Category Archives: Sandhya Jain

UPA boat rocks, averts capsize- FDI in Retail Sector Sandhya Jain

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Sandhya Jain

Pioneer, 25 September 2012

 

India’s freshly-minted millionaire club lost a whopping 18% of its membership as the economic slowdown coincided with the exposure of multiple scams that tripped the gravy train of our crony capitalists. Most citizens would be shocked to learn that despite the global financial crisis ruining millions worldwide, the number of high net-worth individuals in India rose from 84,000 in 2008-09 to 126,700 by 2010 in the halcyon UPA years.

 

India’s top 100 richest are collectively worth $276 billion, whereas China’s total just $170 billion; also, India’s richest three surpass China’s top 24 billionaires. Amidst a manufacturing slump, economic slowdown and rising unemployment, one wonders how such staggering wealth accumulated in the hands of a chosen few.

 

As the Supreme Court noted while dealing with Coal-gate, the well-connected in the UPA regime have benefitted unduly from privatisation of public assets. Should the Hon’ble Court take a broader view, it may discern a link between the earlier privatisation of electricity distribution in several cities, which enabled private firms to make massive profits at public expense while taking over public assets for free, and the subsequent allotment of captive coal mines to the same and similar crony firms for sale of power at commercial rates!

 

The cussed refusal of some firms to redress customer grievances is now upsetting the Delhi chief minister, who thrust electricity privatisation on the capital and championed steeper tariffs without public audit or justification, because state elections are due. It is pertinent that when the British Raj delegated power to Indians, it first gave them charge of municipal services. Surely we must ask if regimes that cannot handle schools, sanitation, water and electric supply are at all legitimate.

 

Coalmine squatting by private capitalists stunted the growth of the power sector and the economy and denied mines to Coal India Ltd., forcing it to lay off over four lakh skilled workers, ruining their families. CIL is now likely to supervise extraction at the cancelled coal blocks. Government must expedite clearances needed by CIL for its own mines, and scuttle the mischief of subsidizing imported coal for private players.

 

Last week, the UPA imposed FDI in multi-brand retail, causing Trinamool Congress to quit the Government, and serenading the unpredictable UP stalwarts Mulayam Singh Yadav and Mayawati for survival. Perhaps the Rs. 60 cr spent by Wal-Mart on lobbying in India, as per its disclosure to the US Senate, impacted the decision.

 

Yet the centre cannot claim that state governments can decide whether or not to allow FDI in their respective states. As several opposition members have argued, under the Bilateral Investment Promotion and Protection Agreements (BIPAs) that India has signed, it will have to offer national treatment to investors. This means states will have to permit big retail, or face court cases.

 

News reports suggest Wal-Mart may come to India within 12 to 18 months. It is notable that its chief Michael Duke may soon be charged under America’s Foreign Corrupt Practices Act for hundreds of illegal bribes paid by its Mexico division from September 2005 to May 2006, and the subsequent cover-up by successive executives. ANew York Times report says Wal-Mart captured nearly 50 per cent of Mexico’s retail market in 10 years in this manner.

 

Currently, India’s retail market is estimated at around $400 billion, with over 12 million retailers employing 40 million people. Wal-Mart has a matching turnover of approx. $420 billion, but employs just 2.1 million people. This means 38 million people (families) plus related ancillary traders face disaster.

 

Executives at Amul, India’s largest dairy cooperative, say FDI will hurt both farmers and retailers. Citing the International Farm Comparison Network, Managing Director R.S. Sodhi says milk producers in America received only 38 per cent share of the consumer’s dollar spent on milk; UK milk producers got 36 per cent. But Indian milk producers get over 70 per cent of the consumer’s rupee; those linked to cooperatives get over 80 per cent.

 

Worldwide, foreign retail hurts local shopkeepers, farmers and consumers. Farm incomes decline because big retail creates a formidable chain of middlemen – quality controller, certification agency, packaging consultant, who cut into the profits. Consumers are wooed with cheaper rates, but prices rise once the local competition is driven out.

 

FDI in multi-brand retail does not create backend infrastructure like cold storages to save food grains from rotting. FDI is already allowed in storage, but no investment has been made, even by Indian brands. The Planning Commission has noted that lack of capital forces farmers to ignore cold storage facilities even where they are available, mainly because of high rentals.

 

The transport of goods from farm to mandi and local markets or processing centres is critical to retail trade. The road transport sector handles nearly 73 per cent of the goods traded and contributes nearly 5 per cent of the GDP. It is an unorganized sector managed with small capital; roughly 18 crore population directly or indirectly depends on it. Big retail always monopolizes transportation of goods and could crush this entire sector.

 

Then, over 70% of the revenue of big retail stores derives from non-food items; the nature of sourcing and pricing of these items deserves wider study. Also, the UPA has totally ignored the fact that in recent years small retailers have vastly improved their shops and customer services.

 

In food processing, big retail forces farmers to alter crop selection. Thus, to service potato chip companies, farmers may skip the Dal season, which indirectly affects the prices of Dal, cereals and vegetables. Big buyers often force farmers to reduce prices, face contract cancellation on grounds of ‘quality’, face last minute changes in contracts, and so on. Then, over 90% of India’s farmers have less than 2 hectares of land; 79% are landless or own less than 1 hectare. Large corporates do not like doing business with small producers; they focus on few large farmers and compel the others to submit to a larger contractor or sell the land and quit.

 

With FDI in retail notified, fresh dangers loom in the form of increased foreign ownership of Indian public sector banks (currently capped at 20 percent); FDI in pensions, insurance, and so on. The very aspects of the Indian economy that gave confidence to the middle class and the poor are set to be undermined.

 

The author is Editor, www.vijayvaani.com

http://www.vijayvaani.com/FrmPublicDisplayArticle.aspx?id=2476

Independence Day blues- Sandhya Jain

16 Aug 2011

If a single event encapsulates the corruption, sleaze and political callousness that bedevils the common man today, it is the Commonwealth Games of 2010, whose reverberations are still roiling the polity and the ruling Congress party. Even as unending price rise drives the middle class and poor to despair, and the Finance Ministry and Reserve Bank insist no relief is likely, a brazen Delhi Government threatens citizens with a staggering 60% hike in power tariffs, after having scandalously intervened last year to inhibit a price cut that was originally envisaged by the relevant authority.

That is the true measure of the rot wrought by chief minister Sheila Dikshit.  A necessary corrective would be to return this essential service to the public sector, while ensuring zero protection to power theft that makes the utility unviable. In fact, the profit allowed to the private companies would have ensured the necessary modernization of equipment, on which they anyway dragged their feet.

Ms Dikshit, meanwhile, despite blistering indictments by the Prime Minister-appointed V.K. Shunglu Committee and the Comptroller & Auditor General’s report on the Commonwealth Games, got powerful protection from the chief control of the Congress party and the fraying UPA coalition. She refused to resign, forcing the Congress to make a dramatic volte face, from bragging about how it secured the resignations of Shashi Tharoor, Suresh Kalmadi, Andimuthu Raja and others caught in one or other controversy, to rallying around the impugned chief minister. Ironically, the BJP had forced Karnataka chief minister B.S. Yeddyyurappa to resign only so it could confront her.

Both Shunglu Committee and CAG Report brought the spotlight of corruption on Sheila Dikshit who was in-charge of the major expenditure, totalling Rs 16,560 crore on just eight city projects (including the sub-standard Barapullah flyover). Both found that the Delhi government overspent and wasted money by manufacturing an artificial crisis of deadlines by delaying the start of CWG-related projects till literally the last three years of a seven-year timeframe. This led to ‘emergency’ decisions, compromising cost and quality.

Though a full year has not passed since the Games were held, a drive through Games-related areas shows pot-holed roads, bumpy flyovers, crumbling pavements and chipped tiles, dead or dying plants on road dividers and the peculiar green net and stakes installed to hold the plants spilling out on the roads, creating a traffic hazard. They should be removed without further ado, before they cause accidents like the utterly ill-conceived and murderous BRT corridors. The BRT corridors – another money-making consultant-driven scheme – need to be ripped up, not extended. Even if workable in theory, the Metro makes them redundant.

In this writer’s mind, the most evocative image of the Commonwealth Games concerns the collapse of the new foot over-bridge near Jawaharlal Nehru Stadium, just 12 days before the inauguration ceremony, critically injuring several workers. PWD minister Raj Kumar Chauhan (recently indicted by Delhi Lokayukta but protected by his boss), glibly asserted that the structure collapsed because the pins were not secured properly. Then Urban Development minister Jaipal Reddy said, “This is a minor incident. The Commonwealth Games will not be judged by this.”

But Ms Dikshit took the cake. Stupefied citizens saw her on television, brushing aside the media with Antoinette-like memorable words: “The over-bridge was for spectators, not for the games officials or the athletes…” Did she mean she could bump off spectators, ordinary citizens like us? She got away with it because the Prime Minister appealed to let the Games happen for the sake of the nation, and old fashioned nationalism carried the day. But in those heady months of untrammelled power, Dikshit merrily spurned the Commonwealth Games Federation’s screams over the state of the Games Village, even as the filth of the residential towers became an international scandal.

Actually, the Commonwealth Games was from inception a non-government entity. Bizarre as it sounds, it was the brainchild, not of the then ruling party, but of the then Leader of the Opposition! This explains much of the confusion in execution, and the ability of the London-based Federation to covertly foist Mr. Suresh Kalmadi as chairman of the Organising Committee, keeping governmental supervision at bay (to its own regret).

The Delhi government’s functioning was opaque; selection of consultants arbitrary; standards and specifications amenable to instant modifications, and budgets eminently stretchable. The CAG found overspending of over Rs. 100 crore on streetscaping and beautification alone, with average cost for projects pegged at Rs. 4.8 cr/km. By contrast, a four-lane national highway costs Rs 9.5 crore/km; railway tracks come at Rs 4.1 crore/km!

Money was made on street lights (forget the contract to a disqualified firm). Violating norms, tenders were restricted to manufacturers of luminaries of international repute and higher financial eligibility, keeping competition restricted. MCD allowed deviance from design specifications in lighting standards, leading to larger number of poles and luminaries on certain roads and avoidable expenditure. Bids were altered in Phase I and II of tendering, again escalating costs.

The CAG found that the chief minister ordered imported lighting equipments in Type A and Type B roads, and indigenous lights for Type C roads. Besides creating a caste hierarchy of city roads, she permitted a huge cost differential which benefitted two private firms. One firm imported luminaries from a Gulf country at the rate of Rs 5,440/unit while charging Rs 25,704/unit. Worse, the chief minister imperiously ordered ripping out all tiles installed in Connaught Place as she did not like the colour!

The bottom-line is that when Sheila Dikshit won the Delhi elections again in 2008, work for the 2010 Games had hardly begun. As decisions were to be taken on street-scaping, road signages, horticulture, purchase of a new fleet of buses, etc., she took direct control of all CWG-related projects costing over Rs 100 crore (i.e., ALL projects.) Now, as the fancy and costly low floor buses are failing (remember the brake jams and bus fires?) and maintenance costs eat up the DTC budget, she cannot evade responsibility for her actions. Not when we citizens are bearing the costs.

If Dr Manmohan Singh wishes to restore public confidence in his government, he must give the CBI a free hand to investigate the chief minister, her erring colleagues and protégés, and bring them to book. We must know if we are a free country or a banana republic.

The author is Editor, www.vijayvaani.com

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