Editorial 1
Editorial 2
By the backdoor, privately
This above all
Letters to the editor


Import of sense

The Union commerce and industries minister has just announced the new export-import policy for 2000-01. Mr Murasoli Maran�s exim policy has been driven by essentially two considerations. First, in view of India�s commitment to the World Trade Organization, Mr Maran has to oversee the dismantling of the regime of quantitative restrictions on imports. He has embarked on this process by the removal of QRs on as many as 714 items covering a wide variety of industries ranging from consumer items such as coffee and tea, to industrial products such as harvester threshers. However, some of the more important consumer goods such as liquor, cigarettes and automobiles, as well as the bulk of agricultural products remain under QRs. There is a sizeable and vocal opposition to any attempts to remove QRs, and this group will inevitably claim that the liberalized trade regime will spell doom to domestic industry since the Indian economy will be flooded with imports. Fortunately, there is little substance in this unduly pessimistic and alarmist point of view. The domestic manufactures will still get a fair degree of protection since the items removed from QRs will typically attract high tariff rates. Of course, there will be some increase in the volume of imports � but there is no reason to fear an avalanche. In any event, Mr Maran had very little flexibility since India is a signatory to the WTO. WTO obligations have also forced the commerce minister to modify some existing procedures relating to export incentives. Thus, Mr Maran has announced the phase out of the post-export duty entitlement passbook scheme because this has been labelled WTO-inconsistent by some trading partners.

The second consideration is the overwhelming need to effect a significant increase in the volume of India�s exports. In recent years, we have not had to face any problem in so far as the balance of payments is concerned. This is mainly because huge inflows of foreign exchange on account of portfolio investment have ensured a healthy surplus on the capital account. However, since portfolio investment can dry up suddenly, it is not prudent to allow exports to fall too far behind imports. Mr Maran has decided to copy the immensely successful Chinese experiment of special economic zones. Two SEZs are to be set up in Gujarat and Tamil Nadu, while several existing export processing zones will be converted to SEZs. These are essentially enclaves within which units set up essentially for export production will get a large number of concessions. Mr Maran has indicated that he was willing to push for 100 per cent foreign direct investment in units set up in the SEZs. They would also be allowed to import capital goods and raw materials without having to pay any duty. However, he ruled out any relaxation of labour laws in the SEZs. Some others steps have also been taken to boost exports. The import regime for capital goods has been drastically simplified and liberalized with the export promotion capital goods scheme applied to all sectors. An important step with far-reaching consequences is the decision to set up a special fund of Rs 250 crore to help states create necessary infrastructure for exports. A massive increase in exports cannot be achieved simply through duty concessions. Infrastructure bottlenecks have often proved to be major constraints preventing the growth of exports and this policy initiative will hopefully improve both the quality as well as quantity of the economy�s infrastructure.    


Salutary neglect

Criminal governmental apathy � by a sort of grim logic � could be seen to have its uses. The sheer desperation of those affected could sometimes mobilize them into self-sufficient and concerted activity. Several victims of arsenic poisoning from contaminated drinking water in West Bengal have recently got together to organize its detection and treatment, without depending in any way on governmental support. Coming from districts like Maldah, Murshidabad, Nadia and 24 Parganas � comprising an area whose ground water has been fatally contaminated for a few years now � these men and women have pledged to enhance awareness regarding arsenicosis and start water as well as medical treatment programmes in badly affected areas.

The contamination of ground water in these areas goes back several years now, and is principally a result of bad water management, whereby overcultivation and excessive irrigation have caused the leaching up of arsenic along the water table. This connection and its terrible physical effects on those who have been drinking this poisoned water have been established through surveys and research, conducted mostly by nongovernmental organizations and university departments of environmental sciences. But these have failed to galvanize the state into any programme of action worth mentioning. It is still hesitating with the formulation of a comprehensive time-bound strategy of eradication and has been known to sit on substantial foreign funding, donated specifically for this purpose. This barbaric callousness regarding basic civic health and hygiene has been manifested in the rhetoric-laden inaction with which the government has dealt with air pollution, malaria and most other basic health services in the state. So, when ordinary citizens take a non-political initiative to work together with NGOs, medical volunteers, charities, and university research teams, certain modes and principles of civic action take shape that mark a step forward in the nature of civil society. This is a constructive, but pointedly dismissive, gesture aimed at the state government, born out of years of the most unforgivable neglect.    


Like any other product, the budget has also to be packaged. Yashwant Sinha has skilfully packaged the latest budget, at least so far as his proposals on banks go. This was shown, in particular, by the way it was received with warm and resounding applause when Sinha boldly � perhaps too boldly � declared that he would not allow the closure of any of the weak public sector undertaking banks. The legislators, who did not know what would be the cost, seemed to be exhilarated.

While Sinha�s declaration is, for the present, a realistic acceptance of the inevitable, he did not indicate the costs. Nor does it appear as though any of the members of parliament who applauded him appreciated in full the financial and other implications of the decision. Not to close down weak banks means Sinha has to find the funds to recapitalize these banks. He says further in his speech, �As a responsible owner, government has decided to do this, provided a viable restructuring plan acceptable to the Reserve Bank of India is made available.�

The sting is in the tail. Sinha has followed, in the main, the Verma committee recommendations. The parliamentarians showed no signs of the hostile reception which earlier the Verma committee�s report had got from the banks as well as the unions. I suppose the relief caused by the suspension of the sentence of imminent death caused a hasty reconsideration of hostile attitudes by the various parties involved.

Let us recall that one of the most important recommendations of the Verma committee involved the rationalization of staff as well as of branches. The restructuring proposals asked for by Sinha will have necessarily to indicate details of this. No restructuring plan, which would not include these details, would be acceptable to the financial restructuring authority.

Another bitter pill � bitter to the trade unions � which Sinha pushed through in the speech � was his decision to reduce the stake of the government in the banks to 33 per cent, a recommendation, which had first been made by the Narasimhan committee (II). The governor of the RBI, Bimal Jalan, had also put forward a similar suggestion a few months back in a widely reported speech.

In effect, either this means divestment of the government�s existing shares or adopting some other means of dilution of the government of India�s hold. In any other context, there would have been violent protests at a divestment proposal. There would have been angry statements that the government was privatizing the banks. Sinha has skilfully put forward an anodyne by saying that although the percentage of government holding would be reduced to 33.3 per cent, the public sector character would be preserved.

At the very outset, it is not at all clear how this would be done. It is logically inconsistent. If the public sector character is to be preserved, the residual non-government holders have to be at least less than 51 per cent. How Sinha expects to reach his reduction of the government of India�s share to 33.3 per cent, keeping the public sector character, is far from clear. One suggestion making the rounds is that the PSU banks will issue fresh capital to the public at large. No part of this fresh issue will be subscribed by the government of India, except perhaps through other PSUs, like the Indian Oil Corporation, Oil and Natural Gas Commission and so on. This may result in government shareholding coming down. But, increasing the size of bank capital through public issue may not be advisable or feasible in the case of some of the weaker banks. They already find it difficult to service even their current equity. Apart from that, the attractiveness of the new issues to the markets and investors in general may be doubtful, given their expected lacklustre results.

The finance minister has not included any specific budget provision for recapitalization of the weak banks. Is it because of the decision to keep the overall government�s share at 33.3 per cent? While I do not see any clear discussion of how the transition will take place, there are doubts that strategic alliances may be worked out with foreign financial institutions. Obviously, once this comes out, it will be a red rag to the swadeshis and the trade unions. No major foreign bank will find the PSU banks attractive without restructuring.

The finance minister�s attempt to reduce government holdings to a minority is effectively privatization by the backdoor. It is also a confession of failure of attempts at improving the efficiency of the current PSU banking system, given government majority. Parliamentarians will have a hard time understanding the complexity of the solution, which however inevitable and desirable it may be, deprives them of all power to intervene in the management of banks.

The 33.3 per cent solution suggested by Sinha is an effort to get around the various constraints which the public sector character involves. Once an institution is not owned by the government of India with a majority stake, it is not subject to parliamentary scrutiny or vigilance by the Central Bureau of Investigation.

The staff of PSU banks will also lose the protection which Article 12 of the Constitution confers on them � such as judicial review of decisions on hiring or firing and promotion. But, the snag is that these requirements will continue if the finance minister persists in his resolve to keep the public sector character of the banks.

In Jalan�s version of the transition, the chairman of the bank will be appointed by the government, even if the shareholding is 33.3 per cent. How this will be ensured even with majority in non-government hands is not clear. It behoves the finance minister to enlighten the public on what exactly is meant by his reform package so far as the weak banks go.

Sinha�s acceptance of the Verma committee proposal to set up a financial restructuring authority is also partial. Whereas Verma had suggested a national level FRA, Sinha�s proposal involves a separate FRA for each bank. The advantage of a nationwide FRA would have been that it could have monitored on a comparative basis the working of the different banks under nursing.

The precise relationship between FRA and the RBI has also to be defined in order to avoid scope for conflict. One of the most critical issues in the restructuring of weak banks is that of human relations. This human relation dimension is particularly important in so far as recruitment to top management is concerned. It is a fact that there may not be many willing takers for the posts of chief executive officers of the weak banks.

No one, but no one, will want to smudge his copybook by taking on a weak bank with all its constraints. He will have nowhere to go after his tenure. If there were a common FRA, it could have established a cadre of strong candidates drawn from business, industry and banking itself to occupy various positions, which will fall vacant in the restructured banks.

In my view, the asset reconstruction authority and the FRA have to be different. The finance minister�s proposal would, however, indicate that both are presumably to be the same entity. The finance minister has to make it clear whether there is need for a separate asset reconstruction device for each weak bank.

There is bound to be a great deal of public interest in the details of proposals of the finance minister which have been skilfully tucked away in a few paragraphs of the budget speech. They require to be spelt out in detail. I do hope the government of India will bring out a clear and transparent publication spelling out the details so that public discussion can usefully contribute to eliciting and solving issues.

The restructuring of weak banks cannot be handled by gimmicks, however elegant. Even banks with majority stake held in private banks can turn out to be liabilities to the fisc, if not properly managed. The faith in divesting the government of its majority stake as an open sesame to efficiency may have to be r considered. After all, most bank failures in Japan and the United States and in pre-nationalization India took place when the banks were in private ownership.

The author is former governor, Reserve Bank of India    


Experiments with truth and Tolstoy

Mohandas Karamchand Gandhi acknowledged his debt to Leo Tolstoy by accepting his ideas on passive non-resistance (satyagraha) to fight oppression and named his commune in South Africa after him. I am not sure if he read all that Tolstoy had written: Bapu was given to reading novels but almost certainly did not have the patience to read Tolstoy�s magnum opus, War and Peace and his delightfully romantic tale of the liaison between a young army officer and an older woman, Anna Karenina. The book that influenced his thoughts most was The Kingdom of God Upon Earth which he referred to in My Experiments with Truth.

It would appear that the two men came to somewhat similar conclusions through their own ways on the existence of God and man�s relationship with other men: Tolstoy after toying with agnosticism came back to Christianity through belief in Jesus Christ but conceded that other religions were equally valid; Gandhi never questioned the existence of God or the divinity of Sri Rama and like Tolstoy, concluded that all religions deserved equal respect.

A recent publication, Tolstoy�s Search for Meaning of Life, by Narendra Kumar of the Punjab university questions Gandhi�s faith in non-violence as a moral principle binding for all times and believes that he used it as a method to use in exigencies of time against people with conscience. He writes, �There is very little reason to believe that Gandhi would have experimented with this method (satyagraha) against a regime as that of Hitler, or even of General Franco.�

He also maintains that Gandhi or no Gandhi, the English would have left India as they left Burma, Malaya, Ceylon, Ghana and other colonies because they felt that they were no longer wanted and the time for them to leave had come. The English were more sensible than other imperialist powers like the French, Dutch or the Portuguese who had to be thrown out of their colonies by force.

There is an element of truth in what Narendra Kumar has to say. Despite Gandhi�s lauding non-violence as an eternal principle of behaviour, he watched in silence as the Indian army and air force clashed with Pakistani infiltrators in Kashmir.

And Gandhism was buried soon after the Mahatma was cremated: Junagarh, Hyderabad, Goa were annexed by force of arms: we fought three wars with Pakistan and one with China. We continue to pay lip service to the Bapu while preparing for the next violent confrontation with Pakistan.

Kumar has more to say about Tolstoy than about Gandhi. His thesis makes very good reading as he analyses Tolstoy�s mental conflicts from their origins to their synthesis. Count Leo Nikolaevich Tolstoy (1828-1910) was born in Yasnaya Pollyana, a large estate which he inherited on his father�s death in 1847. After four years of service in the army he resigned to farm his own land as he believed that living off the soil was �the only basis for a rational and honest existence�.

He was only eight when his father collapsed and died of a fit of apoplexy in a street. Nine months later, his father�s mother died of grief over her son�s death. Young Leo brooded about life and death from his childhood. The quest for truth about birth, purpose of life and what, if anything, remained after death, haunted him through the rest of his days.

He first came to believe that the purpose of life was to achieve perfection, the way to happiness was living for others through love and sacrifice of one�s own selfish interests. He practised what he taught; he worked alongside his serfs, ploughed his land and harvested it. After a hard day�s work he joined his wife and children over the evening meal, then retired to his study to read and write.

He summed up his quest in the following words: �My life came to a standstill. I could breathe, eat, drink and sleep, and I could not help doing these things; but there was no life, for there were no wishes the fulfilment of which I could consider reasonable. If I desired anything, I knew in advance that whether I satisfied my desire or not, nothing would come to it. Had a fairy come and offered to fulfil my desires I should not have known what to ask. If in moments of intoxication I felt something which, though not a wish, was a habit left by former wishes, in sober moments I knew this to be a delusion and that there was really nothing to wish for.

�I could not even wish to know the truth, for I guessed of what it consisted. The truth was that life is meaningless. I had, as it were, lived, lived, and walked, walked till I had come to a precipice and saw clearly that there was nothing ahead of me but destruction. It was impossible to stop, impossible to go back, and impossible to close my eyes or avoid seeing that there was nothing ahead but suffering and real death � complete annihilation.� It reminded me of lines, probably by Javed Akhtar: Humne jaa ke dekh liya, rahguzar say aagey bhee Rahguzar hi rahguzar hai, rahguzar say aagey bhee (I have gone and seen what lies beyond the end of the road ; It is another road yet another and another one beyond it).

Tolstoy read other philosophers, watched how the highly evolved and the utterly ignorant dealt with the questions of where we came from, why, and where we go after death.

He found his answers: There is a father god, strive for excellence as best as you can by serving mankind. The corporeal body perishes but the soul within lives on.

Gandhi accepted most of Tolstoy�s explanation of human existence.

Many memories of Mukesh

Among the many great sons of Delhi was Mukesh Chand Mathur (1923-76), known popularly by his first name, Mukesh. His first love was the stage. He acted in many plays before he took to singing. His inspiration was Kundan Lal Saigal. He rose to the top of the Hindi film playback singing. Saigal, who regarded himself as the badshah of light classical vocal music, recognized Mukesh as his heir apparent.

I rarely go to the cinema; on rare occasions when I am obliged to do so, I usually slip out unnoticed during the interval. But Hindi film songs became my abiding passion. Most afternoons I used to have my little radio transister beside me on my pillow and used to hear Aap ki farmaish through my fitful siesta. Usually I only caught the opening lines of a ghazal, but the lilt of the song and the melody lingered on in the memory for many years.

It was Saigal, Talat Mahmud, Mohammed Rafi, Lata Mangeshkar, Asha Bhosle, Vani Jairam � and of course Mukesh. To me these golden voices without bodies became just singing spirits because apart from a few brief meetings with Lata and Asha I did not meet them. Mukesh I met once when I happened to go to Chandigarh.

He had been invited as the chief guest of the local Rotary Club: he was an ardent Rotarian. He was very smartly dressed in a suit and tie, rosebud in a button hole: very modest, very shy and a man of few words.

When he died in distant Canada while on a singing tour with Lata Mangeshkar, I heard her tearful tribute to her singing partner. Ever since, my favourite film song has been Saawan ka maheena.

Memories of Mukesh were revived 22 years after his death at a piano concert by Brian Silas on an evening entirely devoted to melodies sung by him: Woh subah kabhie to aayegee, Aa laut kay aajaa meyrey meet, Kabhi kabhi meyrey dil mein khayal aata hai and O jaaney waaley ho sakey to laut key aana.

I can�t think of anyone who could have brought those songs alive on any alien instrument like the piano except for Kanpur-born Brian Silas. He is self-taught, the only musical background he had was his father who played the organ in church. And humble beyond belief.

He was content to playing in noisy restaurants of five-star hotels like Le Meridien and Maurya Sheraton till he ran into Ravi Singh who runs an advertising agency, Rainbows. She rescued Brian from these expensive dhabas and put him in concert halls, took him on tours across the country and overseas to countries which had sizeable communities of Indians, Pakistanis and Bangladeshis.

She marketed his tapes; you can hear them on Shatabdi Express. It was inevitable the two would fall in love. They plan to get married as soon as she gets her divorce from her doctor husband. She being Sikh, (she is the niece of Bibi Jagir Kaur, first woman president of the Shiromani Gurdwara Prabandhak Committee), they will have an anand karaj, then a civil marriage, followed by a wedding ceremony in church. Brian has found a sardar beauty, Ravi has found a Christian gentleman and a genius.

As they say in Mumbai

What is a gay Maharashtrian called ? Deccan Queen.

What do you call a Westernized Maharashtrian? Western Ghat.

What do you call a Maharashtrian tailor? Sadashiv.

Which Maharashtrians wrote the book Apartheid in South Africa? Dhaval Gore and Krishnakant Kale.

(Contributed by Amir Tuteja, Washington)    


Wasted expertise

Sir � Both Mohammed Azharuddin and Laloo Prasad Yadav have stunned critics with their recent �performances�. They emerged successful against all odds, even when everyone from cricket experts and psephologists to the common man had written them off. That Azharuddin has emerged triumphant on his own merit, while Yadav has conquered the �electorate�s heart� through dubious means is besides the point. The fact remains that both made critics eat their words. Cricket and politics are so unpredictable that no matter what opinions �experts� hold, the �subjects� of their research and expertise always succeed in surprising them. Earlier, experts in newspapers had also written off Sourav Ganguly and Jyoti Basu. But one has now become the captain of the Indian cricket team while the other was close to becoming the prime minister of the country. The most interesting part of cricket and politics is that the twists in the tail come at the last moment. Why spoil the fun of speculating on climaxes?

Yours faithfully,
Kajal Chatterjee,

Intelligence block

Sir � P.K. Vasudeva gets some of his facts wrong in �Divide and overrule Kashmir� (March 17). First, the duties of the paramilitary forces are very different from that of the army. Two, different paramilitary forces have different functions For example, the function of the Border Security Force is to protect the borders, not to take part in counter-insurgency operations. Three, it is not right to say that these forces are trained to maintain internal security. In this regard, the role of the Central Reserve Police Force is not clearly defined and this has allowed bureaucrats and politicians to exploit it easily. The CRPF is deployed for everything from guarding VIPs, airports and banks, to helping the police maintain law and order during riots and providing relief during natural calamities. In recent times it has also been employed in counter-insurgency operations in the Northeast and Jammu and Kashmir. About 80 per cent of the CRPF�s forces is involved in these operations.

In these operations it is subordinated to the army, though its duties are similar. Neither are the perks, benefits and salaries the same. Counter-insurgency operations are best left to the army and specialized units like the Rashtriya Rifles and Assam Rifles. The paramilitary forces should help the police with law and order, the failure to maintain which is the root cause of insurgency. It is not entirely true that operations Meghdoot and Rhino were successful because of the unified control of the army. It must not be forgotten that the CRPF and BSF tackled insurgency in Punjab without the help of the army.

To improve the CRPF�s functioning, command and control of its operations should lie with it and not the army. Goals and duties should be clearly laid down and it should be manned by officers who have risen from the ranks rather than by Indian Police Service officers who have no idea about the force or its problems. Often officers of the CRPF spend their entire career in the Northeast and Jammu and Kashmir, exposed to continuous threat to life and limb. This long exposure to adverse conditions leads to the inevitable erosion of motivation. The men are always on the move, living conditions are basic � even officers live in huts. Unless better service conditions are provided, raising specialized battalions will not be the answer.

Yours faithfully,
Subhash Kr Yadav,

Sir � The editorial, �Unintelligent� (Feb 28) made interesting reading. The Kargil review committee headed by K. Subrahmanyam, has laid bare the rot in India�s national security system, including the apex intelligence body, the research and analysis wing. Even the little intelligence gathered, however belated, was ignored by both the military and government. However, such lapses by intelligence agencies in India, whether due to negligence or irresponsibility, are nothing new. In 1962, the Chinese had declared a �ceasefire�, but the Indian government reportedly came to know of it only through the newspapers the following day and not through the intelligence agencies.

In 1965 again, it was a Kashmiri shepherd who provided the information that the Pakistani forces were only a few kilometres away from the ceasefire line. In 1977, Indira Gandhi is said to have ordered elections � which she lost � on the basis of misleading information provided by the Intelligence Bureau. The agencies also goofed up on information about Jayaprakash Narayan�s activities in Bihar. Intelligence agencies are supposed to be the eyes and ears of the country, but this is clearly not the case in India.

Yours faithfully,
N. Bose,

Sir � During the Kargil war, it was seen that that guerrilla tactics of mountain warfare were extremely useful to the Indian defence forces in fighting against the infiltrators from Pakistan. A guerrilla force needs to be raised with people who are skilled in mountaineering and have the presence of mind to negotiate tricky situations. Mountaineering or trekking is quite a fashion among young people. They consider it a good sport. Many institutes have come up for the purpose. The government must pay attention to the curricula of these private institutions, picking out a few skilled mountaineers for intensive training so that their skills can be utilized in the national interest.

Yours faithfully,
Amarnath Chakraborty,
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