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Just how to regulate wisely - remains the question today

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In the West, the Left tries to conserve the welfare state. The liberal, economic right wants to dismantle it. Beyond that, the distinctions are blurred. The Right has accepted transfers to the poor but it wants them to be efficient. The Left no longer wants government to run businesses. Few oppose the market - the debate is on how to regulate it wisely. Read more in this TOI column.

We too are moving in the same direction, and correctly so - except some refuse to see it. In this post, I had stated that government appears to have made up its mind to get out of manufacturing. However, even today, units like KSDL, KAVIKA, etc continue in business only to perpetuate all kinds of artificialities in their respective domains.

For the sake of KSDL, the government has to 'protect' the sandalwood tree. The text of the letter I sent to the press in Nov, '07, in this connection, is reproduced below:

Veerappan was just an ordinary tribal living of forest produces until the government turned him into a criminal (sandal-wood smuggler), and later to a monster, using some archaic law, the need for which nobody quite understood fully. Somewhere along one had read that the law was being amended making dealings in sandal-wood a lot more liberal. Apparently, that is not quite so, going by the reports about Natesan Antiquarts, who by all appearances were doing a fairly good job of promoting age-old Indian traditions in handicrafts by creating a lucrative market for them in wealthier homes in India and abroad, landing up at the receiving end of the law.

The fact of the matter is that there are so many laws in this country that even by the mere act of breathing fresh air, you may be violating one, and the numerous babu's who have nothing better to do, can use it against you to extract their pound of flesh. It is a true testimony to the spirit of Indian entrepreneurship that it is flourishing inspite of all these.


BESCOM is obliged to procure not less than 50% of its requirement of distribution transformers from KAVIKA. Incidentally, KAVIKA's original name was Government Electric Factory (GEF). Back in the 60s, the government decided that it needed to upgrade technologies and promoted NGEF (the N here being for 'New'). NGEF was a technology and market leader during its heydays. All the same, the government didn't bother to sustain it - politics playing a major part in its eventual death. The GEF (or KAVIKA), even with its outmoded technology and Jurassic age facilities, chugs along merrily, thanks to BESCOM patronage - another reason why power distribution desperately needs to be privatised - read more here.

Muralidhar Rao

Comments

idontspam's picture

QOL matters not Ideology

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Interesting that I had this conversation today with someone while driving to work on how quality of living matters to the voter rather that ideology. The TOI writer is on the spot in his assessment. We were discussing how the Nordic region where he comes from puts up with socialism and super high taxes and still there is no major revolt from the people. While the slightest hint of tax increase in India can bring down the govt.

I believe while nordic countries charge high taxes the benifits largely is fed back to the tax payer while in India it dissappears into MP's pockets to be brandished about indecently in parliment. Some steps include

1) Remove corruption and plough back ill gotten wealth back to society. How much money can the politicians and bueraucrats hoard anyway? some have enough for generations and are still greedy. What happened to the regulator who ensures this? Well I know he is himself hoarding up.

2) Improve social security system. Privatization of EPF fund management started as of yesterday. Is it enough? Where are minimum garuntees for the poor with no income and minimum wages which are realistic to the prices prevailing in the market today (the 25 paise doesnt exist anymore and the 50 paise will dissappear soon) Where is the regulator who can ensure this?

3) Protection of consumer rights. We were discussing the difference btwn how the consumer is treated in the west Vs how the indian consumer is treated like a cash box.  Companies recall products voluntarily when a defect is found while the same MNC's in India pawn off defective products and take the consumer for a ride. Forget recall we have to stand in court to get our money back. Points to lack of regulatory penalties for such misbehaviour. Regulator is reactive has no rules for doing business in india.

4) Financial market are gettin around and being regulated better (RBI and SEBI are working well) 

But thats it in 17 years of deregulation, baby steps in financial markets, swindled and looted by manfacturers. No social security cover for underpriveliged. In the name of deregulation we have let loose anarchy. We need to fix the anarchy. We are not going to be super power we havent passed kindergarden in maturity. Ideology doesnt even need to be discussed as it is a tactic of the swindlers and mentally bankrupt

navshot's picture

Sandalwood...

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KSDL or not, I understand that sandalwood is in short supply. I mean, more demand than supply, very similar to elephant tusks. To me it makes sense to protect both of them.

-- navshot

-- navshot
murali772's picture

artificialities

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In a liberalised regime, if the demand for sandalwood increases, people will start farming it to meet the demand. Government creates unnecessary artificialities.

Ivory trade, on the other hand, is prohibited and rightly so, to protect elephants.

Muralidhar Rao

Muralidhar Rao
navshot's picture

Re: artificialities

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But in reality, they (source of supply chain) take the easy route - cut trees illegally from core areas of the forests and from anywhere else they're found, esp. as it takes years to get the yield if they had to farm it. I think the special treatment is there, as it demands high price as compared to other types of wood.

-- navshot

-- navshot
shas3n's picture

ಗಂಧದ ಮರ..

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ಅಯ್ಯೋ, ನಿಜ ಹೇಳಬೇಕು ಅಂದ್ರೆ ಗಂಧದ ಮರಕ್ಕೆ ಕಮ್ಮಿ ಏನು ಇಲ್ಲ ಸಾರ್. ನಮ್ಮ ಸರ್ಕಾರದವ್ರು ಮಾಡಿರೋ ಓಬಿರಾಯನ ಕಾಲದ ಕಾಯ್ದೆನೆ ಗಂಧ ಅಪರೂಪ ಆಗೋಕೆ ಕಾರಣ. ನಮ್ಮ ಮಲೆನಾಡಿನ ಕಡೆ ಗಂಧ ಬೇಕಾಬಿಟ್ಟಿ ಬೆಳೆಯುತ್ತೆ (ಜನ ಬೆಳೆಯೋಕೆ ಬಿಟ್ಟರೆ). ನೀರು ಗೊಬ್ಬರ ಏನು ಬೇಕಿಲ್ಲ. ಆದ್ರೆ ನಮ್ಮ ರೈತರು ಗಂಧದ ಸಸಿ ಕಂಡ ತಕ್ಷಣ ಏನು ಮಾಡ್ತಾರೆ ಗೊತ್ತಾ? ಬುಡ ಸಮೇತ ಕಿತ್ತು ಬಿಸಾಕ್ತಾರೆ. ಯಾಕೆ ಅಂದ್ರೆ ಸಸಿ ಸ್ವಲ್ಪ ದೊಡ್ಡದಾಯ್ತು ಅನ್ನಿ, ಫಾರೆಸ್ಟ್ ನವರು ಬಂದು ’ಇಂತಿಂತಾ ಜಾಗದಲ್ಲಿ ಇಂತಿಂತಾ ಗಂಧದ ಮರ ಇದೆ’ ಅಂತ ಬರೆದುಕೊಂಡು ಹೋಗಿಬಿಡ್ತಾರೆ. ಅವ್ರು ಬರ್ಕೊಂಡು ಹೋದ್ರು ಅಂದ ಮೇಲೆ ಪಾಪ ರೈತ ಕಣ್ಣಿಗೆ ಎಣ್ಣೆ ಹಾಕ್ಕೊಂಡು ಅದನ್ನ ಕಾಯ್ತಾ ಕೂತಿರಬೇಕು ಮಾಡೋ ಕೆಲ್ಸಾ ಬಿಟ್ಟು. ಒಂದು ವೇಳೆ ರಾತ್ರಿ ಯಾರೋ ಕಳ್ಳರು ಬಂದು ಅದನ್ನ ಕಡ್ಕೊಂಡು ಹೋದ್ರು ಅಂದ್ರೆ ಫಾರೆಸ್ಟ್ ನವರು, ಪೋಲೀಸ್ ನವರು ಎಲ್ಲ ಬಂದು ನೀನೇ ಕಳ್ಳ ಅನ್ನೋ ಥರ ದಬಾಯಿಸ್ತಾರೆ ಆ ರೈತನ್ನ. ತಲೆ ನೆಟ್ಟಗೆ ಇರೋ ರೈತರು ’ನಮಗೆ ಯಾಕಪ್ಪ ಈ ಉಸಾಬರಿ’ ಅಂತ ಸಸಿನ ಕಿತ್ತು ಬಿಸಾಕಿ ಬಿಡ್ತಾರೆ. So this is one clear example where the very laws that are aiming to protect sandalwood are causing their destruction. With the current laws, there is no way an investor can invest in farming sandalwood legally and gain profits as freemarket dictates. Navshot, I agree that the 'least resistance' route will be followed. In fact that is what is happening now. But if the laws are liberalised, then a point will soon come when it is more economical to systematically grow sandalwood than to chopdown trees from forests. -Shastri

-Shastri

tsubba's picture

ಅಪರಂಜಿ

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ಅಪರಂಜಿ ಬರಹ ಫಾರೆಸ್ಟ್ ನವರು ಬಂದು ’ಇಂತಿಂತಾ ಜಾಗದಲ್ಲಿ ಇಂತಿಂತಾ ಗಂಧದ ಮರ ಇದೆ’ ಅಂತ ಬರೆದುಕೊಂಡು ಹೋಗಿಬಿಡ್ತಾರೆ. ಅವ್ರು ಬರ್ಕೊಂಡು ಹೋದ್ರು ಅಂದ ಮೇಲೆ ಪಾಪ ರೈತ ಕಣ್ಣಿಗೆ ಎಣ್ಣೆ ಹಾಕ್ಕೊಂಡು ಅದನ್ನ ಕಾಯ್ತಾ ಕೂತಿರಬೇಕು ಮಾಡೋ ಕೆಲ್ಸಾ ಬಿಟ್ಟು. ಒಂದು ವೇಳೆ ರಾತ್ರಿ ಯಾರೋ ಕಳ್ಳರು ಬಂದು ಅದನ್ನ ಕಡ್ಕೊಂಡು ಹೋದ್ರು ಅಂದ್ರೆ ಫಾರೆಸ್ಟ್ ನವರು, ಪೋಲೀಸ್ ನವರು ಎಲ್ಲ ಬಂದು ನೀನೇ ಕಳ್ಳ ಅನ್ನೋ ಥರ ದಬಾಯಿಸ್ತಾರೆ ಆ ರೈತನ್ನ.
shas3n's picture

Liberalise or regulate?

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I personally believe in government stepping out of the way in such matters where market economics can help everyone to be happy.

From a very relevant piece in Indiauncut,

Now, what happens when you ban something that has a high demand? The underworld gets in. As it operates beyond the arm of the law, there is no transparency, and the cost to consumers is higher. It is hard to monitor and, since it’s illegal, there is no industry mechanism to do so.

The writing talks about betting, prostitution and drugs, but I guess the underlying theme is very relevant here.

ಸುಬ್ಬಣ್ಣಾ,ಥ್ಯಾಂಕ್ಸು! ತೇಜಸ್ವಿ ಪುಸ್ತಕಗಳ ಸಹವಾಸ ಸಿಕಾಪಟ್ಟೆ ಮಾಡಿರೋದ್ರ ಪ್ರಭಾವ.

-Shastri

-Shastri

navshot's picture

Liberal sandalwood trading

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Shastri,

I'm all for liberalisation. But here, I'm talking of protecting the sandalwood trees, esp. in the forests. I'm all for govt. allowing people to freely grow and sell sandalwood. But still, the'd have to be protected in the forests.

Ok, let's say govt. does indeed give free hand to farmers/private to grow and sell on their own, then...

1. First question that comes to my mind is, how many people would want to plant them given that they may not even be alive to see the benefits? Best sandalwoods are those that are 40-60 years old trees. The quality of sandalwood is lower if they are harvested 30 years or earlier.

2. Ok, lets assume that people do plant and sell off lower quality ones before 30 years. Then, there would still be a need for high quality ones and that makes trees in the forest still vulnarable. 

3. Assume, people plant them so that their next generation benefits by not harvesting before 30-40 years. Now, how do you protect them? As long as the it commands a high price, thiefs would be waiting for that one night when gaurds take it easy. It's a risky business. No one would want to make it their main business.

4. Assume, some among them sort out all these with heavy security and all that. How can we be sure that we meet the demand that is going to be there 40 years from now? The lead times are huge. Easy way out: cut the trees in the wild.

No matter how I see it, I don't think we can protect them in the forests in the near or far future by just changing the laws. KSDL or not (there is a huge foreign market for its oil and other uses), there would be Veerappans - rogues disguising as tribals - who'd continue to chop them off to extinction in the wild.

-- navshot
-- navshot
Gautamrao's picture

You have missed a point

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Dear Navshot,

Regulation in the Sandalwood industry has proven to be counter-productive. Officials of the forest department in connivance with smugglers have been poaching on Sandalwood trees and given the fact that nobody wants to grow sandalwood, the species are in grave danger and could face extinction in a decade's time. The consequence of regulation has meant corruption and illegal trade on one hand and no new sandalwood trees grown on the other hand. This has led to high prices of sandalwood and also the threat of extinction.

Gautamrao's picture

Experts need to decide

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You have made some excellent points. I am also very concerned about protecting them. As you rightly pointed out, the life span of a sandalwood tree is very high and people and poachers would try to take the easy way out by cutting old trees in forests and by cutting young and pre-mature trees elsewhere.

Having said that, I still feel that by liberalising, and same time by protecting the trees in forests, we would be atleast be able to prevent extinction. Poaching will still continue but they will have another route - maybe a much longer one. Some scientists may try to invent a hormone that induces growth. Some farmers will definately plant them in their farms even if they have to wait for generations. Somehow at the end, the species would be saved. If we continue the same way, poachers, foresters and police will bring the species to extinction. It is for experts to deliberate further as to how to liberalise, how much to liberalise, how to protect existing forests and most importantly, how to encourage sandalwood farming.

murali772's picture

all trees need to be protected

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In the forests, all trees need to be protected - not just sandalwood. And, further, today, trees other than in forests also need prtection.

Muralidhar Rao

Muralidhar Rao
navshot's picture

Govt. liberalizes Sandalwood trading...

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This report appeared in Deccan Herald. 

Gautamrao, maybe I've been beating around the bush all along in this thread. Let me shoot my views and points point blank (please read Murali sir's original post before this):

- Did I say past laws are not the culprits for current state of affairs on sandalwood? No. I think they are the primary culprits.

- Is KSDL to be blamed for that? No! KSDL or not, there is a huge international demand.

- Was Veerappan an ordinary tribal who didn't commit large scale smuggling? No! Veerappan was a notorious smuggler who cut and smuggled thousands of tons of sandalwood and killed over a thousand elephants for ivory.

- Given that we are where we are, can changes to laws alone protect a species on the verge of extinction? No! The price it commands is so high that by just changing the laws we can't protect them.

-- navshot

-- navshot
murali772's picture

one-sided debate

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Excerpts from an article titled "The much maligned public sector" which has appeared in today's Deccan Herald (http://www.deccanherald.com/Content/Oct142008/panorama2008101394963.asp), and my responses to them (in red), posted in the CAF google-group:

Aping the capitalist model for our economy is not the panacea for the ills affecting our economy. In fact, the debate 'public sector Vs private sector' is unproductive as there is scope for better interaction and support between the two sectors, which could be a model for other developing countries. One shouldn't forget that without the infrastructure provided by the PSUs our process of industrialisation couldn't have taken place so fast.

They did play a role, but whether it could have been a lot better if the country had followed C Rajgopalachari's route is a matter for debate. 

Let there be a competition between PSUs and the private sector on a level playing field. ( I would even say on a slightly sloping field favouring PSU's - but, monopolies should go) of. Of course, PSUs need not operate in certain non-essential fields that are best served by the private sector.
Upto about a few years back, telecom, civil aviation, insurance, banking, etc were all considered fields where government's presence was essential. Today, I can think of only defence, policing, primary education, primary health, and a very few other areas as  where their presence is essntial. Also, apart from a rare BEL or a BEST (Bombay bus service provider), I wouldn't consider many other PSU's as real "ratna's". Even a BHEL's strength can be attributed largely to the 'price preference clause' in government tenders.

Political leaders, including ministers, should keep off the affairs of PSUs (Isn't that essentially where the problem lies?) except to provide overall guidance. The role of employees and  labour unions is also important in improving the efficiency of the units and for accepting changes willingly.

The labour aristocracy in the public sector is what is responsible for holding back labour reforms, therewith contributing in a large way for the employment-less growth.

Moreover, fruitful co-operation between PSUs and the private sector could benefit both, while reducing costs and improve production as well as distribution.

I am not enlightened any by this article. And, more and more, it’s getting to be a one-sided debate.

 

 

Muralidhar Rao

Muralidhar Rao

Centralisation of credit in OECD markets

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After this financial crisis, the maximum that the US is going to do is to take stake in companies such as AIG, Washington Mutual *without* voting rights. Even after that, the Feds in Washington DC will not dictate to those corporations as to whom they should be lending to and other such nitty gritties. $700 billion is quite paltry for an economy of $10 trillion. And the best part is that the US debt is in *their* currency, unlike the Asian financial crisis when the Asian nation's debt was in dollars. Considering that they are sitting on virtually free oil in Iraq, which they invaded, i doubt the US is going to suffer a bad recession. The biggest problem with the Indian financial sector, read the PSU banking system is that they failed to even moderately lend to SMEs. China is miles ahead of India only because it assidiously promoted SMEs thorought the nation from Lhasa to Hunan. Celebrating that the Indian financial sector was not affected by the earthquake on Wall Street is like celebrating that your village was not destroyed because you had no sky scrapers in it!
murali772's picture

long overdue move

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In a fallout of the Tatra truck scam in which public sector undertaking Bharat Earth Movers Ltd (BEML) allegedly sold “over-priced” Tatra trucks to the Indian Army, defence minister AK Antony has instructed the three service chiefs that PSUs should not be the preferred choice in awarding defence contracts.

For the full report in the New Indian Express, click here.

The only reason for retaining the BEML's of this world as PSU's was perhaps on account of their being large suppliers to the defence services. Now that that privilege has been withdrawn, where is the need for that to continue? On the other hand, there is every need to bring about better accontability, which can happen a lot better when the government disinvests from them, and they are subjected to the rightful scrutiny by the regulators as well as the market forces.
 

Muralidhar Rao
murali772's picture

Sandalwood tragedy

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Is there a crisis in Gandhada Gudi (temple of sandalwood) as Karnataka prides itself? Experts at an international seminar here on Wednesday believe there is.

They cited the increasing instances of smuggling of sandalwood and the sharp dip in its production to back their crisis theory. The seminar 'Sandalwood: Current Trends and Future Prospects' was organized by the Institute of Wood Science and Technology (IWST).

Where did things go wrong? "State ownership was a cause of concern. Despite opening it up for farmers to grow this commercially-profitable species, apart from forest lands since 2001, the prohibition on free trade has been a big area of conc
ern," said HS Anantha Padmanabha, forestry consultant.

"The only tree in the world which is sold in kilograms, sandalwood in its natural habitat is always a plant. Before it grows into a tree, it is cut and smuggled out. Farmers initially struggled to grow sandalwood over a height of 1 foot, but now they're cultivating it successfully. The problem lies with the state's policies," said V Ramakantha, director, IWST.

Significantly, the government of Karnataka retracted this monopolistic policy in 2001, and Tamil Nadu did so in 2002, liberalizing sandalwood cultivation and harvesting by individual entrepreneurs and corporate bodies. Yet, they retained control at all levels. Farmers in Karnataka can sell their produce only to government agencies.


The experts hoped the Sandalwood Protection Bill, the draft of which was placed before the Centre in August 2012, will make a difference. They felt the rules must be farmer-friendly.

For the full report in the ToI, click here.

The farming liberalisation happened in 2001. From then, it has taken over a decade to place a bill before the centre to correct certain anomalies. But, when the caption of the bill has the word "protection" in it, I am not sure, it's going to make much of a difference. Sandalwood needs protection more from the government than anybody else.

And, another decade down the line, the another international seminar will be held, delegates will fly down from across the world, will make similar noises, wine and dine, and go back home. And, the Sandalwood tragedy will continue to cause shedding of bucketfulls of tears for the sacred tree.

Muralidhar Rao
murali772's picture

Rosewood suffering same fate

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The following was the comment by CB in a googlegroup is response to my posting a link to the debate on it:

Yes, Govt created the shortage. Now people with young sandal trees chop them down to prevent outsiders with guns getting there when the trees grow a bit older (Is legal to chop the young plants down).

The same is happening with rose wood. Some people let the fallen trees rot, rather than let the govt officials get into the act (if they ask for permission to use the wood) and persecute them. Obviously, they cut down the saplings on their properties so they do not have to deal with this later.
 
Will the government ever get down to removing such artificialities from life?

Muralidhar Rao
srinidhi's picture

Authorities are hand in glove

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The tree smugglers can be really audacious..last december they cut and stole a sandalwood tree from lalbagh..in front of the directors office..with guards already stationed there..

Its really hard to do something like this w/o the authorities knowing it..so they are easily involved in it..

Rosewood takes wonderful polish after cut but its brittle..but as a tree it looks amazing..

only if people can appreciate the true wealth when the tree is alive..

Its not just the authorities..its the society itself which is sick!

srinidhi's picture

CID HQ targetted

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Sandalwood trees have been 'stolen'  from the state CID HQ..can it get any worse?

For all we know, the same cut trees will end up as gandadha koradu at the homes of officials..or even adorn the homes!

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