The yield on 10-year benchmark government securities (G-Secs), which sets the tone of the fixed-income market, was at 8.52% on 20th January and has risen 25bps to 8.77% on 27th January. RBI’s move to hike the repo rate by 25bps took the markets by surprise. Banks may increase their lending rates which mean higher EMIs (equated monthly instalments) on personal loans. According to Nomura, “The RBI hiked repo rate for two reasons: 1) Even though vegetable prices have moderated, CPI inflation remains above 9% and core CPI inflation has remained sticky at around 8%; and 2) the RBI governor has formally accepted the recommendations of the Urjit Patel committee, which targets CPI inflation below 8% by January 2015 and below 6% by January 2016. In absence of any policy responses, there would be upside risks to these targets.”
One more instance of how stock market-players are usually weak on understanding macroeconomic...
More and more politicians are adopting old-style agitation, brought back to fashion by Arvind Kejriwal, because it is probably the only way one can force a government to care about us
You may agree with him or disagree with his tactics, but there is no doubt that Arvind Kejriwal, by demonstrating electoral support to his Aam Admi Party (AAP), has shaken up an inconsiderate and insensitive political system. The jury is still out on whether these hit-and-run tactics, devoid of a clear plan for economic growth or governance, are good for the country or we will dissolve into mindless anarchy and public protests. But the AAP’s success has signalled that the educated, non-voting, chattering, middle-class has woken up and is willing to go out and vote when it finds a seemingly plausible alternative.
The AAP experience shows that ‘new generation’ political parties (a phrase used by the founder of NavBharat Party) are just as capable of playing to the voters’ gallery by making economically unviable promises about government jobs, subsidies or law & order issues. Consider the AAP record so far. Delhi’s law minister, Somnath Bharti, encourages mob action against two women because the police refused to obey his order to raid without a warrant and arrest women after dark.
This was followed by a street protest by an incumbent chief minister to demand action against the police officials who did not heed Mr Bharti’s illegal order. That agitation fizzled out with considerable loss of face to AAP, but its already implemented populist decision with regard to power tariffs and water charges, at the cost of the state exchequer, remain in place. Importantly, AAP is in no hurry to act on the allegations of corruption against the previous Congress regime. However, this article is not about AAP’s actions, but about its fallout in Maharashtra.
A couple of months before the general elections, the Congress and the Maharashtra Navanirman Sena (MNS) have chosen two middle-class issues for their protest—the MNS is going after high toll charges while Congress MP, Sanjay Nirupam, wants electricity tariffs cut in Mumbai’s suburbs.
MNS leader, Raj Thackarey, exhorted party workers not to pay tolls and to attack anybody who obstructed them. It led to predictable violence and destruction at several toll plazas near Mumbai. A few weeks earlier, the Shiv Sena had resorted to arson and violence at Kolhapur to protest against toll collection. The Maharashtra government made little effort to check the violence or book Raj Thackeray for openly inciting violence.
The toll issue has been festering for years and public anger against usurious levies, cost escalation, poor road maintenance and non-transparency in collection have agitated people for several years. Bankers openly tell us that toll-collection is a cash generation machine because the traffic, in most cases, has far exceeded the projections. The nexus between toll companies and politicians is also an open secret. Contractors, such as Ideal Road Builders (IRB), maintain close relationships across political parties as well as the media. In 2003-04, when I criticised IRB first toll hike for the Mumbai-Pune Expressway, IRB promptly sent me a ‘VIP pass’ to avoid toll.
This nexus was probably key to the stunning silence BJP leader, Nitin Gadkari, has maintained about the many changes in the Mumbai-Pune Expressway contract which ignored alternative modes of revenue generation. Mr Gadkari did not utter a word when every non-toll measure to raise revenues and meet construction costs was dropped. A truck terminal, an IT city at Chowk, advertising hoardings along the Expressway and revenue from food courts and petrol pumps were supposed to be part of the plan. Mr Gadkari also did not challenge the repeated increase in toll fees by IRB under a one-sided contract with a hefty escalation clause.
The situation gets worse at the entry points to Mumbai. A Congress MP admits that his government’s inaction, despite many letters of protest, is embarrassing. At Dahisar, he says, people pay toll “every time they drop their children to school or go out to the market.” Why hasn’t the problem of local residents been addressed by issuing them passes? He throws up his hands and points to the current chief minister who has become known for his monumental inaction.
Contrary to the national policy on tolls, which mandates a distance of 80 kilometres between two collection points, the Maharashtra government permits toll plazas at a distance of 35km-40km. Nobody seems to know why. Chief minister Prithviraj Chavan has asked public works minister, Chhagan Bhujbal, to conduct a comprehensive review of the policy governing the road sector. But many believe that Mr Bhujbal has already failed to act on the recommendation that all toll collections in the state must be linked to a central server to monitor collections.
Meanwhile, media reports say that there will be no change in the 20% hike in toll rates from October 2014 at Mumbai’s entry points. Congress leaders themselves express frustration at this attitude. They point out that Anna Hazare first protested against arbitrary and non-transparent toll charges three years ago; the government’s failure to initiate corrective action makes this a ripe issue for the AAP to capitalise on. AAP, which is hoping to make a mark in Maharashtra, has already jumped in the take up the cause of traders protesting the LBT (local body tax) that replaced octroi.
Congress MP, Sanjay Nirupam’s protest against high electricity tariffs in the Mumbai suburbs is even more interesting. Mr Nirupam went on a fast and had to threaten self-immolation to get the Congress-led coalition in Maharashtra to agree to look into his demands. Having ended his fast, Mr Nirupam has written to the chief minister levelling serious corruption charges against Reliance Infrastructure as well as the electricity regulator. He claims that tariff proposals from Reliance Infrastructure receive ‘benevolent’ consideration by the regulator which has been receiving ‘huge payoffs’. Mr Nirupam wants the government to “rein in vulture capitalists like Reliance Infra (RInfra) to prevent them exploiting and looting their consumers;” he also wants action to ensure that power reforms actually benefit consumers. Having openly alleged corruption and pay-offs, he says that if an independent investigation does not reveal complicity, he will withdraw the allegation.
This tactic of alleging corruption and calling names was Arvind Kejriwal’s modus operandi before the Delhi elections. He even waved around a bunch of papers allegedly containing evidence of corruption against former Delhi chief minister Sheila Dikshit. It is startling to see a Congress MP use the exact same strategy in a Congress-ruled state without raising any eyebrows.
Interestingly, neither Reliance Infrastructure nor the electricity regulator seems to feel defamed or offended at these charges. There was a time when these companies sent out legal notices against hard-hitting media reports, even when they were accurate. Has corporate tolerance for abuse increased dramatically after the scams exposed in the past few years? Or, are power companies keeping mum because they know that an independent audit by the comptroller & auditor general (CAG) will establish how they have reaped huge benefits through the transfer of massive public sector assets (as is alleged in Delhi, where CAG has already begun an audit) while consumers face repeated tariff hikes.
The rage and political protests over tolls and electricity tariffs reveal a dangerous new trend in public life and only time will tell whether people choose good governance in the coming election or we face the danger of anarchy and violence.
Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]