Thursday, October 4, 2012

Economic Reforms: PM’s tough love
UPA, PM, Manmohan Singh, financial crisis, Narendra Modi, CAG
The PM wanted support for tough economic decisions. People want answers to some tough questions

The orgy of corruption that has marked the United Progressive Alliance’s (UPA) second term continues to be exposed almost on a daily basis. Meanwhile, the prime minister (PM) tried to reach out to angry Indians with less than happy results.

Dr Manmohan Singh delivered a rare address to the nation in which he said that economicreforms were necessary to avoid a fiscal crisis and a repeat of 1991-type payment crisis; it was a time for some tough decisions.  His appeal was emotional too: “I promise you that I will do everything necessary to put our country back on the path of high and inclusive growth, but I need your support.” Unfortunately, it didn’t cut any ice with the public.

At the end of his speech, the angry buzz on social media was about one single sentence—“money doesn’t grow on trees.” Clearly, the PM’s speechwriter failed to note that India is angry exactly because UPA ministers are ripping off the nation’s wealth from every available source—land, air and water (mining, telecom and irrigation).  In his rare appearance, the PM did not think it fit to answer a whole host of questions that are burning in the minds of people.

1.    How has India, which was touted as an emerging superpower until two years ago, suddenly reached a 1990-like situation when we had to sell gold?

2.    If the country was in such dire straits, how did the self-declared assets of so many politicians spike sharply? How is it that the officially declared donations to major political parties have also jumped in the same period? This wealth effect is not restricted to ruling alliance politicians; the assets of senior opposition leaders have also expanded. Does it stink of an unholy nexus?

3.    While Dr Singh wants the public to bear the cost of the “unsustainable increase in government expenditure vis-à-vis government income,” aren’t he and his finance minister accountable for balancing the books and planning ahead for eventualities? Instead, they were busy doling out subsidies.

4.    While the PM wants us to take the diesel price hike in our stride, subsidies are not really to blame for the losses to oil companies. As former expenditure secretary, EAS Sarma, has pointed out in Moneylife, it is Central and state taxes (which neither is willing to give up) that are responsible for the price build up. So why won’t the Centre make some tax sacrifices too?

5.    Electricity distribution is another sector where ‘tough decisions by the Congress only mean a big bailout. Since the PM’s address frequently reminded us about a 1991-like situation, shouldn’t we remind him about his role in providing a sweeping sovereign guarantee—covering even basic business risks—to the dubious Enron Corporation’s Dabhol power project?

6.    Or that the Dabhol debacle and plans for expensive independent power projects (IPPs), under the Congress’s liberalised electricity policy, set back the electricity sector by a decade? Even after the UPA returned to power in 2004, why was power distribution left untouched and state electricity boards allowed to pile up huge losses by turning a blind eye to massive theft, leakage and subsidies?

7.    If the situation was all so tough, how come the Narendra Modi in Gujarat could ruthlessly curb power theft in his very first year in office and renegotiate expensive power purchase agreements? How did Gujarat go from being a power-deficit to a power-surplus state in just over a decade? How was it able to electrify 100% of its villages and has eliminated the heavy losses of its electricity boards?

8.    If Mr Modi has achieved this by creating a separate distribution network for subsidised power while giving other customers the alternative of getting steady power supply, wasn’t this easy to emulate? And doesn’t the failure to do so indicate a lack of political will in the UPA-governed states?

9.    What did Dr Singh do after the two-time northern grid collapse in August? He announced dreams and doles. In his Independence Day speech, he said that the Rajiv Gandhi Rural Electrification Scheme will provide electricity connections to one lakh additional villages. Soon after, on 25th September, the cabinet committee on economicaffairs approved a massive Rs1.90 lakh crore debt-restructuring package for state electricity boards. The payout is linked to a regular increase in power tariffs for us the consumers. Will higher tariffs collected from domestic and industrial customers actually turn around the bleeding power distribution companies?

10.    On another note, will the PM explain why he has abandoned plans to track black money? Will he answer the open allegation/ speculation by global investors that half the foreign portfolio investment of over $12 billion in India this year is just round-tripping of unaccounted Indian money?

11.    How can the government be credible when it attacks constitutional bodies, such as the comptroller & auditor general (CAG), for exposing reckless loot of natural resourcesand mega scams in almost every sector? Isn’t the PM responsible for abject lack of governance and deep complicity at all levels?

12.    Doesn’t it stretch credulity to imagine that friends and relatives of powerful politicians bagged lucrative coal blocks for free and then obtained thousands of crores of rupees in bank loans to develop them on merit?

13.    Why should the exchequer bear the brunt for Praful Patel’s profligacy in the civil aviation ministry? Can the government convince us that a Rs40,000-crore bailout to Air India is linked to strict financial accountability?

14.    Will the government prove that cornering of precious real estate (by politician-builders), mining licences and key policy decisions are not the primary reason for a spurt in corporate and foreign donations to political parties?

15.    Former railway minister Dinesh Trivedi’s proposed hike in passenger fares after a decade did not evoke protest from paying travellers, but Mamata Banerjee’s tantrums ensured a rollback and a new railway minister. Yet, when it came to foreign directinvestment in the retail sector, why is the Congress party willing to risk sacrificing the government itself?

16.    Why is the Election Commission of India (EC) silent about EAS Sarma’s demand to investigate foreign donations to political parties and whether there was a quid pro quo involved? Mr Sarma’s crusade was triggered by reports that the politically-savvy Anil Agarwal’s Vedanta Resources Plc had donated $8 million to Indian political parties. Data put out by the Association of Democratic Reforms shows that many political parties have seen a big increase in corporate funding including foreign funds. On 26th September Mr Sarma warned the EC that he would seek judicial intervention in the matter. Is the EC under pressure to remain silent?

17.    The quid pro quo that Mr Sarma wants investigated may not be restricted to corporate largesse to the UPA constituents alone. In the Rs70,000-crore irrigation scam in Maharashtra, Anjali Damania, an activist, has alleged that the BJP leader Nitin Gadkari point blank refused to raise the issue and embarrass the NCP. Is this why the opposition seems so feeble in its protests?

The people of India are ready to make sacrifices but do not wish to be fooled by a self-serving bunch of crooked politicians. Asking for sacrifice, as long as these and other burning questions remain unanswered, is sheer wanton audacity.

Sucheta Dalal is the managing editor of Moneylife. Subscribers get free help in resolving their problems with select providers of financial services. She can be reached at

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