Kochi hosted a widely publicized event intended to market the investment possibilities of God’s Own Country last week, an overview
Talking to media persons who visited Kerala chief minister Oomen Chandy at his residence, a few days prior to the celebration that was “Emerging Kerala” inside the air-conditioned comforts of a posh star hotel in Kochi last week, had focused his talk on Kerala’s infrastructure needs and made an emphatic statement that “money is not a problem”. When the CM emerged after the event, focus had shifted from the prioritized projects to the financial ‘commitments’ made by investors who attended the meet.
Reserve bank of India (RBI) deputy governor Subir Gokarn was a lone sane voice in the sound and fury created by the indoor festival that was “Emerging Kerala” in Kochi. He said the state should exploit the inherent strengths while planning for economic development. Kerala has all the potential to develop at par with some of the developed countries. A long sea shore, round the year comfortable weather, several rivers that can provide energy (electricity), irrigation and transport facilities in that order, across the state literacy of over 90%, substantial remittances from abroad, an enviable topography and history which can attract tourists round the year and so on are blessings other states in India do not share. It has to be said to the credit of the Kerala government that some projects which had some of these features as the basis had been there in the list showcased for ‘sale’ at the meet. But, in all probability, these did not get many takers, in the Utsav that was Emerging Kerala. One wishes that the RBI deputy governor’s mention about inherent strengths would open the eyes of powers that be who will be taking the initiative forward. The immediate impression one gets is that all, including the CM, got lured by the promise of ‘investment’ (read more per capita debt and a rise in import which will have an impact on forex position) and crowding of projects in and around Kochi leaves one with the doubt why it was not marketed as “Emerging Kochi”.
Projects, which were under discussion before the event, included 57 minor irrigation projects with capacity to produce an aggregate 170 MW power.
After concluding the event, the chief minister briefed reporters about an investment commitment of over Rs40,000 crore which include the proposed investment of Rs20,000 crore in certain projects by BPCL, an investment of Rs2,000 crore in an assembling unit by German car major Volkswagen, a Rs1,250 crore agro-processing unit by Agronomy Farms in Kannur, a Water City costing Rs3,000 crore by Dubai Phoenix in Kochi, a Smart Township and IT park with an investment of Rs1,300 crore in Kottayam by the Aabad Group, and healthcare establishments at five centres costing an aggregate amount of Rs2,150 crore by Dubai DM Healthcare Group. Reports show that certain other ventures like a huge underwater aquarium, a laser light show, a ship maintenance facility at Kochi and a University complex are also being considered.
On the whole, one gets an impression that the effort is going to be to replicate Dubai or Singapore in Kerala. Nothing wrong in it economically. Let me express my pain in the heart in a different way.
While I was in the Indian Institute of Management, Ahmedabad in early 1990s attending a short programme, Professor Anil Gupta talked about ‘pre-industrial’, ‘industrial’ and ‘post-industrial’ societies. Guptaji’s words have come back to my mind in different contexts since then. Last year, we visited Dubai during the Shopping Festival. The places to which we were taken in Dubai and the people we met there during our short stay of 4 days made me think again and again and again about the civilization and people that would have existed before Dubai’s oil-dependent economic development took roots somewhere in the1960s. My enquiries about the people who lived in the geographical area which is now covered by United Arab Emirates or the real beneficiaries of the economic boom of the recent past did not fetch convincing answers. I wonder, when my grandson who is in Class 3 now in a Mumbai school visits Kerala after 10 years may repeat my Dubai question, “Where are the locals?” and his hosts or guides may be as evasive as my Dubai friends, unless the concept of development in the minds of our leaders does not get a makeover.
(MG Warrier is a freelancer based in Mumbai. He can be contacted at [email protected])
The increase in diesel price and indirectly reducing LPG subsidy will help the poor more than the rich. Unfortunately for populist reasons and by not having proper understanding of the harm caused by subsidy, political parties are protesting for the wrong reasons
Finally the UPA (United Progressive Alliance) government took a courageous decision, though long delayed, on 13th September to reduce subsidy on diesel by about Rs5 per litre and put a ceiling on the number of subsidized LPG cylinders to six per family per year. As expected all the political parties except the Congress (even many Congress leaders are not very happy) have opposed such a move.
The fact that CII (Confederation of Indian Industry) has welcomed the government’s move adds to the confusion about who actually is benefited by the price increases. Protesters are shedding crocodile tears in the name of helping “aam aadmi” and claiming that petro product price increases will hurt the poor. In reality it is just the opposite. A vibrant and strong consumer movement, if there was one, would have been able to throw light on real facts. Unfortunately we do not have one in India. Unlike the populist stand taken by the political parties, professionally managed consumer NGOs (non-government organisations) would have been more credible to show that there cannot be free lunch in this world. After all the increased burden of oil imports have to be borne and shared in the most equitable way.
How many of those who belong to BPL (below poverty line) families are really affected by this move? Their main worry is to get the next meal. If they can easily get their quota of PDS (public distribution scheme) food and fuel items, diesel price will have absolutely no impact. With per capita daily income of Rs32 in urban areas and Rs26 in rural areas (the Planning Commission’s shocking definition of BPL) how many of them use bus services or railways or goods transported by trucks? Prices charged by these services will no doubt increase because of diesel price, and increase they should.
Why is there so much confusion and even doubts about the government’s claim that there is a crying need to reduce diesel and LPG subsidy? Based on current crude oil prices, the so called under-recoveries of oil marketing companies (OMCs) was about Rs2,00,000 crore and about 54% of that from diesel subsidy. In the first quarter of 2012-13, OMCs announced an unprecedented loss of Rs40,000 crore. But the public and even reasonably well-informed people are unable to believe or trust these mind-boggling numbers.
All these years, oil companies have been announcing ‘huge’ profits. Thus there is a misconception that all these losses or under-recoveries are phantom numbers. It is true that under-recoveries are slightly overstated the way they are computed. But the over-estimation is not enough to compensate for all the subsidies the OMCs are forced to give. Also the profits they are earning though huge is not high compared to the huge investment they have made.
Actually when the government compensates the OMCs for their under-recoveries it is the poor who will end up losing in two ways. The money that would have been otherwise available for welfare measure like education, health, etc, will be reduced. Second, as a result of deficit-financing inflation will be higher. Diesel price increase will also result in inflation. But it is less than the inflation caused by deficit-financing. It is a well-proven fact that inflation hurts poor more than the rich.
Thus the increase in diesel price and indirectly reducing LPG subsidy (after six cylinders consumers have to pay market price) will help the poor more than the rich. Surveys have showed that it is mostly the rich and the middle-class who use LPG. Also, of the poor who use LPG, they will not use more than six cylinders a year rule. Thus limiting the number of LPG cylinders will not affect the “aam aadmi”. Only 43% of those who use LPG will be affected by the new rule.
In the case of diesel, a recent study done by a Geneva-based NGO, Global Subsidies Initiative, has showed that diesel prices affect the rich more than the poor. It is the rich farmers using diesel pump sets, home owners using standby generators, SUV drivers, who have to pay more because of diesel price increases. No doubt there will be increase in bus fares, railway fares and also in trucking costs. As mentioned earlier, those who are below the poverty line will be affected less by these increases. They hardly use these services. There cannot be free lunch for all the people all the time. In the case of trucking costs because of monopoly position of truckers, they have announced price increases of 15%. This is far more than required to compensate them for the diesel price increase of less than 14%. Diesel accounts only 35% to 40% of their costs. They should have increased their costs only by about 5.6% or less. Again a strong consumer movement would have succeeded in stopping such monopolistic action through legal action.
In conclusion, the recent steps taken by the government to reduce its subsidy burden and also reduce the losses suffered by the public sector oil companies will help the “aam aadmi” more than hurting the rich and the middle-class. Unfortunately for populist reasons and by not having proper understanding of the harm caused by these subsidies, political parties are protesting for the wrong reasons. This is where the government has failed. They should have prepared the public better before announcing the price increase by explaining the reasons. Also they should have done it in small steps.
CBI was seeking these files in connection with its probe into increase of spectrum bandwidth for Airtel and Vodafone when Pramod Mahajan was telecom minister during the NDA regime