LAGARDE - INDIAN INDUSTRY NEEDS TO RAISE ITS VOICE

Described by many as the most powerful woman in the world, Christine
Lagarde, 56, is the managing director of the International Monetary
Fund. On her first visit to India as the IMF boss, Lagarde is unique,
the labour and anti trust lawyer of repute became the first woman
minister of economic affairs and finance in a G8 country. After the
Dominique Strauss Kahn fiasco at the Fund, she was inducted for a five
year term to head the IMF last year. The first thing that strikes you
about Madame Lagarde is her striking poise and easy demeanour. She
puts you at ease immediately, her smiling visage mirroring her
composure. Not shaken by the Strauss Kahn scandal, neither stirred by
the Euro Zone jitters, Lagarde speaks with utter candor, “I think the
crisis in Europe is being cauterized in many different ways. The
European Central Bank has played a critical role by applying salve to
a market which was risked with credit crunch. The canvas sadly was
large – Greece, Ireland, Portugal, Italy and Spain – but rational
adjustment policies working towards fiscal consolidation and
structural reforms will only strengthen their national economies.”
Lagarde a former French synchronized swimming champ and a purveyor of
yoga believes that this process of strengthening their governance with
a higher degree of fiscal discipline and heavier sanctions is now
paying off in spades.

The equanimity that comes from one who understands the nuances of the
convergence of legalese and cutting edge financial world is visible.
What is Lagarde’s prescription for India? She is positive on the
country’s future. She feels, “India has resisted the economic crisis
of 2008, it has not only staved off the problems, but it has done much
better than others. Seven per cent is not too slow or low by any
stretch of imagination. Yes, reforms have to be implemented and
sustained. “What then is the overriding priority, Legarde says, “There
is a huge headroom for growth, look at the possibilities that
innovation, entrepreneurship and creativity have thrown up. What India
needs is greater capital investment in infrastructure and in
particular in the power sector. I strongly encourage Indian industry
and private sector which is at the cutting edge of change to raise its
voice and make a case for wider and deeper reform from the government.
This collective can do wonders for the economy.”

Lagarde is a woman of powerful opinions, she has never backed down
from challenges – first as chairperson of US based law firm Baker &
McKenzie, then as France’s finance minister and now in her present
avatar as IMF boss. She walked into a man’s world, a cosy club, a
private male preserve at the IMF and she has cut through the clutter
and jargon at a very difficult time to establish herself by finding
her métier. She told Mail Today, “I came to an institution which
wanted to restore its pride and motivation to being the best. We
didn’t want to be distracted by trifles or scandals. The men and women
at IMF recovered quickly to get on with our lives and work. They are
an outstanding group of people. And you can see how they have turned
it around.”

Heading an organization which has 187 nations as its members can be
cumbersome. Lagarde brings a sense of purpose and persuasion to her
job. Throw in some hard nosed pragmatism and what Forbes magazine
called lack of pretension and you have a winning combination which
rules. Pertinently, the Bretton Woods sisters – IMF and World Bank –
have lately had their hands full by playing nursemaid to crises in the
developed world. Over the last four years or so, from fires in the US
to the recent wars in Euro Zone, capitalism has faced repeated stress
tests. Almost simultaneously, the balance of economic power has
shifted from the west to the east with new locomotives like China and
India driving growth imperatives and paradigms.

Lagarde is extremely sanguine about this saying that the wheel has
perhaps come full circle. She said, “Almost 40 years ago, advanced
economies like UK and Italy were imperiled. The IMF is agnostic, it
is an institution for the entire membership, not just for X or Y
nation. Yes, I agree that volumes of lending are much lower for say
Asia Pacific, Indian sub continent or Latin America than they were
earlier, but to place things in perspective, the IMF new loan for
Greece represents only 3/11th of the total program financing.” Is the
Euro Zone mess a continuum of the earlier malady which surfaced in the
US. Where crony capitalism debilitated the financial system. Lagarde
is very clear in her prognosis, “WE are talking of the same
development, it is an afflication that did not go away, an extension
of profligacy and abuse. The origin was in the financial sector which
caused enormous pain, followed by sovereign debt, which was placed at
risk. The two were co related and resulted in the system getting
caught in a bind. Banks went south, sovereigns entered the equation
because they had to recapitalize banks and all this weakened the
mainframe. Greed tripped up a lot of people.”

Lagarde was critical of greed which according to her is the bedrock of
the financial crises. She said, “Excess in everything was at the core
of the problem. Greed was overpowering, financial instruments that
were overly sophisticated and inefficient supervision cascaded the
world in an economic abyss.” When asked whether capitalism can
survive, Legarde responded – it has evolved… even as it lurches from
crises to crises and it will survive and grow.”

Ironic that this charming sister is out to better a world dealt
bodyblows by the likes of Lehman Brothers.

The loneliness of Vijay Mallya

The time has come for Vijay Mallya to extricate himself from the mess
that he finds himself in with a bold new idea. Perceptually, his
larger than life persona has trapped him. He is seen as an idol of the
cave. The individual with all his glitzy trappings suffering from an
acute image disorder. And he is not apologetic about it. Never has
been. At the height of his flashy and flamboyant lifestyle, he would
be quick on the trigger and tell you conspiratorially that he is a
rich and wealthy man. Nobody ever doubted that. I guess he never made
bones about the fact that – I have it and I will flaunt it. Wearing
his rich and famous lifestyle practically on his sleeve as a badge.
Unlike any other industrialist in India. The majority choosing to
continue with the last vestiges of the old socialist license raj order
where it wasn’t a good idea to flaunt your wealth. In fact, it wasn’t
a good idea to make profits.

If you did, you didn’t make noise about it. But all that changed with
the onset of the unfettering of the economy and dismantling of the
license permit raj. Industrialists like Mallya turned the old order on
its head, they were the brave new face of the modern Indian
industrialist. Bulge bracket, cash rich, splurging on extremely high
maintenance lifestyles. Adding to the mystique of being Vijay Mallya
was a fleet of fancy cars, expensive yachts, luxury jets and even a
Boeing aircraft. Throw in an IPL team – Royal Challengers, a Formula
One outfit Force India (now only partly owned because he hawked 42.5
per cent to Subrata Roy Sahara), purchasing the Sword of Tipu Sultan
at an auction in London – and the imagery and persona of big business.
From Kingfisher Villa in Goa, to Kingfisher calendar girls to
Kingfisher horse racing, Mallya was synonymous with wealth and lux.

So far so good. Deeply religious and a devotee of Lord Balaji, Mallya
made all the right moves as a businessman. Not many had given him a
chance when as a youth he was racing cars and walking around town with
arm candy. But he proved how shrewd and calculating he was, when he
knocked over all the competition in liquor and beverages sector.
Systematically he mowed down all opposition to emerge as the
undisputed badshah of liquor. Known as the liquor baron, he took a
calculated risk by going overseas and pouching Whyte & McKay. But
every businessman, however clever, always makes one mistake. Mallya’s
bugbear proved to be his dalliance with the aviation sector. His naked
obsession to best first mover Naresh Goyal of Jet Airways has in many
ways proved to be his bête noire. Aviation as is well known is a mug’s
game, a cash burning, cash guzzling and seriously hurting game. An
affliction that you cannot shake off. More so, if you are operating in
a high crude pricing environment.

The obsession to best Goyal’s Jet was not limited to running a better
airline alone, it meant that serving better cuisine, giving more leg
space, hiring better looking stewardesses, running wide bodied
aircraft and generally giving the passenger a spiffy Kingfisher
experience. Can’t fault him on that. The question is was this business
model sustainable? No, not all. Yes, he did provide the Kingfisher
experience to all the passengers, but when finances go into a
tailspin, then, it is a deathly spiral that one cannot come out of in
a hurry. Between Formula One and IPL, Mallya doesn’t have the time,
inclination or bandwidth to focus on the ills that plague his airline
business. Sleight of hand business acumen cannot work. Professionals
cannot get a handle on a raging crisis the way an promoter can.
However, for that the promoter needs to be in station. When VJM worked
his way around divesting companies and brands, acquired liquor brands
and gathered mass, VJM was the poster boy of business. It must be
extremely galling for Mallya to suffer these indignities. Known for
his hospitality and large heartedness, it must be hurting that his
airline is in such disarray. Not being able to pay salaries and meet
other statutory obligations equally must be affecting his psyche.

That is why it is imperative for VJM to show intent and commitment. If
he has to remain a responsible airline maintain a schedule integrity,
he will have to come up with jack in the box. Two of his listed group
companies – United Breweries and United Spirits Ltd – have seen a
spurt in their stock prices. At the same time, a much smaller company
MCF is reportedly on the block with a handful of suitors. The way
forward will have to be sale of equity, perhaps even control thereby
charging control premium and as such walk the talk. Putting his money
where his mouth is. Mallya is a proud man and I reckon the time has
come for him to decide whether he should keep his airline afloat. He
cannot wait for the Government to play nanny to him. PSU banks will
only throw him a lifeline if he shows similar commitment. To his
credit he has invested Rs 980 crore or thereabouts in the last 12
months, but he needs to now go the extra mile.

Both UB and USL shares are flying, something is obviously afoot. D
Street normally gets wind of it first. A deal with global behemoths
like Diageo or William Grant may well alleviate his present woes. What
analysts aver is that Mallya essentially requires a booster shot of Rs
2000 crore in phase 1. This way he can meet statutory obligations,
vendor payments and wage bill commitments. If he can pull this off,
then in phase 2, he can actually benefit from the government’s FDI in
civil aviation policy which is in the works. If the govt greenlights
49 per cent FDI then a British Airways or Etihad Airways can swoop
down on him. This will bail him out. Mallya may want deliverance from
this extremely expensive mistake. A mistake that his changed his life
and perception of him as a businessman.

Can he bounce back? The odds are on him succeeding, but with a little
help from the sale of equity in his liquor businesses.

B DAY BLUES

Budget Day has come and gone. The hype and hoopla associated with the
budget has turned the event into a veritable television frenzy. The
immediate takeaway is that prices will rise – all services, barring 17
items, which form 59 per cent of the GDP will be taxed at higher rate
of 12 per cent while excise duty has been ramped up to 12 per cent
from 10. The next big scare comes from the rising fiscal deficit which
obviously has a life force of its own because it has galloped to 5.9
per cent of the GDP. Throw in the debt on the books of the states and
this consolidate figure is in excess of 10 per cent. Tinkering in the
income tax slabs may have thrown some crumbs for the salaried class,
but the general rule of thumb in this budget is that prices will rise.

In many ways a zero risk, middling, pedestrian and lackluster budget
driven by an overhang of a dramatic revenue shortfall. It makes the
right noises about important items on the nation’s agenda, but does
not detail the prognosis for the affliction. The journey over the last
seven years has seen the Congress hemmed in by its coalition partners
– first the Left and the DMK and now increasingly the Trinamool
Congress. One step forwards and three step backwards as pressure
points have been built up incisively by the allies reducing the
Congress’s room to manoeuvre.
Fiscal profligacy over the past few years has even seen full stop vis
a vis populist flagship schemes. Safe rather than sorry seems to be
the mantra. Once again finance minister Pranab Mukherjee has wasted an
opportunity to take India to the next level of the growth paradigm.
While he said the right things, the words may not necessarily mean
very much. "Economic policy, as medical treatment, often requires us
to do something which in the short run may be painful but is good for
us in the long run," he said and rounded it off by saying, “As
Hamlet, the Prince of Denmark, said in Shakespeare's immortal words,
'I must be cruel only to be kind'."
Yes, I want to do so much, but I cannot. Which is a travesty because
it means that India is satisfied with a 6.5 per cent growth when by
widening and deepening reform, it can actually vault back to the 9
plus per cent trajectory. Potent, unpalatable reformist measures
simply cannot be taken by this government, the yawning fiscal gap all
pervasive. Mercifully, the finance minister has for the first time
dealt with one of the biggest eyesores – generation and use of
unaccounted money. What is welcome is the introduction of compulsory
reporting requirement for assets held abroad and allowing for
reopening of assessment upto 16 years in relations to these same
assets.
The FM reckons that 7.6 per cent is an achievable growth target for
next year, which appears optimistic, given the inflationary pressures
that swim around in the economy. A spike in crude oil prices has
swelled India's subsidy burden to roughly 2.5 percent of GDP. The year
2014 is already looming large on the political horizon, this budget
shows that it may well have popped up on the radar a year early.
Distraught over the recent debacle at the hustings, drubbed repeatedly
by TMC’s Mamta Banerjee, it appears to be a government in a limbo. In
many ways a mirror image of the tokenism that an embattled government
is dishing out in terms of governance. The budget being a microcosm of
a larger paralysis. No growth imperatives and definitely no blueprint
to control the rising fisc.

-MAIL TODAY,17TH MARCH,2012

ECONOMICS IS NOW HOSTAGE TO POLITICS

Should good economics always be sacrificed at the altar of bad
politics? Well, in this debate which is as old as the Aravali Hills,
populism appears to be trumping simple economics again and again.
India remains a capital starved, infrastructure, energy and power
deficit nation which does not have the wherewithal to generate enough
capital to pump prime its myriad requirements. On the verge of
becoming a 2 trillion dollar economy, its structural inadequacies lie
exposed. Not that the door to opportunity does not lie ajar. It is
ready and waiting, but it requires gumption, sagacity and in many ways
a bold outlook.

The same Manmohan Singh who heads the government at the Centre took a
series of bold, innovative and even dramatic decisions 21 years ago as
finance minister. The question is whether the majority of those
pragmatic measures were all his own or then Prime Minister P V
Narasimha Rao’s? The reality is that Manmohan Singh, a respected
economist, was the instrumentality of change and in many ways the
poster boy of a new India. Perhaps that is why the expectations from
him as PM rose. But hemmed in by the Left and DMK in his first term
and by allies like Mamta Benerjee in his second, he has failed to keep
the promises.

Devaluing the rupee, decontrolling gold, freeing up the stock markets,
dismantling import controls, slashing customs duties, virtually
abolishing licensing controls on private investment, cutting tax rates
and breaking public sector monopolies – a veritable catalogue of
initiatives changed the course of this country. From a nation trapped
in its socialist moorings, Narasimha Rao understanding the need of the
hour backed the economist FM to the hilt.

Interestingly, a vast swathe of extremely capable bureaucrats and
policy mavens assisted the new FM in all his endeavours. Montek Singh
Ahluwalia (still here as part of the A Team), Shankar Acharya, K P
Geetakrishnan, M R Sivaram, N K Singh (now a RS MP), Y V Reddy (who
became RBI Governor) and even Rahul Khullar (now Commerce Secretary)
who was private secretary to Dr Manmohan Singh then. N K Singh
recently told me that, “Reforms were as much prompted by an impending
economic crisis than intellectual persuasion; more by the former than
latter.” Interestingly two other gentleman played a handsome part as
dramatis personae in those tumultuous times – P Chidambaram who was
commerce minister and his able secretary Montek Singh Ahluwalia who
were instrumental in ushering the spanking new trade liberalization
regime. Montek Singh then moved to finance and assisted the FM.

But over the last seven years, several opportunities have been
frittered away by the present dispensation to undertake path breaking
reforms which could widen and deepen the economy so that it could
neutralize the capital deficit and move to the next level of
competence. N K Singh also made the point that once again the
floundering Indian economy requires a push. Yes, we have over $325
billion in forex reserves, but a burgeoning fiscal deficit, the ever
growing size of the economy and a fattening import bill are reasons to
take notice of. Most policy makers will privately tell you that deep
corrections need to be made for the writing is on is on the wall. For
if they are ignored, then it is at our own peril. A party with 19 MPs
– Trinamool – cannot hold the nation hostage. For the first time in
nearly 10 years, the railway minister Dinesh Trivedi has bitten the
bullet and decided to hike fares. Why, because it is the need of the
hour, one cannot subsidise passenger fares with freight hikes
endlessly. In the process making railway freight uncompetitive. At one
level, the end user has to pay for services and the fares have been
increased modestly by an Indian Railway which is more or less bust,
despite Laloo Prasad Yadav’s falsehoods.

In Manmohan’s first term, for starters the 2008 global meltdown set
India back, but Pranab Mukherjee with a series of calibrated and
considered responses managed to ride out of that crisis ably and
soundly. Now once again India stands on the cusp of change. The choice
is ours – do we want to allow ourselves to be held to ransom by Mamta
Banerjee or do we want to get on with business and life in general? It
is nice to see railway minister Dinesh Trivedi refusing to dodge the
bullet on the issue of a rollback in passenger fares. He reckons his
country comes first and the party that he represents second. The time
is here and now for Pranab Babu. He has shown astute political insight
to straddle both worlds – a world where Mrs Indira Gandhi’s socialism
prevailed and a world where market forces determine everything.
Insulation cannot be proferred as a reason to run the state. Commerce
is the modern axis, everything revolves around it. Deep rooted beliefs
and dogmas have to be consigned to the rubbish heap of history. The
Hindu rate of growth is now an aberration, not the norm. India has to
move on.

Ironically, the moves to liberalise the economy and have it plug and
play with a globalised world was done by what was in effect a minority
government headed by Narasimha Rao. In 1991-92, GDP growth hit skid
row at an abysmal 0.5 per cent. One can argue that in an era of
coalition politics, a policy of gradualism is required. Maybe the time
has come to cut the umbilical cord and once again embark on a path of
least resistance. Highly unlikely given the compulsions of coalition
politics and the state of play in parliament. Yet, hope floats.

-MAIL TODAY,15TH MARCH,2012

BUDGET CONUNDRUM

On March 16, India makes its tryst with yet another budget. B Day with
all its surrounding hype and hoopla is seen as the quick fix to
alleviate our endless woes. The hoi polloi’s constant and ever growing
litany of complaints and grouses will not be transformed at the end of
Pranab da’s speech. There is no metamorphosis or magic wand to change
the course of our lives. In many ways, the budget is a statement of
record, it details the income and expenditure plans of the government.

At best a balance sheet where some commodities, products and services
either get more expensive or cheaper since they are a function of a
hike or reduction in taxes. More importantly, with the UPA
Government’s singular focus on social security schemes so that the
message of financial inclusion actually takes shape at the bottom of
India’s vast pyramid being all pervasive, the rest of the budget
speech doesn’t hold too many surprises anyway. Constructive decision
making has to be taken out of the ambit of the budget. Decision making
to circumvent policy paralysis is a dire and crying need. From the
corporate to the common man, one and all want to see concrete ideation
and quicker roll out on the ground in terms of implementation.

This logjam primarily due to the lack of persuasive and cogent intent
on the part of the executive and bureaucracy to get things moving is
costing India. A classic case of tripping over a major policy
initiative was the fiasco over the entry of multi brand retail trade.
The government for a change showed that it had the gumption to bite
the bullet. As soon as the winter session opened, the Union Cabinet
rammed the new policy through. Alas the parliament was in session and
all hell broke loose.

The resistance to this decision was vehement as opposition parties
closed ranks against the ruling dispensation. In fact, UPA constituent
Trinamool Congress went ballistic on the decision and wanted a
rollback. It was a curious case of – what did we do wrong? Yes, simply
because now that the government had bitten the bullet and rolled out
big ticket reform, why was there so much hullabaloo? More like a cul
de sac, I guess. After all when the Government chooses to allow a
drift in policy, they are criticized by trenchant opposition. When
they do take the plunge, equally the treasury benches are at fault.

So, one step forward and three steps backwards as the parliamentary
whirligig found a decibel level which was uncomfortable for the ruling
party. Humbled, they had pull the plug on the multi brand retail
foreign direct investment issue. It was a resounding slap on the face
of this government. Let us go back in the Wellsian Time Machine for a
bit. In June 2010, once again the government decided to go for a dare
all bare all type of policy impetus. But, again it worked out as a
half way house since oil deregulation translated merely into petrol
pricing deregulation. A dangerous half way house, align petrol prices
with global crude prices, but refrain from taking a call on diesel,
LPG and kerosene pricing. Remember India runs on diesel, its entire
freight movement is on diesel wheels.

Ergo, diesel is an untouchable. Which allows people to exploit a
nearly Rs 26 differential between petrol and diesel prices. Car
manufacturers big and small have entered the diesel domain and the
entire business case for oil sector deregulation has been self
defeating. Oil companies are in the process losing money hand over
fist. Between April and December 2011, the under recoveries are a
humungous Rs 97313 crore. All told at the end of this financial year
ending March 31, 2011-12, they will be in the vicinity of Rs 140,000
crore in this high crude price environment. This is pretty much
bleeding the oil marketing companies, debilitating them to such an
extent that soon they will not be able to secure loans to buy crude to
refine.

Let us now come back to this budget and what it will showcase. The
first big number that anybody who understands economics and finance
will be looking out for will be the fiscal deficit number. This is a
biggie, all eyes are on this number. The number despite the FRBM Act
which mandates that this number needs to be scaled down year after
year progressively will be closer to 6 % of GDP against 4.6 % last
year. Throw in the debt that state governments have amassed and this
number grows in a hydra headed monster. Nearly 10 % of GDP, a scary
prospect for any finance minister. Now add the new fangled Food
Security Bill and the rising subsidy bill which includes food, oil and
fertilizer and you have a potent mix on hand. Nobody has a fix on the
new food security bill and what kind of allocations will be made for
the same. The subsidy bill hovers around Rs 120,000 crore presently,
add another Rs 30,000 crore for the new food security bill and the
spike in the fisc is a cause for concern. All this can shave off as
much as a percentage point from the already decelerating GDP growth
numbers.


WHAT IS HURTING THE GROWTH STORY

*India’s economy is stuck with 10 headaches – just when it looked like
a challenger to China as the world’s fastest growing economy.

*Food prices may have moderated, but global commodity prices,
especially crude oil prices are soaring.

*High commodity prices will knock up prices of most goods

*Industrial sluggishness owing to a spike in interest rates

*Export slowdown and weakening consumer demand are major concerns

*Overhang of Corruption scandals have hit political and bureaucratic
sentiment impacting business climate

*Recent Supreme Court judgment invalidating 2G licenses has rocked the
investment climate forcing a pull out from some of the foreign majors
who had set up shop

*There have been no major policy decisions in recent months because
policy-makers cannot agree on critical issues

*Spats between ministers and a parliamentary logjam have hurt governance

*Not many innovative policy decisions have been taken in recent months
to reach out to the poor, whose votes are vital for the Congress-led
UPA.

*Time and cost overruns have been a bane for India’s infrastructure projects.
•
*Coal and equipment shortages, bad weather and delays in government
clearances have resulted in major slippages in projects

*Investment remains concentrated heavily in favour of few states.

*Policy uncertainties loom ahead of the budget, threatening the
government’s aim to rein in its deficit

*Runaway prices have upset the government’s plans of implementing a
carefully calibrated exit plan of the fiscal stimulus package set in
motion during the world economic crisis.

*Recent results at the hustings will encourage Congress to resort to
greater populism in the budget.

-MAIL TODAY,14TH MARCH,2012

Desperate 2G review petition ends up defending NDA actions

In an attempt to save face, UPA has given NDA a major political
concession where the 2G scam is concerned.

The review petition filed by the government against the Supreme Court
judgment cancelling the 123 UAS licenses and directing that the
spectrum be taken back from these companies and auctioned in the
future seems to be the result of detailed discussions within the
government, including presentations and meetings held under the
chairmanship of Prime Minister Manmohan Singh on February 11, 2012,
and a second presentation discussed with Finance Minister Pranab
Mukherjee on February 24, 2012.

While two actions have already been taken regarding clarification and
a review, discussions are still on about a presidential reference
under Article 143 of the Constitution with respect to the question of
the law, which have arisen in the context. Mail Today has got a copy
of the presentation that was discussed amongst the members of the
Cabinet, based on which the decision to file the review petition was
taken. A reading of this presentation shows that the DoT may have
stretched, even misrepresented, what the Supreme Court has said or the
inferences drawn – in a bid to extract an approval to file the review
petition. Under the Section ‘Suggested Approach’, the conclusions of
law that have been listed, based on which the review petition has been
argued, include an argument that the Supreme Court has exercised the
power of judicial review to examine the merits of a policy adopted by
the government.

The Department of Telecom has argued that since the First Come, First
Served (FCFS) is government policy, its rejection amounts to a
rejection of the policy of the government. While making this argument,
the presentation does not state anywhere that, in effect, FCFS was
announced for the allocation of spectrum for basic service operators
or fixed line companies in 2001. It does not inform that fixed line or
basic service licenses were never given out after 2001 and came to a
complete halt by October 2003, but more importantly, it has led the
government in desperation to defend the actions the NDA government as
a part of the review petition.

The now-jailed Telecom Minister A Raja had argued for the longest time
that he had continued the policy of FCFS adopted by the NDA government
in 2003. This has also been a subject matter of several press releases
and press conferences, including those held by his successor and
current Telecom Minister Kapil Sibal. In fact, Sibal’s argument has
been that the policy was correct and at best there was a problem with
implementation, and therefore Raja and Raja alone was to blame. The
Supreme Court, however, while writing the detailed judgment, has made
several adverse comments about the FCFS policy.

The Supreme Court has mentioned that, “There is a fundamental flaw in
the principle of first come, first served in as much as it involves an
element of pure chance or accident. In matters involving award of
contracts or grant of license or permission to use public property,
the invocation of first come, first served principle has inherently
dangerous principles.” The court then goes on to describe how FCFS is
misused by emphasizing, “Any person who has access to power corridor
at the highest or the lowest level may be able to obtain information
from the government files or the files of the agency/instrumentality
of the state that a particular public property or asset is likely to
be disposed of or a contract is likely to be awarded or a license or
permission would be given.

He would immediately make an application and would become entitled to
stand first in the queue at the cost of all others who may have a
better claim.” Then, in a bid to ensure that no further misuse of FCFS
occurs where scarce natural resources with high commercial auction
value are concerned, the court stated in its judgment, “This court has
repeatedly held that whenever a contract is to be awarded or a license
is to be given, the public authority must adopt a transparent and fair
method for making selections so that all eligible persons get a fair
opportunity of competition. To put it differently, the state and its
agencies/instrumentalities must always adopt a rational method for
disposal of public property and no attempt should be made to scuttle
the claim of worthy applicants.”

It is clear from the Supreme Court’s order that the court is paying
special attention to natural resources where demand far exceeds
supply, and those where private companies or businesses are willing to
pay monies to the exchequer since they believe that the contract (in
this case, spectrum) can, as a part of their business, generate income
for them and their shareholders. Making specific reference to such
natural resources which are qualified to raise revenue due to their
commercial worthiness, the court concluded, “When it comes to
alienation of scarce natural resources like spectrum etc, the state
must always adopt a method of auction by giving wide publicity so that
all eligible persons may participate in the process.”

Warning against other methods, the court makes a final comment, “Any
other methodology for disposal of public property or natural/national
assets is likely to be misused by unscrupulous people who are only
interested in garnering maximum financial benefit and have no respect
for the constitutional ethos or values.” The government is not only
upset with what they think is a Supreme Court decision which impacts
their right under the policy making function to decide auction versus
FCFS, but has in fact gone overboard in attacking auctions and by
consequence, defending FCFS by questioning the court’s judgment,
citing issues of public interest by way of tele density, affordability
and growth etc.

Now, while there is very little by way of evidence to show that the
government’s decision of utilizing FCFS resulted in any great increase
in teledensity, especially through the new entrants whose licenses
have now been cancelled, the entire petition seems to defend
vehemently the decisions made by the NDA government and therefore
bringing to naught any attempts by the CBI hereafter to find fault
with the allocation of spectrum between 2003 and 2007 by Arun Shourie
and later by Dayanidhi Maran.

It is unclear if the government realizes that its strong defence of
FCFS would essentially mean that any attempt to shift the blame to the
NDA is hereafter thwarted. In fact, the government also seems to have
gone out of its way during the hearing of the 2G cancellation matter
wherein the government lawyers told the court in specific terms while
referring to the decisions made by the NDA government in 2003 that,
“The policy decision taken by the DoT for migration of CDMA service
providers was neither illegal nor unconstitutional.”

It remains to be seen whether the Supreme Court will admit the
petition filed by the DoT, but it is quite clear that the UPA, in a
bid to hide its embarrassment, has taken steps that will now be used
by the NDA government if the issue about irregular or illegal favours
is ever brought up by the government or its spokespersons as it
relates to the NDA regime between 2001 and 2004. The presentation
made to the PM and FM also seems to be flawed by suggesting that the
court rejected the policy because it believed that “revenue
maximization should have been the overriding consideration.” A reading
of the judgment shows that the Supreme Court has never made such a
claim.

Sure, it has argued that exchequer revenue needs to be protected,
especially when private companies in turn earn monies from such
allocations, but stretching that to terms such as ‘revenue
maximization’ is certainly not within the purview of the judgment.
While the judicial review of the petition will depend upon its
admission, its political fallout by way of this massive concession
granted to the NDA, even if inadvertent, leaves the UPA even more
fragile in its defence after the judgment has held, contrary to the
PM’s and Sibal’s attempts, that the decision was not only illegal, but
that in fact, a massive loss has been caused to the government.

- MAIL TODAY , 11TH MARCH,2012

BHAIYAJI TRUMPS THE PRINCE

Sitting in Delhi, Uttar Pradesh conjures up myriad thoughts in your mind’s eye. The dustbowl of UP went to the polls in one of the most eventful elections in recent times. You can argue that the seminal vanquishing of the Left by dragon slayer Mamta Banerjee in West Bengal last year was equally momentous. As a date in time and history perhaps the Left’s ignominious exit was of far greater significance than the UP hustings in 2012. After all, Mamta threw out the Left after an eternity, an aeon. But Bengal is not central to Indian politics, not in the way UP is. I know that Mamta di will take objection to that. For Mamta has her alliance partner by the shorts and curlies. UP is contiguous to New Delhi, the seat of power in Indian politics, Noida, Ghaziabad and even Faridabad are increasingly part of the NationalCapital Region.

UP fires one’s imagination. Political pundits and pollsters get excited at the thought of rajneeti in UP. The state has given a catalogue of Prime Ministers and other assorted eminence grace to theworld of Indian polity. The timing of the UP elections this time was crucial. It was viewed as a referendum, a semi final, call it what you will, but a milestone. A milestone simply because it is reckoned that we once again stand on a cusp of change. Seven years of a Congress led coalition at the centre has a seen a policy paralysis in the wake of a slew of corruption scandals. Hence, two years before the general elections, even if one ignores the hyperbole, it is an important election. For several reasons.

Firstly for Rahul Gandhi’s ambition. His tearing ambition to evict the landlady in Lucknow. His hunger to make a mark in national politics by usurping the lost legacy of the Nehru-Gandhi dynasty in UP. So, he has tried and you cannot fault him for that. For Rahul Gandhi and his family, this is a crucial election, probably more important than even the 2009 general elections. A third of the constituencies redrawn as part of delimitation throwing the most hardnosed of political observers to shake their head in wonderment when asked to call the result. A voting trend line which again confused one and all because the higher the percentage, the more the anti incumbency. Anyway , so , goes the theorem. Even as I sit and hammer down the keys on my laptop, news just breaking is that former UP health minister Babu Singh Kushwaha has been arrested by the CBI for his role in the multi crore National Rural Health Mission scam. The time 5.03, just moments after polling ended in the seventh phase. Look at the timing, isn’t it clear that in a coordinated operation, the CBI has swooped down on him. An olive branch from the ruling dispensation led by the Congress at the Centre to the principal and leading party in the state polls SP.

The Muslim quota equally played a major part in these polls. Congress leaders Salman Khurshid, Beni Prasad Verma and Sriprakash Jaiswal made a big song and dance over the sub quota for Muslims. The SP ran its own campaign to garner the Muslim vote. Between the two parties, it appeared that they had cornered the Muslim vote. Or so one would like to believe. But this led to deep polarization with the upper castes and upper classes gravitating perhaps to the BJP. Thoroughly confused.

Oh yes, without a doubt because there is so much in this state of play that one cannot call with any degree of certainty. The sub text just got more interesting because of some of these imponderables. Rahul Gandhi brazen armed with his derring do went eye ball to eyeball with SP’s next gen Aklilesh Singh Yadav. Rahul Gandhi’s naked obsession for the throne in UP and Akilesh’s much calmer response was one of the high points of this election. Point and counter point. huesBoth crisscrossed the state tirelessly, trying to best the other by fulminating against one another. The ‘ lal topi’ wave which first emerged in eastern UP and then spread over the rest of the state hurting the Congress and its aspirations. Similarly, the BJP apparatchik Sanjay Joshi in conjunction with Uma Bharti transposed in to the battlefield from MP tried their level best to return BJP to some respectability. An election of endurance, character, varying characters, many hues and a quadrangular contest hitherto not seen in any other state.

Netaji Mulayam Singh Yadav wisely allowed his son to take on Rahul. Taking a backseat he allowed his son space in this joust. In many ways, not much is known about both Rahul and Akilesh. For both young leaders, this is a defining election, one wants to wrest back his family’s legacy and heritage, while the other wants to reclaim what he believes is rightfully his. In this theatre, no one could ignore the incumbent Behenji Mayawati whose sarvajan samajh social engineering experiment worked wonders in 2007 upsetting everyone’s applecart. A breath taking simple majority has seen five years of what can only be described as arrogant misrule. While the lawlessness of the previous regime was corrected, corruption and in the main a bloody rural health scam cover up has sullied her term indelibly. A park full of elephants on the periphery of the rajdhani accentuating her arrogance. More votes and voters added to the sweepstakes, as many as 1.3 crore new voters voting with their feet.

An election with a vast swathe, replete with colour and colourful lingua franca. Case in point being Salman Khurshid who was even willing to be hanged for the Muslim quota and vote. Rahul Gandhi backed by his family complete with mother and a proud sister backed by a huge party apparatus, though woefully short of cadres on the ground. Even brother in law Robert Vadra pitched in, entering the equation by announcing his arrival, though his wife Priyanka dismissed his electoral ambitions with nonchalance. The Rahul vs Akilesh imagery wasn’t lost on the youth of the state. A new breed of politicians, a new brand of verbal warfare, truly an election or should I call it a theatre. A theatre so huge that from west to east and north to south, it is a country by itself. A state plagued by misrule, underdevelopment, corruption, inhabited by millions who want change and succor and alleviation from their long litany of woes. The exit polls and the punters have called it. The colour of victory is red. Lucknow beckons. It is Samajwadi which appears to be headed in that direction.

March 6 will offer closure. It is only then that we will get to know where Rahul, Akilesh, Uma Bharti, Sanjay Joshi, Mayawati – the dramatis personae – of these hustings will actually know where they
stand.

-MAIL TODAY,O4TH MARCH,2012