The Cyprus shock gives us an opportunity to trim our ambitions and tailor our projects and programmes in such a way as to harmonise them with resource availability. Taking a lesson, Kerala should also review its half-baked investment ideas that are being pushed through by the neo-rich and non-resident Keralites and stop taking guidance from arm-hair economists
Cyprus is a small country with a population less than 10 lakh and geographical area less than one-fourth of Kerala. The country with almost 100% literacy, life expectancy at 79 years and a per capita income of over $28,000 in 2012 (today’s position will be assessed by analysts in due course!) must be having a comfortable position in various human development indicators. Despite all this, Cyprus has recently attracted media attention for failure of its financial sector needing a ‘bailout’ involving $13 billion jointly supported by the European Union, the European Central bank and the International Monetary Fund. The pre-bailout days saw the failure of Cypriot financial sector sending shock waves to global markets and even Indian stocks sliding in a sympathetic vibration mode.
The cause of the failure of the Cypriot economy is attributed to unbridled functioning of banks in the country, not following prudential norms, offering interest rates on deposits (mainly accepted from Russian depositors) which were unrelated to return on investments and heavy dependence on external assistance for survival in times of crisis. The conditions of present bailout package announced on 25 March 2013 include:
• Splitting the Popular Bank of Cyprus (also known as Laiki) into a good bank and a bad bank. The bad bank will be closed in due course.
• The good bank will be merged with Bank of Cyprus (BoC).
• BoC will be recapitalized through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders. Simply put, major portion of large-size deposits which are not covered by insurance will become “non-refundable” in nature.
• The conversion will aim at a capital ratio of 9% after implementation of the programme. The programme (bailout) money will not be used to recapitalize Laiki and BoC.
The Cyprus shock gives us an opportunity to trim our ambitions and tailor our projects and programmes in such a way as to harmonise them with resource availability. Cyprus suffered from an over-sized banking sector some eight times the size the country needed.
Taking a lesson from the failure of this country despite several positive factors in its favour, Kerala should review its ambitious projects involving massive investments dependent on borrowing and investments from outside.
“God’s own country” (That is how the state’s tourism department is marketing Kerala in the international tourism market!) is going through a crisis, on almost all fronts. No. I am not referring to the sex scandals rocking the state assembly or the nasty outbursts by the leaders of various political parties or the weekly hartals and bandhs, which routinely affect the normal life in the state. People of Kerala take all these in their stride and have by now, learnt to live with them. After assumption of office nearly two years back, chief minister Oomen Chandy did not go to bed even on a single day with an undisturbed mind. This is on the assumption that his mind gets disturbed for things normally bothering ordinary human beings.
The last straw is the Comptroller and Auditor General of India’s (CAG) report on the state finances for the year ended 31 March 2012, presented to the state assembly on 18 February 2013. The increasing revenue and fiscal deficits and resultant growing fiscal imbalance were highlighted in the CAG report on the state finances for the year ended March 2012. Adverse features in the report included, among others:
These observations, howsoever well-founded they might be, will be brushed aside by the combination of varying selfish-interests, which are these days coming together with the single agenda of staying in power and ‘sharing’ the benefits of power, as views of an auditor who should be checking the accuracy in figures rather than bothering about or suggesting how a government should manage the country’s/ state’s resources. The limited purpose of quoting CAG’s observations at the outset is to draw attention to the state of the state’s finances, which is relevant in the context of the discussion that follows.
Kerala, though the state came into being only in 1957, had the benefit of tasting the benefits of being governed by governments representing different permutations and combinations of different political and economic interests and periodic change in the ruling front, which has been a much later development at the Centre and in many other states. Thus, at least till the emergence of LPG (Liberalisation-Privatisation-Globalisation) politics. I differ with the economists who say that this LPG had more to do with economic development rather than politics—circa 1991—and usurping of power at the Centre by BPL (Businessmen-Politicians-Lawyers) combine—circa 2001. Kerala enjoyed the best of both the worlds namely a sprinkling of socialist ideology in policy formulation and capitalist practices in governance.
Kerala’s Sastra Sahitya Parishad, around 2002-04, did make some in-depth study on ‘How Kerala lives?’ and ‘How Kerala thinks?’ (Kerala padhanam—2006) and come out with some interesting revelations. By the time the Parishad team carried out the field study, the “Kerala Model” which had been by then received world acclaim had started showing signs of disintegration and was fading. At this stage, it would be worthwhile to recount the positives of “Kerala Model” briefly:
These commendable achievements are shadowed by near anarchy on the labour front, which has affected industrial progress and political instability. This resulted in assortments of political parties, with not much in common in terms of ideology except the greed to hang on to power, coming together to form alternating LDF (Left Democratic Front) and UDF (United Democratic Front) combinations governments after each election in the state. This situation has resulted in governance being hijacked by vested interests within the state and outside, many a time, through inefficient and lazy leaderships of small political parties gaining more than their reasonable share of ‘responsibilities’(say, based on votes polled or number of legislators in the state assembly ) in the government of the day. When survival of the government is dependent on a couple of MLAs “not crossing the floor”, the ruling front compromises several democratic principles of governance. Much on the same way as Dr Manmohan Singh is carrying on at the Centre.
Historians will not pardon the political leadership of Kerala for messing up and destroying the gains and advances made during the closing years of the decade 1950s (Kerala came into being on 1 November 1957) by the governments which ruled the state from the formation of the state and successive couple of governments that followed. The choice of ministers by EMS Namboodiripad who was the first chief minister needs special mention. Ministers in the first cabinet like C Achutha Menon, VR Krishna Iyer and Joseph Mundassery brought glory to the first ministry by initiating far-reaching reforms in their respective areas of responsibility.
Last two years have seen policy prescriptions from several pressure groups influencing the approach of the Oomen Chandy government in several areas of the state’s economic development. Half-baked ideas for investment in industry, infrastructure and other development areas are pushed through by the neo-rich within the state, investing NRKs (Non-Resident Keralites) and arm-chair economists now guiding the state government. ‘Festivals’ like Emerging Kerala, conferences of NRKs and interactions with NRKs by state leaders when they visit countries like the UAE give an impression that the state is ripe to be transformed into another Dubai. When majority of the schools, hospitals, poverty alleviation programs, drought relief, unmanned level crossings on rail tracks, under-developed roads linking interiors of the state with towns, bridges, agriculture and so on wait for small allocations for years, the state government commits huge funds which involves long-term external borrowings for projects like Kochi Metro (Rs4,500 crore, with state and central participation), Trivandrum Metro (projected cost Rs5,100 crore), Calicut Metro (Rs4,500 crore) and several new airports. PPP (public-Private-Partnership) or attracting private investment from external sources have the inherent danger of leading the state into a debt trap which has been avoided because of the foresight shown by planners till the late 1990s.
Self-reliance is not a bad idea. Neither is borrowing for productive purposes. But, leaving everything to market forces or taking a short-term view of long-term liabilities may take the state into an irretrievably deep debt-trap. Sooner the state approaches planning with the seriousness the governments in the state perceived finances and economic development during the initial years of planning, the better for God’s Own Country!
(M G Warrier is a freelancer based in Thiruvananthapuram.)
There is a clear need to reduce the subsidy provided to different classes of vehicles at the point of consumption rather that at the time of purchase
Government finances are troubled. Subsidy burden is proving a drag on the overall fiscal situation. Fuel subsidy arising out of a wide gap between economic cost and price is straining balance sheets of oil companies and consequently the government. Within the pool of fuel subsidy, diesel pricing has been kept artificially low to buffer the impact of global diesel price escalation to economically backward parts of the society.
This deliberate mis-pricing to accommodate the weaker sections of the society is resulting in a perverse subsidy to affluent consumers who are increasingly switching to diesel-powered vehicles across the price range—from an entry-level compact all the way to high-end imported SUVs. In order to recoup or arrest the trend of a switch towards diesel cars (to partake of the fuel mis-pricing), the government has repeatedly tried to increase the upfront duty/tax/levy at the point of purchase of these vehicles. This promotes a clear fiscal mismatch through inadequate upfront revenues (in the year of vehicle purchase) and continued stream of subsidy outgo for the government for the next 15 odd years (especially in the era of consistently rising dollar price for fuel and the consistently depreciating rupee). These measures have clearly not proven successful as the switching continues unabated leading to increased fuel subsidy burden in future years.
There is thus a need to stanch the bleeding through a more targeted diesel subsidy that will meet both the fiscal and societal needs. The government has ideated and failed in bringing about a dual price regime for diesel and has indicated helplessness in addressing the same.
There is thus a clear need to reduce the subsidy provided to different classes of vehicles at the point of consumption rather that at the time of purchase. It has proven near impossible to introduce dual priced diesel at the gas pump in a viable manner so that affluent consumers pay near full prices while there is a scaled increase in diesel subsidy for other classes of consumers.
My suggestion to tackle this dilemma is to switch the point of collection away from fuel pumps to another party. The suggested collection agent for the diesel fuel subsidy is the insurance company. Every vehicle in India is mandated to compulsorily have a third party insurance renewed every year. The government could introduce a diesel fuel adjustment tax based on a normative usage of a vehicle (say 10,000 km per annum) multiplied by the potential fuel subsidy (say Rs.10 per litre) adjusted for fuel efficiency. A simple table can be created using the above parameters to arrive at a normative annual subsidy burden for each vehicle type. The government can also decide to have a sliding scale of subsidy on some of these vehicles over the higher-end model. This provides sufficient flexibility to the government to direct the tax and amount thereof to a specific segment/sub-segment of the vehicle population.
Insurance companies can also prove to be efficient and easily manageable/assessable entities for the tax collection exercise. This could also be introduced in a staggered manner beginning with the higher end luxury vehicles being brought into the ambit for the first year, with progressively larger number of vehicles coming into the ambit over subsequent years.
The above suggestion of collecting diesel subsidies on vehicle owners at the time of annual insurance premium has the following advantages
In 2011, governor of Goa tried to dodge RTI queries by stating that he does not come under RTI. Now, the J&K governor’s secretariat has denied information stating that the office of the governor is a ‘privileged’ one
Rewind: In January 2011, Goa-based RTI (Right to Information) activist, Aries Rodrigues, demanded information under the RTI Act regarding president Pratibha Patil’s controversial four-day visit to Goa which was declared as a “private visit” via a press release issued by the governor’s office in Goa. Mr Rodrigues was denied information stating that the Goa governor’s office does not come under the purview of the RTI Act. K Sankaranarayanan was the governor of Maharashtra and holding additional charge of Goa at that time.
Therefore, Mr Rodrigues demanded the same information from the office of the governor of Maharashtra where Mr Sankaranarayanan was the governor. He was given the information, which confirmed that the president was indeed on an official visit to Goa and not on a private one as claimed by the Goa governor’s office, for which the Goa government spent Rs14.81 lakh from taxpayers’ money.
Thereafter, Mr Rodrigues also sought legal intervention against Goa governor’s denial of being public authority under RTI. On 14 November 2011, the Bombay High Court at Goa ruled that the governor of Goa is a public authority and comes within the ambit of the Right to Information (RTI) Act. The high court held that the governor enjoyed no immunity from the RTI Act and the public information officer (PIO) at the Goa Raj Bhavan is duty bound to furnish information sought under the Act.
Fast Forward: On 6 February 2013, Jammu-based journalist and RTI activist, Raman Sharma filed a RTI at the governor of Jammu & Kashmir’s (J&K) secretariat seeking information on the number of individuals who had visited governor NN Vohra between January 2010 and February 2013 and appointments sought by citizens and rejected by the governor’s office. Public Information Officer, OP Bhagat of the governor’s secretariat who replied on 27th February, denied information stating that the office of the governor is a ‘privileged’ one.
His reply reads: “…in this context, it is to inform you that the office of Governor is the privileged one and thus this information pertaining to delegation/ information about criteria adopted for seeking appointments cannot be made public under Section 8 of the RTI Act 2009. If you are not satisfied with the reply, you may appeal to FAA of the Governor’s Secretariat.”
This reply was a sequel to Sharma’s RTI application, which had a series of questions and read as follows:
“Provide me following details and Information under the provisions of Jammu and Kashmir Right to Information Act, 2009.
INFORMATION SOUGHT (period 01/Jan/2010 to till date of both offices, Jammu/Srinagar):
Having been denied information by the PIO, Sharma then filed his first appeal on 18th March, with the First Appellate Authority, the principal secretary to the governor. Sharma states in the appeal, “Sir, the argument given by the respondent is neither justifiable nor hold any legal weight as in his rejection order. The respondent had
cited Section 8 of the J&K RTI Act, 2009, for not sharing the information to the applicant and claimed that office of governor is privileged one.”
“Sir, though there is no denial that the office of Governor is one of the “Highest Constitutional Office” in any state including J&K, but as per the Jammu and Kashmir Right to Information Act, 2009, it is not specifically mentioned that office of governor is exempted from providing any sort of information. Hence the reason of ‘privilege’ cannot be claimed here while dealing an RTI application.”
“Moreover, nowhere in the Section 8 cited by the PIO, it is mentioned that information related to delegations/ individuals meeting with the governor can be denied to an information seeker.”
“Sir, the information sought by the information seeker is purely in larger public interest and would promote transparency and accountability of the Public Authority, which is well defined in the preamble of the J & K RTI Act, 2009. The preamble of the RTI act states that ‘The Constitution of India has established democratic republic and
whereas democracy requires informed citizenry and transparency of information which are vital to its functioning and also to contain corruption and to hold government and its instrumentalities accountable to the governed’.”
“Sir, the applicant also wishes to submit it for your kind information that almost everyday the State Information and Publicity Department issues press notes and photographs showing the Governor with the visiting individuals/ NGO/ dignitaries/ senior bureaucrats/ politicians/ educationists/ artists and other, the news and stories are often being published regarding the delegations meet with the governor. Hence the sought information is itself made public by the Raj Bhavan therefore the claim of ‘privilege’ holds no logic and justification therefore the present applicant cannot be denied the sought information.”
“Prayer: Keeping the above factual submissions of the applicant into your kind consideration the respondent may be asked to release the sought information without any further delay.’”
Raman Sharma should have also quoted the Goa governor example and the high court judgment.
For Goa governor related stories, see RTI Act: Same Governor comes under it in Maharashtra, but not in Goa and Goa Governor eats humble pie; High Court says he also comes under RTI Act
(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)