Covering developments on policy responses, policy implementation and policy distortions on a quarterly basis. PPoolicyWatchlicyWatch Comments are welcome. Volume 15, No. 2 April-June 2014 From Yojana Bhawan to Sudhar Bhawan he new Government means business and to do so many of our institutions Twill be resurrected with alignment to our federal nature, where the Prime Minister and the Chief Ministers will govern the country. The reform of I N S I D E T H I S I S S U E Planning Commission, in this regard, will be an important step. The Planning Commission underwent some soul searching but it was another Corporation on War Path ...... 3 perfunctory exercise before the end of Congress rule. Five years ago when Price Revision Opposed ...... 4 Arun Maira was appointed, he was asked to prepare a blueprint to turn the plan body into a Systems Reform Commission. Alas! His efforts did not succeed, Fiscal Deficit Narrows ...... 6 because of sheer inertia and status quoism. Bad Loans Hurts India’s As one sets out to review the Recovery ...... 10 performance of the Commission, India 15th on Wealth List ... 12 two fundamental issues strike upfront. First, is the Commission Flaws in the Health efficiently carrying out its Sector...... 15 assigned roles? And second, are Competition Law the Commission’s roles attuned Awareness ...... 21 to the political and economic realities of the country? The H I G H L I G H TS answer is an unequivocal no to www.harvardpolitics.com both the questions. Government Will Provide The Commission has become a Ministry but without accountability to the Electricity to All Within Parliament. The Deputy Chairman is a ‘Minister’ with independent charge Five Years ...... 7 along with an Administrative Secretary, to who all officers report. Members are ranked as ‘Ministers of State’ for protocol purposes, and like Ministers of 9 Percent Growth, a State in other Ministries, have no say in the matter of personnel management Pipedream ...... 13 in the divisions they are responsible for. Further, being run like a government department, the Commission’s Dumping Good Laws members, staff and officers remain unaccountable and are not subject to Will Hurt the Economy ...11 performance evaluation and review. There is an urgent need for the Commission to reform itself into a high quality, action oriented organisation. Rigorous Indian Companies May selection and evaluation processes must be put in place to enable only the Go Dutch to Meet CSR brilliant to gain entry in the reformed Commission. Independent professionals Norms ...... 14 must be allowed to compete with the civil servants for appointments, and retired civil servants must be declared ineligible. Know Your Ministries .....16 The Commission should be capable of evolving with needs of the economy, and its actions must be open to public scrutiny. The Commission should shift its focus from simple top down planning to perspective planning based on a bottom up approach. It also needs to function as a repository of knowledge across various areas of governance and should become a smaller tech-enabled Reforms and Development Commission with regional centres in our states. Only when Yojana Aayog (Planning Commission) is transformed into Sudhar “The reformer has enemies in all those who and Vikas Aayog, (Reforms and Development Commission) can its place in the profit by the old order and only lukewarm prevailing political-economic scenario, be justified. Otherwise, it will end up defenders in all those who would profit by justifying Jeffrey E. Garten’s words, ‘A vision without execution is hallucination’. the new.” Machiavelli in The Prince

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COMMUNICATION which has reduced to 11 percent at components, may be introduced from present. TRAI has issued a number July. of directions and orders to the service At present, finished telecom Restore Trust providers. (NDTV, 30.05.14) equipment attracts zero duty but 10- in Telecom 15 percent is imposed on components. nsuring customer satisfaction and RJIL’s Free Wi-Fi Services Till now, around $12.8 billion has been Erestoring the declining investor Reliance Jio Infocomm Limited invested in telecom equipment sentiment will be the key areas of (RJIL) is rolling out mobile network manufacturing, with 75 percent of the focus for the new Telecom Minister, and WiFi hotspot services for free in FDI coming in during 2007-12, which Ravishankar Prasad who said that Ahmadabad, Baroda and Surat is considered small by global since in telecom100 percent Foreign regions of Gujarat. It will use multiple standards and also has planned a $1- Direct Investment (FDI) is permitted, standards for its 4G data offering as billion venture capital fund for telecom therefore, it must be helped to come well as varying technologies, said the equipment. (TT, 15.06.14) in India, under transparent regime. report for fiscal 2013-14. RJIL is committed on innovation, Govt. Plans to Revive PSUs design and providing technologically Shares of Mahanagar Telephone advanced devices at affordable prices Nigam Limited (MTNL) surged in trade and is nearing closure of negotiations after the Government said it will take with device vendors. steps to revive ailing telecom Public In February, RJIL had purchased Sector Units (PSUs) MTNL and Bharta airwaves for M11,000 crore to offer 4G Sanchar Nigam Limited (BSNL). services in 14 circles. According to Communications and IT Minister, the report, over 44 percent of the Ravi Shankar Prasad said that steps world’s 4G services are deployed on will be taken on a priority basis to the category of airwaves. (TT, 22.05.14) revive the two PSUs that have failed to ride the boom in the Indian telecom DoT Denies CAG Allegations sector even as private operators The telecom department has said like Airtel, Vodafone and Idea grew that the merger of the Tamil Nadu and from strength to strength. He also added that fiscal policy Chennai service areas in 2005 was “I have found that MTNL and issues must be stable and there is a thought-out, rejecting the national BSNL have not received as much need of softer regulatory mechanism, auditor’s claim that it was a hasty attention as required. They need which can bring more stability to the decision that cost the exchequer proper infrastructure support. I have sector and focus on establishing a M2,400 crore and appeared to benefit asked them to improve services for broadband highway. certain telecom operators. CAG also consumer satisfaction”, added There are over half a dozen firms questioned the decision to allow the Prasad. (ET, 18.06.14) across the country, which are caught licence tenure be the later date of the up in multi-billion dollar tax issues two circles. Vodafone Loop Dispute Settled with the Indian Government In reply the Department of Within 24 hours of blocking Telecommunication (DoT) said that incoming calls from Loop Telecom including Vodafone. (DNA, 28.05.14) operators had to pay the higher of users, which has over 3 million users the two spectrum usage charges on in Mumbai, Vodafone today said it is 100 Million Change Network the combined revenue earned in the restoring their connection to its Around 100 million mobile two circles. They had proposals to network as the two companies have subscribers, about 11 percent of the merge other circles, but couldn’t reached a settlement on country’s cellphone services proceed due to non-availability of interconnection charges. customer base, have ported their spectrum and issues of entry fee and The telecom major said that these numbers, since the Mobile Number they instantly abolished roaming payments from Loop were long Portability (MNP), facility was charge thus benefitting the public. overdue, forcing it to restrict calls. As introduced nationwide over three (ET, 18.06.14) per sectoral regulator TRAI, a mobile years ago. Telecom Regulatory operator on whose network a call Authority of India (TRAI) had Thrust on Telecom Gear up originates has to pay charges of 10 prescribed a porting charge of M19, The Narendra Modi Government paisa a minute to the telecom company among the lowest in the world and plans to make the country a hub for on whose network the call terminates. has also given recommendations for the manufacture of telecom Loop Mobile is in the process of full MNP, which will allow customers equipment as this can significantly transferring its assets and customers to change their operators across any curtail the trade deficit. A structured to Bharti Airtel, under a strategic part of the country. tax set-up, which imposes higher taxes agreement announced in February, In 2011, the porting request on finished capital goods and which is estimated it to be worth M700 rejection rate was around 40 percent, electronics and lower tax on crore. (ET, 17.06.14) 2 April-June 2014 PolicyWatch I N F R A S T R U C T U R E TRANSPORT The areas identified are North-east The Finance Ministry-appointed region, with the exception of committee’s report comes at a time Fair Hike for Railways Guwhati and Bagdogra, all airports in when private-sector investments in Terming the step hike by the Jammu and Kashmir with the the road sector have dried up over the railways in passenger fares and freight exception of Jammu, all airports in past few years. as a “difficult but correct decision” Andaman and Nicobar Islands and Investments have been drying up Finance Minister, Arum Jaitley said Lakshwadeep. (ET, 12.04.14) since 2010 as is evident from the fact that it was the only way for the survival that only projects worth less than of the railways. Automatic Lighting System M500 crore were awarded in 2013; The passenger services have been The Delhi division of northern Besides, the government was forced subsidised by the freight traffic and railway has installed automatic to cancel awarding projects, under the the Indian Railways has been running lighting systems at some railway PPP mode. (BS, 05.04.14) at a loss for the past few years. stations in the Capital and other Implementing a decision of the stations across the division in order Corporation on War Path previous Government, Railway to conserve energy. The Kerala Government and the Minister, D S Sadananda Gowda had With the new system, 70 percent Kerala Corporation are on a collision increased passenger fare by 14.2 lights at platforms where sensors have course over forming special purpose percent and freight by 6.5 percent. been installed will go out after the vehicles (SPVs) for integrating various He said that a loss making railway departure of trains and come on modes of transport in the district. will provide below-par services and automatically with the arrivals of trains. While the corporation is planning will eventually not even have the Railway officials said that the an exclusive SPV for transport in the resources to pay its bill. The decision system has been installed on one city as per the direction of the Urban to increase the rates was mooted by platform at each station and on an Development Ministry (MoUD), the the railway board in February and the average, the new system cuts down State Government insists on board proposed a 5 percent increase the energy demand at the platform by constituting a single SPV for a cluster in freight rates and 10 percent increase half. (TH, 27.04.14) of three or more districts. in passenger fares. (IE, 01.06.14) This would upset the plan of civic Private Investment in Roads body, which has almost completed the Ministry Banks on Toll Revenues The National Transport formalities for constituting a separate The Ministry of Road Transport Development Policy Committee, SPV for the city. The SPV is required and Highways has embarked on an headed by former Reserve Bank as part of the plans to integrate exercise to estimate their revenue from Deputy Governor, Rakesh Mohan, various modes of public transport toll collection to see if the Government has pegged private investment needs systems in Kerala, under the proposed can build more roads through its own in the road sector at M6.65 lakh crore Unified Metropolitan Transport resources. over the next 20 years. Authority (UMTA). (ToI, 21.05. 14) The National Highways Authority of India (NHAI) and the Ministry’s kitty has swelled over the past decade over States Accountable for Accidents seven times as more roads come under ndian roads have proved to MARKED INCREASE IN ROAD ACCIDENTS BETWEEN 1970 AND 2010 tolling. The Ministry is also thinking of Ibe giant killers. CONCERN OVER KILLER ROADS ONE Demanding immediate ACCIDENT new models like leveraging debts using 1 1,26,896 deaths DEATH EVERY this toll revenue for new projects. attention and remedial 4,66,600 serious injuries Serious road 4 MINUTE This was done to assess rate of action, the Supreme Court accidents every 4,30,654 accidents has appointed a three- minute growth in toll revenue, see how much Source: Road Accidents in India 2010, Ministry of Road Transport and Highways can be acquired from public funded member panel to suggest projects vis-a-vis the Build-Operate- measures to prevent road Transfer (BOT). (ET, 08.04.14) accidents and ensure accountability. New Guidelines Notified The Bench said, “We intend The Civil Aviation Regulator to monitor implementation and to Director General of Civil Aviation make the States accountable for (DGCA) has recently notified the new any inaction or lapse”. www.team-bhp.com regional air connectivity guidelines of Quoting figures furnished by the Civil Aviation Ministry, under the the Ministry of Road Transport and Civil Aviation Requirements. Highways in the volume, ‘Road As per the new regional air Accidents in India 2010’, the connectivity requirements, scheduled Bench highlighted the increase in accidents and fatal cases between 1970 airlines will have to deploy at least 6 and 2010. The report has revealed that one accident takes place in the percent of their total operating capacity country every minute and one person dies in an accident every four minutes. to “remote or strategic areas”. (TH, 23.04.14) April-June 2014 PolicyWatch 3 I N F R A S T R U C T U R E

OIL & GAS a year). Environmental clearance (EC) annually. However, EBP has yet to has been granted to Cairn India to achieve that target across the country. augment hydrocarbon production (ET, 17.06.14) Foreign Investment in Oil & Gas from Barmer and Jalore districts of With foreign investment almost Rajasthan to 300,000 barrels of oil per Priority Allocation Norms drying up in India’s oil and gas sector, day from current limit of 200,000 bopd. The Ministry of Petroleum Petroleum Minister, Dharmendra Cairn had made 31 oil and gas and Natural Gas proposes to come up Pradhan has promised an overhaul to discoveries in the Rajasthan block, of with a common policy for priority make policies predictable, transparent which four – Mangala, Bhagyam and allocation for utilisation of natural gas and fair to investors. Three years of Aishwariya and Raageshwari have procured across sources like policy paralysis and regulatory policy been put on production. It contributes administered pricing mechanism uncertainty over issues, such as about 30 percent of India’s domestic (APM), non APM and New natural gas pricing had led to crude oil production. The output had Exploration Licensing policy (NELP- companies deferring their touched 200,000 bpd in March but the X). investments, resulting in domestic block is currently producing about The policy to be worked out will production stagnating. 190,000 bopd. (ToI, 17.06.14) have two major objectives – to The priority of the Government maintain the current priority of would be to put in place transparent Ethanol Blending in Petrol allocation first. Secondly, the priority systems and time-bound delivery of The Oil Ministry may cap the allocation will be to only to those government services. The Ministry quantum of ethanol blending in petrol sectors where either there is an proposes to replace New Exploration at 10 percent. The Ministry has been element of government subsidy in consultation with all stakeholders Licensing Policy (NELP) with a involved or end use pricing of of the ‘Ethanol Blending Programme uniform licensing policy to facilitate the product, which uses natural gas production of all forms of (EBP), over the recurring demand that is regulated. Subsidised natural gas hydrocarbons, under a single policy the percentage of ethanol in petrol will be given only to those sectors, regime. The next round of oil and gas should be increased. said sources. block auctions will be offered with all Sugar industry, which supplies Similarly, liquefied petroleum gas statutory clearances that will derisk ethanol to oil marketing companies, (LPG) and compressed natural gas exploration activities to some extent. has been pushing for an increase of (CNG) users get priority allocation and (ET, 17.06.14) 15 percent from the mandatory 5 percent. However, automobile the ultimate beneficiary is common Cairn Gets Environmental Nod manufacturers have said that over 10 users. Cairn India has received percent will not be viable for the The allocation criteria for environmental nod for raising crude current generation of cars. distribution of natural gas currently oil production from its prolific As per the sugar industry, 5 runs in descending order in priority in Rajasthan fields by 50 percent to percent mandatory blending can help sectors like fertiliser, LPG, power etc. 300,000 barrels per day (15 million tons oil companies to save M6 per litre (BS, 28.05.14)

Hike in LPG Prices Price Revision Opposed The Ministry of Petroleum is n a development, that backing an immediate increase of Imay further convolute M250 a cylinder for subsidised the vexed issue of raising cooking gas, even as the monthly domestic gas prices, a diesel price hike has been resumed, section of the National so that the gap of M4.40 paisa a litre is Democratic Alliance bridged. With the rupee appreciating (NDA) Government is against the dollar, the gap is expected against the contentious to narrow to around M3-3.50 a litre. price formula suggested The Ministry also backed by the C. Rangarajan resumption of direct transfer of Committee. cooking gas subsidy to bank The new price is accounts and reducing the number of based on a formula suggested by a panel headed by Rangarajan, former subsidised cylinders from the current Governor Reserve Bank of India (RBI) and former Chairman of the Prime level of 12. Subsidies as a percentage Minister’s economic advisory council. of total Central Government spending The price based on the formula changes every quarter. This would have have increased from a little over 9 priced the fuel at $8-8.5 per million metric British thermal unit, at which percent in 2004-05 to almost 14 percent natural gas was to be sold to producers of power, fertilizers, minerals and in the interim budget estimates for domestic gas producers, including Mukesh Ambani’s Reliance Industries 2014-15. (ToI, 23.05.14) Ltd. and Oil and Natural Gas Corp. Ltd (ONGC). (Mint, 10.06.14)

4 April-June 2014 PolicyWatch I N F R A S T R U C T U R E POWER Power Cuts in Delhi and UP High Tension on Power Supply iyush Goyal, India’s new Post bifurcation between PEnergy Minister pulled an Telangana and Andhra Pradesh, the all-night work session to Andhra Pradesh Re-organisation Act, tackle power cuts caused by a 2014 divides power plants based on dust storm in New Delhi and their geographical location and states provide more electricity to that existing ‘Power Purchase Uttar Pradesh. The State that www.in.reuters.com Agreements’ will continue for both has been hit by blackouts of existing and under-construction up to 12 hours a day as soaring projects. temperatures and were Accordingly, Telangana will get expected to reach up to 45 nearly 54 percent and successor degrees Celsius. Andhra Pradesh will get 46 percent. Goyal said that action was being taken to address power disruptions in Power from central projects will be the capital and would ensure that a request from Uttar Pradesh for an extra shared in the 51:49 ratio. 325 MW of power would be met. Peak demand for power in Uttar Pradesh Though the total installed capacity is around 12,700 MW, around 2,000 MW in excess of supply that has been of the Andhra Pradesh power grid available till date due to power station shutdowns and delays in buying coal stands at 16,679 megawatts, the actual stocks. (Reuters, 31.05.14) generation is only between 9,000 MW and 10,500 MW, largely due to a lack tariffs traded at about M3.05 per unit Kannauj and Rampur will have to shell of gas linkages. Of this, Telangana will in power exchanges against M3.6 per out extra tariff for every hour of get about 4,500 MW to 5,000 MW. unit in the year-ago period. Over the electricity they receive exceeding the (TH, 30.05.14) past one year, merchant rates have scheduled outlay. been subdued due to weak financials The proposal may undergo certain Restoring Power Subsidy of state distribution companies (SEBs) modifications, as any decision will be Subsidised power for domestic and muted industrial activity. taken only after due consultation with consumers using up to 400 units may (ET, 18.06.14) the state government as well as the become a reality in the months ahead. UPERC. Following a meeting with Lieutenant Reviving Investment in Power Further, its implementation will Governor, Najeeb Jung, Delhi With the disconnect between the require changes in software that Government is preparing a proposal departments of power and coal stalling generates bills and it will be difficult to make allocations for power subsidy major projects, bringing the two under to ascertain that districts got 24 hours in the 2014-15 budget. one minister is likely to reverse the of supply, because of regular tripping The quantum of the subsidy will trend of declining investment in the caused by poor power infrastructure. be decided either by the Centre when sector and provide power for all. (ToI, 25.05.14) “Minimum government and the budget is presented in Parliament th or whenever the new Government maximum governance” will top the Susan UMPP’s 4 Unit takes charge in Delhi. Ever since agenda of the Minister, who said Reliance Power’s fourth 660 MW power had been privatised in Delhi in “transparency” would be a key factor unit of Sasan Ultra Mega Power Project 2002, people consuming up to a certain in the functioning of these ministries. (UMPP) in Madhya Pradesh has number of units were getting subsidy The three Ministries have been commenced electricity generation. At till March 31, 2014. (ToI, 18.06.14) brought under one umbrella, so that present, the total operational capacity all can work in tandem, cut down costs of the plant has reached 2,640 MW. Tariff Rates to Rise and ensure that the objectives of the The remaining two units are in Merchant tariff rates for power- Government and the delivery advanced stage of construction and generating companies are expected to mechanism to achieve those objectives will be commissioned in the next few go up as business activity picks up can be streamlined. There are a lot of months. The total power generation amid hopes of a faster economic challenges, synergies between the capacity of Sasan UMPP is 3,960 MW recovery. Power utilities were running various Ministries. (ToI, 27.05.14) (6x660 MW). at lower capacity utilisation due to With this unit, Reliance Power’s lack of demand. Extra Tariff in VIP Districts generation capacity has increased to According to the Central The UP Electricity Regulation 4,525 MW that includes 4,440 MW of Regulatory Authority, the country is Commission (UPERC) proposed to thermal and 85 MW of renewable expected to face an energy deficit of impose 0.5 percent extra tariffs on energy based capacity. The first 660 5.1 percent in 2014-15, despite the fact consumers in cities aspiring to get MW unit of the Sasan UMPP was that 17.8 GW of capacity is expected more power than the usual roster. If commissioned in March 2013, second to be commissioned in the current the proposal is passed, consumers in in January 2014 and the third one in fiscal. In April 2014, merchant power districts like Mainpuri, Etawah, March 2014. (BS, 20.05.14) April-June 2014 PolicyWatch 5 F I N A N C I A L S E C T O R RBI Eases Bank Lending argued that the department was maximum of 5 percent stake in Indian The RBI recently struck a dovish already dealing with the FDI policy. exchanges. tone on lending rates and eased bank The demand came days after the “The current policy on ownership lending, suggesting that it was buying Department of Economic Affairs in the of stock exchanges may be amended into the commitment Finance Minister, Finance Ministry asked for the entire to allow for an investment stake of at Arun Jaitley made to pursue fiscal policy to be shifted to it on the least 15 percent (or preferably even prudence. grounds that the Foreign Exchange 26-49 percent) for foreign exchanges In its policy statement, RBI said Management Act (FEMA) is of international repute, in line with the that it may ease monetary policy if administered by it. (ToI, 29.05.14) regulations for Indian exchanges,” inflation slows faster than anticipated. BSE said. Accordingly, the Central Bank kept Reduction of Withholding Tax The move will allow domestic the repo rate, at which it lends short- To spur foreign investment in the stock exchanges the flexibility to form term funds to banks, at 8 percent, corporate bond market, the Finance deeper partnerships with global having raised it by 75 basis points, Ministry has proposed reduction in bourses, help attract more foreign since Raghuram Rajan (RBI Governor) withholding tax for Foreign funds, facilitate and accelerate took office in September to tame the Institutional Investor (FIIS) to 5 adoption of best-in-class technology. rising prices. One basis point is 0.01 percent from 20 percent, at present. (FE, 27.05.14) percent. In a note prepared for the new In response, Jaitley endorsed Government, the Ministry has Changes in Resolution Regime RBI’s stance and maintained, “It (RBI) proposed cutting withholding tax for The International Rating Agency, has followed a calibrated approach FIIs in non-infrastructure corporate Moody’s has warned that aimed in the direction of balancing bonds to 5 percent, thus favouring implementation of the bank resolution between growth and inflation”. uniform withholding tax for all FIIs regime as proposed by the high-level (Mint, 21.06.14) investing in corporate bonds. Financial Stability and Development “The withholding tax for FIIs in Council (FSDC) working group may Battle for FDI Policy Control non-infrastructure bond issuance by raise risks of the creditors to the The control over foreign direct companies is 20 percent, which may domestic banks and other financial investment (FDI) policy and the be brought down to 5 percent”, said a institutions. Foreign Investment Promotion Board Finance Ministry official. (ET, 26.05.14) “Modifications to the bank (FIPB) has turned into a full-blown resolution framework, if implemented battle between two wings of the Boosting Domestic Markets as recommended, may increase the Government and is expected to prompt The Government should allow risks for many creditors of domestic the Finance Minister, Arun Jaitley, to leading global bourses to hold up to lenders, including holders of both intervene and end the tussle. 49 percent stake in Indian stock senior and subordinated debt,” Gene In its presentation to Commerce exchanges to enhance the Fang and Srikanth Vadlamani, analysts and Industry Minister, Nirmala competitiveness of domestic capital at Moody’s Investors Service said in Sitharaman, Department of Industrial markets, Bombay Stock Exchange a note. (Zee Biz, 29.05.14) Policy and Promotion (DIPP) asked (BSE) has said. The current policy that the FIPB be shifted back to it and permits foreign bourses to own a New Norms for Licenses The RBI would soon come out with policy guidelines for Fiscal Deficit Narrows differentiated banking licences. The he fiscal deficit in 2013-14 new licences for banking operations Tstood at 4.5 percent of GDP, including differentiated ones would lower than 4.6 percent projected be given “on tap” basis, R Gandhi, in the revised estimate, mainly on Deputy Governor of the central bank account of curbs on government said. expenditure. The fiscal deficit, the “We are currently working on the gap between government’s guidelines. Once we are done, we’ll expenditure and revenue, in actual take feedback and then the final terms was M5.08 lakh crore as announcement will be made,” Gandhi against M5.24 lakh crore projected said on the side lines of International in the revised estimate. Chamber of Commerce (ICC) Banking The government’s total expenditure worked out to be M15.63 lakh crore Summit. in the last fiscal as against the original budget estimate M16.65 lakh crore. “The new guidelines on different The revenue collection was M10.15 lakh crore. The revised target was M10.29 types of banks – universal, lakh crore. differentiated, etc. – will be issued The lower fiscal deficit reduces the government’s expenditure on shortly. After these guidelines are interest payment and unlock funds for investments in social welfare issued...we intend to offer licences on programmes as well as infrastructure development. (BS, 30.05.14) tap”, Gandhi said. (BL, 14.06.14) 6 April-June 2014 PolicyWatch I N F R A S T R U C T U R E The Government Will Provide Electricity to All Within Five Years

North India is facing power supply Some parties talk of giving freebies, issues. Even after Bhartiya Janta free power, free water. Party (BJP) has come to power, BJP believes that if the price is fair and power woes have not seen any end. affordable, then people do not have any I took charge on May 27, 2014 and issue. completed a month. This power supply problem has not been created in three days, What is your message to power and but in the past 15 years. The transmission distribution companies? and distribution infrastructure has not kept I want to tell power companies, investors pace with the population growth. Hardly and people that we are all in it together. any steps were taken in the past to combat The mining companies should give good issues, such as last-mile connectivity and quality coal, in good quantity and right power theft. price. Generating companies should increase their efficiency, like I have taken a decision that You become Power Minister and Uttar Pradesh power plant running for over 25 years will be given faced power cuts, mainly in those areas where automatic approval to set up new and super-critical plants, BJP had won, even in PM’s constituency coal will be supplied to reduce power cost. Consumer theft Varanasi. has to be stopped, and consumers should pay bills on The situation was such that there was some problem with time. If we all work together, then investors get confidence their generating plant, not because of coal supply issues. that power sector is being sorted out. UP was buying 377 mw power from Jhajjar power plant in summer, but the day Lok Sabha results came out on May The previous government claimed that they 16, they stopped buying power from there. And when continued with NDA’s coal policy. Now that you people asked them why power supply problem has are in power, will you get transparency in coal occurred, they told people to ask those people for whom block allocation? they voted. This is unfortunate. What happened in the past is unfortunate. I have given my views on this issue many times, this is a lesson that in In how many days will you fulfill the dreams of the coming days, people will not tolerate corruption of any 24x7 power about with Narendra Modi has talked kind. Power is an important natural resource and has to be about in his campaign? fairly utilised keeping the nation’s interest in mind. I think the situation is ripe for some low hanging fruits. We have started planning on some medium-term policy Will your government take action against people issues. I have full confidence that we will provide 24x7 accused in coal scam? power to every house, business establishment in the five- In case of any scam, Modi’s government will take action; year mandate that people have given us. Now, we have you already saw that in case of Swiss bank accounts, our approved projects related to power transmission Finance Minister has already written a letter. infrastructure worth Rs12,500 crore, bidding and tendering process will be over soon. There are allegations against many companies regarding selling coal from coal captive plant? Power theft is a huge issue in the country In the coming days, in any coal allocation, the end use will This is indeed a huge problem, in many areas. No be specified. Also, the end-tariff regulation will be specified. government other than Narendra Modi’s had the political will to act on this issue. Modi filed around one lakh FIRs Will action be taken against companies which in Gujarat with regards to power theft and faced the sell it in open market? reaction, stopped power theft, and then, won elections. If anybody violates the law, action will be taken. Presently, the people want that the government should show such political resolve.

– Excerpts from an interview of Piyush Goyal, Union Minister of Power, Coal and Renewable Energy with Amish Devgan published in DNA on June 27, 2014.

April-June 2014 PolicyWatch 7 I N F R A S T R U C T U R E An Infra Road Map Shyam Ponappa* et’s hope a newly elected Government has the health care, banking and agriculture. It’s just that a thorough, Lcoherence and leadership to begin to deal right away comprehensive approach from the outset would be most with the mess in infrastructure, learning from what has beneficial. gone wrong before. There are problems galore with our infrastructure, but a couple of examples stand out for what n hindsight, what’s lacking in both instances is proper to look out for and avoid in future initiatives. There is a Iorganisation and co-ordination, the discipline of sound little doubt that we must improve our approach to projects project management; and this is a missing piece in most and undertakings in terms of functionality and efficiency, areas of deficiency in governance, including infrastructure and that digital infrastructure is a key requirement. development. Both depend on digital infrastructure. This is where real efforts must be focused to fix things, quite One example is the multiplicity of schemes to register apart from dealing with corruption. individuals, including the unique identification (UID) or Aadhaar scheme, the national population register (NPR), The “plumbing” of hardware, software, communications the multipurpose national identity card, the voter lines, and systems that enables effective use of information identification card etc. Another example is the National and communications technology is a critical necessity for Optical Fibre Network our economic growth and (NOFN) by Bharat well-being. While a balanced Broadband Network availability of energy, Limited (BBNL). Accepting transportation and water for the moment that these supply/sewerage is required, projects are well in the short run, it is ICT that intentioned, there seem to is likely to yield the broadest be flaws right from the overall benefits and design stage, and on economic returns through through execution. While multiplier effects, provided the fallout from past errors the others come up to has to be dealt with, it is minimum requirements. most important to avoid these mistakes in fresh lear, convergent initiatives. C objectives and task- oriented processes and he UID and NPR projects apparently began without systems are not really part of our culture or vocabulary, Tsufficient care in defining their purposes; they did barring sectors oriented to external markets like IT-BPM, not mesh seamlessly with each other and with other and some corporations and professionals. There are, of objectives and processes. This disjunction has carried course, rare individuals who excel, such as the former head through in implementing their design and execution. of Delhi Metro, E Sreedharan, who maintained his reputation from the Konkan Railway and before that, Indian Railways. The NOFN aims to extend a countrywide network on the But it’s not as if getting it right is a foregone conclusion for foundation of the existing fibre networks of state-owned countries with a far better record of good systems and entities Bharat Sanchar Nigam Limited (BSNL), RailTel and high-quality delivery – as evidenced, for instance, by PowerGrid. This was to link over 245,000 village Germany’s increasing problems after turning away from panchayats by the end of 2013, but is still undergoing nuclear energy. limited trials. Given its magnitude, this requires vast capital investment that is unrelated to likely revenue generation The incoming government needs to focus on starting to in the short run. This critical infrastructure project is do things right, and that is the best way to create apparently behind time and over budget despite its reduced opportunities that can make the most of our demographics, scope. That said, such monumental undertakings and and the potential of our large and increasing markets. It changes can’t be expected to go like clockwork, and the must view any scheme as part of an integrated, overarching considerable efforts being made should eventually system, and apply itself from the very beginning with care contribute to positive outcomes. For instance, a and understanding to defining the aims, objectives, and Confederation of Indian Industry report prepared with detailed processes so that they mesh and converge with the help of KPMG in 2013 outlines possible business what else is there. models and ecosystems in four areas, namely, education,

* Columnist in Business Standard and this article was published on April 30, 2014.

8 April-June 2014 PolicyWatch I N F R A S T R U C T U R E A National Investment Fund May Provide the Solution to the Infrastructure Mess Subir Gokarn* ver the past few months, I have of the fund is really what makes it Owritten several columns about meaningful. Disinvestment realisations the chronic and intensifying problems are clearly an important potential in infrastructure. To my mind, two resource. The political economy of issues are of particular concern. First, disinvestment has been challenging there is a severe imbalance between and the opportunities and valuations investments across sectors, which have changed significantly over the lowers the productivity of each past decade. investment. Infrastructure is essentially a network phenomenon, a A huge potential source of funds is chain, which is only as strong as its what I would call a balance sheet weakest link. Second, public-private substitution. When the Government partnership (PPP) may have been a transfers assets that it conventionally promising strategy in theory, but it is owns to the private sector, it is A well-designed and well- now proving to be financially reasonable to expect that the proceeds unviable. The ability of the companies governed NIF could help be used to create other, new assets. in the business to mobilise even a the economy achieve what fraction of the total resources needed it has struggled with for the There is the all-important dimension from financial institutions and capital of governance. The basic reason why past two decades: narrow markets has virtually disappeared. transactions involving land, mining the gap between rights and spectrum went the way they Any prospect of acceleration in infrastructure demand and did over the past few years is, I growth critically rests on supply believe, the absence of an appropriate infrastructure investment across a governance framework. At its core, any range of sectors. Power plants framework that deals with these issues without coal linkages or ports without become, its utility needs to be must take into account the time rail and road access are not going to appreciated. As I said earlier, the entire horizon over which these transfers cut it. But such large and infrastructure system of an economy have an economic impact. synchronised investments are not performs like a network. It works within the capability of the PPP efficiently only when all the n essence, a well-designed and well- framework in its current state. So is components of the network match. Igoverned NIF could help the there a solution in sight? While it may be relatively easy to draw economy achieve what it has up a blueprint of interlinked projects struggled with for the past two n the common minimum programme with balanced capacities, executing decades: narrow the gap between Ilaid out by the United Progressive them, so that the balance is maintained infrastructure demand and supply. It Alliance (UPA) Government in 2004, is clearly a huge challenge. cannot be an exclusive funder; nor there was a proposal for a National should we forget that the public Investment Fund (NIF). Essentially, rom the perspective of the NIF, sector’s record of project this involved pooling the resources Fthough, the strategic dimension implementation hasn’t been the best. mobilised through disinvestment into provides a foundation for the other But the lesson of the last decade on a fund, which would then invest it into two aspects. Strategy could be this issue is: just because the public various social priorities that the internalised into the structure, thus sector cannot do something doesn’t coalition partners would agree upon. making it into a National mean the private sector can. A structure was actually set up, but Infrastructure Commission, for did not become operational in any instance. Or it could be an external It isn’t the core concept of PPP that meaningful way. mandate to a more narrowly focused needs to be rejected; it is a redefinition mechanism, combining finance and of the roles and responsibilities of each Three aspects of such a framework governance. partner. An NIF can, with a holistic are key to its success: investment strategy, adequate funding and strategy, financing and governance. Where do the funds come from? Some credible governance, play a catalytic On strategy, as discredited and must come from standard budgetary role in this process and, ultimately, in archaic a term “planning” may have provisions. But the original concept solving the infrastructure mess.

* Director of Research, Brookings India and Former Deputy Governor, RBI, and the article was published in Business Standard on April 20, 2014.

April-June 2014 PolicyWatch 9 T R A D E & E C O N O M I C S 5.5 Percent Growth Estimated consumer goods output saw a decline Government has proposed setting up Asian Development Bank (ADB) in February. mega industrial zones in different parts in its report issued on April 1, 2014 The electricity sector, which has of the country. suggested central government to 10 percent weightage in the IIP, for The National Manufacturing undertake structural reforms, February 2014, it grew at 11.5 percent Policy aims at increasing contribution boost manufacturing and revive (-3.2 percent). Similarly, mining output of manufacturing to the national GDP investment, for economy to grow at grew 1.4 percent in February, against from current 16 percent to 25-26 its potential rate. 7.7 percent contraction in same month percent by 2025 and creating 100 The bank said though the Cabinet in the previous year. million jobs in the next decade. Committee on Investment had cleared The Confederation of Indian (FE, 26.04.14) projects worth a combined $89 billion Industry (CII), Federation of Indian or 4.8 percent of Gross Domestic Chambers of Commerce and Industry Moody’s Skeptical of Reforms Product (GDP), most government (FICCI) and the Associated Chambers Global ratings agency Moody’s ones. Investments in general have to of Commerce and Industry of India has said that India’s growth prospects be revived. India’s pressing policy (ASSOCHAM) called for urgent steps, are hampered by lack of reforms in challenge is to create significantly especially on the business regulation recent years. It said the economy is more productive and well-paying jobs. front, to help revive the manufacturing expected to grow by 4.5 to 5.5 percent For that, manufacturing will have to sector. (BL, 11.04.14) in 2014 and then to 5 to 6 percent in play a key role. 2015, “The country is also vulnerable Contribution of the manufacturing Robust Manufacturing Needed to capital outflows given a history of sector in GDP and employment is very India needs an employment sizeable current account deficits”. low when compared to China, generating robust manufacturing Stable government is expected to Malaysia, Thailand and Vietnam. It sector to achieve an annual growth of rush in economic reforms to rebuild also projected the current account 10 percent, a top government said. the faltering economy. Stubborn deficit (CAD) would grow to 2.5 “Manufacturing cannot be driven inflation and sticky food inflation percent in the current financial year. unless and until India becomes have been key policy headaches for (BS, 02.04.14) innovation led economy and therefore the previous government and fuelled innovation has to be the backbone of voter anger against the government. Factory Output Declined India’s growth”, said Amitabh Kant, The agency said a rebound in Weak manufacturing performance Chief Executive Officer of Delhi capital flows suggest that pulled down overall industrial output Mumbai Industrial Corridor international investors continue to by 1.9 percent in February. The Development Corporation Limited. perceive attractive investment manufacturing sector continued to be India’s economic growth expected opportunities in India. (ToI, 09.05.14) in the negative for the fifth straight to clock a decade-low figure of 4.9 month recorded a 3.7 percent decline percent in FY 2013-14. To boost India Misses Export Target in February. Both capital goods and manufacturing sector’s growth, the India missed its goods export target for 2013-14 with shipments declining for the second straight Bad Loans Hurts India’s Recovery month in March 2014 as demand from ith rebound in capital key markets failed to pick up. Winvestments and Exports in March fell 3.15 percent pick-up in private to $29.5 billion while overall shipments consumption economy can in 2013-14 increased 3.98 percent to make gradual recovery, $312.35 billion against the target of however rising bad loans at $325 billion. its banks might choke the “Sluggish demand in major recovery, said Organisation markets coupled with loss of of Economic Cooperation preferential access in Europe and and Development (OECD). quality issues with drugs have hurt The Paris-based think- exports”, said a Commerce Ministry tank in its report said 4.9 official. percent in 2014, predicted an upturn in capital investments after national There may be cheer on the deficit election. Capital investments barely grew in previous fiscal year. To break front but there is little optimism among investment logjam, the Cabinet Committee on Investment, has cleared the exporters. “With the rupee so projects worth about 6 percent of GDP. volatile, we do not know whether to The report urged New Delhi to rapidly carry out pending labour, fiscal hedge or not. We can suffer losses and tax reforms for a faster economic revival. It also backed a Reserve Bank either way”, pointed out Delhi of India (RBI) panel’s proposal for moving to an inflation target of 4 percent Exporters’ Association President, in three years while setting monetary policy, sharply below current levels. Tilakraj Manaktala. (BL, 11.04.14) (FE, 07.05.2014)

10 April-June 2014 PolicyWatch T R A D E & E C O N O M I C S Dumping Good Laws Will Hurt the Economy

he euphoric post-election days in India are for many unviable public-private partnership projects is common. Thopeful in terms of the future of the country, and for Contracts in use are inappropriate. Pre-tendering approval some, loaded with impending horrors. I’m not going to process is centralised and slow. Performance management add to either stack of perception, but to the depleted stack is weak. Availability of skilled and semi-skilled manpower of necessary cautions. There is little dispute about the is insufficient. Weak risk management skills. Below-par fact that India’s economy needs to grow robustly for the design and engineering skills. Lack of best-in-class country to simply continue running in place, let alone take procurement practices. In areas related to delays in land fantastic strides into a future of self-fulfilling prophecies acquisition, the McKinsey report states: “Global best of widespread peace and prosperity. But that future cannot practices suggest that land acquisition should be complete arrive by pandering to a privileged band of robber rajas, as before a project is tendered. In India, projects are often it were, or the notion that industry, benefits and a better awarded with only part of the land physically acquired, life are the prerogative of a few. To that end, it is vital that sometimes as low as 30 percent. Delays in subsequent Prime Minister-elect Narendra Modi and his colleagues at land acquisition are possibly the single-largest factor the Bharatiya Janata Party (BJP) resist calls to equate causing project delays. These delays are driven by three economic growth with blind approval for projects, factors: 1) undervaluation of land price; 2) dependence on especially in the areas of infrastructure, extractive industries state governments for land acquisition; and 3) the and construction. They must resist calls that only such ambiguous definition of the term unencumbered land.” blind approval – or more precisely, wide-eyed approval www.healthcaregovernancereview.org blinded by falsified notions – will accelerate slowed Dumping Good Laws economic growth.

Economy It is also vital that the new government resists calls to ditch inclusive legislation for the sake of exclusive entitlement. I refer specifically to the on-the-record calls by several business leaders to negate legislation, such as the new land acquisition law and make the pending mining Bill entirely pro-business. I wouldn’t be surprised either with a growing pitch to amend the forest rights law, a move that assumes the BJP-led alliance’s majority in Parliament is enough withal to do whatever it pleases. To do so would be to add to India’s brimming cauldron of internal security issues. Legislation of affirmative action and fair play are “With regard to the economic climate, designed to reduce or resolve disenchantment, anger and this should be accepted that things conflict – key ingredients to increasing the country’s have got to get worse before they can economic efficiency and prosperity. get even worse”.

offer some observations from McKinsey and Co., which, Ilike others of its ilk, is considered by several of India’s he report also adds that in India, “dispute resolution business leaders (and not a few in government) as a holy Tprocesses are ineffective”, on account of grail of advice. In 2009, some months after the United “ambiguous” legislation and the tendency of arbitration Progressive Alliance took office for the second time, to be ineffective, leading to “long drawn-out disputes”. McKinsey published a report, titled Building India: Nearly without exception similar points can be applied to Accelerating Infrastructure Projects. The report’s major manufacturing projects, extractive industries and observations of policy and procedural impedimenta – construction projects. Such inefficiencies need fixing, not largely derived from the thoughts of India’s business fixing the match by dumping, preventing or weakening leaders, some engaged today in pushing a rampage of legislation that seek to correct – entirely within the spirit pro-business legislation – remain as valid today. of participatory growth – massive disadvantage. In a message beamed countrywide, Modi dedicated BJP’s Lok The report lists several areas of inefficiency in India that Sabha victory to India’s poor, and the country’s have little to do with pro-business arguments of inclusive dispossessed and trampled. Empowering and enriching legislation damaging economic growth. I quote: Quality of them will grow India – and the BJP – not calls to nationalism planning and engineering design is poor. Tendering or notions of exclusion.

– This article has been written by Sudeep Chakravarti, a renowned columnist, and was published in Mint on May 22, 2014.

April-June 2014 PolicyWatch 11 R E P O R T D E S K India 15th on Wealth List Mittal’s houses in London’s massive amounts of waste. The India ranks 15th in the world in Kensington Palace Gardens occupy construction boon can be a bane as terms of millionaire households in 2013 the fifth and 18th spots on the list of unfettered growth can have a and is projected to become the the 21 most expensive billionaire damaging impact. seventh wealthiest nation by 2018, homes in the world. In second place The CSE highlighted the according to the Boston Consulting is the home of Brazilian philanthropist importance of conducting workshops Group (BCG) wealth report. Lily Safra in France. so architects, engineers and The report said the global private (BL, 14.05.14 & BS, 15.05.14) prospective owners can understand financial wealth grew by 14.6 percent the energy-saving strategies for in 2013 due to the performance of Highest Maternal Deaths construction. NCR will be particularly equity markets. India accounts for the maximum affected and the scalability of the The US had the highest number number of maternal deaths in the buildings has to be seen. The urban of millionaire households and the world – 17 percent of the 2.89 lakh boom has taken place on the highest number of new millionaires. deaths in 2013. According to a UN periphery, therefore, people living in North America at $50.3 trillion and Report, maternal deaths have these areas have to travel long Western Europe at $37.9 trillion still dropped by 45 percent globally, since distances. (TH, 02.05.14) remain the wealthiest regions in the 1990 and only Sub-Saharan Africa world, followed closely by Asia- poses a high risk. Despite Maternal Data Refutes High Poverty Pacific at $37 trillion where strong Mortality Rate (MMR) dropping by India could be overstating poverty Gross Domestic Product (GDP) 65 percent, since 1990 the country levels as the private final consumption growth was the key driver. Globally, needs to reach the UN-mandated estimates captured by the National the amount of wealth held privately Millennium Development Goal of 75 Income Accounts (NIA) is nearly twice rose by $19.3 trillion in 2013 primarily percent decline till 2015. of the National Sample Survey due to returns on existing assets. Literacy, social issues, AIDS, Organisation (NSSO) estimates for (ToI, 11.06.14) postpartum hemorrhage, malaria, consumption expenditure of dengue and also lack of accurate households in 2011-12. Ambani’s Home Most Expensive information of births and deaths are The Planning Commission’s latest Reliance Industries Chairman, some of the factors causing maternal estimate of the poverty line, using Mukesh Ambani’s skyscraper deaths. The National Urban Health National Sample Survey Organisation residence in Mumbai is the most Mission is working to provide better (NSSO) data, was at consumption expensive billionaire home in the healthcare to slum women and the expenditure level of M33.33 in cities world, according to a Forbes list with Janani Suraksha Yojana (women and M27.20 in villages per day per safety plan) encourages women to construction costs reported between person. Indians below this line fell visit hospitals for monetary benefit. $1-2 billion. Ambani’s 27-storey, from 41 crore in 2004-05 to 27 crore in (IE, 07.05.14) 400,000 sq ft skyscraper home 2011-12. ‘Antilia’, has six floors of underground Housing Crunch in 2030 The irreconcilable differential of parking, three helicopter pads, and As per the data released by the the two data sets means even these allegedly requires a staff of 600. Centre for Science and Environment estimates of poverty levels could be To put Antilia’s scale and cost into (CSE) more than 70 percent of the an overstatement. The exact extent of perspective, Forbes compared it to ‘7 buildings that should stand in India overstatement of poverty could not World Trade Centre’, a 52 storey tower by 2030 are yet to be built. Another be calculated as there is no way to that stands near Ground Zero in worrisome fact is that Indian cities use find out who is under-reporting Manhattan. Steel tycoon Lakshmi more of resources and generate consumption. (TH, 05.05.14) Slowest Internet Ingress ndia, which accounts for the third largest online I user base globally, has had the lowest internet penetration growth in Asia Pacific (APAC) at 17.4 percent so far in the current year, according to a research firm eMarketer.

http://i1.ytimg.com The research firm said that there is a clear split between developed internet economies, which all have at least three-quarters of their total populations online and less developed, but growing, markets like Indonesia and India. However, these less mature markets are growing their populations more quickly owing to their smaller bases and saturation being far off. India led Asia Pacific nations in user growth at 28.9 percent. India’s internet user base is expected to touch 243 million by this month, projecting a year-on-year growth of 28 percent. (TH, 05.06.14)

12 April-June 2014 PolicyWatch R E P O R T D E S K 9 Percent Growth, a Pipedream here is an even chance that the Households putting off spending are TIndian economy will grow at an early warning signals for the onset of annualised average rate of 6.5 percent an economy-wide squeeze. According over the next five years, credit rating to the Crisil report, sales of consumer and research firm Crisil said in a report items, such as cars and televisions signaling that the country’s “have taken a huge beating in the last slowdown is stickier than earlier 2-3 years”. “The high growth phase believed. won’t return soon-not in the next five years at least”, the report said. The slower expansion will affect job creation and job prospects, while on ndia’s economy has now recorded the other hand, weak income will Ifive successive quarter of sub-5 affect the sales of a range of goods – percent growth, and appears set to From a foreign investors’ favorite to from cars to two-wheelers, from clock the second consecutive year of an economy characterised by policy houses to cement and steel. annual growth of below 5 percent, the flip-flops, the Indian economy’s first time in 25 years. India’s economy turnabout has been as rapid as the risil warned that unless pressing grew by 4.5 percent in 2012-13, the heady 9 percent-plus growth it clocked Cpolicy and implementation issues worst in a decade. during 2004-2008. are addressed, even sustaining this (6.5percent) growth would be difficult. The Indian economy’s average annual Number Game: Bigger is Better expansion of 6.7 percent during the Growing at 6.5 percent rather than 9 percent a year would mean hundreds past five years (2009-14) and Crisil’s of thousands of fewer jobs forecasts suggest the economy’s • 15mn fewer jobs created in industry and services, if growth is 6.5 percent steep turnaround wasn’t likely not 9 percent anytime soon. • 49mn more people stuck below poverty line • 10mn fewer 2-wheelers sold – equivalent to 70 percent of present annual “With 6.5 percent average Gross sales Domestic Product (GDP) growth, non- • 125mn tonnes less cement sold – equivalent to 50 percent of the present farm employment over this period will annual sales at best grow by 37 million,” Crisil said • 96,000 fewer homes sold in the 10 major cities in a report titled “Of Growth and Growth = Jobs + Demand + Sales Missed Opportunities”. “This means How a higher growth rate brings cheer across sectors an additional 14 million (people) will be forced to either depend on low- Assumed GDP Growth Rate in 2014-19 productivity agriculture or remain Additional sales during 2014-19 9.0 % 6.5 % unemployed”, Crisil said. By 2019, Passenger Vehicles (mn units) 18.5 16.5 more than 51 million people would be Two Wheelers (mn units) 108 98 seeking employment. TV sets (mn units) 85 72 “ iven insufficient job Refrigerators (mn units) 53 47 G opportunities, labour force will Non-farm job additions (mn people) 52 37 not be able to migrate to the higher- No. of people moving out of poverty line (mn people) 92 43 wage, more- productive industry and services sectors,” the report pointed The rise, the fall and the struggle 5 Year Period Real GDP Growth in Percent out. Elevated prices have hurt family From a heady 9 percent, the budgets, as companies are offering Indian economy’s growth has 2004-2009 8.4 % meagre salary hikes and are holding crashed to decadal laws. A 2009-2014 6.7 % back expansion and hiring. Besides, climb back is tough 2014-2019 9 % high inflation has prompted the RBI to raise lending rates. 2014-2019 6.5 %

– This news item has been taken from Hindustan Times dated April 22, 20.14.

April-June 2014 PolicyWatch 13 C O R P O R A T E G O V E R N A N C E Indian Companies May Go Dutch to Meet CSR Norms

different grass-root level NGOs with marginalised population and exhort various corporate groups to invest their CSR funds in their areas of interest.

“ e are already sifting through the track record of the W work NGOs have done with different communities in the last three years. This would be classified into different categories and hosted on the cloud for the companies to review where we can help channelise their funds into ground level work”, said Jasmir Thakur, founder of Samabhavana Society, a home-grown not-for profit group. It will generate periodic reports of the progress and build a plan to use the social media platforms to display the kind of results such collaborative pieces of work are generating.

ompanies in India, particularly mid-sized and small “The government is bullish about the prospects of such Cones, may go Dutch to meet the corporate social groupings going is apparent from the fact that we have responsibility (CSR) norms, under the new corporate law, specially set up a dedicated cell, under the National a move that can help them cut down on common costs Foundation for CSR (NFCSR), an arm of Indian Institute of and maximise the impact of the money they spend on Corporate Affairs (IICA) to facilitate more such alignments philanthropy. between the companies”, said Nikhil Pant, Chief Programme Executive of NFCSR. The Combined efforts India has become the first country in the government is focusing on helping 1,400 top NGOs, consultants world to make it mandatory from April, 2014 listed firms to comply with the norms and for firms with a net worth of over M500 and the the trend may gather more steam as the crore or yearly sales of M1,000 crore plus or government are focus shifts to smaller firms, he added. While those booking net profit in excess of M5 betting big on the spelling out nuanced rules for the CSR crore to allocate at least 2 percent of their future of social obligations earlier the Corporate Affairs Ministry made an explicit mention of such profits to social responsibilities. State-run joint ventures Rural Electrification Corporation (REC) has possibilities. decided to contribute about M2 crore to a literacy project, which was already receiving funds from “ company may also collaborate with other companies the largest public sector natural gas company GAIL (India). A for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of ore such arrangements of resource pooling between respective companies are in a position to report separately Mfirms with shared philanthropic ambitions are being on such projects”, said the new corporate law. The logic thrashed out in what could well become a trend. “REC’s behind such team-ups is compelling. Of the 16,400 odd decision to back non-governmental organisation (NGO) companies in the CSR net in the current year, almost 14,000 Aroh Foundation’s Padho Aur Badho, a government-led companies would need to make small contributions of less right to education initiative, which had received about M5 than M1 crore. crore from GAIL, came after it approached Indian Institute of Corporate Affairs (IICA), which in turn identified that Individually, they may not achieve much but splitting the the Public Sector Unit’s (PSU) social vision matches that bills can help them rationalise administrative, back office of GAIL and advised it to join the ongoing project”, said a and other common spends and attain economies of scale consultant. and make a meaningful difference”, said Linn Dorin, founding Principal of Global Finance Strategies (GFS), an NGOs, development sector consultants and the international development consultancy, which advises government are all betting big on the future of such social donors, governments and NGOs in areas of finance, joint ventures. For instance, Samabhavana Society, a home- administration and operations. GFS, which entered India grown not-for profit group working with ‘difficult in 2014 is in avid talks with multiple companies and is communities’, such as male sex workers is rolling out in working out such cause led groupings. April its prototype portal where it will showcase work of

– This news item has been taken from Economic Times dated April 19, 2014.

14 April-June 2014 PolicyWatch G O V E R N A N C E & R E F O R M S C A G N E W S Government to Tread Carefully Information Technology. The CAG Raps Maharashtra The ambitious river inter-linking Government employees will get two The Comptroller & Auditor project will get a new impetus, under email ids, one permanent and another General (CAG) has found serious the Narendra Modi Government but linked to their existing post, which will faults with the guarantees provided the Centre would like to select specific be used by their successors. Though by Maharashtra Government. It has schemes for implementation very many employees and officers have rapped the Government for not cautiously. Its focus will first be on started using emails for official framing any policy regarding grant of linking rivers within a basin or nearby correspondence, it’s not treated guarantees to the cooperative sugar basins instead of going for distant official until hard copies land on factories and state corporations. inter-basin river linkages. relevant desks. The committed liabilities of the The Government will first take up The Government hopes it will state government on the account of those inter-basin rivers for linking, significantly increase the efficiency by invocation of the guarantees as on which are close to each other, keeping bringing efficiency in communication March 31, 2013 stood at M2,583.45 in mind its feasibility and utility to between districts and the Secretariat crore. larger beneficiaries. in Bhopal. (IE, 21.05.14) The test check of 14 institution in The full river inter-linking project eight departments revealed that has two components – Peninsular and Setting up Green Regulator respective administrative department Himalayan. The Peninsular The UPA Government wants to did not maintain the details of component included diversion of the leave it to the next government to repayment of loans, recovery of the surplus waters of Mahanadi and decide on the Supreme Court’s order guarantee fee. (BS, 18.06.14) Godavari. The Himalayan component, to set up a national environment on the other hand, is conceived for regulator for granting green CAG Can Audit Pvt. Companies building storage reservoirs on the clearances. The court had set April 30 The Supreme Court has widened Ganga and the Brahmaputra and their as the deadline for the same. the powers of the CAG, so that it can main tributaries both in India and The Ministry of Environment and now audit private companies instead Nepal to conserve water during the Forest (MoEF) sought time till July 15 of only government departments and monsoon for irrigation and generation to decide on setting up the regulator state-owned undertakings. of hydro-power, besides checking to appraise projects, enforce Vinod Rai, former CAG, who floods. (ToI, 03.06.14) environmental norms for approvals pushed for audit of private companies, and impose penalties on polluters. A said that the Supreme Court order is Legal Status to Official E-mails bench led by Justice A K Patnaik only an enabling clause. It will be an Madhya Pradesh, probably the first refused to entertain a plea by the audit done on rotation-picks and state to do away with the requirement MoEF to grant six more months to set choose – wherever there is a need for of backing emails with hard copies for up the regulator. an audit. the decisions to be taken. The MoEF brought to notice that The techniques of the audit will The State Cabinet approved ‘Email views of various ministries had to be be focused towards detecting Policy-2014 hoping it will enable quick taken into account and also it has to understating or undisclosed amounts decision-making and called it a write to all the state governments that could result in loss of revenue to significant step to expedite seeking their comments on the the Government. (DNA, 17.04.14) government work through use of proposal by June 15. (IE, 02.05.2014) Flaws in the Health Sector The CAG in its Audit Report has Speeding E-governance Projects detected serious inadequacies in he Central Government departments could have a Chief Information infrastructure facilities at hospitals. TOfficer for IT adoption and to fast track E-governance projects as a part Many hospitals have no trauma care of the National E-governance Plan (NeGP) and emergency medical services. soon. It was also decided to fast track Shortage of doctors is yet another the adoption of ‘E-office’ for independent major crisis faced by the hospitals, the movement of e-files. report said. It has also criticised the Apex Committee of NeGP decided health department for not finalising a to organise the workshop to explain the comprehensive health policy. features, capabilities and the way forward It has pointed out that an effective for implementing cloud by default. Other planning process was essential for the workshops includes Mobile Seva, E- health department to marshal its pramaan and E-taal, for all Ministries, financial and human resources. The Departments and the Planning audit noticed that no appraisal was Commission. conducted by the department to The Committee also suggested that a standard mechanism should be identify the current status of the established for expeditious replication of E-governance projects across the hospitals. (ToI, 11.06.14) country to speed up exchanges by all ‘E-trade’ network partners. (BL, 17.04.14)

April-June 2014 PolicyWatch 15 G O V E R N A N C E & R E F O R M S Know Your Ministries

or those of us who try and understand what different Ministries Fdo, life can often be frustrating, since their behaviour does not conform to standard normative expectations. But there is one simple key to deciphering what goes on. Each Ministry is designed to achieve the opposite of what its name implies. If you grasp this simple truth, you will be less mystified. They operate on an inverted logic, of the kind no subtle dialectician has been able to fathom. One simple test for each new Minister is this. Can they, at the end of their tenure, reverse this inverted logic? Here are summary descriptions of what the Ministries are like currently.

Ministry of Home Affairs: This does live up to its name. It Ministry of Agriculture: Does truly look after the interest is deeply interested in what goes on in your home. It is of farmers. Remember, Nitin Gadkari, Sharad Pawar and armed with all the powers to carry out that function. Internal Amitabh Bachchan are all agriculturalists. security is another matter altogether. Ministry of Water Resources: Truly spectacular in its Ministry of External Affairs: This truly is the Ministry of achievements. Guided by one simple principle. How fast External Affairs. It is external to the Government of India’s can we consume as much water as possible and kill as objectives. It is also usually, in Sir Humphrey Appleby’s many rivers as possible? memorable phrase, “a hotbed of cold feet”. Ministry of Science and Technology: The Ministry for the Ministry of Environment: Contrary to what newspapers bureaucratisation of all science. and fitful bursts of activism would lead you to believe, the Environment Ministry is actually our ministry of industry Ministry of Information and Broadcasting: The Ministry promotion. It has no real credible plan for the environment. for controlling information and slowing broadcasting.

Ministry of Industry: This is our true Ministry of the Ministry of Telecom: Now the Ministry of fuzzy numbers environment. Its objective has been to de-industrialise and complicated auction theory. Did anyone say 4G and India and thereby protect the environment. broadband?

Ministry of Civil Aviation: Single-mindedly makes sure Ministry of Statistics and Programme Implementation: that India-based airlines eventually get grounded, Now its job is to ensure how information can be made somewhere or the other. least useful. Prasanta Chandra Mahalanobis would be turning in his grave at the state of India’s statistical service. Ministry of Railways: This is actually a Ministry of protection of the British Raj. The railways are a heritage Ministry of Planning: The plan for this Ministry is never monument to be protected, so no real modernisation is clear. possible. Ministry of Social Justice and Empowerment: So Ministry of Coal: The Ministry is designed to put black empowered that almost no one cares. soot on the face of every government. Ministry of Parliamentary Affairs: Makes sure Parliament Ministry of Corporate Affairs: More interested in the does not run. affairs of corporations than promoting them. Ministry of Finance: This is the most serious and big one. Ministry of Law and Justice: It is actually the Ministry of Always full of gravitas. Only problem: sometimes confuses court cases. It designs laws in such a way as to maximise finance with the economy. their probability of being litigated and causing uncertainty. It is hopefully clear now what the core identity of each Ministry of Health Affairs: An appendage of the Medical Ministry is. When in doubt, consult this template, and Council of India, which itself has little to do with medicine. you will find all actions suddenly becoming intelligible. Never accuse the Government of a lack of solidity, direction Ministry of Defence: The Ministry that always fights a or integrity. Each of its actions can be traced to the secret two-front war. How to defend bureaucrats from generals of its name: a secret hidden in plain sight. on the one hand, and the CAG on the other.

* Excerpts from views expressed by Pratap Bhanu Mehta, Centre for Policy Research, Delhi, and a Contributing Editor for the Indian Express published on June 09, 2014.

16 April-June 2014 PolicyWatch P A R L I A M E N T A R Y R O U N D U P New Privacy Bill More Refined, More Powerful but Creates Wide Exceptions for Government Agencies

The new Privacy Bill was originally conceptualised to ensure that the data collected by the Government under various new projects are not misused in any way

he Government’s projects, such as Aadhar or T attempt to draft a the National Information Grid Privacy Bill is being termed (NATGRID) are not misused as a refined one by an experts in any way. But incidents, as it expands its ambit. The such as the tapping of phone Bill however creates some conversations involving wide exceptions for law lobbyist Niira Radia, enforcement and intelligence prompted the Government to agencies to collect personal expand the ambit of the information of individuals. Privacy Law from just being The Government has made a data protection one to also several attempts at drafting cover survelliance and a privacy Bill, since 2010 with interception. the aim of protecting individuals against data misuse by government or private owever, it was unable to reach a consensus due to agencies. Hinter-ministerial conflicts as the law was superseding various provisions, under several existing legislations. The first draft, released in 2011, extended the Right to Privacy to citizens of India. But, the 2014 version has The Government also set up a Committee, under the retired expanded its ambit to cover all residents of the country. Delhi High Court judge, Ajit P Shah, under the aegis of the The 2014 Bill also recognises the Right to Privacy as a part Planning Commission to study international best practices of Article 21 of the Indian Constitution and extends to the on privacy and surveillance. This Committee filed a report whole of India. In contrast, the 2011 Bill did not explicitly in 2012. recognise the Right to Privacy as being a part of Article 21, and excluded Jammu and Kashmir from its purview. Some additions to the Bill include the term personal identifier, defined by any unique alphanumeric sequence oth the drafts include a list of circumstances, under of members, letters and symbols that specifically identifies Bwhich authorisation for the collection and processing an individual with a database. of sensitive personal data is not required. The lists are broadly the same. However, the latest version exempts he Bill also re-defined sensitive personal data to denote insurance company and government intelligence agencies Tpersonal data relating to physical and mental health, collecting or processing data “in the interest of including medical history, biometric, bodily or genetic sovereignty, integrity, security or the strategic, scientific information, criminal convictions, password, banking credit or economic interest of India”. and financial data, nacro analysis or polygraph test data etc. The Bill carves out another exception for government agencies, allowing disclosure of sensitive personal data Once the Law comes into being, the government or a private without consent to government agencies mandated, under agency will have to adequately inform citizens before law for the purposes of verification of identity, or for collecting data, stating the reasons and only collecting as prevention, detection, investigation, including cyber much information as is necessary”. incidents, prosecution and punishment of offences”, the Centre for internet and Society said in a note analysing It will also have to clearly define the time period for which the provisions of the Bill. the data will be stored and security measures taken to protect it from misuse. The Law also lays down the penalties The Privacy Bill was originally conceptualised to ensure in case of a breach. the data collected by the government, under various new

– This news item published from Business Standard dated April 2, 2014.

April-June 2014 PolicyWatch 17 E X P E R T C O R N E R E D U C A T I O N S E C T O R Government Stingy in Court Funding Grievance Redressal Software The Chief Justice of India (CJI), P Sathasivam ,has slammed the Centre The Gujarat Education Minister, for allocating shoestring budgets to infrastructure-starved judiciary, Bhupendrasinh Chudasama receives over which has been grappling with over 2 crore pending cases. 100 complaints every day by hand, post and The CJI had to request the Finance Minister for an additional grant e-mail, seeking his intervention on issues of M45 crore for the ongoing construction of additional building complex. of corruption, transfer, pay, pension and He also added that there should be a fixed tenure of at least two years for leave and lack of basic facilities. the CJI, so that the CJI can do more work. In order to keep track and provide quick He said that in his career he had seen sweeping changes in the redressal, the department has introduced judiciary but with one constant-pendency of cases. The CJI said that the software termed as ‘Monitoring System for two Lok Adalats organised during his stint saw nearly a crore cases References of Education Minister Offices’ getting settled. (ToI, 26.04.14) and all complaints pertaining to the department are being uploaded on this Questions to Modi system with details and current status. Posing a few questions “as a citizen of India”, Shanti Bhushan, The general resolution issued by the former Union Minister, lawyer and anti-corruption activist, wanted to department clearly states how the system know when Modi proposed to launch proceedings against Robert Vadra would ensure redressal within five days of and if he would resist the demand of Reliance Industries Ltd. for a stiff receiving the complaint and also keep the increase in the gas prices. identity of complainants secret, if required. He questioned Modi on the low representation of Muslims in the (IE, 30.05.14) Parliament and whether he would assure that the controversial Ram Mandir would not be constructed without obtaining consent of the Blind Spot in System Muslim community. While lakhs of students were enrolled The other questions posed were related to the setting up of fast- in the schools in Kerala in the current track courts for criminal cases against legislators, his plans to handle academic year, thousands of others who are Parliament disruptions, amount spent on elections and if he propose to blind will be left out of the system. Many take steps to prevent a candidate from exploiting his backward caste blind and visually impaired students either status. (TH, 27.05.14) never enroll or drop out before they complete their education. Experts in Key Ministries Technology has brought about great As the Indian economy and financial markets get increasingly improvements to the way a blind person can integrated with global peers, it is time the Indian Government took a access textbooks. The State Government or serious look at roping in experts on global financial markets in the RBI publishers are yet to make digital copies of and key Economic Ministries, asserted financial market expert and Charles books available for the visually-impaired, E. Merrill, Professor of Finance and Economics at the Stern School of especially books in Malayalam. Business at New York University, Marti G. Subrahmanyam. There are about 50 schools for the blind Appointment of such experts on international markets in key in Kerala and more than four lakh visually government departments would pave the way for effective policy challenged people. The main reason is lack formulation in improving access for Indian companies to global markets, of textbooks and teachers. (TH, 30.05.14) attracting global capital, and mitigating the impact of global forces on the volatility in Indian commodity and financial markets due to spill-over Rising Defaults in Loan effects, said Marti. (TH, 19.06.14) It has been reported that the defaults in the education loans in the banks are continuously rising. Due to the low salary Green Policy Soon in the beginning, students are facing problem he State Government, Kerala will soon formulate a comprehensive in repaying back the education loans. Tenvironment policy and a high-level expert committee will be The Gross Non-performing Assets appointed for the same, Environment Minister, Thiruvanchoor (NPA) of education loans has increased from Radhakrishnan, informed the Assembly. 3.5percent to 5.5 percent during the last fiscal Speaking on a resolution, brought by year. With the interest rate of education loan T N Prathapan of the Congress seeking to being 12 percent on amount of M4 lakhs, bring in necessary amendments to the Kerala students need to pay an Equated Montly Protection of River Banks and Regulation Installment (EMI) of M8,000 monthly. of Removal of Sand Act, 2001 in view of The Chairman and Managing Directors the lapses in effectively enacting the same, (CMDs) of the Indian banks stated that in the Minister said that the Government was order to control this they have asked the in favour of the spirit of the resolution. students and parents to opt for restructuring It’s essential to ensure protection of water resources and restrict of loans, get their repayment period extended the quantity of sand that can be taken from rivers. The Government and are offering a repayment holiday of six to should urgently intervene in the issue. (IE, 21.06.14) nine months. (Rupee Times, 21.05.14)

18 April-June 2014 PolicyWatch H E A L T H S E C T O R Lack of Regulation The $5bn diagnostics industry in Regulating Combination Drugs India may be on the brink of a crisis he Central Drugs Standards Control due to the absence of regulation. The T Organisation (CDSCO), the Central Drug industry is largely fragmented with 90 Regulator, has started examining the safety percent market dominated by of fixed-dose combination drugs, which unorganised players. are formulations used for a variety of Consumers often complain of medicines ranging from antibiotics differential pricing for similar services, to painkillers. which are driven by Commissions to CDSCO has asked drug doctors, geography and location. For controllers at the State and instance, a Magnetic Resonance Union Territory level to inform Imaging (MRI) can cost anything all manufacturers of fixed dose between M1,000 and M6,000 combination drugs that they depending on the laboratory, its need to make presentations regarding the safety and efficacy of their drugs location and geography. before the central regulator Experts pointed out there is no The regulator has constituted 10 expert committees to examine the entries specific law regulating the industry received from the manufacturers (BL, 11.04.14) and even the accreditation is permissions and regulatory clearances tendency to treat data as an asset that voluntary. The Clinical Establishment involved long and unjustified delays. would lose value if exposed to public Act that bring diagnostic industry Conducting overseas trials pushed up scrutiny. into its purview is yet to be their costs significantly and gave There are many benefits to this implemented in spirit. (BS, 16.04.14) companies an understanding of those kind of sharing. It is proof that an markets. (BL, 26.04.14) organisation, whether it is part of Antibiotic Resistance industry or academia wants to play as Antibiotic resistance is a serious Newborns’ Deaths in India a good global citizen. threat to public health with cases With nearly 8 lakhs newborn It enables the scientists to use the being reported from every region of babies dying every year in India, the data to learn new ways to help patients. the world and having the potential to country holds the dubious distinction Such an approach can even teach a affect anyone, the World Health of having the highest number of such company like Johnson & Johnson Organisation (WHO) has said. deaths globally. A comprehensive something it did not know about its In India, the easy availability and review led by Professor Joy Lawn of own product (BL, 04.04.14) higher consumption of antibiotics the London School of Hygiene and have contributed to inappropriate use Tropical Medicine found that 8,000 Drug Violators Fined of the drugs, creating a situation where newborn babies die everyday, leading The National Pharmaceutical resistant micro-organisms are to 2.9 million deaths per year Pricing Authority (NPPA) in 2013-14 becoming more common. worldwide. initiated 89 cases against drug In 2011, there were an estimated Half of the newborn deaths occur companies for over-charging on 6.3 lakhs cases of multi drug resistant in just five countries: India (7,79,000), medicines and demanded 384 crore as tuberculosis (MDR-TB) among the Nigeria (2,76,000), Pakistan (2,02,400), the overcharged amount. world’s 12 million cases of TB. A WHO China (1,57,000) and Congo (1,18,000). According to the NPPA Chief CP report notes resistance to antibiotics Babies who are stillborn, born too Singh, consumers get hurt when used as a last resort to treat life- early, or die soon after birth are least companies over-charge, which is why threating infections caused by likely to be registered, even in high- the NPPA is looking at big price intestinal bacteria – pneumonia – has income countries.New analyses violations but that does not mean spread to all regions of the world. indicate that 3million maternal and smaller violations are off the hook. (TH, 01.05.14) newborn deaths and stillbirths can be From its inception in 1997 till up to prevented by promotion of March 2014, the NPPA filed 1,018 Clinical Trials Going Abroad breastfeeding, neonatal resuscitation cases, demanded 3381 crore and The delays in permission and and prevention and treatment of recovered just 274 crore. regulatory clearances are resulting in infections. (ToI, 20.05.14) In 2003, the NPPA decided to look companies taking their clinical trials at bigger violations from the abroad. Making Trials Data Public consumer’s point of view and the According to Dilip Sanghvi, Johnson & Johnson has recently current year will see several new cases Managing Director, Sun Pharma announced that it was making all its being finalised. From its inception in Advanced Research Company clinical trials data public for scientists 1997 up to March 2014, the NPPA has (SPARC), though the companies can around the world. This is an filed 1,018 cases, demanded M3,381 conduct good studies in India, trials extraordinary donation to society and crore and recovered just M274 crores. were going abroad because getting a reversal of the industry’s traditional (BL, 08.05.14)

April-June 2014 PolicyWatch 19 H E A L T H S E C T O R The National Health Sector Agenda ndia needs to develop a humane, Iaffordable, scientific and equitable health care network. Important preconditions include a freedom to choose and optimal client say. Content of care is as important as access. The health sector agenda will include pooling of resources, primary care, promoting economy hospitals in public and PPP sectors, health information sources, health laws and regulation, promoting Indian system of medicines, control of important diseases, Health Human Resources (HHR), rational use of drugs and technology, healthy demographic change and a better role for states and upgrade SHAs, informal providers and create a million jobs. The ambulance local governments. network is a good development, and we need paramedics here too. AYUSH doctors can manage the existing sub-centres. The rural doctor course (BRMS) As a national framework, Social Health is a lesser alternative. Handing over the nearly one lakh sub-centres to Insurance (SHI) is preferable to both panchayats will also open a new front for local action in primary care. statist or market driven models. The critical issues are health finance and wide primary care network will ensure preventive programmes and reduce HHR. The Srinath Reddy Committee Ahospital-workloads and hence total costs. No UHC is possible unless we recommended 2.5 percent of GDP have this gate-keeper system. The small family and spacing of births should (about 1.2 percent till last FY) for again be an important primary care concern. It is both a cause and effect of providing a free Universal Health Care underdevelopment, among other factors. But let us do it without coercion or (UHC) package supported through tax bribes. Also, primary care calls for a national open source on health in all source. However this ambitious plan languages. requires above 5 percent of GDP. This is achievable only through pooling of On the disease control and prevention front, we need to act on under nutrition, private and public health-spending. urban obesity, diabetes and hypertension, trauma, drug abuse, occupational hazards, cancers and joint problems. The old foes like TB and malaria need a HR is another complex front. relook. HAbout 60 percent of basic specialist positions in rural hospitals Medical college hospitals should work as tertiary care centres and district hubs are vacant, negating the quality for all local health networks. States should encourage charitable hospitals to concerns in referral care. We failed to offer affordable services and there are shining examples all over India. Drugs get enough doctors even in urban and technology take a major chunk of heath costs. There is a need to promote public hospitals that are already good practices for proper use of generics, vaccines, lab tests and medical scant. This is due to gaps in training technology. IT, including telemedicine can save costs and improve outcomes. infrastructure, poor working conditions and employment terms. It everal health laws and rules need to be reviewed. The new Clinical is time to end the chronic neglect of SEstablishment Act (CEA) needs to involve provider associations and avoid AYUSH (health policy) and paramedic Inspector Raj. The CEA may jeopardise the small establishments by unrealistic HHR. About 7 lakh ASHAs get below norm-setting, care is, therefore, necessary. The MCI itself needs a remake for a M1,000 a month. No UHC is possible pragmatic HHR policy including AYUSH and paramedics. School Health Index without good HHR management. (SHI) needs a proper hospital regulation/accreditation system.

Here are some easier things. The first The Pre-natal Diagnostic Techniques (PNDT) act is merely preventing is taking primary care deeper in rural ultrasound machines rather than sex determination. SHI will also need a and urban units. Trained paramedics supporting legal framework. Finally, health care is a federal subject. States vary can handle some 50 common health widely in needs and resources. This is where major initiatives and action is problems. Through this we can necessary.

– Views of Shyam Ashetkar, a Public Health Consultant at Bharat Vaidyaka Sanstha, published in Nation, on June 20, 2014.

20 April-June 2014 PolicyWatch C O M P E T I T I O N I N S I G H T CCI Probes Air Fares countries and regions. India needs a dealt with in the Act. Also, the time- Amid sharp fluctuations in air vibrant aviation sector, which is period required by the CCI to pass an fares, Competition Commission of integral to the new India we dream of. order or issue directions with respect India (CCI) is again probing whether (IBN Live, 14.06.14) to combinations has been reduced to cartelisation among airliners is 180 days from the current 210 days. influencing the movement of ticket Penalty on Tesco The changes in merger regulations prices. CCI has the mandate to keep a The fair trade watchdog, on May have come at a time when the tab on unfair trade practices at market 22 had cleared the Tesco-Trent deal, corporate and the legal worlds are place, has started the investigation which is the first FDI transaction in awaiting amendments to the into the matter after getting a reference multi- brand retail, since the sector was Competition Act, 2002. from a Parliamentary Commission. opened up in 2012. CCI, in an order (Money Life, 03.06.14) Earlier, the Commission had found dated May 27, has imposed a penalty that air ticket prices were moving in of M3crore on Tesco Overseas Coal India Guilty Again tandem with the forces of demand and Investments for delay in filing notice Finding Coal India again guilty of supply. Since January 2014, SpiceJet, seeking approval for the deal. abusing its dominant position in fuel in particular, had initiated a fare war As per the Commission, Tesco supplies, CCI has directed the state- on several occasions, forcing other should have filed the notice seeking run miner to “cease and desist” from airlines to follow suit by frequently approval within 30 days of its indulging in unfair business practices. providing steep discounted advance application to the Department of The latest ruling on a batch of purchase tickets. Industrial Policy and Promotion (DIPP) complaints come a few months after This was apparently done keeping and the Foreign Investment the CCI slapped a M1,773.05 crore in mind the competition from the new Promotion Board (FIPB). penalty on Coal India and its airline AirAsia India, which has been Going by Competition Act, the subsidiaries in December. Coal India promising tickets at 35 percent acquirer as required to give the notice through its subsidiaries “operates cheaper than the existing rates. by January 16. In case of such independently of market forces and AirAsia launched its operations on violations, the watchdog can impose enjoys undisputed dominance in the June 12. (ET, 15.06.14) penalties. (ET, 13.06.14) relevant markets of supply of non- coking coal to thermal power AirAsia Good for India Clarity in M&A Deals producers and sponge iron In India, the aviation sector sadly Recent amendments in merger manufacturers in India”, the watchdog has been stuck in a time warp. While regulations will help bring clarity in said. all other sectors have grown by leaps M&A deals, especially big ticket CCI has directed the coal major and bounds – IT, automobiles, international mergers, which will need and its subsidiaries to “cease and telecom, bio tech, pharmaceutical, CCI’s approval as the parties desist from indulging in the conduct, television multiple media to name a few concerned have businesses in India. which has been found to be in – the aviation sector has remained Currently, the concept of joint contravention of the provisions of the stagnant in the past two to three years. ventures is a grey area not explicitly (Competition) Act”. (BS, 19.05.14) The total number of tickets sold is a measly 60 million domestic seats annually. That is less than 3 percent Competition Law Awareness of India’s population. Low cost airlines ith a view to empowering MSMEs to take advantage of the Competition in particular have a beneficial ripple WLaws in India, the Federation of Indian Micro, Small and Medium effect on the economy. They expand Enterprises (FISME) and Hindustan Unilever Limited have jointly initiated a the market at the bottom of the nationwide campaign to create awareness about the rights and responsibilities pyramid, which is the real back bone of small businesses under the of any economy. They open up new Competition Act. unconnected and poorly connected FISME has recently, routes deep in the bowels of the organised two sessions on country or remote areas, which is good Competition Law and for tourism, the largest employer in the Compliance in world. Bangalore, covering Reforms have to be accompanied topics, such as unfair by connectivity and it is the key to trade practices, drive investments into far flung towns cartelisation and monopolies. The first session was held with the Association and cities in the hinterland to achieve of Women Entrepreneurs of Karnataka (AWAKE), and the second was held equitable growth and jobs. Low cost with the Federation of Karnataka Chamber of Chambers of Commerce and airlines like Southwest in the US, Ryan Industries (FKCCI). Air and Easy Jet in Europe or Goal in A session on Competition Law and Compliance was also recently held Brazil or Airasia are the back bone of in Gurgaon and saw the participation of 47 individuals from the Micro, the new globalised economy of their Small and Medium Enterprises (MSME) sector. (BS, 30.06.14)

April-June 2014 PolicyWatch 21 C O M P E T I T I O N I N S I G H T High Five for India’s Competition Law Regime Avirup Bose* and its capacity to inflict jaw-dropping financial penalties, In the half-decade it certainly has the resume for being the most powerful since it became regulator of the Indian economy. functional, the CCI Within this short span of time, the CCI has reviewed anti- has acquitted itself competitive practices in diverse sectors, such as stock creditably in exchanges, infrastructure, travel, automobile, real estate, enhancing the pharmaceuticals, financial services, publishing, manufacturing, mining and entertainment, and it has gone competitiveness of on to impose more than M8,000 crore in financial penalties, the domestic industry including imposition of approximately M18.25 crore in personal fines on senior officers of erring enterprises. But ost of the major issues of the recently the CCI is not a trigger-happy regulator and has often M concluded 2014 Lok Sabha elections, which gave considered the nascent law as a mitigating factor for the Narendra Modi-led Bharatiya Janata Party (BJP) an inflicting lesser penalties. outstanding mandate to form India’s next Government, are the outward manifestation of a still more important he CCI’s overarching aim, mirroring those of other one: to enhance the competitiveness of the Indian economy. Tmature competition law agencies, is to create and sustain competitive markets and protect the interest of For example, the next Government is determined to reduce Indian consumers. In these five years, the CCI has worked inflation. A competitive Indian market, besides other fiscal to achieve this mandate. initiatives, would compel producers and distributors to keep prices closer to cost and reduce opportunities for Perhaps the greatest contribution of the CCI is the price collusion, besides forcing firms to innovate to unleashing of the competition forces in restructuring efficiently use their limited resources. One of the manifesto several sectors of the Indian economy, from within. The promises of the BJP is to allow FDI in all sectors except CCI’s investigations in several sectors, including cable retail. A competitive market disallows the accumulation of television, real estate, banking and pharmaceuticals have market power and thereby reduces returns from corruption revealed the regulatory fault-lines, prompting the – another major agenda for the incoming Government. government/applicable sectoral regulator to initiate ex-ante pro-competitive rule making. The CCI, which has the mandate to sustain the competitiveness of Indian markets, will have a lot to owever, the CCI’s relationship with other sectoral contribute in this backdrop. On May 20, the CCI completed Hregulators of India has not been always positive. five years of enforcement and this is the most suitable Several sectoral regulators taking advantage of their occasion for some stocktaking. overlapping jurisdiction with the CCI, have attempted to chip away the CCI’s mandate, not realising that the CCI’s ndia was one of the last major economies to introduce a oversight can be beneficial to enhance competitiveness Imodern Competition Law regime. Although, India’s for their respective sectors. They have attempted to draft Competition Act was enacted in 2003, its enforcement was regulations and adopt policy initiatives, in addition to delayed by legal challenges and legislative processes. The hectically lobbying the Government to virtually eliminate CCI, which became fully functional from May 20, 2009 has the CCI’s regulatory oversight in their respective sectors. since then reshaped ways of doing business in India. In order to restrict such sectoral backlash against the CCI, Indian economic regulators have a reputation for being the government has proposed amendments to the bureaucratically obtuse and functionally opaque. Competition Act that make it mandatory for sectoral However, the experience of practitioners of Indian regulators to refer matters to CCI, if the decision taken by Competition Law has been different. Practitioners have such sectoral regulator raises any competition issue. While often commended the CCI for its economic pragmatism, we wait for such amendments to be implemented, the CCI with one Indian lawyer describing the CCI to have taken a seems to have kept the Indian economic actors on an “quantum leap forward” in its case selection and the efficiency-based diet, setting the stage for an economic quality of legal and economic analysis. Given CCI’s revival, under the new Government. mandate to regulate almost every aspect of Indian business

* Competition Lawyer with the CCI and views published in Business Standard on May 26, 2014.

22 April-June 2014 PolicyWatch S P E C I A L A R T I C L E Gujarat is Forthcoming and Transparent, MP is Not s an election campaign issue, the Gujarat model of The next day, they visited the Gujarat State Transport Agovernance and development is being challenged Corporation, which runs the inter-city bus services. They that it is smoke and mirrors. One of the indicators of good could meet the Managing Director, who summoned some governance is how bureaucrats interact with people when of his staff and the data flow was very smooth. asked for information. Our own field experience on different dates and with different agencies suggests that unlike nother set of colleagues working on clean energy other states, Gujarat babus are more open and forthcoming. Aawareness issues went to Gujarat to collect data. They went to meet Gujarat Electricity Regulatory Commission Under an International Project we are assessing the impact (GERC), Gujarat Renewable Energy Development Agency of Competition Reforms in two sectors – staple food and other government departments. At GERC, the (wheat, rice and maize) and bus transport – as both impact Chairman met them with all his members and their visit to the poor directly. The Project is being implemented in other offices too was smooth. Let us contrast this with my Ghana, Zambia, colleagues’ experience in Philippines and India. MP, also a BJP ruled India, being such a huge state with another hat- country, the study trick Chief Minister M, focuses on Madhya Shivraj Singh Chauhan. Pradesh (MP) and Gujarat for the bus This state was chosen transport sector, while it for the study on bus looks at the wheat transport because it is sector in Bihar and the only state, which has

Rajasthan. http://upload.wikimedia.org scrapped the State Road Transport Corporation, Let me share some details about how our field researchers a brave act. They had secured appointments at Bhopal, were received in various government offices in Gujarat but were not told that the Transport Director sits in Gwalior. and MP. In Gujarat, they assisted actively and data So they went to meet the Regional Transport Office (RTO) furnished – across the table and through emails after their in Bhopal who had agreed to meet them had retired. But he visit – without any questions. In MP their experience was had not conveyed this to my colleagues when they had sad. sought an appointment. One new gentleman had taken his place. Anyway, they waited for him who came in late asked he first meeting of our Research staff was with a my colleagues to come the next day for some papers. Next TResearch Officer in the Transport Commissionerate day, he did hand over some papers, but it was useless. It in Ahmedabad. He escorted them to the Joint Director would not be fair to qualify the insouciance of officials in who was forthcoming with the data and went ahead to MP on basis of one anecdote. But there are other suggest names for them to meet. “The employees were experiences of my colleagues in MP, which only confirm bright, nimble and helpful. Our experience at the that it is not as open as Gujarat is. Commissionerate was a stark contrast to the stereotype anecdotes of the government offices”, reported the y young colleagues write with anger: “While the Research staff. The Government Officer fished out all data Mofficials in Gujarat readily shared information with and gave them the copies. us and also pointed out ways to deepen our research, officials in Bhopal with much ‘enthusiasm’ violated the The Transport Commissionerate was not an exception as principles of logic and work ethics. Why was it so difficult my colleagues found when visiting the offices of the Bus to share information, which is anyway supposed to be Rapid Transport Services and Ahmedabad Municipal made available to public? Even their websites are outdated Transport Services (AMTS). AMTS supplied the data on and no one bothers to update them”. the spot, while Bus Rapid Transit Service (BRTS) agreed to forward it by email, which they did after a reminder. What was interesting about Ahmedabad and Bhopal visits “Ahmedabad BRTS is a hugely successful PPP initiative. was sharp difference in the ways of functioning. No wonder The bus corridors are spotless and garnished with Gujarat is a model state in India for good governance. Our greenery, and it has been backed by sound logistics to politicians need to do a reality check before making hollow ensure smooth functioning”, reported our Research staff. noises.

– Abridged from an article by Pradeep S Mehta, Secretary General, CUTS International, published in DNA on June 01, 2014.

April-June 2014 PolicyWatch 23 P U B L I C A T I O N S Better Governance for Inclusive Growth: CUTS 30th Anniversary Lecture Series 2013-2014 he key message of this anthology is: achieving better governance for inclusive growth Twill require a multi-disciplinary approach, including building the capacity of stakeholders for good governance, effective regulations and rules-based trade. In the framework of inclusive growth, responsibility should be shared and no one should be left behind. Better governance will also make institutions more accountable and operate more effectively. Finally, the regional and global partnerships forged in the emerging development discourse and through inclusive growth will be able to tackle new and upcoming challenges such as climate change and its consequences on food-water- energy security. This anthology will provide a fresh set of thinking on how the new dashboard of inclusive growth should look like, particularly in respect to the Post-2015 Agenda for Sustainable Development Goals. We should not get bogged down to a few indices of growth. Unless all elements of this dashboard work in tandem we will not be able to move forward effectively. www.cuts-international.org/30thAnniversaryLectures/pdf/Better_Governance_for_Inclusive_Growth.pdf Economiquity he April-June 2014 issue of Economiquity carries an article entitled, ‘Improving TTrade Connectivity in South Asia’ in its cover story, which states that it is imperative to expand the idea of connectivity in the context of regional trade to include financial and informational aspects. South Asian countries trade with each other far less than they could. The high cost of doing trade in the region, among the highest in the world, is the prime deterrent of trade among South Asian countries. A special article by Martin Wolf states Inequality damages the economy and efforts to remedy it are, on the whole, not harmful. Another special article by Peter Drysdale states that Regional Comprehensive Economic Partnership (under the umbrella of ASEAN) is dominating thinking about regional integration. Yet Trans-regional FTAs, like the proposed TPP, are only a small step, incidental to realising the potential of Asian economic integration. Besides, it highlights important news and views on economic issues from different parts of the world with a view to keep the trade and development community abreast of the latest. Broadly, it covers Economic Issues; Trade Winds; Development Dimensions and Environment & Economics. It also comprises articles of well-known researchers and policy influencers. This newsletter can be accessed at: www.economiquity.org/

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