cities
still use BS-III standards where sulphur content stands at 350 ppm for diesel and 150 ppm for petrol.
While the government is yet to announce the new BS-VI norms, the oil marketing companies (OMCs) are currently busy
finalising multiple projects at an investment of Rs 28,000 crore to enable this reduction in concentration of sulphur (and other
harmful contents like nitrogen). This includes ramping up capacity of sulphur recovery blocks and HDS units. The HDS unit is a
key component of a refinery as its efficiency determines sulphur concentration and thus, fuel efficiency.
Indian Oil Corp (IOC), the nation's largest fuel retailer, says the process will also involve changing the crude oil mix of refineries
(lighter "sweet" crude varieties are low in sulphur but are costlier than heavy crude oil), capacity optimisation and even
modifying the product streams of refineries.
IOC alone plans to spend Rs 13,000 crore on such projects to set up more hydro-processing units, replacing traditional catalysts

(chemicals that aid sulphur binding with hydrogen) employed in HDS units with improved, more efficient catalysts. These
OMCs are working out the framework of these projects in consultation with consultants. All these projects will be
commissioned across refineries in four years.
The switch to BS-VI norms will also reduce concentration of carbon monoxide, unburnt hydrocarbons, nitrous oxide and
particulate matter from emissions. Finally, the quality upgrade will also result in diesel's cost of production going up by 63
paise per litre and petrol by Rs 1.40 per litre, according to IOC. For consumers, this translates into higher retail prices of petrol
and diesel. The switch will also make petrol vehicles costly by Rs 50,000 and diesel vehicles by Rs 1 lakh.
The tangle of spaghetti, as neuroscientist Karl Deisseroth describes the wiring of the brain, has posed a singular challenge to
researchers: how do you navigate an opaque mesh of 80 billion neurons to decipher brain activity emotions, memory and
learning or identify diseased circuitry that manifests as autism or schizophrenia?
Now, two path-breaking techniques devised by Prof. Deisseroth and his colleagues at Stanford University are changing the way
we see, understand and control the brain. The first technique illuminates the brain, enabling researchers to manipulate
electrical activity. In a process called optogenetics, specific targetted cells are infused with a gene that directs the production
of a light-sensitive protein (derived from algae or other microbes) that can then turn brain cells on or off in response to a
focussed light signal.
The second is a transparent brain engineered through a method called CLARITY. This process makes brains transparent, by
building a hydrogel inside the brain, removing lipids that make the brain opaque. This allows scientists to study the wiring of a
three-dimensional brain in its entirety, without having to laboriously dissect and reassemble tissues as has been the practice.
Prof. Deisseroth, who is D.H. Chen Professor of Bioengineering and of Psychiatry and Behavioural Sciences at Stanford
University, was recently awarded the prestigious Life Sciences Breakthrough Prize for 2016. He spoke to Divya Gandhi in
Bengaluru, where he begins a three-city lecture tour as part of the Sixth Annual Cell Press-TNQ India Distinguished Lectureship
Series. Excerpts:
Laboratories around the world have begun using optogenetics to study and manipulate the brain. Are there specific disorders
that the technique has proven particularly useful in shedding light on?
One of the most exciting things for me about this whole field is that I get to see corresponding principles with my own clinical
practice. In the clinic, I see patients with treatment-resistant depression and also those with autism spectrum disorders. And
these are really challenging and complicated clinically but they have certain symptoms symptoms you can study in animals.
And another big example is anxiety. Anxiety is a prominent feature of depression and is also a major problem in autism
spectrum disorders. We can study anxiety in a very reliable way in mice. And thats been probably one of the biggest success
stories. Optogenetics is sorting out how anxiety works in the brain, what are the pathways and cells that cause it or control it,
and how it is all put together. Anxiety is complicated. We know there are lots of parts to anxiety. There is the heart rate change
and the breathing rate change and there is the avoidance aspects. Optogenetics has helped sort out how all those parts are
Not least because of the lack of academic opportunity, doctors in India tend not to go in for a PhD, something that critically
undermines cutting-edge research. As a clinical psychiatrist and a neuroscientist doing front-end research, what would you
recommend to encourage more physician-researchers in India?
One thing that makes it work well in the U.S. is the existence of a very well-defined MD-PhD training programme that is
supported by the government. It really helps to attract some of the best people to the programme because you get support
through medical school and through graduate school from the federal government. The other thing is, at a later career stage,
making sure there are employment opportunities, where one only practices in a clinic one or two days in a week, because to
really make competitive advances in research you need to spend most of your time doing research.
How did you go about creating a see-through brain? And have there been any significant, or unexpected, discoveries through
Around 2009, optogenetics was working really well in controlling neurons with light. But we noticed that we couldnt quite
make the final intellectual step in understanding how the wiring of the brain causes behaviour. With optogenetics, it is like

roughly knowing where the parts are in a computer but not knowing the detailed circuit diagram.
The central nervous system is the hardest thing to make transparent and the reason is that the nervous system uses electricity
to communicate and it has to create insulated wires to send all that electricity around, and the way the brain makes insulation
is through lipids or fats and those scatter photons. So it is almost impossible to make a living transparent brain. You can slice it
up into several thin sections and try to reconstruct, which is the standard way of doing it. But thats difficult and takes a long
time. So we thought: how could we keep the brain intact and make it transparent? So we had to remove the things that are
making it opaque the lipids and fat. But that would normally be destructive and cause the whole thing to dissolve, so we
had to build a new kind of support for the brain while we removed the fat. We developed a chemical engineering trick by
basically building a gel within the brain that gives it the support it needs when we remove the lipids and see through the brain.
The new insights have been pretty exciting actually. CLARITY has been developing faster than optogenetics. But even in just the
last year, labs around the world are using CLARITY to make new discoveries. We have been surprised to see certain patterns of
wiring and connections across the brain that we didnt know were there. It has also been used in human brain tissue
Alzheimers brains for instance and seen some interesting patterns.
In India, a country of over a billion people, we have, according to guesstimates, just between 3,000 to 8,000 psychiatrists. Is
that a worrisome statistic, and is there an ideal ratio?
The best thing under these circumstances would be figuring out how to train general practitioners to at least recognise the
disorders and know enough about the medications to provide. Of course, psychiatrists are best because they have spent the
most time thinking and learning the about the ins and outs but this may be the best short-term solution.
In 2010 you wrote about the stigma that surrounds psychiatric disease, just as a cancer diagnosis once carried more stigma
than it does now. Would you say there is a growing awareness about mental illness now and, by extension, less prejudice
around it?
I think that is happening. There is detectably, in the U.S., a more open discussion and less stigmatisation of psychiatric disease
but it is not yet where it needs to be. A couple of things seem to help with reducing prejudice and stigma. If people really
understand how something works, then they tend not to assign prejudicial or superstitious explanations. The general public in
the U.S. is getting a deeper knowledge and understanding of psychiatry as biological. There has also have been individual
people writing books and speaking out and sharing their experience with psychosis, depression or drug abuse. People arent
hiding, they are coming out, saying this is me.
Tailoring policy to get the government out of the way of start-ups was the underlying theme at the StartUp India Stand Up
India event hosted at Vigyan Bhavan in Delhi on Saturday. However, implementation hurdles might dent the prospects of the
policy, say experts.
Entrepreneurs and investors have largely responded positively to the announcements made. (STARTUP INDIA ACTION PLAN)

Criteria for start-ups to get government incentives under Startup India Action Plan
The firm incorporated should be less than five years old
Annual Revenue of less than Rs 25 crore
Needs to get approval from inter-ministerial board to be eligible for tax benefits
Get recommendation from an Incubator recognised by government, domestic venture fund or have an Indian patent
He (PM Narendra Modi) understands that start-ups are going to transform India in the next 10 years. Many policies were
announced and while there are some more that are needed, they have said they will look at it because legal change is
required, said TV Mohandas Pai, co-founder of Infosys and an active investor in start-ups.
While the three-year tax holiday and relaxation of capital gains for funds have been received well, some say attention has not
been paid to solving larger problems such as keeping start-up companies (and the wealth they create) within the country.
All the Unicorns (companies valued above $1 billion) are basically no longer based in India; theyre Singapore-domiciled

companies. Stop the re-domiciling and I think we have made some steps in that direction, although it fell short of many
peoples expectations, said Sharad Sharma, convenor of iSPIRT, the informal lobby group to promote home-grown product
The government has been in talks with stakeholders in the start-up space to understand their problems. The start-up action
plan is broadly spread to address issues in the short, mid- and long-term but the general sense was that longer-term initiatives,
such as how the government plans to incentivise listing of companies in India, need more clarity.
In terms of scope, I would say full marks. But, we always find in India and most parts of the world when a government tries to
do something, from the intent to the actual execution remains to be seen. Clearly, there has been a lot of inputs taken from
the stakeholders in the industry and it seems like the intent is very sincere to do the right things here, said Sanjay Swamy,
partner at Prime Ventures.
Innovation and investments go hand in hand, but not enough was done by the government for the latter. N R Narayana
Murthy, co-founder of Infosys, who also runs his own fund, Catamaran Ventures, said the PMs move was great, since the
sector would create massive employment in the years to come. However, there wasnt enough encouragement for investors,
he added, hoping that vagaries surrounding exits are solved.
The announcements by the government were more than what a normal start-up would have expected, said Vijay Shekhar
Sharma, co-founder and CEO of Paytm.
Nidhi Agarwal, founder and CEO of Kaaryah, termed the policy a well-rounded, well-structured and articulated. The move to
simplify formalities for starting a business, funding, apart from tax relief were notable, said Ravi Gururaj, president of Nasscom
Product Conclave.
The government itself became a start-up, according to Radhika Aggarwal, co-founder and CEO of Shopclues. The government
has acted like a disruptive start-up. The policies around cleaning the licence raj will be a huge booster for the start-up
Sanjay Swamy: In terms of the scope I would say full marks but from the intent to the actual execution remains to be seen.
TV Mohandas Pai: We were all delighted and pleased that the Prime Minister understands that startups are going to transform
India in the next 10 years.
N R Narayana Murthy: We need to encourage both investors from India and abroad because without proper investment,
startups wont be able to succeed.
Sharad Sharma: All the Unicorns are no longer based in India, theyre Singapore domiciled companies, so if you do more for
startups, the only beneficiary is Singapore
Vijay Shekhar Sharma: It's like a populous budget on steroid for a startup. This is going to go a long way in the country to
celebrate startups
Start and go
'Start-up India' is overdue. But creation of enabling policy environment must not be restricted to start-ups.
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By: Express News Service | Published:January 18, 2016 12:02 am
Prime Minister Narendra Modi with Finance Minister Arun Jaitley during the launch of "Startup India" action plan at Vigyan
Bhawan in New Delhi on Saturday. (PTI Photo by Kamal Kishore) Prime Minister Narendra Modi with Finance Minister Arun
Jaitley during the launch of Startup India action plan at Vigyan Bhawan in New Delhi on Saturday. (PTI Photo by Kamal
The governments new initiative for start-ups promises swift approvals for starting enterprises, easier exits, tax and fiscal
incentives, faster registration of patents and protection of intellectual property rights. It signals a possible end to the inspector
raj that has sapped the energy and spirit of many young entrepreneurs in the country. Unlike Indias large business groups,

small entrepreneurs find it difficult to navigate the complex bureaucratic and regulatory maze. From that perspective, these
supply-side reforms are welcome. What makes this initiative especially welcome is the fact that start-ups hold the potential of
creating more jobs at a time when the manufacturing sector is facing a slump that may last longer given global economic
prospects and the slowdown in China, which has been one of the engines of global growth. And with growing automation, the
manufacturing sector may no longer be in a position to create jobs. The fact is that there is a fundamental problem of demand
and the real challenge for the Indian economy now is to fund several large projects be it roads, highways or railways. Thats
why it is heartening to see the government attempting to provide an enabling policy environment for start-ups, which are job
creators much like the large number of self-employed who form a significant part of the countrys labour force.
But should the government, which says it wants to be more of a facilitator, get into the funding of start-ups? There has been
enough capital chasing start-ups in India, including e-commerce firms, with a predominant share coming from overseas
investors, unlike in the US or China, which are ahead of this country in terms of the number of new-age firms. Tax breaks do
help, but global experience shows that what is more critical is an enabling regulatory and business environment that will foster
innovation and have a cascading impact on entrepreneurship. Indian policymakers appear to be grasping this imperative but
the funding now on offer could perhaps be directed more towards entrepreneurs who find it tough to raise capital in segments
such as food processing, rather than mobile-based applications or e-commerce firms, for whom raising money isnt a major
The governments approach of targeting start-ups to power growth over the next decade is well judged. But the easing of rules
and creation of a conducive policy environment should not be restricted just to start-ups. It should be extended to all
businesses. That will be the real test, along with getting more Indian firms domiciled overseas because of rules here to move
back. Otherwise, the losers will be the government and local investors.
Starting up to stand still?
Two lakh passes were sought for the Start Up India workshop at New Delhis Vigyan Bhawan with a seating capacity of 1,350, a
good indicator of the interest in the action plan for start-ups unveiled by Prime Minister Narendra Modi after a nine-hour
talkathon between Silicon Valley honchos, financiers, Indian unicorns and top government officials. Amidst the euphoria, at
least one Silicon Valley CEO, B.J. Arun of July Systems, warned that India was witnessing a bubble similar to the heady dot-com
rush of 1999-2000 in Silicon Valley with too much money chasing too few ideas. The high demand for passes to the event is
probably a sign of that growing bubble. India, Mr. Arun warned, wont recover as easily as the U.S. did after the bubble bursts,
only to be told by his Indian counterparts that there is no bubble and even if there is, the fittest would survive. That confidence
is refreshing, coming from under-40 first generation entrepreneurs. The governments action points seem laudable for
starters, if not deep enough. They include Rs. 10,000 crore of funding for the next four years, tax-free and labour-inspectionfree existence for start-ups for the first three years, speedier patent clearances with the exchequer footing most of the bill,
and promises to fix taxation hurdles that deter domestic and global financiers from bankrolling new ventures in the coming
Budget. That the government must intervene less for start-ups to succeed Mr. Modis core message drew the loudest
cheers, followed by the tax breaks on start-up profits. The tax breaks fly in the face of the corporate tax reform being pursued
to lower rates and phase out exemptions; but it is a headline-grabbing measure that wont hit revenues as few start-ups would
make profits in the first three years.
A bigger issue is the attempt to define the start-ups eligible for the sops, support and funding announced by the Prime
Minister: firms set up in the past five years with an annual turnover below Rs. 25 crore, working towards innovation,
development, deployment or commercialisation of new products, processes or services driven by technology or intellectual
property. The mere act of developing products or services that do not have potential for commercialisation or have no or
limited incremental value for customers would not be a start-up. Moreover, a start-up shall be eligible for tax benefits only
after it is certified by an inter-ministerial board. Slotting something like innovation into a template may not click and until more
details emerge, it just sounds like more red tape to clear to avoid some red tape. Smarter ventures would seek funding on their
own and work without official sops, but the government must not lose sight of the need to fix Indias overall business climate.
Failing that, even with tax sops, start-ups will continue to quit India and list or register elsewhere. Bubble or not, thats one
issue Indian unicorns are unanimous about.
On Saturday, Prime Minister Narendra Modi presented the outline of the government's "Start-up India" plan to an enthusiastic
audience. The intention of the plan is to be applauded, and there is much in it that is praiseworthy. Self-certification of
compliance with labour laws, for example, is a focus of Start-up India, which is welcome. There would be no labour law
inspections for three years, and some start-ups would be able to self-certify their compliance with environmental regulations,
too. Support for legal issues and filing for patents was also promised, and norms for public procurement are to be relaxed to

allow start-ups to compete with established firms. More incubators for new enterprises and 500 laboratories with 3-D printers
are to be established. The thinking behind this push is eminently admirable - especially inasmuch as it hopefully reflects a
vision of state action that relies on removing regulatory obstacles, reducing its own role and on providing instead an enabling
However, euphoria over it needs to be tempered with a realistic assessment. This is because, as Nikesh Arora of SoftBank
warned at the event, there are signs of a bubble in start-ups, and so the government's promised easier exit policy is essential.
It is also because there are loopholes in the scheme and other areas in it which depend crucially on the mechanism put into
place for implementation. And more generally, it is far from clear why only companies which satisfy the government's
restrictive definition of a start-up - "driven by technology or intellectual property" - should have access to an enabling
environment. In addition, to be eligible for schemes, start-ups will have to show that their innovation has "significantly
improved" existing processes. Oddly, there is no self-certification as to whether the "improvement" is "significant" - allowing
the bureaucrat to once again insert himself into the process. It is thus possible that discretion - anathema to a start-up
ecosystem - may have been built into the scheme from the outset. It is inexplicable why benefits from any such scheme should
not be extended to all start-ups depending on criteria that are transparently laid down and objective. The government cannot
target or identify innovation; only the market can. The government should focus on creating conditions for innovation.

Some probing questions should also be asked about the use of tax incentives for start-ups. Exemption from income tax, of
course, will only be available to those vetted by an inter-ministerial panel. This runs counter to the government's stated
intention to remove exemptions in corporation tax and to close various loopholes in the system. Exemptions inevitably distort
commercial activity - the history of Indian information technology provides ample evidence of this fact. Instead, simplicity of
compliance with tax requirements should have been the focus. The real test for Start-up India will be if the de-domiciling of
Indian start-ups - Flipkart, for example, is registered in Singapore - stops being a phenomenon. Partly to improve the ease of
investing in start-ups, such investments have been exempted from long-term capital gains - which will have to be watched
carefully for signs that it is being taken advantage of by, for example, real estate manipulators. Overall, while the intent is
praiseworthy and there are many laudable ideas in the policy, much in the fine print needs attention if its goal is to be realised.
Hopefully, the government will be nimble in making any needed changes and in overseeing Start-up India's implementation.
A Road To Bastar
New mobile towers, better roads are making a difference in a troubled region.
14 6 Google +0
Written by R.K. Vij | Updated: January 19, 2016 3:07 pm
The tribals of Bastar, a sprawling region of 40,000 square km, have been forced to live a life of isolation for long.
Scanty roads and poor communication have marred the development of the Bastar region. Even the basic right of its men and
women to live with dignity has been denied, as it is infected with a chronic menace called Maoism.
In the pre-Naxal era, the erstwhile Madhya Pradesh State Road Transport Corporation (MPSRTC) used to ply buses, although
the interior routes were not financially viable. After privatisation of road transport in Chhattisgarh, the state government tried
to incentivise a few interior routes by exempting them from passenger tax, but private operators did not show much
enthusiasm. Further, in order to thwart security forces movement into the core areas, the Maoists started damaging these
roads. Till 2015, more than 130 roads have been blasted, cut and ultimately damaged and made non-motorable by the
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The Border Roads Organisation (BRO) was especially deployed in Bastar for a small stint, to construct major roads. Afterwards,
the government of India rolled out a new scheme, called the Road Requirement Plan (RRP-I). Although the road situation has
now improved due to the dedicated deployment of Central and state forces, full targets (of constructing about 2000 km road in
Chhattisgarh) could not be achieved due to reluctant and defaulting contractors. The RRP-II is on the anvil now. The roads
department is now working in tandem with the security forces so that more roads can be built.
Until recently, mobile connectivity was very poor in Bastar. Many towers have been blasted by the Maoists in the past. The
Maoists often snatch mobile phones from the villagers fearing that information about their movements could be passed on to
the police. Security personnel, deployed deep in the jungles, were not able to contact their family members. This resulted in
frustration, and even casualties at times, while searching for mobile network. But now, the work of establishing 146 new
mobile towers, in addition to the existing 351 (out of a total sanctioned 2,199 for all the leftwing extremism affected states), is
in its last phase of implementation.
Most of these V-SAT based towers, although with a limited bandwidth of 256 kbps and effective up to a five-kilometre radius
only, have started functioning. More than 10 villages per tower are on mobile now. As a result, the faces of the surrounding
villagers and security personnel of the camps have lit up. Although many pockets still remain devoid of communications, the
newly established towers are likely to prove a boon in the coming days.
The Raoghat mines project, which includes the laying of a 95-km railway track from Dalli-Rajhara to Raoghat, is another project
that will impact mobility and the lives of the people of Bastar. Even if the primary objective of the project is to transport iron
ore from the Raoghat mines to the Bhilai steel plant, the railway line will also be used to carry passengers. Despite the Maoists
heavy protests, the first 17 km of the track is already laid. The passenger train can start rolling any day. The government has
also approved the Jagdalpur-Raoghat (140 km) railway track.
In the annual conference of the directors general (DG) of police, held in November, 2013, the DG of police, Chhattisgarh, A.N.
Upadhyay, told the prime minister that the villagers of Bastar could not listen to his Mann Ki Baat as the radio waves
transmitted from Raipur and Jagdalpur (Bastar) were not strong enough to reach them and its strength needed to be increased
from 100 KW to 200 KW.
In response, the government has sanctioned three new AIR stations of 100 KW each for three southern districts of Bastar. This
will help in increasing the reach not only of national programmes but also programmes in regional languages.
The only viable solution to end Bastars isolation is to connect it with the mainstream. The Maoists agenda to keep the tribals
away from the advantages of development can be defeated only if the direct action of security forces is supplemented
effectively with developmental works. Development is the basic right of the people and even the state has no authority to
violate it.
The big fish
Raghuram Rajan rightly cautions India against being seen as a weak state that lets off the well-connected loan defaulters.

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By: Express News Service | Published:January 19, 2016 12:02 am
RBI governor Raghuram Rajan. (Express Photo by Prashant Nadkar) RBI governor Raghuram Rajan. (Express Photo by Prashant
In a year-end letter addressed to all his colleagues in the Reserve Bank of India, Governor Raghuram Rajan has yet again
exhorted regulatory and banking institutions in the country to demonstrate that India is not a weak state when it comes to
bringing the big loan defaulters to book. Not only are we accused of not having the administrative capacity of ferreting out
wrongdoing, we do not punish the wrong-doer unless he is small and weak. This belief feeds on itself. No one wants to go
after the rich and well-connected wrong-doer, which means they get away with even more, he wrote. This is not the first time
that Rajan has raised this issue. On November 25, 2014, while delivering the third Dr Verghese Kurien Memorial Lecture at
the Institute of Rural Management, Anand, Rajan had launched a scathing attack on the dominant banking culture in India,
which works like a net that lets the big defaulters, including industrialists who have spent unwisely and lost huge amounts of
money, escape without any penalties by restructuring their debts, while catching only the small borrowers. The backdrop of
Rajans lecture, then, was the growing burden of restructured debts.
Rajan had pointed out that the amount recovered from cases decided in 2013-14 under the Debt Recovery Tribunals was Rs
30,590 crore or just 13 per cent of the total amount at stake. Worse still, these cases were estimated to take four years,
instead of the mandated six months under the law, to resolve. It is not surprising that often this inability to make big business
comply has led to allegations of crony capitalism. Rajans latest missive suggests that much still needs to be done and that lack
of compliance continues to pose a challenge to the viability of the banking system.
To be sure, under Rajan the RBI initiated the Strategic Debt Restructuring (SDR), which allows creditor banks to convert their
unpaid loan into equity and take a majority ownership of the troubled firms. This then allows the banks to look for new owners
and redeem their investment. But till now, the SDR has been used by banks in nine cases, and there are question marks on its
efficacy as an instrument to enforce compliance.
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In this context, the government can help the RBIs cause by passing the long-pending bankruptcy code. One of the key reasons
why large defaulters tend to get away is that they can seek legal recourse, which is a very long-drawn-out process in India.
Under the proposed bankruptcy code, a solution will have to be found within 180 days.
Start-up India: Did the government overreach?
Sometimes, the best practice a government can adopt is to stay away

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Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint
Dave Thomas, founder of the famous fast-food restaurant chain Wendys, once said, What do you need to start a business?
Three simple things: know your product better than anyone, know your customer, and have a burning desire to succeed. But
in a country as difficult to do business as India, an entrepreneur also needs a fourth attribute: knowledge of a complex maze of
laws and regulations. In this context, the governments Start-up India campaign, initially announced by Prime Minister
Narendra Modi during his last Independence Day speech, was eagerly awaited.
The daylong event on Saturday saw the unveiling of an action plan for the campaign. The measures announced by the
government fall under three distinct heads: simplification and handholding; funding support; and industry-academia
partnership and incubation.
Sometimes, the most salutary practice a government can adopt for a sector to flourish is to stay away. While the start-ups in
India have, of late, seen a boom, most of it is despite the government and not because of it. The year 2015 was, by far, the
best year for Indian start-ups. On the back of a massive spurt in funding, India is nowaccording to a report by software lobby
group Nasscomthe worlds fastest growing and the third largest start-up ecosystem. With a lively venture capital financing
culture, the government would have been better off avoiding the funding support it announced on Saturday.
Though this fundamounting to Rs.10,000 crore over four yearswill be in the nature of Fund of Funds and will be invested in
Securities and Exchange Board of India-registered venture funds (many of the big-name investors arent), the selection of
appropriate venture funds for investment is a privilege the government can do without. Besides the high opportunity cost and
potential charges of cronyism, the government fund is neither sufficient to resurrect the start-up ecosystem if it is floundering,
nor is it required if the ecosystem is alive and kicking. Likewise, the government should also desist from the temptation of
organizing start-up fests and such events, and leave this job to industry associations.
A whole host of simplification measures announced to make business easier for start-ups is indeed welcome, but with a
caveat. A lot of these steps need to be taken for improving the business environment across the board and not just for startups. For instance, it will help if a mobile app and portal is available to all businesses, and not just to start-ups, for clarification
of regulatory requirements. And what about reducing the number of regulations and discarding the archaic laws which would
make such an app superfluous? This should be part of the governments broader effort towards ease of doing business and
the app should not become the permanent solution.
Most of the exemptions and concessions offered to start-ups were either not needed or not desirable. The tax holiday for the
first three years is much ado about nothing. Few start-ups, if any, can be expected to start returning profit in just three years of
existence. A number of other exemptions and handholding measures are a throwback to the infant industry argument
which becomes an excuse to protect a certain class of industries from market competition. A number of concessions available
to the small and medium enterprises in India, for instance, have done little more than keep them from growing up. Moreover,
these exemptions stand in direct contrast to the governments intention to phase out all exemptions and reduce corporate tax

rates from 30% to 25% by 2019.

The governments focus on industry-academia partnership is perhaps the most appropriate one. Most of Indias top institutes
of higher learning are not known for their research outputs. Moreover, a lot needs to be done to make research outputs useful
for industry. Conversely, the feedback from industry should be used as inputs for research. Such centres of excellence which
combine education, research and industry experience can become hotspots for disruptive technologies and start-up ideas.
Most of the Indian start-ups are engaged in fixing broken markets. While this is commendable in itself, India also needs startups throwing up globally path-breaking products. An enabling environment for this will comprise incubation centres which can
plug into cutting-edge research happening in the country. If the government pulls this off, the Start-up India campaign would
have done some good.
T V Mohandas Pai: A new paradigm for start-ups
The biggest positive in the action plan for start-ups announced by Prime Minister Narendra Modi on January 16 was the
unequivocal commitment to offer a conducive ecosystem for start-ups to flourish. But a lot remains to be done
T V Mohandas Pai
January 18, 2016
Last Updated at 21:46 IST
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T V Mohandas Pai
An e-commerce shake-out in the works

Prime Minister Narendra Modi announced the action plan for start-ups at a glittering event on January 16. It was a great show.
More than 1,500 start-ups were present, the energy was high and palpable. The next generation of Indian business leaders
gathered in their full strength and, what was more amazing, they were on the dais with global stars. Women entrepreneurs
were showcased and they made us proud. An action plan was sorely needed as the situation was grim.
Six out of eight Indian Unicorns had re-domiciled outside India. Ten of the top B2B start-ups had gone, 54 per cent of the top
start-ups had gone in 2014 and 75 per cent in 2015. Our policies and tax laws were forcing the best and the brightest to
register outside India. Global investors wanted a more benign environment with tax certainty as they were investing longterm, not the tax nightmare we have had in India. Our forex regulations were not in tune with investor needs, mergers and
acquisitions could become difficult and long-drawn-out and structuring was convoluted.

There were many conversations with the Department of Industrial Policy and Promotion, Department of Revenue, Ministry Of
Corporate Affairs and the Reserve Bank of India (RBI). They were positive and promised much. The Securities and Exchange
Board of India (SEBI) was truly outstanding. Within four months, they created a listing structure that was on a par with Nasdaq
on the same bourse but with different norms. Expectations were being built up about radical moves and the action plan did
not disappoint.
The biggest positive was the unequivocal commitment of the prime minister, the finance minister, the commerce minister, all
secretaries to government and the Prime Minister's Office to offer a conducive ecosystem for start-ups to flourish. Never
before was such an extensive commitment seen in public. All recognised that these new generation entrepreneurs would
transform India by leveraging technology, solve her challenges and create a massive number of jobs across the country.
The action plan met around 60 per cent of their needs - faster and easier registration of companies, self-certification for many
laws, no inspection for three years, funding for patents, speed of patent protection and the like. A promise to change the law
in the new Bankruptcy Bill to ensure closure of dead companies within 90 days was a big plus. With the high mortality here,
ease of starting and ending is essential. Public procurement norms, too, would be changed, removing turnover and track
record conditions. Funding for 500 incubators across universities, innovation movements, research parks and industry parks
were assured. An ecosystem would be created to support innovation with funding for grand challenges.
Start-up funding was a large ask, and it was answered with a big idea: Rs 10,000 crore for a fund of funds over four years which


would catalyse investment of around Rs 100,000 crore at series A level over the next seven years, truly transformational and a
message to Indian capital to participate in this high-return area. The credit guarantee for lending to start-ups is welcome, as it
will enhance access to credit.
A few tax concessions were thrown in. A three-year tax holiday, though of not much use as there would hardly be any profits
to tax, would nevertheless save the start-ups from harassment by tax officials. Some changes in the capital gains regime were
made. There were promises to consider in the Budget demands to equate capital gains for start-ups with the regime in the
listed market. A serious issue was the high deduction on receipts due to withholding of tax and service tax, causing serious
cash-flow issues. Revenue actually said they understood this and would try to mitigate it in the Budget. It was heartening to
see a positive, open outlook by revenue after so many years.
The forex area remains a major challenge. RBI governor Raghuram Rajan has promised to relook at all regulations inhibiting
investments, reduce unnecessary documentation, but we are yet to see changes for start-ups. Forex regulations are a major
reason for re-domiciling. We need a more open progressive regulation in this area. The hangover of FERA (Foreign Exchange
Regulation Act) lingers. Governor Rajan's letter to his staff says it all and offers hope of change.
Much more needs to be done. Company law is a big hindrance, putting a heavy compliance burden on small start-ups. The
penalty provisions are onerous. Tax laws need more clarifications and simplification. Taxes on alternative investment funds
and venture capital need rationalisation. The valuation of start-ups for investment by angels needs clarity. Policies on
digitisation and digital business are not clear. Marketplaces are not understood, least of all e-commerce! Mobile banking needs
a boost. Payment systems need change. Supply chain issues continue to linger. Funding is needed for training in new
technologies. In biotechnology, speedier clearances, Intellectual Property Rights issues and the like need clarifications.
The definition of a start-up for much of the benefits, as a unit with a turnover of not more than Rs 25 crore, not more than five
years old, working towards innovation driven by technology or IP, needing a certification from an inter-ministerial board, is an
unhappy compromise driven by fears of misuse reflecting our general environment. This would need a relook early on, as it will
inhibit growth in a number of start-ups. Again, most of the promised investment in universities is limited to IIT and central
government-funded institutions, ignoring 97 per cent of India, a glaring discrimination.
Overall, very positive with much work to do, but the direction is clear - up, up and away!
Debt recovery tribunals: More pain than gains for banks
Experts suggest that the law should be strengthened to ensure mandatory time bound disposal of cases
Somasroy Chakraborty | Kolkata
December 17, 2014
Last Updated at 00:48 IST
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Debt recast or postponing the inevitable?
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The functioning of debt recovery tribunals (DRTs), created to help financial institutions recover dues speedily without being
subjected to the lengthy procedures of usual civil courts, appears to cause more pain than gain for banks.
Consider this: The amount recovered from cases decided in 2013-14 under DRTs was Rs 30,950 crore, while the outstanding
value of debt sought to be recovered was Rs 2,36,600 crore. In other words, recovery was only 13 per cent of the amount at
stake. Also, while the law indicates that cases before DRTs must be disposed off in six months, only about a fourth of the cases
pending at the beginning of the year were disposed during the year.

The functioning of DRTs needs to improve to ensure banks are able to recover their existing loans and offer fresh advances at


cheaper rates... In the current scheme of things, there is no mechanism in place to ensure that the tribunal disposes the case in
a timely manner. There is a strong need to bring in more accountability for the DRT, said Shashwat Sharma, partner
(management consulting), KPMG in India.
One problem is the small number of DRTs and Debt Recovery Appellate Tribunals, where judgments of DRTs can be appealed.
While there are 33 DRTs, there are only five Debt Recovery Appellate Tribunals in the country. There is certainly a need for
more number of DRTs. The biggest challenge, it appears, is their ability to deal with a subject with speed. The system that was
designed is clearly not working. Probably, there should be a feedback mechanism and people involved with DRTs should be
encouraged to point out the areas of pain, said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services.
Deepak Haria, senior director at Deloitte in India, echoed a similar view. The challenge is that our judicial system is both
clogged and inadequate in infrastructure, which slows down any redressal. Recovery can be speeded up only when there is a
fixed time-frame for all disposals, and realisation of assets could be speeded up by having special courts to deal with such
recoveries, he said.
A consequence of this is credit cost increases even for borrowers who repay loans on time. For instance, banks now demand a
credit-risk premium of close to six per cent from power companies to compensate for the risk of default. The average interest
rate on loans to these companies is close to 14 per cent.
The functioning of DRTs is also keeping the Reserve Bank of India (RBI) worried. If bankers cannot get their money back, they
are not going to give you loans at cheap price. So, making sure debt recovery tribunals work better, making sure that you dont
have excess number of stays, excess number of appeals that is what we need to focus on, RBI governor Raghuram Rajan
said earlier this month following the central bank's fifth bi-monthly monetary policy review.
Experts suggest that the law should be strengthened to ensure mandatory time-bound disposal of cases. Also, performance
indicators of the adjudicating officer could be used to improve the efficiency of the system. A few recommended that stay
petitions should be analysed before being accepted as there have been instances where advocates exploit the loopholes of the
Act and plead for stays, leading to piling up of cases.
Rs 30,950 crore Amount recovered in 2013-14 under DRTs
Rs 2,36,600 crore Outstanding debt sought to be recovered in 2013-14
13 per cent Actual recovery for the period (2013-14)
While law indicates cases before DRTs must be disposed off in 6 months, only about a fourth of pending cases at the beginning
of the year were disposed during the year
The small number of DRTs and Debt Recovery Appellate Tribunals may be a reason for the dismal scene
The environmental costs of subsidies
Its time to look at the deleterious environmental impact of subsidies so as to attain correct pricing of resources

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Kunal Singh
Low power tariffs, subsidized diesel and the provision of minimum support price for certain water-intensive crops have
together led to unrestrained exploitation of groundwater. Photo: Ramesh Pathania/Mint
Low power tariffs, subsidized diesel and the provision of minimum support price for certain water-intensive crops have
together led to unrestrained exploitation of groundwater. Photo: Ramesh Pathania/Mint
A few days before Delhis odd-even rulea road rationing scheme in which odd- and even-numbered cars were allowed to ply
on roads on alternate dayswas to be implemented, Delhi deputy chief minister Manish Sisodia appeared on a television


channel to answer questions on the rule. During the show, Sisodia admitted that the idea to give a subsidy on diesel for
farmers who use diesel-run pump-sets to irrigate their fields has led to a damaging impact on the environment. The number of
cars running on subsidized diesel has multiplied over the years and contributed to the deteriorating air quality.
I use the word admitted despite knowing that Sisodias was not the brain behind the genesis of diesel subsidy. But at the
same time, Sisodia and his party have been extremely reckless in showering subsidies to win political constituencies. If Sisodia
were currently a politician in rural India, he would have naturally supported the subsidy on diesel.
This problem has now been solved. The lowering of oil prices has allowed India to eliminate the subsidy on diesel. But actually,
the bigger problem is not yet solvedthe one of the political economy and the mindsets it engenders.
Consider, for example, the electricity sector. Most Indian states provide electricity at very cheap rates. The finances of
distribution companies in many of these states are entirely wrecked. To improve the situation, the Union government has
recently announced a number of measures under the UDAY (Ujwal Discom Assurance Yojana) scheme, which wont be
successful unless the underlying causeslow tariffs, power thefts, large subsidy billsare addressed.
Those who havent seen it first-hand should watch the movie Katiyabaaz, based in Kanpur, to get a glimpse of the political
economy which sustains large-scale power theft in many parts of India. The majority of farmers receive electricity either free
or at dirt cheap rates. Non-payment seldom invites punishment. Low power tariffs, subsidized diesel and the provision of
minimum support price for certain water-intensive crops have together led to unrestrained exploitation of groundwater.
There are more examples. Any hike in passenger tariffs by the Indian Railways, for instance, is followed by an uproar by the
opposition parties. In a one-of-a-kind episode, former railway minister Dinesh Trivedi had to step down days after presenting
his maiden railway budget because his own Trinamool Congress party was unhappy with the absolutely minimal tariff hikes he
had proposed.
Since passenger trains dont earn enough, they are cross-subsidized by revenues from freight trains. The freight tariffs, as a
result, are high and uncompetitive, which in turn has caused business to move to roads. This not just makes it difficult to
sustain the cross-subsidy mechanism, but diversion of traffic to road also leads to increase in pollution. As current railway
minister Suresh Prabhu said while presenting the budget for 2015-16: The energy consumption is about 75-90% less for
freight traffic when compared to road. The carbon dioxide emission is about 80% less than road.
The traditional opposition to subsidies has come from the proponents of free markets. Subsidies distort markets and lead to
inefficient outcomesthus goes their indefatigable argument. But these examples show that subsidies also cause significant
environmental damage.
This is interesting since, in India, there is a significant overlap between people who advocate subsidies in the name of the poor
and those who fight for the protection of the environment. The latter movement has, so far, largely restricted itself to
exposing the collusion between the state and big corporations. It is time they began looking at the deleterious environmental
impact of subsidies. If they do so, it will be a victory for correct pricing of resources, if not for free markets and freemarketeers.
Can rural India reap digital dividends?
The virtual world has increased the possibilities of trade in the real world

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Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint
One of the primary agendas of the liberalization which began in 1991 was to improve competitiveness and reduce the


transaction costs which largely restricted Indias trade with the rest of the world. But a quarter century after economic reforms
were initiated, this Coasean problem of transaction costs remains more relevant than ever. The World Banks latest World
Development Report, or WDR, points to the potential of Internet and communication technology (ICT) in pruning these.
The Coase theorem (named after British economist Ronald Coase) states that if trade in an externality is possible and there are
sufficiently low transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.
Since the digital revolution, the virtual world has increased the possibilities of trade in the real world, minimizing these
transaction costs. Transaction costs include search and information costs, bargaining and decision costs, and policing and
enforcement costs.
The WDR cites the example of the Taobao villages in China to show the extent to which the Internet can induce development.
Taobao, a consumer-to-consumer portal established by Chinese e-commerce giant Alibaba, allows entrepreneurs to open
online stores and sell their products to interested consumers. A Taobao village is a cluster of rural e-tailers where at least 10%
of village households engage in e-commerce.
Its worth looking at the potential benefits of such a model in India. Over half of Indias population depends for its livelihood on
an agricultural sector that cannot support it adequately. Structural reforms may improve the sectors viability, but the only
long-term solution is enabling the rural populations access to other forms of economic activity. An e-retail model that aims at
incorporating rural households could offer some utility here.
As matters stand, e-commerce in India is almost entirely an urban phenomenon. Clustering rural retailers as the Taobao model
does creates the volume necessary for incentivizing at least some portion of the logistical and financial support urban retailers
enjoy. And it could have the secondary benefit of providing a boost to artisans who lack access to a wider market, making
traditional crafts unsustainable.
E-commerce ventures structured along similar lines such as ITC e-choupal, Craftsvilla and Keralas Kudumbashree have had
moderate success in the past.
The major obstacle, of course, is the lack of rural Internet access. India has the ironic reputation of having the second largest
number of Internet users and the largest offline population in the world. Internet usage is highly skewed in favour of men and
urban households compared to women and rural households. Prime Minister Narendra Modis Digital India initiative aims at
resolving this bottleneck. Its goal of connecting rural areas with high-speed Internet networks is laudable, as is its focus on
digital literacy. How such a mammoth undertaking will play out remains to be seen. And to be successfulparticularly in the
context of the Taobao modelit must form robust linkages with other government initiatives that range from providing a
cradle-to-grave digital identity to universal access to banking services.
Other hurdles wait further down the road. Judging by the governments Start-up India push, the infant industry syndrome is an
occupational hazard in the Indian policy environment. Rural e-commerce should not fall into the same trap. If the Internet has
to become an effective catalyst for efficiency and innovation, competition is essential. Alibabas Taobao advanced so much on
the efficiency frontier due to intense competition from eBay.
The last thing the rural economy needs to add to the protectionism the agricultural sector enjoys is a subsidized, protected
retail segment.
ICT alone accounted for one-fifth of global growth from 1995 to 2014. In 1990, American economist Paul Michael Romer said,
Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable History
teaches us that economic growth springs from better recipes, not just from more cooking. Technological change is an
endogenous factor in growth and Internet is technology at its best.
Forging PPP of a different kind
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It should come as no surprise that a funds- and infrastructure-starved country like India should take a shine to public-private
partnerships (PPPs). In fact, the private sector is expected to bring in at least half of the over $1 trillion investment in
infrastructure that is targeted as part of the Twelfth Five Year Plan (2012-17).
Add to that the expertise of the private player, and off-balance-sheet access to funds for public sector entities that PPPs bring
to the table, and we could forgive policymakers for thinking they finally have the magic pill to deliver India from its low-growth
But if we were to draw upon our experience in governance and capacity building across sectors and learn a few lessons, wed
need to take PPPs more seriously. And if we could compare the concept of PPP to the theory of gravity, then the recent
Chennai floods could well be the falling of the apple moment.
Chennai showed the way
In December, Chennai showed how even a heterogeneous civil society could come together to make a difference. Some of
these Good Samaritans even put their own lives in danger while trying to save strangers. The story of Yunus, a Muslim man
who did not know how to swim, but did not bat an eyelid before jumping into the water to rescue a Hindu woman in labour,
immediately comes to mind. (In a touching side story, the deeply moved couple named their newborn Yunus). And then there
was 18-year-old Imran, from an impoverished neighbourhood, who succumbed to an insect bite that he suffered during relief
While Yunuss and Imrans stories show acts of extreme courage and sacrifice, there were thousands of others who
contributed in their own way, such as the doctors who organised free medical camps and teachers who took special classes for
students preparing for their board examinations.
Now the question is, as a society, are we going to fritter away this great swell of human kindness that has manifested itself in
myriad ways? Are we going to treat this as a single, isolated display of compassion that is incapable of being nurtured,
sustained, and channelised for a better tomorrow? Can we afford to?
Tiding over the resource crunch
There is a shortage of half-a-million policemen and teachers across States. The National Health Mission also talks about a
severe shortage of specialists and overburdened primary and community health centres.
While filling up these vacancies would definitely go a long way in improving the employment situation and the overall standard
of living, would it hurt if the government used the services of the general public available absolutely free of cost in some
of these sectors?
If a Corporation school in Chennai, whose pass percentage in public examinations is nothing to write home about, could
collaborate with both private teachers and subject-matter experts to conduct weekend classes for the students for free,
wouldnt it be a win-win situation for everyone?
Similarly, if a primary health centre in Bihar could throw its doors open to doctors ready to do pro bono work at a fixed time or
day in a week, what more could one ask for? The benefits of such an arrangement could be manifold. Besides the obvious
improvement in service delivery, this intermingling of government staff with private individuals would help the former imbibe
best practices. This will also help bring transparency and serve as a social audit of government services and accounts.
Calling for equal partnership
But this is easier said than done if one goes by the experience of non-government organisations that have worked or that work
with the government. Says Prahalathan, the founder of Bhumi, an NGO that works with orphaned and underprivileged children
in the field of education: The biggest problems we face when we deal with the government include ad hocism and lack of
continuity. Each officer has his or her own idea of what needs to be done. By the time there is a tangible impact, either the
officer moves out or there is a regime change, and we are back to where we had started.


So, is the absence of a policy framework on how to co-opt the civil society the only problem? No, says Balaji Sampath, founder
and secretary of AID India: It is not about rules or regulations. In fact, we have had the Council for Advancement of Peoples
Action and Rural Technology, an agency for bringing together voluntary organisations and the government for sustainable
development in rural areas. But the problem here is one of mindset. Wherever the government has engaged with an NGO, it
looks at the NGO more as a contractor which could bring down its overheads (in terms of staff cost) and relieve it of some of its
statutory responsibilities. The moment the NGO starts suggesting improvements or a different way of doing things, it is
immediately shown the door.
Adds Dr. Prahalathan: We must admit that the government continues to be the biggest welfare machinery. But with all due
respect, the government should also understand that for many of these NGOs, doing what they are doing is not a 9-5 job. So,
they bring in lot of passion and expertise to the table. If both these are not recognised, they see no point in working with the
government. Many NGOs say that the government displays this big brother attitude even when an NGO brings in everything
to a project, including funds.
If the government can iron out these wrinkles, it could well be setting in motion an army of selfless volunteers who could be
the solution to many of the problems that the government is blamed for.

If we could compare the concept of PPP to the theory of gravity, then the recent Chennai floods could well be the falling of the
apple moment
India must capitalise on cheap crude oil
Even if Opec finally cuts production, it will be more than compensated by the return of Iran
Business Standard Editorial Comment | New Delhi
January 20, 2016
Last Updated at 21:40 IST
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Crude oil could soon fall to $20 per barrel: Abhishek Deshpande
Why low oil prices are bad for financial markets
Traders raise bearish bets on crude oil
Oil prices can dip another 50% from current levels: Vandana Hari
How battle for oil supremacy is helping India

In the past month, crude oil prices have collapsed. Spot contracts have hit 12-year lows at around $28 a barrel for Brent crude
oil. Crude oil has dropped over 20 per cent in 2016 alone. Futures contracts have also fallen drastically with 2020 crude oil
futures now priced below $50 a barrel. Some commodity analysts are predicting a further slide. The investment bank Morgan
Stanley says that a stronger US dollar could drive crude oil down to the $20 mark. However, other analysts believe that oil
could recover and head back to around $60 by end-2016.
The rout has been caused by a combination of factors. The lifting of sanctions on Iran will bring more supply into a market that
is already seeing over-supply. Even if the Organization of the Petroleum Exporting Countries finally cuts production, it will be
more than compensated by the return of Iran. Global oil inventory is also hitting a ceiling as there is little storage capacity left
to spare. Over-supply coincides with weak global demand. Slower growth, in China in particular, is expected to impact demand
adversely. In addition, there is the currency effect. Every major currency has lost ground against the dollar; other things being
equal, dollar-denominated oil prices could fall if this trend continues. Going forward, the geopolitical complexities that could
influence the supply-demand equation are mind-boggling. There is a proxy war on between Iran and Saudi Arabia. Production
has also been affected by war in Libya and Iraq. Meanwhile, persistently low prices could lead to widespread shutdowns in
production of shale oil and gas, leading to a reduction in exploration efforts.

Persistently low crude oil prices will impact India in several positive ways. There will be less pressure on the trade account, and


probably a lower fiscal deficit, due to the lower subsidy burden. Fertilisers and retail petroleum products will cost less. The
government has mopped up higher excise collections on petro-products as prices have fallen. Non-food inflation has
moderated. The government has taken advantage of the lower oil prices and stepped up the pace to build strategic oil reserves
in the country. This scenario also offers an opportunity to move ahead with policy reforms without causing undue consumer
distress. For example, kerosene and gas subsidies could be eliminated, or at least, reduced substantially, by easing closer to
market-driven prices. The government has taken some steps in this direction and more, hopefully, should be taken in the
coming months. The same holds true for fertiliser subsidies; the subsidy mechanism for fertilisers requires overhaul.
On the other hand, there is some danger that exploration and production activity will fall by the wayside. There will not be
much commercial interest until the price cycle changes. There is a commitment to shift to open acreage licensing from the
current New Exploration Licensing Policy system. The absence of urgency could lead to delays in policy review. Given the longgestation nature of exploration activity, policy reviews must not be delayed. Paradoxically, another danger could arise from
reduced inflation. A concomitant fall in nominal growth may exacerbate debt servicing problems for the government, as well
as for companies. Countering this deflationary effect will require prudent fiscal management and careful budgeting. The
overall effect of lower crude oil prices over a long period would certainly be positive - but only if the opportunity is taken to
review and revamp policy while conditions remain benign.
Photonics to drive terabit chips
Scientists from the Centre for Nano Science and Engineering (CeNSE) at the Indian Institute of Science (IISc) in Bengaluru are
working on two projects in the area of photonic integrated circuits.
In the first, researchers and scientists at CeNSE are building a next-generation processor. Its hard to imagine a world without
microprocessors. These ubiquitous little chips drive our technology and are embedded everywhere, from phones to laptops to
DVDs and rockets. But at its very core, each unit is still electrical; it has millions of transistors connected with copper lines.
What if you replaced the copper lines with photonic components? It would exponentially improve the power of
microprocessors. Now, scientists from CeNSE, in a project supported by the Defence of Research and Development
Organisation (DRDO), are trying to develop indigenous technology for high-speed optical interconnect technology. CeNSe has
received a Rs. 5-crore grant from the DRDO for the three-year project.
The copper wires/interconnect create a bottleneck for data transfer, but the project, will exploit high-speed Silicon photonics
to improve data transfer between the core and the memory exponentially, said Professor Shankar Kumar Selvaraja from
CeNSe. In the second project, a CeNSE team is working towards improving the existing optical communication technology.
The aim is to build integrated photonic transceivers that will allow for communication speeds beyond 1 terabits per second
per channel in a scalable fashion, said Professor V. R. Supradeepa, one of the principal investigators of this Rs. 3.40 crore
The hidden wealth of nations
Pin It
This could be a bumper year for the ever-lucrative tax avoidance industry. The 2015 final reports of the Organisation for
Economic Co-operation and Development (OECD)-led project on Base Erosion and Profit Shifting (BEPS) which refer to the
erosion of a nations tax base due to the accounting tricks of Multinational Enterprises (MNEs) and the legal but abusive
shifting out of profits to low-tax jurisdictions respectively lays out 15 action points to curb abusive tax avoidance by MNEs.
As a participant of this project, India is expected to implement at least some of these measures. But can it? More pertinently,
does it have the political will?
The BEPS project is no doubt a positive development for tax justice. If Indias recent economic history tells us anything, it is


that economic growth without public investment in social infrastructure such as health care and education can do very little to
better the life conditions of the majority. Which is why curbing tax evasion to boost public finance is part of the United
Nations Sustainable Development Goals (SDGs).
However, notwithstanding the BEPS project, MNEs and their dedicated army of highly paid accountants are not about to roll
over and comply. Again, if past history is any indication, the cat-and-mouse game between accountants and taxmen will
continue, with new loopholes being unearthed in new tax rules.
Empowering tax dodgers
The primary cause of concern here is the quality of Indias political leadership, which has consistently betrayed its own taxmen.
All it takes regardless of the party in power is for the stock market to sneeze, and the Indian state swoons. Weve seen it
happen time and again: the postponement of the enforcement of General Anti-Avoidance Rules (GAAR) to 2017, and more
spectacularly, on the issue of participatory notes, or P-notes.
Last year, the Special Investigation Team (SIT) on black money had recommended mandatory disclosure to the regulator, as
per Know Your Customer (KYC) norms, of the identity of the final owner of P-notes. It was a sane suggestion because the bulk
of P-note investments in the Indian stock market were from tax havens such as Cayman Islands. But the markets threw a fit,
with the Sensex crashing by 500 points in a day. The National Democratic Alliance (NDA) government, which had come to
power promising to fight black money, promptly issued a statement assuring investors that it was in no hurry to implement the
SIT recommendations. Given such a patchy record, what are the realistic chances of India actually clamping down on tax
Lets take, for instance, Action No. 6 of the OECDs BEPS report: it urges nations to curb treaty abuse by amending their Double
Taxation Avoidance Agreements (DTAA) suitably. The obvious litmus test of Indias seriousness on BEPS is its DTAA with
Mauritius. By way of background, Mauritius accounted for 34 per cent of Indias FDI equity inflows from 2000 to 2015. Its
been Indias single-largest source of FDI for nearly 15 years. Now, is it possible that there are so many rich businessmen in this
tiny island nation with a population of just 1.2 million, all with a touching faith in India as an investment destination? If not,
how do we explain an island economy with a GDP less than one-hundredth of Indias GDP supplying more than one-third of
Indias FDI?
We all know the answer: Mauritius is a tax haven. While not in the same league as Cayman Islands or Bermuda, Mauritius is a
rising star, thanks in no small measure to Indias patriotic but tragically tax-allergic business elite. In Treasure Islands: Tax
Havens and the Men Who Stole the World , financial journalist Nicholas Shaxson notes how Mauritius is a popular hub for
what is known as round-tripping. He writes, A wealthy Indian, say, will send his money to Mauritius, where it is dressed up
in a secrecy structure, then disguised as foreign investment, before being returned to India. The sender of the money can avoid
Indian tax on local earnings.
In other words, it appears that Indias biggest source of FDI is India itself. Indian money departs on a short holiday to Mauritius,
before returning home as FDI. Perhaps not all the FDI streaming in from Mauritius is round-tripped capital maybe a part of it
is genuine FDI originating in Europe or the U.S. But it still denotes a massive loss of tax revenue, part of the $1.2 trillion stolen
from developing countries every year.
What makes this theft of tax revenue not just possible but also legal is Indias DTAA with Mauritius. Its a textbook example of
treaty shopping a government-sponsored loophole for MNEs to avoid tax by channelling investments and profits through
an offshore jurisdiction.
For instance, as per this DTAA, capital gains are taxable only in Mauritius, not in India. But heres the thing: Mauritius does not
tax capital gains. India, like any sensible country, does. What would any sensible businessman do? Set up a company in
Mauritius, and route all Indian investments through it.
India signed this DTAA with Mauritius in 1983, but apparently woke up only in 2000. India has spent much of 2015 trying to
renegotiate this treaty. But with our Indian-made foreign investors lobbying furiously, the talks have so far yielded nothing.
Meanwhile, China, which too had the same problem with Mauritius, has already renegotiated its DTAA, and it can force
investors to pay 10 per cent capital gains tax in China.


Changing profile of tax havens

Tax havens such as Mauritius thrive parasitically, feeding on substantive economies like India. Back in 2000, the OECD had
identified 41 jurisdictions as tax havens. Today, as it humbly seeks their cooperation to combat tax avoidance, it calls them by a
different name, so as not to offend them.
The same list is now called and this is not a joke Jurisdictions Committed to Improving Transparency and Establishing
Effective Exchange of Information in Tax Matters. Distinguished members of this club include Cayman Islands, Bermuda,
Bahamas, Cyprus, and of course, Mauritius.
Today the function of tax havens in the global economy has evolved way beyond that of offering a low-tax jurisdiction. Mr.
Shaxson describes three major elements that make tax havens tick. First, tax havens are not necessarily about geography; they
are simply someplace else a place where a countrys normal tax rules dont apply. So, for instance, country A can serve as a
tax haven for residents of country B, and vice versa. The U.S. is a classic example. It has stringent tax laws, and is energetic in
prosecuting tax evasion by its citizens around the world. But it is equally keen to attract tax-evading capital from other
countries, and does so through generous sops and helpful pieces of legislation which have effectively turned the U.S. into a tax
haven for non-residents.
Second, more than the nominally low taxes, the bigger attraction of tax havens is secrecy. Secrecy is important for two
reasons: to be able to avoid tax, you need to hide your real income; and to hide your real income, you need to hide your
identity, so that the booty stashed away in a tax haven cannot be traced back to you by the taxmen at home. So, even a
country whose taxes are not too low can function as a tax haven by offering a combination of exemptions and iron-clad
secrecy which is the formula adopted by the likes of Luxembourg and the Netherlands.
Third, the extreme combination of low taxes and high secrecy brought about a new mutation of tax havens in the 1960s: they
turned themselves into offshore financial centres (OFCs). The economist Ronen Palan defines OFCs as markets in which
financial operators are permitted to raise funds from non-residents and invest or lend the money to other non-residents free
from most regulations and taxes. It is estimated that OFCs are recipients of 30 per cent of the worlds FDI, and are, in turn, the
source of a similar quantum of FDI.
Such being the case, all India needs to do to attract FDI is to become an OFC, or create an OFC on its territory bring offshore
onshore, so to speak. Thats precisely what the U.S. did it set up International Banking Facilities (IBFs), to offer deposit and
loan services to foreign residents and institutions free of reserve requirements. Japan set up the Japanese Offshore Market
(JOM). Singapore has the Asian Currency Market (ACU), Thailand has the Bangkok International Banking Facility (BIBF),
Malaysia has an OFC in Labuan island, and other countries have similar facilities. OFCs, as Ronen Palan puts it, are less tax
havens than regulatory havens, which means that financial capital can do here what it cannot do onshore. So every major
hedge fund operates out of an OFC. Given the volume of unregulated financial transactions that OFCs host, it is no surprise
that they were at the heart of the 2008 financial crisis.
Apart from accumulating illicit capital (in the tax haven role), channelling this capital back onshore dressed up as FDI (in
investment hub role), and deploying it to engage in destructive financial speculation (in OFC role), these strongholds of finance
capital also serve a political function: they undermine democracy by enabling financial capture of the political levers of
democratic states.
It is well known that political parties in most democracies are amply funded by slush funds that would not have accumulated in
the first place had taxes been paid. But today, not least in the Anglophone world, global finances capture of the state appears
more like the norm.
A lone exception seems to be Iceland, which began the new year on a rousing note by sentencing 26 corrupt bankers to a
combined 74 years in jail. Meanwhile in India, we continue to parrot long discredited clichs about the need for more financial
deregulation and a weird logic that mandates a smaller and more limited role for public finance.


All India needs to do to attract FDI is to become an offshore financial centre (OFC), or create an OFC on its territory bring
offshore onshore, so to speak. Thats precisely what the U.S. did

Indias biggest source of FDI is India itself, money departing on a short holiday to a tax haven and then routed back as FDI. Will
the government muster up the political will to clamp down on
the tax-allergic business elite?
Devangshu Datta: Shifting India to clean energy
What may happen if India's energy demand were met by an almost complete shift to solar, wind and other renewables
Devangshu Datta
January 20, 2016
Last Updated at 21:44 IST
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The year's highs and lows

By 2022, India aims to have an installed solar energy capacity of 100 gigawatts (Gw) and wind turbine capacity amounting to
another 60 Gw. In total, it hopes to have 175 Gw worth of renewable energy (RE) capacity by 2022. The next target is to double
this, to 350 Gw of RE by 2030.
Assuming all targets are met, about 40 per cent of total power capacity will be RE by 2030, with solar and wind forming the
backbone. (Much less than 40 per cent of actual power generation would be from renewables because RE load factors are low.

RE has been enthusiastically supported across the political spectrum. Prime Minister Narendra Modi was an early advocate of
solar energy during his days as chief minister of Gujarat. The Bharatiya Janata Party has ramped up the targets set during the
United Progressive Alliance era. Solar and wind costs have dropped to competitive levels, compared to thermal.
There are many positive public associations with renewables. It is assumed that the environmental footprint is small. In treehugger circles, it is believed that woes like anthropogenic global warming, conflicts in petroleum-rich regions, atmospheric
pollution, environmental damage and conflicts caused by coal mining etc, will ease off as RE becomes a larger part of the
energy mix.
The reality does not bear such a close resemblance to Disneyland. Solar, wind et al, will mitigate some problems. But
renewable technologies have significant downsides. Solar and wind will also cause major and messy shifts in employment
Huge sums are required. Solar alone needs $95-100 billion equivalent of investments (at Rs 65/USD) to meet the 100 Gw target
of 2022. To put that in perspective, the current outstanding bank credit to the entire Indian power sector (conventional and
RE) is $85 billion equivalent.
There are also enormous technical challenges in integrating intermittent power generation via solar and wind, with
conventional grids. Grid-balancing becomes tricky - they must get much smarter, which is of course, a good thing. Smart
solutions for net metering - adjusting power bills to reflect RE generated and put on the grid by the consumer - will also be


Solar and wind need specific natural conditions (sunshine, wind consistency). Both place pressure on land and other resources.
Instead of being dependent only on imports of crude, gas and coal, India could end up dependent on rare earth imports as well
as crude and gas. The only big exporter of rare earth metals is China and it has put the squeeze on that market many times.
In environmental terms, everybody focuses on the bright side of RE. So, let's look at the dark side.
First, wind. Wind kills birds. it is estimated that literally millions (by some estimates more than 10 million) of birds are killed all
over the world every year by wind turbines. Plus, each turbine installation consumes large amounts of concrete and steel, PVC
and fibre-reinforced plastics. These are all materials with nasty footprints. Wind can coexist with crops. But it needs a lot of
land with consistent wind speeds.
Ideally, wind turbines can be located offshore where noise doesn't matter, and there are fewer birds to kill. But then there are
problems connecting to the grid, due to the necessity of laying undersea cables. Offshore facilities also incur much higher
maintenance costs due to the corrosive effects of sea water.
Now, solar. India is well-suited to solar because it averages nearly 300 days of sunshine across a very large tropical region
("high solar irradiation" in the jargon). Still, enormous amounts of land is required.
Setting up a capacity of 50 Mw in India needs about one square km of land. A Gw (1 Gw=1,000 Mw) therefore, needs about 20
square km and 100 Gw will require upwards of 2,000 square km. Delhi city (area 1,485 square km) currently consumes over 6
Gw. In fact, 40 Gw of that by 2022 is to be built on roofs. Gujarat has built arrays on top of canals.
That brings us to another requirement. Solar needs water (or lots of manual labour) to keep panels clean. Installations in
deserts must solve that problem. And yes, some solar energy concentration technologies also kill birds by flash frying them in
large numbers.
Labour is another interesting factor. Solar and wind are more labour-intensive than conventional power. Manual supervision is
required to install, maintain and repair installations, quite apart from the labour requirements of factories manufacturing RE
The high labour intensity is welcome in India. But there could be loss of employment and loss of revenues in two major
employment-generating industries as RE takes hold. RE requires far less construction activity compared to conventional power
(or hydro, or nuclear). Construction employs over 40 million people at present. Second, there would be an impact on coal
mining and the associated value chain. The transition phase where coal miners and construction workers are laid off would
have to be managed well.
As with all new technologies, RE will bring some new problems in its wake. Of course, the net effects of diversifying the energy
mix and reducing the environmental footprint should be positive. But there will be downsides and some of those could be
destabilising. We should be prepared for that.
India may cease to be pharmacy of the world
17 Share?
With patients grappling with increasing drug prices, the government has expressed concern that India will no more be the
pharmacy of the world if generic companies gave up the fight for access to affordable drugs.
The concern here is regarding the Voluntary Licence (VL) agreements signed between 11 Indian generic drug makers and
Gilead Science to bring the blockbuster Hepatitis C drug Sovaldi (salt name sofosbuvir ) to Indian markets.
This (VL arrangement) is a concern. But it is part of a companys business strategy, and the government cannot have a policy


dictating what a companys business strategy should be, a senior official handling matters related to intellectual property
rights said on the condition of anonymity. As part of the VL, the Indian companies pay a royalty to the innovator company
(Gilead, in this case) and are allowed make copy-cat versions of blockbuster drug.

However, under the VL agreement on Sovaldi, Indian made generic versions of the drug could not be exported to 50 middleincome, high burden countries, or any high income nations including much of Western Europe, and the U.S. According to a
technical analysis by MSF, over 49 million Hepatitis C patients live in middle income countries excluded under the VLs antidiversion programme.
In 2005, when it was faced with the implementation of the WTO rules, India globally changed conceptions of policy
approaches to managing ever-greening in the patent examination system on pharmaceuticals to continue with the production,
registration and supply of generic medicines to millions of patients in India and other developing countries. But today generic
manufacturers face major constraints to produce and supply generic versions of new patented medicines and the Indian
government needs to once again step up and respond to the crisis in the industry. India is increasingly now reliant on imported
expensive medicines and equally disturbing is the fact that India is shutting down as the pharmacy of the developing world,
Leena Menghaney, Head of South Asia, Access Campaign, Mdecins Sans Frontires (MSF) said.
Another official said these VL pacts are handy to avoid litigation and ensure fair competition between licensees. The
government will be concerned if the VL arrangement hampers the growth of generics or prevents access to medicines or
artificially jacks up the prices
Tax elite to reduce inequality
1 Share7
French economist Thomas Piketty says he hopes the Indian elite will pay more taxes on wealth and income, as the countrys
tax-to-GDP ratio of less than 11 per cent is insufficient to meet its challenges of inequalities. The aim should be to evolve the
ratio towards 30-50 per cent, as in the U.S. and west European countries.
India has zero wealth tax I hope the Indian elite will behave much more responsibly [in paying more taxes] than the western
elite did in the 20th century, he told The Hindu in an interview.
Drawing a comparison with China, the author of the best-seller Capital in the Twenty-First Century said: The Chinese
Communist Party has been much more successful than the democratic and parliamentary Indian elites in mobilising significant
resources to finance a strategy of social investment and public services. Indias public health system has a budget of barely 0.5
per cent of GDP, compared with almost 3 per cent in China.

His observations follow new research based on the World Banks poverty data that show the burden of cutting global
inequality now rests largely on India as China has been successful in doing it. At the same time, the Modi government has
announced its intention of reducing the rate of taxation of corporate incomes to 25 per cent (with corresponding withdrawals
of exemptions), which is lower than in rich countries.
Superbug and quantum dot
Two IIT-Delhi alumni use light to persuade invisible bits of semiconductor material to kill drug-resistant bacteria


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Samar Halarnkar
Transmission electron micrographs of cadmium telluride nanoparticles, seen here using electron beams instead of visible light,
which sparks chemical reactions in them. Fashioned in water from semiconductor materialsimilar to that used in solar panels
or mobile phonesthe particles, or quantum dots, as their inventors call them, destroyed 92% of drug-resistant bacteria in a
laboratory trial.
Transmission electron micrographs of cadmium telluride nanoparticles, seen here using electron beams instead of visible light,
which sparks chemical reactions in them. Fashioned in water from semiconductor materialsimilar to that used in solar panels
or mobile phonesthe particles, or quantum dots, as their inventors call them, destroyed 92% of drug-resistant bacteria in a
laboratory trial.
It challenges the limits of physical law, the ability of the scientist and the imagination of the ignorant. The nanoscale is a
challenging frontier where atoms and molecules, the building blocks of everything, are manipulated. The tools are
infinitesimally small, the problems addressed, among Earths biggest.
The problem in question is the rise of super-bacteria resistant to the latest antibiotics, the last line of medical defence against
various infections, cancer and HIV. The rampant, indiscriminate administration of common antibioticspenicillin is a prime
examplehas allowed bacteria such as Salmonella, Staphylococcus and E. coli the ability to shuffle their genes and defeat
these drugs. For humanity, its always been a one-step-ahead-many-steps-back battle in the war against the superbugs, which
use evolutionary abilities to overwhelm medical advances.
This week, Prashant Nagpal, Anushree Chatterjee (both are PhDs and alumni of Indian Institute of Technology, Delhi) and their
colleagues at the University of Colorado-Boulder took us a step ahead, as they revealed the development of a light-activated
superbug-killing nanoparticle some 20,000 times smaller than the width of a human hair. The nanoparticles, known as
quantum dots, are each one million times smaller than a millimetre, and they killed nine of 10 drug-resistant bacterial cells
grown in a laboratory culture and resistant to all known antibiotics, according to a paper published this week in the journal
Nature Materials. The quantum dots were used in tiny concentrations, about a thousand times smaller than current drugs in a
pill, Nagpal, a recipient of several awards, told me in an email interview. The development of the quantum-dot nanoparticles
required much interdisciplinary research, stretching into biology, chemistry and electronics.
As the superbugs evolve, adapt and fight back, the quantum dots can be tuned, or customised, with an atom added or
subtracted to create a new material, property or therapy, while using data from related clinical trials or drugs, said Nagpal, an
assistant professor and senior author of the study. With Chatterjee (also an assistant professor and senior author), Nagpal has
co-founded PRAAN (life in Hindi) Biosciences, a start-up that uses a separate discovery from their laboratories: A single DNA
molecule to sequence genetic profiles to diagnose and treat the infections that drug-resistant bacteria cause. The duo has also
filed a patent for the quantum dot.
Antibiotic-resistant bacteria infect about two million people and kill at least 23,000 people in the US each year. There is no
comparative data for India, but the country is the worlds largest consumer of antibiotics and has emerged as a leading hotbed
of untreatable bacterial infections, their threat doubling over five years, my colleague Charu Bahri reported in November.
Gold and silver nanoparticlesamong other materialshave previously been used to attack superbug infections, with varying
degrees of success. Their main drawback is the damage to surrounding cells. The quantum dots, fashioned in Nagpal and
Chatterjees laboratory in water from several semiconductor materialsused in solar panels or mobile phonesshow
different effects on bacteria. For instance, cadmium telluride nanoparticles have a therapeutic effect against drug-resistant
bacteria; similar-sized copper indium sulfide particles help good bacteria grow, said Nagpal, useful for future mass production.
The quantum dots are benign in darkness. Much as in any semiconductor, lighta room lamp or sunlight will doexcites
electrical charges in the quantum dots and sparks a chemical reaction. Varying the wavelength of light, or size, composition
and surface of the dots, allows selective killing of drug-resistant bacteria, without harming host human cells.
This means, if successful in further clinical trials, we can simply administer these dots to patients with infections and it can
cure the infection without potential effects (or side-effects) for healthy host cells, said Nagpal, who with Chatterjee and other
colleagues is currently conducting pre-clinical trials using animals. We have tested our therapy, as a blind trial, on five-worst
patient isolates (actual clinical samples from the University of Colorado Medical Campus), and it has been effective against


each and every one of them!

They envisage three modes of quantum-dot therapy and drug administration. First, for topical infections caused by wounds or
cuts, where a sticky adhesive patch coated with nanoparticles will need to be illuminated with light to begin treatment.
Second, for systemic infections, which will need the drug to be injected or administered intravenously. Based on results we
see with clinical studies, if the nanoparticles are dispersed evenly, will be effective for patients exposed to a well-lit room or
photo-therapy room, Nagpal said. Third, as a disinfectantfor instance, on hospital surfaces or instrumentsin a well-lit or
specially lighted room.
Nagpal and Chatterjee now require funding from government or private donors for clinical trials, the final and most challenging
proving grounds that take any therapy from laboratory to marketand determine if the quantum dot could be the next small,
big thing.
India is just months away from deploying a regional alternative to GPS.
0 2 Google +1
Published:January 22, 2016 12:56 am
With the launch of the fifth payload of the Indian Regional Navigation Satellite System (IRNSS), the Indian Space Research
Organisation (Isro) is almost set to deploy a secure and nationally owned alternative to GPS, which will cover all of India and a
zone about 1,500 km beyond the national borders. After two more launches, India will join the small group of nations with
their own satellite navigation systems. The US GPS was the trailblazing system with a global footprint, followed by the Russian
GLONASS and French DORIS. By 2020, the European Unions Galileo and Chinas BeiDou satellite arrays are expected to be
globally deployed.
BeiDou is still a regional system, and the IRNSS marks Indias first, confident and very necessary step into this field. It will have
two services, a public access system and an encrypted variant for the military. Indeed, while satellite navigation systems are
generally celebrated for improving accuracy in conjunction with other services like GPS DORIS can drill down to millimetric
levels, which is valuable in the earth sciences security will be the initial deliverable of the IRNSS. The need for secure
communications is understood in our hacker-infested world and, by extension, so is the need to own communication satellites.
However, the need to own secure positioning services should be equally obvious. A major geopolitical incident could render
foreign GPS systems hard to access, or impossible to trust.
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The extra accuracy which the IRNSS promises will assume significance for future developments like the Internet of Things, to
revolutionise logistics and inventory management, for instance, and perhaps enhance telemetry services. The Isro is taking a
significant step with the IRNSS, helping to future-proof the nation from the perspective of the security and accuracy of data. In
an information-hungry world, its serving the national priority of generating and owning reliable data on the neighbourhood.
Power Tariff Policy
What is the policy?
Tariff policy for power is governed under the Electricity Act. The policy is the guiding principle for setting power rates, power
purchase agreements, sale and purchase of coal and power both conventional and renewable energy
Why was it revised?
The policy revision was undergoing since 2006 in wake of increasing basket of power generation, corresponding growth of
transmission & distribution and lack of regulations to tackle new issues cropping up in the ever dynamic power sector. Power
ministry in its first draft said the revision was taken up to provide affordable power to consumers and ensuring fair returns to
generators, transmitters and distributors of power and to facilitate development of markets and market instruments in the
power sector.
Major Ammendments
For optimal utilisation of land and other resources that are used for power projects, the policy allows increasing power
production on the same project site to the extent of 100 per cent capacity. (Subject to regulatory approvals) Impact: hassles
of land acquisition, forest and environment clearance reduced without effecting power generation. Impetus to private
Sale of surplus power generated which has no takers, in spot market through power exchanges Impact: As spot market is
mostly buyers market, cheap power would be available for states/discoms to buy. It would improve the PLFs of generating
station which have to reduce the capacity when states dont buy the contracted power.
All transmission projects to be awarded through tariff based competitive bidding. The basket of exceptions reduced to minimal
list of security related projects. Even intra-state projects which are above a stipulated cost to follow bid regime. Impact: The
policy has given a clear directive to follow competitive bidding in both central as well as state transmission projects. This will
allow greater flow of private capital into the lagging transmission sector, said Pratik Agarwal, Vice Chairman, Sterlite Power
Grid Ventures Limited.
Hydro power projects to be awarded under cost-plus basis and not reverse bidding. The tenure of power purchase agreement
extended by 15 years over and above the existing 35 years Impact: Hydro power gets a new lease of life. Also, hydro when
compared to thermal takes longer time and faces lot regulatory hurdles. Any forecast regarding tariff is difficult, so cost plus is
a blessing for private investors in the hydel sector.
Solar Renewable Purchase Obligation (RPO) to reach 8 per cent by March, 2022. Also, the policy introduces Renewable
Generation Obligation, which allows new coal/lignite based thermal plants to also establish renewable capacity to meet their
RPO. Existing plants can set up such capacity subject to approval of procurers. Impact: This will mandate discoms towards
providing clean energy to the consumers and prevent payment default to the power producers. Market experts are however
still reading the fine print of how much would 8 per cent solar power purchase entail on generation and demand for solar
Bundling of renewable power with power from those plants whose PPAs have expired or plants which have completed their
useful life, subject to development through competitive bidd
No inter-State transmission charges and lossesNo inter-State transmission charges and losses to be levied for renewable
power (solar/wind) till such period as notified by GoI. Impact: One major worry that renewable energy investors face is
procurement. Leveraging existing power assets to expand capacity in both conventional and unconventional energy to boost
generation suggests better utilization of invested capital. The continued preoccupation with renewable energy is heartening.
This is in line with the growing expectation that cleaner energy like solar shall increasingly displace conventional sources in


energy portfolios of developed and developing countries. The intentions have been reiterated, what remains to be seen is how
these are implemented and the various parties involved held accountable to deliver the commitments proposed, said Kalpana
Jain, Senior Director, Deloitte in India.
Enhanced role of regulators: Both central and state regulators have been strengthened to take up hard tasks and be the final
word in most cases. The state regulator would devise the trajectory for achieving 24*7 power by 2022 and closely monitor it as
well. Regulator would also mandate compulsory purchase of power from micro grids set up in remote locations. Impact: Tariff
Policy being just a guiding principle is usually twisted by state regulators. The policy amends the legal position of SERCs to
may which entails falling in line with most regulations. SERCs being given executive role also strengthen their role further.
Other important amendments for:
Cost pass through of change in domestic duties, levies, cess and taxes in competitive bid projects Cost pass through for use of
imported/E-auction coal in competitive bid projects which the producer had to use in case of shortfall contracted coal supply
by Coal India. Recovery of costs owing to variation in prices of fuel / power purchase etc. on monthly / quarterly basis.
Power Producers
To benefit from periodic cost variation as there would be no carry forward cost. Upfront payment for several cost variables.
Smart meters to simplify billing, demand monitoring, help choose power supplier in future Net metering for roof-top solar.
Two way smart meters shall be provided to all consumers for roof top solar
Why solar tariffs are falling and what they mean for Indias renewable energy sector
Aruna Kumarankandath @CSE_Aruna | Thursday 21 January 2016
At Rs 4.34 per unit, Fortum Energy has quoted Indias lowest ever tariff for electricity in Rajasthans solar auctions, trumping
the previous lowest bid of Rs 4.63 in Andhra Pradesh
The lowering of solar prices would make renewable energy more attractive to distribution companies (Photo: Ankur Paliwal)
The lowering of solar prices would make renewable energy more attractive to distribution companies (Photo: Ankur Paliwal)
This week, Indian power utility NTPC Limited announced the results of solar bids for six projects of 70 MW each in Rajasthan.
The bids saw Finland-based company, Fortum Finnsurya Energy, quote Rs 4.34 per unit of electricity produced at one of the
projects, the lowest ever for electricity from solar in India.
Other winners included Rising Sun Energy and Solairedirect (each with two projects with a bid of Rs 4.35 per unit) and Yarrow
Infrastructure which quoted a tariff of Rs 4.36 per unit. The projects will be set up in Bhadla Solar Park-II near Jodhpur in
Taking the Central Electricity Regulatory Commission benchmark cost of Rs 5.87 crore per MW, the total investment in the
projects would be of Rs 2,466.79 crore. "The Rajasthan bids have achieved the lowest tariff due to higher capacity utilisation
factor (CUF) and lower land costs," said Anjali Rattan Nashier, CEO, Rattan India Solar, in a statement. Rattan India bid through
its subsidiary Yarrow Infrastructure for one of the 70-MW projects.
The fact that land procurement and transmission infrastructure would already have been taken care of in the Bhadla Solar Park
was a huge incentive for these solar bids. Vinay Rustagi, managing director of solar consultancy Bridge to India, said the
provision of assured land may have made the difference. "The winning bidders are mostly international players. It shows that
despite the falling prices, they feel they are getting the best projects possible because the solar parks are being provided by
the government, he said.
Bhadla in Jodhpur district has the highest solar radiation in the country," added B K Dosi, managing director, Rajasthan
Renewable Energy Corporation. According to National Institute of Wind Energy, Global Horizontal Irradiance (GHI) of the park
is 2010 kWh/m2 per year.
Power minister Piyush Goyal tweeted, Through transparent auctions with a ready provision of land, transmission and the like,
solar tariffs have come down below thermal power cost.
NTPC will procure and bundle solar power from these parks with coal-based power generated from its older plants to keep the


resultant tariff low. The lowering of solar prices would make renewable energy more attractive to distribution companies since
they can buy power and fulfill their renewable purchase obligation, mandated under Electricity Act, 2003, without incurring
extra costs. Lower cost of generation will also attract consumers who feared that more and more renewable energy in the
energy mix of the country would cause electricity prices to go up.
Mercom Capital Group, which reports on developments in the sector, however raised concerns over the decline in tariffs.
Project costs include those of solar modules that take up half the investments. But the fall in solar module prices do not
match the rate of decline in tariffs, it told news agency Press Trust of India (PTI).
Great fall of Indias exports
From January to December, Indias total exports were significantly lower than the same time of the previous year. This was
perhaps a nadir

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Deepak Nayyar
A file photo of the container terminal at the Cochin port. Photo: Reuters
A file photo of the container terminal at the Cochin port. Photo: Reuters
The news about exports was dismal throughout 2015. For 12 consecutive months, from January to December, Indias total
exports, in terms of US dollars, were significantly lower than in the corresponding months of the preceding year. This was,
perhaps, a nadir.
The problem is not altogether new. It has persisted for some time. Export performance in the recent past has been poor in
relation to the needs of the economy and in comparison with some other developing countries.
Graphics: Naveen Kumar Saini/Mint
Click here for enlarge
Table 1 presents the basic contours of Indias foreign trade from 2010-11 to 2014-15. It reveals a stagnation in the dollar value
of exports, around $300 billion per annum, in the past four years. It also shows that, on average, exports were able to finance
just two-thirds of imports.
Consequently, the trade deficit reached alarming levels, at 10% of gross domestic product (GDP), in 2011-12 and 2012-13. Even
in the remaining three years, its average level, at 7% of GDP, was among the highest for countries in the developing world.
The associated current account deficit would have been simply unmanageable, were it not for software exports at more than
$70 billion per annum, and remittances in the range of $70 billion per annum, in the past three years.
In addition, world prices of crude oil dropped from around $110 per barrel in end-June 2014 to less than $50 per barrel in endJanuary 2015, to remain in the range of $50 per barrel through the year. But, in mid-January 2016, the price plunged below
$30 per barrel, its lowest since 2004. This windfall gain has eased what could have been an exceedingly difficult situation.
It must be recognized that the global economic situation has been difficult for some time. The financial crisis that surfaced in
the US in late 2008 led to a sharp contraction in world trade that was much greater than the fall in global output. The Great
Recession, which followed in its aftermath, persists even now. Recovery in output is slow, uneven and fragile. The recovery in
trade is just as slow.
During 2010-14, Indias export performance conformed to the average. Its share in world exports stayed in the range of 1.5%,
while its share in developing countries exports remained unchanged at 4%. Yet, over the same period, some Asian economies,
such as China and Vietnam, managed to increase their share in world exports.
India probably fared worse than the average in 2015. More importantly, its performance in exports of manufactured goods
was clearly below par throughout, as its share in world manufactured exports (1.3%) was significantly less than its share in


world manufacturing value-added (2.3%).

The slow growth in world trade does impose a demand constraint on total exports from developing countries. But this demand
constraint is not binding for single countries such as India, particularly if their share in world exports is small. After all, in the
same world economy, several Asian countries boosted their export performance by increasing their share in global exports.
Even if it is a convenient alibi, it would be misleadingif not deluding ourselvesto blame the world economy for Indias
dismal export performance. The explanation lies in domestic economic factors. And the main culprit is the exchange rate of the
The exchange rate is a crucial price that determines the rupees earned per dollar of exports (and rupees paid per dollar of
imports). Thus, it shapes the price competitiveness of exports in world markets and the profitability of exports for domestic
firms. It also influences the relative profitability of exports, compared with sales in the domestic market, which is particularly
important in India because most exports are exportables that can be sold either in the world market or in the home market.
Figure 1 compares the depreciation of the rupee vis--vis the dollar during 2015, with that of the euro and the currencies of 11
emerging markets in the developing world. It shows the rupee fell the least, just 4.2%, a fraction less than the Chinese
renminbi, much less than the euro at 13.6%, and way below the depreciation in the Turkish lira at 25% or the Brazilian real at
44%. In the first fortnight of January 2016, nervous markets depreciated both the Chinese renminbi and the rupee by a further
1.5% vis--vis the dollar.
Such a comparison of nominal exchange rates, which is by definition bilateral, is necessary but not sufficient. There are two
derived concepts that are important. The nominal effective exchange rate (NEER) is an index that measures the value of a
currency against a weighted average of a basket of currencies. The real effective exchange rate (REER) adjusts NEER for
differences in the rates of inflation at home and abroad. NEER and REER can be either export-based (with appropriate weights
for currencies of countries that are major markets for, or competitors in, its exports) or trade-based (with appropriate weights
for currencies of its important trading partners).
Export-based effective exchange rates for India, both NEER and REER, for every month from September 2013 to November
2015, are plotted in Figure 2. These are more appropriate measures of how the competitiveness of Indian exports, shaped by
the exchange rate, in nominal and real terms, changed over time.
It shows that the NEER index appreciated by 8% (from 70 to 75.6 compared with 100 in 2004-05). In contrast, the REER index
appreciated by 14% (from 101.2 to 115.2 compared with 100 in 2004-05). Obviously, the competitiveness of exports over the
past two years was diminished significantly by the exchange rate of the rupee.
There are, of course, other underlying domestic factors that constrain export performance. Despite massive import
liberalization, access to imported inputs necessary for export production remains a serious problem. The infrastructure
power, roads, transport, communication and portsis simply inadequate. Non-price factors that affect the competitiveness of
manufactured exports, such as quality or delivery dates, persist. But these usual suspects have been with us for a long time
and cannot, by themselves, explain the dismal export performance in recent years.
The persistently overvalued exchange rate in India means that the rupee is overpriced. Why? In the past, when exchange rates
were fixed, devaluations often had negative political consequences for governments. However, in the present world of floating
rates, currencies do depreciate or appreciate. Hence, the politics of exchange rates is passe. But it might have a corollary in the
form of a macho belief system that thinks of a strong rupee as a plus point for the government. Any such belief is flawed.
It might just be a camouflage for the real reason, which is never made explicit. This stems from the compulsion of financing
large current account deficits (in the balance of payments) though capital inflows provided by foreign institutional investors.
The economy needs a strong exchange rate for confidence, together with high interest rates for profitability, to sustain such
portfolio investment.
This solution often turns out to be worse than the problem. It erodes the competitiveness of exports over time and enlarges
the trade deficit. Larger trade deficits and current account deficits require larger portfolio investment inflows, which beyond a
point undermine confidence, and create adverse expectations, even if the government keeps the exchange rate pegged.


When a stifling of exports does ultimately force an exchange rate depreciation, confidence may simply collapse and lead to
capital flight. This is the story of many currency crises across the developing world over the past two decades.
It is essential to recognize that the exchange rate is a price which matters for the economy in many spheres much more
important than portfolio investment inflows that can be unstable, fickle or volatile. The overvaluation of the rupee, which
makes exports difficult and imports attractive, must be corrected.
The time has come to let the rupee depreciate not just in nominal terms but also in real terms. A more appropriate exchange
rate would help reduce the balance of trade deficit to manageable proportions by stimulating exports and dampening imports.
It would also help domestic manufacturing firms competing with imports to Make in India and combat the onset of deindustrialization.
Even for those who want the comfort of large foreign exchange reserves, exports and trade surpluses (China and Taiwan) are a
far better way of accumulating reserves than portfolio investment inflows (India) that can be withdrawn on demand.
Clearly, the exchange rate is a critical determinant of export performance and matters for the economy in other domains.
Similarly, exports play a vital role in the performance of the economy. In the external sector, exports are a means of financing
imports, which are essential to sustain desired levels of consumption, investment and production in the economy, while
keeping the trade deficit and external borrowing within manageable proportions.
At the macro level, exports not only provide an external market that complements domestic demand as a driver of economic
growth on the demand side, but also impart efficiency and competitiveness in domestic production by enforcing a cost
discipline on the supply side. India cannot aspire to sustainable high growth without a dramatic transformation in its export
Operation begins to curb money laundering, terror funding
Government agencies have launched a massive National Risk Assessment (NRA) exercise to identify the sectors that are
susceptible to money laundering and terror funding, and plug the loopholes. This is in line with the Financial Action Task Force
(FATF) recommendations. While India has met its obligation of mutual evaluation with FATF, it is now required to make a risk
assessment and put necessary mechanisms in place. FATF is an inter-government body that sets the standards for measures to
counter terror financing, money laundering and other threats to international financial system.
As part of the process, the World Bank had earlier this month made a customisable excel-based self assessment software tool
available to Indian agencies. It focusses on all vital aspects of money laundering, including terror financing risks, and helps
identify threats and vulnerabilities in different sectors.

A three-day workshop attended by senior officials of the Finance Ministry and enforcement agencies was organised recently to
thrash out the future course of action. Real-estate emerged as one of the sectors requiring urgent intervention.
The NRA exercise generally takes about a year. It begins with the collection of data on sectors that are prone to money
laundering in high, medium and lower categories at the national level. The country then has to prepare an action plan based
on the level of risk.
RBI Governor steps up to the challenge


Discrimination is all-pervasive and is often suffered silently. Where there is discrimination, there is sub-optimal use of talent,
an unequal allocation of resources, and misuse of responsibility. When all these combine, it is an insurmountable mess. And if
this takes place in a domain that deals with large public funds, we have to sit up and review the situation seriously, as it has
been allowed to drift for far too long.
Maybe there has been a deliberate attempt to let things just drift. Or maybe the system is incapable of arresting the problem.
But more than the cause of the drift, it is its effect that could permanently impair the national economy. Thus, it is a tall order
for anyone to stem the drift. In this scenario, it is refreshing to see a person of Raghuram Rajans stature speak his mind. The
youngest to adorn the mantle of governorship at the Reserve Bank of India, Dr. Rajan is widely acclaimed for predicting the
2008 global financial meltdown. And he commands quite a following and respect in the global financial community. It is also
refreshing to see that when he expresses his view, he does it without mincing words.
The plain-speaking in his New Year message to the employees of RBI therefore did not come as a surprise. He hit the nail on
the head when he articulated his thoughts on the system in India today. It has often been said that India is a weak state, he
said. Not only are we accused of not having the administrative capacity of ferreting out wrongdoing, we do not punish the
wrong-doer, unless he is small and weak. This belief feeds on itself No one wants to go after the rich and well-connected
wrong-doers, which means they get away with even more. If we are to have a strong sustainable growth, this culture of
impunity should stop.

Lest he be misunderstood, he quickly clarified: This does not mean being against the rich or business, as some would like to
portray, but being against wrongdoing.
This is perhaps the first time that a person who holds such an important office in the monetary management sphere has
spoken openly of punishing the wrongdoings of the big ones in business. Defaulting promoters have no divine right to
remain in charge of their companies, he stressed.
Treatment of borrowers
Banks have the habit of throwing good money after bad money, and letting the recalcitrant promoters freely run their
enterprises. Financial shenanigans of defaulting owners are covered up in a system that easily breeds collusion among various
interest groups. Can a common borrower (one who takes retail loans) have the luxury of defaulting on a single Equated
Monthly Installment (EMI) let alone not paying his/her debt? He or she would be bombarded with telephone calls. A common
citizen needs to submit several documents of proof to be eligible for a bank loan. With stricter Know Your Customer (KYC)
norms, things have become much tougher for ordinary citizens to access bank funds. Often, big borrowers are given a royal
treatment by the banking system. Banks go out of their way to accommodate the borrowers failures. Retail borrowers dont
have the benefit of such overwhelming courtesy. This difference in the treatment of borrowers of different loan sizes has been
prevalent for a long time, creating a new class system within the banking sphere.
Today, the banking industry is sitting on a mountain of non-performing assets (NPA). Dr. Rajan has been pushing hard for the
debt-laden banks to clean up their books. He does not hesitate to call a spade a spade. With so many inter-connections taking
place within the financial services sphere, it is becoming much more difficult for any defaulting retail borrower to hoodwink
the system and keep accessing funds from organised sources. The Credit Information Bureau (India) Limited. is effectively
playing the watchdog role to ensure that defaulting retail borrowers dont have access to fresh funds from the system.
Why cant the same yardstick apply to big borrowers? Often, subsidies are a subject of huge discussion among thinkers,
economists, policy planners and the industry alike. If subsidies are bad for the economy, as has been suggested time and again,
what about the accommodation of defaulting big borrowers? In effect, the piled-up NPA has been a big constraint for banks to
pass on the RBI-induced rate reductions. Why is the transmission not happening?


The reasons are not far to seek. Banks are using up the rate cuts to shore up their profits, rather than passing on the benefits
to retail borrowers. Not surprisingly, the RBI Governor has emphasised the need for cracking down on rule breakers so as to
avoid a bigger catastrophe down the years. PSU banks especially deal largely with public funds (deposits from the general
public and capital infusion from the government). And these cannot be allowed to be squandered away by recalcitrant clients,
however big they are. Dr. Rajan deserves praise for taking the bull by its horns.
Walking into the jihad trap
Data shows that jihadi terrorism has actually declined
81 584 Google +0
Written by Salman Anees Soz | Published:January 26, 2016 12:20 am
pathankot, pathankot attack, india, terrorism, jihad, jihadi terror, terrorists, muslim terrorists, pakistan terrorists They were
just looking for a fight and a speedy dispatch to hell. It is our incompetence that gave them sufficient time to start dreaming of
heaven. (File Photo)
How often have you heard statements along the lines of jihadi terrorism posing an existential threat to society? So prevalent
has this narrative become that many people take it for granted. Headline-grabbing terrorist attacks carried out by self-styled
guardians of Islam fuel this narrative. Ill-informed or agenda-driven opinion-makers, especially on the right, help sustain this
dangerous and, frankly, terrorist-friendly narrative that sparks paranoia, prejudice and bigotry. A recent column in The Indian
Express by one such opinion-maker, Tavleen Singh, inspired me to put on my researchers hat; what I found was a revelation.
In her column, After Pathankot what?, Singh asserts, Jihadi terrorism is the biggest threat to civilisation as we know it. Do
such statements have an empirical basis? Should we even question such statements? Is that not being friendly with terrorists
or with proponents of radical Islam? I will get to these questions later, but first, based on available evidence, jihadi terrorism
is not the biggest threat to civi-lisation as we know it.
The Global Terrorism Database (GTD), maintained by the National Consortium for the Study of Terrorism and Responses to
Terrorism (START) at the University of Mary-land in the US is the most comprehensive repository of information on terrorism
incidents around the world. According to the GTD, between 2000 and 2014, India suffered 6,023 terrorist attacks in which
8,613 persons died. The number of incidents linked to terrorist groups operated by Muslims were 436 (7 per cent of total) and
the fatalities were 1,650 (19 per cent of total). Mind you, some of these groups may not necessarily draw inspiration from
radical Islam as much as they do from nationalism, as in the case of a few Kashmiri groups. Nevertheless, I lumped all of them
together to cast the net as wide as possible to capture this jihadi element.
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Some may make the case that jihadi terrorism is a bigger problem now than it was earlier. Well, lets look at more recent data.


In the five-year period from 2010 to 2014, India suffered 3,468 terrorist incidents resulting in 2,515 fatalities. The so-called
jihadi terrorists were responsible for 146 such incidents (4 per cent) and 236 fatalities (9 per cent). This suggests that the share
of terrorist incidents and fatalities attributed to jihadis has in fact declined.
While jihadi terrorism leaves an indelible mark and creates fear, the numbers are hardly reflective of an existential threat. For
the overwhelming majority of Indians, the threat of violence is likely from other sources of terror. But, even for them,
terrorism is not an existential threat. US President Barack Obama in his recent State of the Union address may have articulated
the real existential threat. While acknowledging the threat posed by terrorism, he was emphatic in stating that climate change
was the greatest threat to future generations.
Is the terrorism inspired by radical Islam a major problem? Sure. You wont find much disagreement on such questions. In fact,
Muslims around the world are beginning to see the threat radical Islamists pose to, well, themselves. Not only are Muslims the
biggest victims of Islamist terrorism in countries like Syria, Iraq and Pakistan, they (or let me say, we) are viewed stereotypically
as potential terrorists. Is it any wonder then that a recent Pew Research Centre survey of 11 countries with significant Muslim
populations found that people overwhelmingly expressed negative views of [the] ISIS? With almost 200 million Muslims in
India, a narrative of civilisational conflict is likely to create an environment of mistrust and prejudice, a dream scenario for
terrorists. If this is not a recipe for a weaker India, I dont know what is.
That six terrorists managed to engage us in an air force base in Pathankot for so many days is not because they were
superhuman. They were just looking for a fight and a speedy dispatch to hell. It is our incompetence that gave them sufficient
time to start dreaming of heaven.
If a bunch of terrorists is all that is required to make India worry about its existence, they have already won. Let me assert that
India is one of the biggest economic and military powers in the world. Period. Terrorists, jihadi or otherwise, as an existential
threat? It is not even close.
Oil is too high. Oil is too low. Which one is bad?
A globalised world means that India will not escape the contagion if the doomsday predictions play out

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Shyamal Banerjee/Mint
Shyamal Banerjee/Mint
I remember a time not so long ago when the headlines screamed oil, as they are doing today. But just six years ago, it was the
fear of very high oil prices that was freaking out everyone. A resource-guzzling China was setting the oil, and commodity,
market on fire, and in 2006, predictions of oil barrelling past $100 was making headlines. Oil did break $100, got to $142 in
2008 and then sank to $32 the same year when the markets collapsed, and then roared back to cross $100 two years later.
Today the reverse is truedoomsday forecasts project oil at $10 a barrel, after oil breached the $30 price last week. Some of
the current end-of-the-world predictions for 2016 rest on the collapse of oil.
We know that high oil prices are bad for India because we import over three-fourths of our oil needs and the oil bill makes up a
third of the total import bill. Every dollar rise in price means a bigger hit on Indias forex kitty. So why the frown when oil prices
are falling causing the import bill to go down? The worry right now is less local than global. The fall of oil below the long run
average annual range of $20 to $40 a barrel, is about this being a symptom of a world economy falling into recession. A
globalised world means that India will not escape the contagion if the doomsday predictions play out. Though were in a better
place than where we were two years ago due to better fiscal management, there are worries about the fall in oil prices causing
Indians in the Gulf to lose jobs and hence hit the strong $70-billion remittance pipeline.
If oil prices are falling and our import bill is giving less pain, why is the rupee falling? The last time oil prices were high, we were
told that the fall in rupee was due to a larger import bill. As India needed more dollars to pay for the oil, it sold rupees and
bought dollars, reducing the value of the rupee, so why the fall now and should it worry us? The current fall in the value of the
rupee has less to do with domestic weakness but more with the stronger dollar. My colleague Ira Dugal nails it when she writes
( that Rs.70 to the dollar is the new normal and that it is not a bad thing. Remember that India is in a
different place financially than it was two years ago. A falling rupee accompanied by a large current account deficit (the excess
of the import bill over the export earnings) is symptomatic of the weakness of the economy. A falling rupee when the current


account deficit is 5% of the gross domestic product (GDP) as it was in 2012, to when it is 1.3% of GDP, as it was in December
2015, are two different situations. The error we make is to assume a strong currency is a symptom of national pride. Dont
forget, countries devalue their currency as a strategy to gain global market share.
So, do we worry?
What should we believethat high prices are bad or are low prices bad? Should we worry about oil prices or about that darn
leaking tap? We need to worry about the prices being too high or too low, just as we need to worry about the summer being
too hot or the winter too cold. The only exceptions are people whose livelihood is directly linked to the value of the rupee or
oilexporters usually celebrate a falling rupee and importers usually cry. I try not to worry about things that I cannot control.
Like the weather. Or markets. Theres nothing you can do about it. So you just keep yourself hydrated more in summer and
drink lots of hot water and rum in winter.
There is nothing you can do if giant commodity cycles play out or giant economies slow down. There is no individual action that
you can take that will mitigate the effect on your life. Id attend to the leaking tap and leave the worries for the hedge funds,
the speculators, the regulators and those who look after the countrys personal finances.
As long as you have a skill set that has the capacity to throw off an income and an ant-like habit of salting away money
regularly in a well diversified portfolio, you dont need to waste your time worrying about oil. Or the dollar. Or the rupee. Or
the markets. So. To that tap.
A case for professional tax in India
Revenue enhancement of municipalities is needed to address the yawning infrastructure gap in our cities

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Anil Nair
Photo: Hindustan Times
Photo: Hindustan Times
There are approximately 4,000 municipalities in India, with aggregate revenues of less than Rs.1 trillion, which includes grants
from central and state governments and loans. Urban India is estimated to need capital expenditure of the order of around
Rs.3 trillion per annum, besides additional funds for revenue expenditure. A substantial portion of these monies will need to
be raised by municipalities themselves, given that state and central funds are spread over various equally important priorities.
One revenue stream that could hugely empower municipalities is professional tax. They can reap the benefit of a rapidly
urbanizing population and a concomitant increase in the workforce by paying greater attention to mobilizing professional tax.
professional tax is levied by state governments or municipalities under Article 276 of the Constitution, which provides for levy
of tax in respect of profession, trade, calling and employment. Unfortunately, the Constitution also fixes a ceiling of Rs.2,500
per taxpayer per annum.
Important source of revenue
Municipalities are local self-governments and need access to several buoyant revenue streams if they are to evolve from
rickety institutions into transformative city governments. At present, most cities are greatly dependent on property tax
revenues to finance their budgets. professional tax can be a significant auxiliary source of income which ensures that a sliver of
the economic growth being enjoyed by the city and its citizens is partially harnessed for public infrastructure.
At present, 21 states in India impose professional tax. The tax is applicable to all persons engaged in any employment or
profession in some states; in some others, it is applicable only to certain specified professions. The tax may be levied and
collected by the state government alone in some cases, while in states such as Kerala and Tamil Nadu, municipalities also levy
and collect the tax.


For some cities, professional tax is the most important source of income after property tax. In the Corporation of Chennai, for
instance, it contributes Rs.200 crore annually, half as much property tax. Profession tax contributes around Rs.90 crore to the
revenues of Surat Municipal Corporation, around 30% of its property tax collection. The corresponding figure for Hyderabad is
around Rs.100 crore.
professional tax could provide an alternative source of revenue to cities that stand to lose current sources of revenue such as
octroi, entry tax or local body tax due to the impending roll-out of the goods and services tax. However, to plug the gap, a
renewed focus on leveraging professional tax would be called for.
A strong case for devolving
professional tax
The 14th Finance Commission recommended that professional tax could be an important source of revenue for local bodies, if
they are allowed to levy and collect it under state legislation within a reasonable ceiling set by Parliament. The empowered
committee of state finance ministers on the implementation of the goods and services tax had also recommended removing
the cap on professional tax, which would bring more revenue to the states.
The original ceiling on professional tax, as prescribed in the Constitution passed by the Constituent Assembly, was Rs.250 a
year. It was raised to Rs.2,500 a year in 1988 and since then both the 11th and 12th Finance Commissions have recommended
an increase; the 11th Finance Commission also suggested that the current requirement of a constitutional amendment to fix
the ceiling be replaced with parliamentary approval. The 14th Finance Commission has also recommended an increase in the
ceiling to Rs.12,000.
In a research report submitted to the 14th Finance Commission, the Vidhi Centre for Legal Policy reveals that the Government
of India Act, as enacted in 1935, did not contain any limit on the amount of professional tax that could be levied by the
provincial legislatures. The relevant section was inserted in 1940 to curtail the powers of the provincial states to tax income.
As per Vidhi, in most federal systems, either the levy or collection of income and professional tax is wholly within the purview
of municipal bodies (Switzerland) or with the federal government (Mexico). In the context of the US and Canada, both federal
and state governments have the power to impose income taxes. In none of these nations is the state governments power to
impose a professional tax limited by the federal government.
After almost 70 years of independence, with the question of the federal structure of our government largely being settled, the
time is opportune to empower states and municipalities with greater responsibility for their finances. Parliament should
consider empowering state legislatures to decide on all aspects related to imposition of a professional tax, including the need
for a ceiling.
Striking a balance
Revenue enhancement of municipalities needs to be a national priority if the yawning infrastructure gap in our cities is to be
addressed. A principal component is fiscal decentralization, with a focus on devolving buoyant revenue streams to
municipalities. In the case of professional tax, Parliament should devolve to state legislatures the power to legislate on all
aspects related to imposition of the same. State legislatures should do their part by committing to pass on this revenue
generated by the cities back to their municipalities.
States and municipalities have to find the right balance between lowering taxes to attract investments and maximizing
revenues to make their cities more livable. No rational citizen will grudge their government that extra rupee, if used to provide
them a better quality of life.
Delivering benefits to the poor
The issue of cash-versus-kind is not one that can be resolved by just fixing the delivery mechanism


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Photo: Hemant Padalkar/HT
Photo: Hemant Padalkar/HT
One of the biggest challenges for the finance minister in the upcoming budget is to increase spending in rural areas. The
challenge is not only to increase the quantum of money delivered through various subsidies, along with employment
generation programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, but also ensure that the
benefits reach the poor.
The challenge of efficiently delivering government benefits to the large mass of poor farmers and the working population in
rural areas is crucial to the revival of the rural economy at a time when it is clearly in stress.
The necessity of increasing such expenditure during times of rural distress and otherwise is not challenged even by those who
find such subsidies regressive. However, a large and influential lobby does exist, arguing against such spending on account of
leakages. Although definitive data on leakages in most such schemes is not available except for the public distribution system,
the good news is that PDS leakages have come down substantially in the last decade.
The news on the other big subsidy element, the petroleum subsidy, is also positive, with the government managing to do away
with subsidies on petrol and diesel. So much so that these fuels are now sources of substantial revenue to the government
after the collapse in global petroleum prices. The remaining components of the petroleum subsidyliquefied petroleum gas
and keroseneare also showing signs of reduction, partly as a result of declining consumption of kerosene and partly because
of the fall in crude prices.
While leakages are no reason for reducing spending on these programmes given the current situation, there is a need to fix the
delivery mechanism. Essentially, the issue revolves around three questions: What to deliver? Whom to deliver to? How to
Of these, there has been definitive movement by the government on how to deliver. The focus on the trinity of JAM (Jan
Dhan accounts, Aadhaar and Mobile) is essentially to fix the mechanisms of delivery of subsidies to beneficiaries. But given
their nature, this exercise is more likely to be successful for benefits delivered in cash, although the same mechanism is also
useful for delivery of benefits in kind. However, the focus on direct benefit transfers has meant that other aspects of subsidy
delivery have largely been ignored or made slower progress.
The most important among these is whom to deliver to. This has been a vexed issue for more than a decade now, ever since
the government decided to shift to targeted PDS. The issue of identification of beneficiaries is not only crucial for
implementing the National Food Security Act (NFSA) but also for other schemes such as social pensions.
On this front, the socioeconomic caste census (SECC) has not been used in many states for beneficiary identification. While
there are concerns on the quality of SECC data, most states that are using the SECC for beneficiary identification have found
the data to be fairly reliable. Bihar is a notable example where the use of SECC data for beneficiary identification has led to
reduction in exclusion errors for the NFSA. However, the use of different methodologies and criteria of identification by state
governments means that there is no clarity on either the criteria for identification of beneficiaries or the extent of exclusion
and inclusion errors in these lists. In some of the states, the list in use is the below poverty line census of 2002, which is known
for its errors of targeting.
While the SECC is useful for beneficiary identification for social sector schemes, it is not sufficient as far as identification of
beneficiaries for delivery of subsidies in agriculture is concerned. Since the agricultural sector receives various forms of
subsidy, designing error-free methods of identification is a must.
This is essential due to the large number of absentee landowners and because a significant amount of land is cultivated under
unrecorded tenancy. Attempts by the agriculture department of Uttar Pradesh to use a model of cash transfers in lieu of
product-linked subsidy in case of seeds clearly showed high levels of exclusion.
The final issue of what to deliver, although linked to reforms in the other two issues of whom to deliver to and how to


deliver, is essentially a political economy question. Andhra Pradesh has clearly shown that once the delivery mechanism is
fixed with correct identification of beneficiaries, it does not matter whether the subsidy is given in cash or in kind. While the
Andhra model was successful in reducing leakages in cash transfers, it also worked in the case of PDS where the benefits were
given in kind. Moreover, PDS is a good example where states such as Tamil Nadu, Odisha and Chhattisgarh have shown success
in eliminating leakages with in-kind transfers. Unfortunately, instead of focusing on implementing the NFSA throughout the
country using these success stories, the focus of the government is on shifting to cash transfers.
But the issue of cash-versus-kind is not one that can be resolved by just fixing the delivery mechanism. This is a question which
requires an understanding of the efficiency of the transfers, not just from a technocratic approach of leakages, but also on
what works better for the intended purpose. There is now sufficient evidence to suggest that subsidies delivered in kind for
food-related schemes deliver more in terms of nutritional intake compared with similar amounts delivered in cash. The same
may be true for subsidies in agriculture where product-linked subsidies may be required till such time as there is some
evidence to suggest otherwise.
Any hasty attempt to shift to cash transfers may only end up excluding a large majority of needy farmers from the few benefits
they receive. At a time when the agricultural sector is suffering from the twin problems of drought and global commodity price
deflation, any attempt to reduce subsidies will be detrimental to the economy. The need of the hour is not just to augment
efforts to fix the broken delivery mechanism but also to increase spending in rural areas on these programmes.
V Rajwade: Budget and infrastructure investment
Relying on the private sector to undertake infrastructure investment may not be a realistic proposition; the sanctity of fiscal
deficit may need to be dented in the interest of investment, growth and
A V Rajwade
January 27, 2016
Last Updated at 21:48 IST
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A V Rajwade
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A week after the Fed rate rise

A month from now, Finance Minister Arun Jaitley will present his Budget for the 2016-17 fiscal to Parliament. One expects the
Indian Financial Code to get enacted along with the Finance Bill. For the former, the minister has already announced his
intention to limit the deficit to 3.5 per cent of nominal gross domestic product (GDP); for the second, while the principle of
inflation targeting as the sole objective of monetary policy seems to have been accepted, the issue of composition of the
Monetary Policy Committee and the Reserve Bank of India governor's veto power still seem to be under consideration.
As the Financial Times emphasised in an editorial on January 22, "India needs to create jobs for a fast-growing workforce and
lift large numbers out of poverty", one major hurdle in achieving this is "the scale of the challenge to build infrastructure". The
other side is whether fiscal consolidation and inflation targeting could become constraints on infrastructure investment,
growth and job creation.
Read our full coverage on Union Budget 2016 Consider the question of fiscal deficit first. As conventionally calculated, it is the
difference between the government's income and expenditure on both revenue and capital accounts. The deficit adds to
government debt, but surely there is a huge difference between, say, the expenditure incurred in implementing the recent
award of the Seventh Pay Commission, and the money spent on building roads, ports, or other infrastructure, which adds to
government assets? This apart, investments in infrastructure are essential to maintain growth momentum and the resultant
increase in GDP improves the government's debt servicing capacity. As Dani Rodrik of Harvard University wrote in a recent
Project Syndicate column, rapid growth in the most successful economy in Africa, namely Ethiopia, was the result of "a massive
increase in public investment, from five per cent of GDP in the early 1990s to 19 per cent in 2011 - the third-highest rate in the
world. The government went on a spending spree, building roads, railways, power plants and an agricultural extension system
that significantly enhanced productivity in rural areas where most of the poor reside". My memory is that much of the
building/rebuilding of infrastructure in today's advanced industrial economies such as Japan, the US and countries in Europe


was financed by public resources at the end of World War II.

It may be argued that the building of infrastructure could be left to the private sector and bank financing rather than through
fiscal resources. While prima facie this sounds reasonable, at present there seem to be several constraints on this happening
on any significant scale. Some of the more important ones are as follows:
The banking supervisor has been expressing serious concerns about the level of non-performing assets of the banking system.
Loans to the infrastructure sector have a disproportionate share in the aggregate non-performing assets, and banks would be
reluctant to increase their exposure.
Even otherwise, the banking system would be reluctant to increase its loan book because of the much higher capital
requirements prescribed by the Basel III norms, which are to be complied with in the next few years. The new accounting
standards would not only increase the on-balance sheet debt of companies, but also increase the provisioning requirements
for the banking system as banks would need to provide expected future losses on existing loans, once the new standard
becomes mandatory. This will make Basel III compliance even more difficult.
For the private sector, its experience with stalled projects in the infrastructure sector has not been happy, and that will surely
dim its enthusiasm. Another problem is that, in Maharashtra at least, there has been strong political opposition and agitations
against the collection of tolls on roads financed by the private sector. One also wonders to what extent the prevailing high real
interest rates would adversely affect infrastructure investment by the private sector -and this is not entirely the result of
inefficient monetary transmission on the part of the banking system. Both the vice-chairman of Niti Ayog and the chief
economic advisor have commented on this issue; so have economists like Gita Gopinath of Harvard University.
In short, relying on the private sector to undertake infrastructure investment may not be a realistic proposition; the sanctity of
fiscal deficit may need to be dented in the interest of investment, growth and job creation. As for inflation targeting as the sole
objective of monetary policy, I expect to revert next week.
Ghosts Of Ship-To-Mouth
Price spikes, production fluctuations challenge us, not insufficient food production
6 22 Google +1
Written by Ajay Vir Jakhar
| Published:January 28, 2016 12:00 am
Having inherited an unsustainable farm economy, made worse by bad monsoons and low international commodity prices, the
government is struggling to show progress in the face of farmer suicides. To its credit, the government is consulting farmers for
the preparation of a budget that not only addresses their concerns but also appears to do so.
In the recent pre-budget consultations on agriculture attended by the finance minister, the head of a multinational commodity
trading house suggested that international commodity prices are low and so it is time to import food to build stocks for food
security. I was aghast not just by his statement but also at his presence at the meeting. A desperate commodity firm looking
for foolish nations to accept subsidised food for which there are no buyers today. Cheap imports artificially drive down
commodity prices, leading farmers into a cycle of perpetual poverty and, as a result, rural-urban migrations.
First, the conversation on the farm sector needs to radically shift from focusing on fears of insufficient production to issues of
nutrition and safety. The ghosts of decades of food shortages, ship-to-mouth horrors and Lal Bahadur Shastris appeal for
skipping a meal continue to haunt us. Technology input companies and commodity firms are scaremongering us into a narrow
tunnel of fear. But for long, India has moved on to greener pastures. Outdated fears are being reinforced by allegedly
insurmountable new challenges posed by population growth, changing dietary patterns and climate change inhibiting food
production. Even after taking into account these underlying anxieties, we farmers, on the contrary, feel India has entered an
era of marketable surpluses but there are no buyers for our produce. The challenges India faces are price spikes and
production fluctuations, not insufficient production. Onions and pulses, etc, augment the anxiety, but these are the
consequences of lopsided farm support programmes and detached policymaking.
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Why am I sticking my neck out in the face of widespread pessimism? For one, we farmers are an optimistic lot. Second, as a
farmer, I recognise our potential. Consider an example of plenty from my own farm, where an acre can yield approximately
two trucks of onions, potatoes, tomatoes, carrots or citrus fruit. If just one village (about 3,000 acres) cultivated the same crop
god forbid, but lets assume this for the sake of analysis it could produce 6,000 trucks of a particular crop. There are over
six lakh villages in India. Not all are bestowed with the same bounty of circumstances, but just imagine the possibilities.
India is already among the largest producers of foodgrain, pulses, sugarcane, tea, spices, eggs, meat, fruit and vegetables in the
world. These milestones have been reached even though we lag behind in crop yields. Investments in research for better farm
technology and applications hold endless opportunities for yield improvement. Additionally, there is a difference in yields
within villages, as well as between a research centre and even the best farm. These differences can be bridged by improved
extension services. Other than research-induced increases, productivity can be enhanced by a quarter across the spectrum
without adding extra inputs (and with fewer seeds) if we simply upgrade sowing machinery. While farmer-ownership of
machinery will lead to debt, service leasing will lead to prosperity. Merely defining objectives is half the work done; the fine
print holds the key to achieve the objectives.
India is the largest milk producer in the world, but cooperatives are collapsing because of just the interest burden of unsold
stocks and competition from cheap, imported, subsidised and substandard milk products. Milk production in the country will
rise by a third if a preventive health programme of the National Dairy Development Board could be standardised countrywide.
Better handling of food, right from the time it is harvested till it reaches the table, would reduce wastages and make an extra
15 per cent of produce available for consumption.
Farmers biggest concern isnt insufficient production. In irrigated areas, farmers worry about markets and, in rain-fed areas,
they worry about water availability. Only time will tell if the consultations are seeking to validate existing ideas or if they
accept the new rationale.


If you flaunt while owing a lot, it suggests you don't care: Raghuram Rajan
Interview with Governor, Reserve Bank of India
Shekhar Gupta | Davos
January 27, 2016
Last Updated at 23:30 IST
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Has the financial and legal adminstration in India been too soft on large and influential loan defaulters?
Can't Say
Reserve Bank of India Governor Raghuram Rajan feels the markets are volatile because they dont really know the true level of
their fundamentals; they are trying to find a level. In Davos for the World Economic Forum, Rajan also tells Shekhar Gupta on
NDTVs Walk the Talk show that some big bank defaulters, in fact, increase the cost of borrowing for everybody. Edited
This morning here in Davos is cold, and so is the market mood...

The markets have been very volatile this time. What we really have is a world economy where central banks pump up market
prices quite a bit. I dont think markets really know the true level of their fundamentals; they are trying to find a level. Every
time there is news that can possibly cause economic worries, there are jitters and volatilities. Today it is China and whether it
will depreciate (its currency); and whether the oil funds will withdraw money from the market. Tomorrow it will be something
else. Until we have more stability, partly with monetary policies becoming more normal, we may keep seeing this volatility.
Is it because we dont know how we got to the top that we are afraid to be there?
No, we pumped ourselves to the top. The hope among policymakers is that since we have pumped the stock markets up, now
we have to elevate the economic activity to match that level. But thats a big hope; economic activity hasnt kept pace and, of
course, there are concerns over China slowing right now and Brazil in deep recession. These are the issues the market is
worried about.
I listened to one of your lectures where you made a point that an individual can today borrow at a rate 300 basis point lower
than corporations...
There are two components to interest rates one is the risk-free rate that we set, and another is the risk premium that banks
demand. If somebody is borrowing at 13 or 14 per cent, with the policy rate at 6.75 per cent, the bank is charging six-and-ahalf percentage points of risk premium. That happens when a bank distrusts you. In good times, you take the upside, you take
equity. But in bad times, you ask how much the bank will cut; what haircut it will take.
Haircut, which is now called mundan...
Mundan, exactly! You say to the bank, Look, I know I have to pay you. I even know you have pledges against my assets, but


try me in court and Ill see you 10 years later. Rather, why dont you take a one-time settlement?
I know of suicides in the mining industry. Mining shut down, so small-town contractors who had borrowed couldnt repay now
and were exposed to shame.
This is the problem with debt. In order for you to get low interest rates, the lender has to be able to repossess effectively. So,
the answer is not softening the debt contract but making it work effectively for the big guy. For the small guy, we need to find
ways of dealing with the problems in a way that businesses dont shut down. Perhaps we can work out with the entrepreneur
who has some prospect, without killing the business. Broadly, we have to fix our own house to make sure large entrepreneurs
repay on time when they get into trouble. We are working on that.
Are you going to do more on this?
The government has come up with the bankruptcy code, which I think will make a big difference. In many countries, it is the
threat of taking the borrower to bankruptcy which leads him to deal with the bank outside.
You used to say during the 2008 crisis.... the phrase too big to fail... We have borrowers who are too big to repossess...
Well, yes, were trying to change that this is not about the big business, successful businessmen, businesswomen,
businesspeople. This is not a Robin Hood issue but of wrongdoers who raise the cost of borrowing for everybody.
And frankly, they seem to be suffering no pain...
If you flaunt your yacht, massive birthday bashes, etc, even while owing the system a lot of money... it seems to suggest that
you dont care. I think that is the wrong message to send out. If you are in trouble, you should show that you care by cutting
down your expenses.
In fact, it is interesting that you say this; even the theme at Davos this year is so much about equity, and fairer wages...
Absolutely, I think we have to celebrate entrepreneurship. We have to encourage more of the kinds of businesses we are
seeing emerging in India. I think Startup India is a great programme, but we also need to make sure established businesses do
what they need to. Many of them are, but if the guys who are not behaving behave, with them, and all the young
entrepreneurs coming on stream, we have a world-class system.
So, if you fix this, it is the key to reducing interest rates, right?
Yes. The risk-free rate will come down as inflation comes down; that is our endeavour. People keep writing to me Why did
you cut the interest rate? I tell them they are actually better off today than earlier. Earlier, they used to get a nine per cent
interest rate when inflation was 11 per cent. So their principal was actually reducing by 11 per cent every year; they didnt
notice. Today, they get seven per cent interest rate but inflation is 5.5 per cent. So, their principal is not eroding; theyre
actually getting the interest rate over and above the inflation rate.
We know your diagnosis for the world and India. Whats your treatment?
The treatment for the world is that central banks say, Weve done enough. Lets now let things normalise. As central banks
do more, they put pressure on other central banks to follow suit. Youve seen the Chinese sending out the message they are
depreciating the renminbi. I think part of the reason is, they see the euro and yen depreciating against the dollar, and they
think why not us? I have been making the statement that we are not in the business of depreciating the rupee. But we do feel
the pain when the euro or the yen depreciates against us, because that hurts our exports. We need a more predictable world
where exchange rates are not the method.
Do you think this fixation in India with the value of the rupee is overdone?
We keep looking at the rupees worth against the dollar; thats wrong because the dollar is the strongest currency in the world,
and it has been appreciating. When we look at the rupee, people keep talking about an all-time low against the dollar. But if


you look at the rupee in real effective terms adjusting for inflation relative to the rest of the world in the past couple of
years, were absolutely flat.
Do you think the central banks globally should be as disciplined as you and willing to say no as you do?
Countries have to do more structural reforms. From Indias perspective, I think we are broadly on the right path. We cant have
the kind of massive reforms we did in the 1990s. But what we can do are a lot of small reforms that build into large ones. For
example, in the financial sector we have two new banks; 21 new ones are coming up next year.
I featured the Bandhan Bank founder on this show. I went to his village in Tripura. What a brilliant story that is...
Absolutely. Hes a dedicated man. He says we have to charge the right price. He says he cant make it work below the 23-24
per cent he used to charge. But now, since he is allowed to take deposits, he can bring it down into the teens and keep
working to bring it lower. Hes about giving people loans, easy access at the right price. I think we need to do this across the
board; bring more people into the system.
How do you fix Indias banks? They are under stress, particularly the government ones.
We are in the process of cleaning up. We spent time giving them powers to take action. Now they have the flexibility in dealing
with loans. Were telling them to put the assets back on track. But for that they might have to put new managements. They
might have to write down debt a little bit to give an entity space to grow. It means you recognise it as non-performing asset.
Dont put bandages. Weve done enough of that. Weve had this process of extending and pretending. If you take the real pain
now, it will create enormous gain down the line. When the balance sheets are clean, you can fund growth.
Nouriel Roubini says India is in a sweet spot. The idea is that India is a big net-importer of commodities. The prices have fallen.
How do we make the best use of it?
I think were making appropriate use. People say oil prices have fallen so much, hasnt this helped in inflation? Remember that
the government has also taken some excise which is reasonable because you dont want people to over-consume in the short
run. You need to be careful. Passing on some but not all is appropriate.
Rafale deal: An expensive buy
The purchase eats up defence acquisition budget
Business Standard Editorial Comment | New Delhi
January 27, 2016
Last Updated at 21:42 IST
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Defence equipment parameters should be realistic
Parrikar going to Russia to finalise deals for Modi to sign in December
Ajai Shukla: Mr Parrikar, a message from Bihar
Modi-Hollande meet: Nuke reactors, energy, anti- terror message on agenda
Defence deals to top Francois Hollande's agenda

A highlight of French President Francois Hollande's India visit was the signing of a government-to-government agreement on
the purchase of two squadrons of the Rafale multi-role fighter aircraft. But continuing price negotiations, already protracted,
stand in the way of a formal contract. It bears recalling that the Rafale offer from Dassault was chosen over rival bids exactly
four years ago, in January 2012. That was to have been a contract for 126 aircraft, of which the first 18 were to have been
handed over by 2015, with the rest being assembled or made locally. Instead, the rapidly rising cost of the aircraft (deliberately
under-stated by Dassault) forced the government last year to cancel the deal as unaffordable, and to decide on buying just two
squadrons, without any condition for local assembly or manufacture. Prime Minister Narendra Modi had announced that the
new, restricted deal would be concluded in about three months; but negotiations continue even after nine months. The cost,
meanwhile, has ballooned to an astronomical $250 million per plane (about Rs 1,700 crore). That is equivalent to the cost of
perhaps three or four heavier Su-MK30 planes from Russia, and about 10 of the home-made Tejas light combat aircraft
(quoted price: Rs 162 crore). In truth, therefore, the Rafale continues to be unaffordable. The implication of buying a very


expensive aircraft is that it will eat up a good chunk of the defence acquisition budget, leaving less money for other badlyneeded equipment-for all the forces.
One reason for why the government is sticking with the Rafale may be that the air force is short of fighters, and inordinate
time has already been invested in the purchase process. Arguably, the air force could simply buy many more Su-MK30s and
scrap the Rafale deal. Two factors mitigate against this: the poor serviceability of the Russian plane (frequent engine failures,
with barely half the 200-odd Sukhois air-worthy at any given time), and the poor logic in deploying heavy, fuel-guzzling planes
in situations where smaller, lighter ones are better suited for the job. Fortunately, Defence Minister Manohar Parrikar has
focused on improving Sukhoi serviceability through new deals on maintenance or spare parts which could improve engine life
and cut down maintenance delays. Meanwhile, Hindustan Aeronautics is said to be expanding its servicing capabilities.

The high cost and poor serviceability of foreign aircraft (with long-term dependence for the supply of critical spare parts)
underline the importance of developing indigenous capabilities. An important issue here is the reluctance on the part of the air
force brass to invest time and energy in supporting the indigenisation process-a contrast with the navy's more productive
stance. The air force brass has been quizzical of the Tejas light-combat aircraft project, at a time when replacements for the
ageing MiG-21s are urgently required. Indeed, the air force has been so sold on the Rafale that it has even obfuscated on the
joint project with the Russians to develop a fifth-generation fighter aircraft. Again, Mr Parrikar seems to have banged heads
together, because the Indian Air Force and Hindustan Aeronautics have now agreed on the improvements that will be made to
the Rafale (to improve its survivability and also ease of maintenance), following which orders for 100 aircraft will be placed. It
is now up to HAL to ensure that it delivers on time and with the quality required.
Is the worst over for rural economy?
Four of the 6 large states have seen uptick in rural wages, following equally sharp increase in coverage of the rural
employment guarantee scheme
Mayank Mishra | New Delhi
January 29, 2016
Last Updated at 00:36 IST
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Image via ShutterstockImage via Shutterstock
After pause, NDA tries to revive NREGS
Rural distress could trigger mass migration to cities
Surinder Sud: Bringing the youth back into agriculture
Rural stress thwarts automobile industry's growth
Rural growth story still intact: IMRB data

After months of stagnation, rural wages have started inching up, albeit marginally. Coinciding with the renewed push for the
rural employment guarantee scheme in the second half of 2015, rural wages have shown a marginal uptick since August. It
remained flat between December 2014 and July 2015.
In August last year, jobs provided under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) rose
35 per cent compared to a year ago.

The Business Standard analysed rural wages and MGNREGS data of six large states for September, October and November to
see whether there is any correlation between the two. These three months were chosen because of the availability of data. No
data on rural wages is available for December.
Four of the six large states have seen uptick in rural wages, in some cases quite sharp, following equally sharp increase in
coverage of the employment scheme. Tamil Nadu exhibited a negative correlation probably because of recent floods in the
In Bihar, rural wages grew by nearly 10 per cent in these months, compared with the same period a year ago. The number of


households provided jobs under MGNREGS grew by more than 100 per cent during these three months.
Madhya Pradesh too saw a rise of more than 10 per cent in rural wages in September and October and a modest rise in
November, according to Labour Bureau data. Number of households covered under the MGNREGS has been consistently going
up in the state since September.
Rajasthan recorded growth of eight per cent in rural wages in September and very modest growth in October and November
despite providing substantially more jobs under the MGNREGS, compared with a year ago.
In Maharashtra, rural wages have remained flat and so has the number of beneficiaries from the employment scheme.
Uttar Pradesh and Tamil Nadu, however, have bucked this trend. In the most populous state of Uttar Pradesh, rural wages
grew in excess of 10 per cent despite a fall in the number of MGNREGS jobs in October and November. The state, however,
saw substantially more households covered under the scheme in the preceding months of May, June, July, August and
September. The uptick in rural wages could be a result of that.
The case of Tamil Nadu is different from other states as rural wages here have fallen despite substantial increase in coverage
of MGNREGS in all months since August 2015.
Positive correlation between MGNREGS coverage and rural wages suggests that at least a section of population may get partial
relief from acute rural distress. Business Standard reported a few days ago that the rural job scheme is likely to see a record
allocation in the forthcoming budget to boost rural consumption. If so, it may result in further recovery in rural wages.
Does it mean the worst is over for the rural economy? Experts are not so optimistic as yet. ICRAs senior economist Aditi Nayar
says Rural wage growth has trailed rural CPI inflation in several months of 2015, squeezing demand of households that derive
a dominant share of their income through wages. The unfavourable trends in rabi sowing suggest that demand of farm
households that are dependent on crop cultivation may remain slack in the immediate term.
CARE ratings chief economist Madan Sabnavis is of the view that increasing allocation for rural job scheme alone will not solve
the problem unless wages given are properly indexed to consumer price inflation for rural areas.
Uday to be modified to include states without discoms
Power Ministry's bailout initiative targets states with stressed discoms
BS Reporter
| Kolkata
January 29, 2016
Last Updated at 00:45 IST
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I have given states an offer they can't refuse: Piyush Goyal
Delhi discoms paid Rs 460 cr to generators without getting power: Report
New power tariff policy supports low rates, smart tech
UDAY has 15 takers, Jharkhand first state to sign MoU
Power supply to 18,500 villages in three years
Prime Minister takes stock of sick power distribution companies

Uday, a scheme rolled out by the power ministry to bail out financially stressed discoms, will be modified soon to
accommodate 12 states that don't have their own distribution company.
These 12 states are not eligible to fall under the Uday scheme as they dont have their discoms. I am looking at modifying it to
accommodate them as well, said Union power, coal and renewable energy minister Piyush Goyal here on Thursday during an

He said the scheme was not only a bailout programme but a show of collaborative federalism as advocated by the


While the minister did not cite a deadline for the scheme to be modified, he said, Uday ensures the discoms don't run into
losses in the future as well.
According to him, since the onus of running the discoms efficiently falls on states, they will ensure its financial health.
Since the scheme was rolled out in November last year, 15 states have joined covering 90 per cent of the entire discoms debt
of Rs 4.3 lakh crore while three states Jharkhand, Chhattisgarh and Rajasthan have signed a memorandum of
understanding with the Centre.
He said West Bengal had given an in-principle verbal assurance to join the scheme. According to Goyal, the country can save
Rs 1.8 lakh crore each year if the states consent to join Uday.
The power ministry is stressing on securing fuel-supply agreements and contracts for power generation, tackling the
impending problem of loss-making discoms, and increasing power transmission lines in the country.
Pulse production needs to be ramped up
One way to resolve lingering pulses crisis is to ensure farmers are assured of remunerative prices
Business Standard Editorial Comment | New Delhi
January 28, 2016
Last Updated at 21:39 IST
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Pulses check WPI's negative spiral
Pulses check WPI's negative spiral
Budget 2016-17: Agri bodies seek more allocation & soft loans for farmers
Surinder Sud: How water conservation can save money in drought-ridden India
Pradhan Mantri Jan Suraksha schemes get 117 million enrolments

Pulses, Indias most consumed protein-rich food group, have continued to pressure food inflation upwards even as the prices
of most other items have cooled off. The average annual wholesale price inflation (WPI) in pulses in the last 10 years is
estimated at 9.4 per cent, well above the overall WPI inflation of 6.3 per cent during this period. The reasons for this are many.
The most significant among them is the neglect of pulses vis--vis staple cereals like wheat and rice. Developmental strategies
have focused primarily on boosting the output of these cereals, notwithstanding the fact that pulses are an integral
accompaniment to rice and wheat in the Indian diet. As a result, the cultivation of pulses has been pushed to more and more
marginal and unirrigated lands with low fertility. Hardly 15 per cent of the total pulses acreage is irrigated. Numerous highyielding and quicker-maturing varieties of pulses are now available which can easily fit into multiple cropping cycles commonly
followed in irrigated tracts. The inclusion of pulses in such intensive farming systems is imperative also to cash in on their
ability to tap nitrogen from air and fix it into the soil for use by subsequent crops. But little has been done to ensure that these
seeds and their production technologies reach the farmers.
Besides, the minimum support prices (MSPs) of pulses, which are routinely increased every year, do not benefit the pulses
growers for want of their enforcement through market interventionin other words, through procurement. The governments
import and export policies for pulses, too, are most often aimed at taming domestic prices to protect consumer interests,
disregarding those of the producers. Little wonder, therefore, that the production of pulses does not respond to high prices or
growing demand. Normally, at times of subnormal monsoon rainfall, the area under crops that require less water should
expand. But this is not the case with pulses, though these are also efficient water-users. Pulses acreage has remained static at
around 13 million hectares in the last as well as the current year, despite poor rains. Predictably, therefore, output is also
expected to stagnate at around 17 million tonnes (mt) while the projected demand has surged from last years 22.6 mt to 23.6
mt. The need for imports of pulses has, thus, soared to well above five mtnot easy to meet, given limited availability of
pulses in the international market. The government agencies, which have been asked to import pulses, are also finding it
difficult to source enough supplies from abroad. Private trade has turned wary of large imports, fearing that the government
may confiscate their stocks.


The only way to resolve the lingering pulses crisis is to boost domestic output. For this, the farmers need to be assured of
remunerative prices. They also need financial assistance to buy new seeds, fertilisers and plant protection chemicals, which are
essential to increase crop yields. The incentives being offered to farmers to dig rainwater harvesting ponds in their fields under
the Pradhan Mantri Sinchayee Yojana need to be channelled to pulse growers. If these and other measures and strategies that
worked well in wheat and rice are applied to pulses, there is no reason why India cant be self-sufficient in pulses as well.
02 Forestry challenges in India-I. Strengths, achievements
The challenges facing forestry in India-I. The strengths and achievements
In addressing the question of what challenges are before the forest sector in India today, I thought that it would be a good
starting point to look at how the sector has dealt with its challenges in the past, and where its main successes and deficiencies
lie. The present is obviously not unconnected to the past, and we may be able to make a realistic assessment of our present
position if we look at where we came from and in what shape we have come through those past challenges.
The basic fact of forests as a resource is that they are in the nature of an open treasury, owing to their generally wide
geographical expanse, the impossibility of erecting boundary fences or maintaining them in perfect condition over all the areas
and over long periods of time; and the intimate juxtaposition of human settlements and forest patches. Given the huge
population and high population densities of India, it was difficult even in pre-independence times to closely protect the nearer
forest blocks, and only the more distant and mountainous tracts had their vegetative cover left in any good condition. Even
there, although the population densities of forest dependent or tribal communities may have been comparatively low, the
practice of slash-and-burn shifting cultivation took its toll (although social environmentalists have been at great pains too
make out a case for this practice during recent years). In the densely settled plains, the pressure of human populations was all
the heavier, through hacking for local needs like firewood and small timber, only exacerbated by the administrative pressure to
generate revenue through commercial harvesting. There has been a continuous imbalance between supply and demands for
both subsistence consumption and market products, and the situation was getting so out of hand that the Supreme Court had
to intervene and order a cessation of the rampant fellings that had been going on in the richest forest areas such as the
Western and Eastern Himalayas, the Western and Eastern Ghats, and other ecologically sensitive areas of the country. India
has been a good example where a comprehensive legal framework and a strong judicial institution have together contributed
to a better forest conservation situation, supported additionally by a bold and imaginative change in the national forest policy,
that was taken up and developed on the ground by a highly motivated and well-knit forest service that had a great pride in its
own competence and record of achievements in a hostile environment.
Lets look at some basic assessments of the forest cover in India. According to the Forest Survey of Indias successive State of
Forest Reports (SFR), there has been a small increase in the forest cover from around 66 million hectares (mha) in 1997 to 69
mha in 2007, or some 3 mha, even after correcting for a certain amount of re-computation of the figures owing to
improvement in the technology of satellites, sensors, and interpretation methodologies. Subsequently, the forest cover has
increased slightly to 69.8 mha in 2011 as per the latest SFR (2013). We will have to wait for the 2015 report to see whether this
moderate rate of increase has been maintained, as it may be only now that the effects of two trends, one the heightened pace
of development, and second the thrust given to distribution of forest lands under the Forest Rights Act (2006), begin to be
visible in the field. A small chart is given below to portray this gradual stabilization of the forest cover in graphic terms.
How did this come about? It is sometimes (and not kindly) dubbed a miracle (Jay Mazoomdar, 2012 in Tehelka Magazine, Vol
9, Issue 08, Dated 25 Feb 2012), as if forests are indestructible and self-sustaining. We foresters cannot suppress a little smile
when we read such things. Of course it was not a miracle, dear Sir, and what has contributed to the improved situation has
been a combination of many factors, which we will be discussing in more detail. Without the long foresight of the colonial
administrators, the dedicated work of the staff on the ground, and the culture and ethos of the people which engenders a
natural respect for life and nature, a country with such a huge population and so many problems could hardly have succeeded
in maintaining such a rich biodiversity stock and forest cover.
In summary, we may also mention the changes between the 1952 forest policy and the 1988 policy, which reduced the


pressure for commercial returns and increased the support for ecological and environmental considerations (including
livelihood support), which naturally gave a push to the induction of mechanisms and institutions for participatory management
with communities, that goes under the name of Joint Forest Management (JFM) in India. Between the early 1980s, when the
first experiments in JFM were initiated in pockets like the Aravallis in Haryana and Midnapore in Bengal, the number of JFM
committees (also called Village Forest Committees, VFCs) had grown to some 118,000 by 2011, looking after around 23 mha of
forest in the country (see chart). The figures for interim years have been culled from different reports and papers, as follows.
N.C. Saxena, in his detailed account The Saga of Participatory Forest Management in India (CIFOR Special Publication , 1997)
quotes an estimate by Singh & Khare (1993) that by 1993 JFM had been implemented on some 1.5 million ha (mha) of forests
under some 10,000 FPCs. As on 15 August 2001, there were 62,980 committees managing 14.25 mha forest area (FRI
Dehradun, Status of Joint Forest Management in India (as on June 2011), Dehradun, 2011). By September 2003, Government
of India reported that it covered some 17.33 mha with 84,642 JFM Committees in 27 states (Ministry of Environment & Forests
figure, quoted in Ravindranath & Sudha, 2004, Joint Forest Management in India: Spread, Performance and Impact,
Universities Press). Joint Forestry Updates were occasionally published by the JFM Network with support from the Ford
Foundation. In 2006, when the next status report was prepared by the ICFRE, there were 1,06,482 JFM committees managing
22.01 mha forest (FRI, 2011, cited above). By 2011, as stated in the FRI report of 2011, the numbers stood at 22.9 mha area
under various forms of JFM, involving around 1,18,213 village or hamlet communities (compared to the estimated 2,50,000
gram sabhas under the Panchayati Raj regime).
A second major factor has been the Forest Conservation Act or FCA (1980), which took away the power of the state
governments to dereserve forest areas, and made it mandatory to obtain the permission of the central government, on the
basis of the advice of a Forest Advisory Committee (FAC) consisting of both government officials (mainly forest officers in the
central Ministry of Environment & Forests, MoEF), and non-official members with expertise in forestry, wildlife and
environmental conservation. The Supreme Court took up the cause of forest conservation and implementation of the FCA
under the umbrella of the Godavarman case, which has been running right from the 1990s, using it as a platform to pass
hundreds of orders on forest management, administration, policy and conservation. It is perhaps thanks to the Supreme Court,
and the numerous advocates, academics, officials, and activists who assisted the Court in various ways, that the governance of
forests was made a national issue, and some degree of stability has been achieved. As one of the honourable judges confided
to us a few years back, the Supreme Court justices decided to pass very strong orders, curtailing fellings, instituting supervisory
mechanisms, and so on, because the situation had got out of hand, like a team of runaway horses that had to be lassoed and
tied down. A system of payments for the damage (or use) of the environmental services of diverted forest areas was instituted
by the court through the net present value (NPV) payments, and this together with the payments towards compensatory
afforestation (CA) were directed to be put into a fund maintained by the central ministry (called the CAMPA fund), rather than
having the amounts lying around with the state administrations. The situation is not perfect, but definitely there is now some
system and order in the CAMPA affairs thanks to the scheme drawn up by the ministry with the courts approval and guidance.
Ministry assessments are that the rate of annual diversion of forests, which used to be of the order of some 150,000 ha per
year before the FCA came into force, came down to around 38,000 ha per year after 1980, or even lower, 23,000 ha per year if
the pre-1980 legacy of 366,000 ha eligible lands are excluded from the post-1980 tally. We will look at these aspect also in the
ensuing articles.
Another area where the forest sector has been able to register some gains is in wildlife, with a network of some 688 protected
areas (PAs) as on September 2013, comprising of 102 National Parks and 515 Wildlife Sanctuaries, with most of the worlds
wild tigers and Asian elephants being found in and around these areas, apart from other animals, birds, reptiles, other
organisms of both land and water, and flora. Since there is so much material available in the media and popular magazines like
Sanctuary Asia about wildlife, we need not repeat all those details. Suffice it to say at this point that these achievements have
been made not just by luck, but again by a combination of administrative measures, scientific activity, advocacy by interested
individuals and organizations, and most of all thanks to the ethos and tolerance of our people. Of course much more needs to
be done to consolidate and insulate these islands of biodiversity, and to achieve a sustainable relationship of wildlife with
people outside the PAs. These are all matters of intense and sometimes passionate debate, and some of these socio-economic
and public policy aspects will be discussed in ensuing instalments. The Protected Areas are estimated to cover around 20.6% of
the forest area, or 4.9% of the total geographical area of the country, and more areas need to be set aside to secure different
ecological systems, rescue and restore connecting corridors and buffers, and include prime natural habitats and refuges in the
Agroforestry and restoration of degraded lands (both within and outside the forest under the charge of the forest


departments) is another area where significant efforts have been made, and substantial benefits reaped. Although the subject
of agroforestry itself has been transferred to the agriculture sector in the central ministries, the forest departments are still
playing a crucial role on the ground in the states, whether through production of planting stock, or through research and
extension support, apart from significant field activity through state schemes and externally-aided projects, which still
recognize the synergy between the forest and adjoining non-forest lands in the rural landscape. It is estimated that the major
portion of timber feeding the market is now from trees outside forest: one study, done by Devendra Pandey for the India
Forest Sector Report, 2010 (published by the ICFRE on behalf of the ministry) records that trees outside forest (TOF) produced
some 44.3 million cum of timber, as against just above 2 million cum for timber from the forest departments. This shows the
importance of the non-forest sector for production of wood in the country, especially with the strict controls imposed on
fellings in the managed forests.

Apart from agroforestry, there has also been a concerted effort to restore the huge tracts of degraded lands to a better state,
by v arious interventions and models like assisted natural regeneration (ANR), inter-planting, block planting, soil conservation,
etc. depending on the site conditions and availability of suitable species and techniques. Over the years, the approach has
changed from clear-felling and planting of exotics, to a more ecologically sensitive one based on participatory planning,
attention to local needs, and inter-departmental efforts like watershed development. The National Afforestation Programme
(NAP), the many externally-aided projects (EAPs), and lately the Green India Mission (GIM) which was drawn up in 2010-11 and
commenced operations in the current five-year plan (2012 onwards), are programmes that will merit mention and review.
These, we feel, are some of the major strengths and achievements of the forest sector in India, which the country can be
proud of. However, nothing is perfect (especially in the public sector!), and we will go on to discuss the weaknesses and
deficiencies in the forest departments and their approach from other points of view.
Map shows India at top of climate violence
S Singh Thursday 28 January 2016
Conflicts related to water management appear highest in India with 59 cases, followed by conflicts in fossil fuels and climate

India, Colombia and Nigeria have the most cases of conflict caused by climate change and environmental disputes, according
to a map of global ecological conflict.
The Environmental Justice Atlas, released in Current Science last month, shows that more than 200 conflicts in India are caused
by ecological disputes and scarcities of basic resources such as water and forests (see map). Colombia has 101 and Nigeria has
71 environmental conflicts, the researchers say.
The atlas is a work in progress and aims to map 2,500 environmental conflicts and injustices by the end of 2017.
According to V V Krishna, EJOLT project director and professor at the Centre for Studies in Science Policy at Jawaharlal Nehru
University, New Delhi, one reason for India recording the maximum number of conflicts is the thrust on industrialisation,
mining for natural resources and industrial units exploiting loopholes in environmental governance.
Conflicts related to water management appear highest in India with 59 cases, followed by conflicts in fossil fuels and climate
justice category with 47 cases and the industrial and utilities conflicts category with 36 cases.
Explaining the observation, Krishna said water is important and India is known for bad management of water resources. "This
leads to shortage, leading to conflicts. There is also the appropriation of water sources and channels by industrial units with
political nexus," he said.
Map small: Location of conflicts
caused by environmental reasons in
India and South-East Asia


Anup Kumar Das, an author of the Current Science article includes cases related to infrastructure and built environment, waste
management, nuclear, biomass and land conflicts, tourism recreation and biodiversity conservation conflicts in the categories.
So far, the EJAtlas details 1,671 conflicts. Joan Martinez-Alier, professor at the Autonomous University of Barcelona, Spain and
member of the EJOLT co-ordinating team, many conflicts may be underreported, especially in India. This is the largest
country in the world in terms of population, and very likely in terms of environmental conflicts, he says.

Krishna adds that countries which are good at gathering and distributing evidence around climate change and resources tend
to be better at avoiding violent conflict arising from these issues. "If there is a fit between knowledge generation and decision
making, it helps, says Krishna. In India there is a very weak or no link between these two domains of policymaking.