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Learnings from Delhi's power supply privatisation

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DELHI has never been inviting in May and June. This summer, the capital saw its worst power crisis, and frayed tempers pushed Sheila Dikshit’s government on the back foot. Power cuts lasting 12 to 15 hours a day became routine, especially in the worst 20 days of June when the temperature shot beyond 44{+0} Celsius. Since then, every aspect of power generation and distribution has been under the scanner as the government found it hard to explain a crisis of such magnitude after the much-publicised privatisation of power distribution in 2002.

When power reforms began in 2002, the Delhi Vidyut Board (DVB) was unbundled into three privately owned distribution companies – a power transmission company, a power generation company and a holding company that held most of the DVB’s pre-privatisation liabilities. Following the unbundling of the DVB in July 2002, the business of power distribution was transferred to North Delhi Power Limited (NDPL), owned by the Tata group; BSES Yamuna Power Limited (BYPL); and BSES Rajdhani Power Limited (BRPL), owned by the Anil Dhirubhai Ambani group. All this was part of the Delhi government’s effort to increase the efficiency of power distribution. These entities function as joint ventures with the Delhi government, but they hold 51 per cent of the shares.


For the full report that appeared in the Frontline, click here

The imperatives of privatisation of distribution of power, particularly in urban areas, has already been discussed threadbare here. Now, if the processes taken up are not going on too smoothly, let's examine the why of it all, based on the above report.

Points of note from the report:
1) Private discoms have proved more efficient than the DVB is the reduction of power losses and thefts. The losses, which were at 52.3 per cent in 2002-03, are now down to less than 20 per cent.

This means the freeing of a capacity of close to 1200 MW, which otherwise would have required an additional investment of Rs 6,000 cr.
 
2) More and more people now question the very basis of the privatisation decision, which has so far only meant power cuts and rising tariffs for the people and higher subsidies for the government.

At a gathering of Socialists, convened essentially for privatisation bashing, that I attended a few years back, a lady went on to blame TATA’s and Reliance for the faulty meterings in New Delhi, after they took over the distribution, and went to lament that A/C, which she termed as a necessity in the Delhi summer, has now become unaffordable for even the middle classes. The fact of the matter, however, is that the consumers in Delhi had so far been ‘managing’ the government-owned DESU very well, and, with the private sector players taking over, the consumers are now having to pay the actual costs.

There was another gentleman who went on to state that ‘electricity’ is now a necessity, and therefore, should be treated as a ‘fundamental right’. The question that arises simultaneously is whether A/C in Delhi should likewise be treated as a fundamental right, even as the poor in the villages are roasting in the summer heat because of the incompetencies of the government service providers. For more on that, click here

3) NDPL, however, seemed to perform better, mainly because of its strong human resources and the infrastructural upgradation it undertook over the past few years.

Perhaps, brings out the difference between TATA's and Ambani's.

4) The Reliance-backed BSES has been operating for seven years, but its chairman, Lalit Jalan, admitted that the old distribution network had not been replaced. “Around 50 per cent of the network is old and needs replacement. Old transformers are prone to breakdown,” he said. Upgrading the whole system would have made power supply “unviable for consumers in the long run”, he added.

However, replacing the transformers was part of the mandate for the private discoms when they took over from the DVB. Instead of spending money from their own pockets, the utilities are now demanding investment from the Centre. On their behalf, the Delhi government has also sought funds from the Union Ministry’s Rs.50,000-crore national scheme for power infrastructure development.

The Accelerated Power Development and Reforms Programme (APDRP) would give Delhi around Rs.300-400 crore as part of the funding, according to a newspaper report. “The money will only be used for better services. Why should Delhi consumers not benefit from Central funds just because their power distribution is privatised?” asked Arun Kanchan of BSES. The three discoms, however, are rich with a surplus of Rs.938 crore, and BSES claims to have spent Rs.3,500 crore on infrastructure upgradation.


The Delhi government still stands by its claim that decentralisation makes the power sector more efficient. However, the Public Accounts Committee (PAC) of the Delhi Legislative Assembly during the previous Sheila Dikshit government criticised the whole process of privatisation in its report in 2006. The committee, headed by a Congress member, S.C. Vats, accused the core committee of the State government of bending all “rules and colluding” with the business houses to “accrue monetary benefits” to the latter.

The PAC reportedly recommended an inquiry by the Central Bureau of Investigation (CBI) to ascertain the circumstances that led the members of the committee to go against the interest of the public exchequer by favouring the conditional bidders. The BJP, citing a CAG report, alleged that there was a Rs.12,000-crore scam in the power sector, and this became a campaign issue in the last Assembly election.

BSES has also been notorious for quoting an exaggerated Aggregate Revenue Requirement (ARR) to be approved by the Delhi Electricity Regulatory Commission (DERC). For instance, in 2004-05, BRPL claimed Rs.800 crore as capital investments. Of this, the DERC cleared only Rs.525 crore. For the same year, BYPL claimed Rs.700 crore, but the DERC cleared only Rs.416 crore.


The Tata-owned NDPL, in contrast, claimed Rs.328 crore – all of which was cleared. The DERC also complained, in the same year, that both BRPL and BYPL had spent just 40 per cent of the capital expenditure approved by it towards improving the power distribution network in the capital. The scorecard of NDPL is better: it spent almost 75 per cent of the capex approved by the DERC. Earlier this year, the DERC also sent notice to the discoms to replace faulty meters following numerous complaints of abnormally inflated electricity bills.

Reliance got into this business by acquiring BSES in Mumbai, which already was a fairly efficiently run set up, in the private sector. As compared to that, taking over from where the 'government boards/ undertakings' were earlier operating, is a far trickier job. So much so, even after seven years, Reliance and TATA's are still trying to chart their way through the minefield that had been laid out by the erstwhile DESU, in Delhi. In Orissa, in fact, a foreign player gave up and ran away after handing it over to RPG of Kolkata, for some salvage value. Based on the learnings, perhaps it can happen faster now. But, the greater the delay, the more difficult it's going to be.

It can perhaps be said in defence of Reliance that they may be tending to compare their financial performance in Mumbai with that of Delhi, and finding it comparatively unremunerative, are playing around to get the state to invest more (rather than pumping in their own money), using the various enabling clauses they would have managed to introduce into the contract in fine print. These pitfalls are inevitable when you allow the government agency to be run to ground, and then out of desperation look for a competent player to take over. This once again brings out the urgency for the government to divest itself from these functions early.

As for TATA's, this being their first full-fldged foray into distribution, they are not carrying any baggages, and are perhaps able to approach it totally objectively, and from a long-term point of view. This of course is apart from the intrinsic differences between TATA's and Ambani's.   

5) However, according to a Power Ministry report, all the three discoms have, in fact, sold 5.4 million units of energy through power exchange for Rs.5.35 crore between June 21 and June 29, the worst phase of the power crisis in Delhi. Power Ministry officials, who did not want to be quoted, said that despite the shortage of power in the capital, the three discoms had a history of selling power for profit and being stingy when it came to purchasing power for the city. In the monthly report of the Central Electricity Regulatory Commission’s (CERC) short-term transactions of electricity, compiled by the Market Monitoring Cell, Delhi ranked among the top five power sellers of the country both in the open market and through bilateral agreements for the first three months of 2009. But it ranked among the bottom five in purchasing power.

“The DVB, under the Delhi government, functioned with the sole purpose of providing service, but the private discoms are here for profit. If a company makes profits, it is also expected to upgrade its service and infrastructure, but BSES has not spent much on its units and it does not have adequate human resource to address people’s grievances. Since the power sector is one that directly affects people, accruing profits should be secondary. This situation is only one of the negative outcomes of the privatisation of such an important sector,” one official said. A.K. Sah, former Chairman of the NTPC has a similar view: “The discoms are being very commercial by not buying expensive power when consumers are suffering.”

I wonder what the regulator is doing. Clearly calls for strengthening the regulatory mechanism

6) Delhi Transco Limited, under the Delhi government, is responsible for wheeling power to the discoms and is known for having the lowest transmission loss in India. The discoms, therefore, seem to be the only entities responsible for the situation.

If they are known for keeping the losses at the lowest level compared to any other transmission company in the country, that is indeed commendable. However, transmission is a fairly simple function, requiring very little man-power, and consequently the efficiency can be quite high. Even our own KPTCL does a fairly good job of it.

Conclusion:  Well, like I have stated before, it's nobody's case that privatisation is the panacea for all the ills. There will continue to be problems. But, like the late Sri C Subramaniam had once stated, atleast these will be new problems, and not the same old ones for which we have no solutions for over half a century.

Further, apart from Delhi and Mumbai, the cities/ areas that 'enjoy' power supply from private companies are Ahmedabad, Surat, Kolkata, Greater Noida, and in all these places, the customer satisfaction and profitability levels are far higher than elsewhere where the supplies are with government companies/ agencies, all being subject to uniform regulation by the respective SERC's. So, there must be enough merit to it. And, perhaps learning from the experiences in Delhi, the switch-over in other cities can happen more smoothly.

Muralidhar Rao



 

Comments

murali772's picture

some interesting mail exchanges

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VB mailed the this link to an article titled 'Smog smothers scams in Delhi' in 'The Pioneer', on the ill effects of Delhi power distribution privatisation, a select group, adding besides his comment "maybe the next gravy train is : WATER in Delhi DJB? Why shd they leave that behind? Despite the PWC, DJB, WB scam of 2005"


I responded with
Interestingly, the report is silent on the performance of the other licensee - TATA's. Is it because it is good? Reliance has never covered itself in glory anywhere. Whatever, it wouldn't be wrong to rate their performance in Mumbai as good.

For all the criticism in the report, Madame Sheila Dixit appears set to break Jyoti Basu's record for getting re-elected. And, the Delhi electorate are known to be more discerning in their choices.

For a more balanced assessment of the Delhi power supply privatisation, I would recommend a reading of the report by organisations like PRAYAS of Pune, based on some of which I have attempted a summing up here(above). However, those who choose to subscribe to the views in "Pioneer", may also want to subscribe to this too.


VB came back with
Did the DERC order not affect the TATA's and if so will they / have they raised tarriffs

Am not sure if the Prayas report was relased prior to the order and since a 30 % proposed annual hike is unprecedented any where in the country and also since such an order has come after privatisation it raises issues of prifits, trading & both resource and tariff equity and power for whom!

Can a post-privatisation order such as this be cjhallenged on the above grounds. the annual reports of the companies in the years following the order will reveal the real impact

Elections are fought on many grounds and difereing issues. The comparison could be to SMKrishna and chandrababu naidu then CM's of Karnataka and AP who in their reforms zeal for serving investment destinations and urban areas lost elections, There were famrers agitations and now both states have govts who came to power on free power to farmers planks

As much as Shelia dixit brought in DVB privatisation she also got a major BRT corridor in and CNG buses as well as stopped the privatisation of DJB due to widespread public pressure and the scam



DKP came in with
Couldn't find the Prayas report.  Found this TOI article though:  'Privatisation no solution to power problems: Prayas'

The Frontline report referred to in the Praja post is pretty downbeat on privatization.  It concludes that there was only one improvement - power losses & theft were brought down from (unreliable/ inflated) 53% or so to 20% or so.  BESCOM has the corresponding figure at 9.5%.



I responded with
The Frontline report is what I have tried to analyse here (above). And, quite like PRAYAS, what I have stated (in the concluding para) is appended below:

"It's nobody's case that privatisation is the panacea for all the ills. There will continue to be problems. But, like the late Sri C Subramaniam had once stated, atleast these will be new problems, and not the same old ones for which we have no solutions for over half a century.

Further, apart from Delhi and Mumbai, the cities/ areas that 'enjoy' power supply from private companies are Ahmedabad, Surat, Kolkata, Greater Noida, and in all these places, the customer satisfaction and profitability levels are far higher than elsewhere where the supplies are with government companies/ agencies, all being subject to uniform regulation by the respective SERC's. So, there must be enough merit to it. And, perhaps learning from the experiences in Delhi, the switch-over in other cities can happen more smoothly
."

Delhi apparently is now paying a high price for having delayed the reforms process. Bangalore will perhaps have to pay an even higher price. Actually, it's already doing so, if one takes into account the enormous cost of stand-by (in many cases - mainstay) power that the entire city (as well as the state) population is dependent on - check this

In the Hindu report (to which a link was provided) the line "Power theft was being accounted for as T&D losses, the Minister said" is significant. In power sector parlance, T&D losses have from long been known as "theft & dacoity losses", and the incapacity of the government to curb it is the root cause of all the problems. In fact, when Delhi power supply was under DESU, a state cabinet minister was operating a high-consuming battery charging unit from an unlicensed connection, right in the heart of Delhi.

The following excerpts from the KERC site, in this connection, are significant:

a) BESCOM distribution losses (FY09) for cities is 8.73%; for rural areas - 26.22%; Aggregate - 16.81% - shows they have not been too successful in curbing the theft in the rural areas

b) Realisation of dues from KPTCL/ESCOMs: The Company has taken up with the GoK to ensure 100% current monthly billing payment together with definite time frame for liquidation of old dues and allocation of outstanding dues of KPTCL amongst ESCOMs - the dues are huge, impacting further investments in upgradation and modernisation adversely.

c) Subsidy between 2000-01 to 04-05: (Rs cr) 709, 1779, 1796, 1538, 928 resply; Total 6750 - the figures for the remaining years have not been provided. But, knowing the government's mismnanagement of finances over these years, the position can't be much better. This is what results out of the existing symbiotic relationships between service providers and the government.


KRC came in with
I am now convinced that there are no benefits of privatizing either public transport or electricity distribution.

Electricity distribution in a given area is necessarily a monopoly. A privatized electricity supply will therefore necessarily involve prices and quantity of electricity supplied fixed by the government so the efficiency advantages of privatizing can come from three quarters: a) buying the cheapest electricity in the market; b) transporting it in the cheapest way; and c) cutting on theft.

With the creation of the national grid, I am not sure there exists any concept of buying the cheapest power out there. In most cases, one just connects to the national grid, draws power from it and pays a sum determined by the government. Efficiency in transmission of electricity is dependent on the length of the electricity cables and the number of transformers in the middle, but one can safely assume that the government will anyway regulate this stuff. It is only in cutting down on theft that any significant efficiency saving can be made.

It seems to me perverse that the government would go through such an elaborate process of privatization simply to prevent poor people (unscrupulous, yes, but also mainly poor) from accessing electricity. The goal is not bad, there shouldn't be any free lunches, but the solution is so fraught with risks to public welfare that one has to question its wisdom. After all, if BESCOM cannot prevent poor unsophisticated people from stealing power from it, how good will the regulator be in preventing the private players in the market from ripping the consumers off?

So much so for privatizing electricity distribution.


I responded with
Electricity distribution is a natural monopoly situation. But, what you do in such situations is to divide the total area into two or three districts/ zones, and allocate it to different players, and the regulator periodically publishes comparisons of their performances based on given parameters. And, that's what Delhi has done. And, with the Reliance's performance showing to be poorer than that of TATAs, there's pressure on them to do better.

It's not just the price that determines the trade terms. As important are the payment terms. And, then there are other factors like the arrangement between Karnataka and Chattisgarh, where GoK-owned KPCL is going to be investing and setting up a generating station in Chattisgarh. The rates as such can vary considerably depending on the various factors coming into play.

The government cannot easily curb theft because it is largely its own people who are at it - furtherance of vote-bank politics. And, the biggest beneficiaries are people like the minister in the erstwhile Delhi cabinet who was running the battery charging unit, not the poor. Resulting out of it all, the quality deteriorates, and whereas the rich can then switch to genset, inverter, converter, etc, the poor are left at the mercy of the weather gods. Apart from this is the burgeoning subsidy bill, which ultimately gets passed on to the consumer.

On the other hand, when an Anil Ambani controlled Reliance sends its bills, even Dawood Ibrahim's henchman in Dharawi and Bal Thackeray in Matoshri, better up on time, failing which they will face disconnection as much as any ordinary human being. As a result of it all, not many people in Mumbai even know what a genset is.

With Socialism so steeped in the Indian psyche, I am now kind of convinced that change is too far to seek. And, being a businessman, basically, I see a great opportunity in getting into the rapidly growing two-wheeler, as well as genset, inverter, converter, battery businesses. I only hope the Socialists don't change their stance once I have got into them.
 

Muralidhar Rao
murali772's picture

how do you expect governments to manage it all?

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The last two (the last being mine) of a series of postings on the subject on the Hasiru Usiru Y-group:

RD:
The planners in the ASEAN expected to achieve a rather diverse and sweeping range of objectives from reform - attracting foreign investment, providing mass electrification, improving affordability, developing capital markets, and ensuring economic prosperity.

MR:
The per capita energy consumption of a country is generally considered a good indicator of its state of development, leaving aside for the moment arguments questioning this idea of development itself. For India, the figure stands currently @ 682 (in Kwhr per annum), while for Brazil it is @ 1422; UK @ 5218; USA @ 10,381.

Now, if India has to improve this by even a 100 units, it has to add generation capacity to the extent of 12,016 MW (assuming 95% efficiency & capacity utilisation), meaning an investment of Rs 54,072 cr at Rs 4.5 cr per MW (for thermal; for hydel and nuclear, it's much higher).

This is the kind of capital required by just one sector, for a marginal capacity addition, taking the macro view into consideration. Imagine then the kind of capital required collectively by all the infrastructure sectors put together that you want the government to handle - water supply, roads, sewage systems, drainage systems, bus services, AIR-INDIA, railways, sea-ports, air-ports, banking, insurance, hotels, etc, etc, and of course, defence.

Well, that was exactly what the Soviet Union was doing, and look where they have landed.

Even if you have a thousand Jairaj's in the government, it is unmanageable. And, it's perhaps in full appreciation of that that Mr K Jairaj is pursuing privatisation of power distribution. Being a bureaucrat, he cannot generally comment on policy issues. So, he has got the neta to do it - check this.

Admittedly, there are serious issues with the current regulatory mechanism. And, correcting that is where the future focus should be.

 

Muralidhar Rao
idontspam's picture

Deficit is staring

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Imagine then the kind of capital required collectively by all the infrastructure sectors put together that you want the government to handle 

The worst part of govt putting in all the money into is the deficit that the govt will likely run up. Already there is talk of relaxation in FRBM to allow state deficit to be hiked to 4% from the current 3.5%. Just last year this was raised from 3%.

Public Agenda's picture

On The GRAND DECEIT of Fiscal deficit

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Just as an aside the DH today says the US budget has a fiscal deficit of US 1.54 TRILLION though %age was not mentioned

That is higher than the Indian GDP this year 2009-10. a SOVEREIGN nation like India if it is not beholden to IMF/ WB discredited economic model will not baul about the balooining deficit

what we need is more food production like the PM said yesterday

This is the only way we can be Food secure www.zeenews.com/news600618.html

and then maybe food inflation can be controlled

The reason that the highest urban and rural poverty in South India is in Karnataka ( economic census data 2005) is dues to the fcat that Karnataka in the SMK / WB regime granted the nation the Fiscal responsibility act

Now 22-28 states are also facing the same ..... not to mention the centre

Pl refer an article in EPW by the Fin Min of Kerala

Why Do the States Not Spend?   (2nd December 2006)
     T M Thomas Isaac , R Ramakumar
           This paper investigates the unusual phenomenon of state governments currently maintaining large cash balances even as many important sectors call for substantial outlays. Is it a governance issue, as the union finance ministry makes it out to be, or is it something more fundamental affecting the fiscal powers of state governments? We argue that the constraint on expenditure is imposed by the Fiscal Responsibility and Budgetary Management Acts passed by the centre and most state governments; the cash surplus phenomenon is a perverse outcome of such legislation. This essay also investigates the price paid by Kerala, an outlier where receipts do not keep pace with expenditure growth, because of the mechanical constraints imposed by the fiscal responsibility legislation.

The Fiscal fundamentalists want to control the defict Central at 3.8% when per ca expenditure for 700 mn public (for whom the constitutional rights and protection) virtually does not exist ? Maybe a quick return to fiscal norms in the FRBM is not so important after all

and I really hope the basis for the cancellation of any laon for Power privatisation will made public....


Naveen's picture

Power privatization - Start with distribution

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It is clear that there is an enormous shortage of power - & demand will keep outstripping capacity for a very long time to come.

It is true that investments necessary for power generation are very high & roping in private sector funding has been on-going, though there have been many ups & downs (dabhol-enron, cogentrix, etc).

It is also clear that cheap power cannot be procured as & when necessary due to fluctuating demands & with it, prices. Even the largest of players, such as Reliance operate in a manner that suits them best which is to maximise their own profits, casting aside consumers' priorities. Tatas may have done well in Delhi or Mumbai, but this may be an exception, & not a general rule when private players are employed. In any case, they would still be dependent on power procurement from others at varying costs, & with it varying rates.

Tackling deficiencies in the distribution network is the first step as is reduction in T&D. For power privatization in Karnataka, would it not be best to start with only distribution & maintenance of the distribution network handed over initially to private parties ? If incentives were placed such that it would result in coverage as decided by the state, & rewards reduction in T&D losses, will this not improve the situation since about 15% more power would be made available, assuming T&D is reduced to below 5%, in say about 4-5 years, plus any capacity additions ?

As long as the supply side & coverage areas are controlled & left to be the state's responsibility, private parties will be in no position to cheat consumers or supply power to areas that suit their interests best. They will also be unable to resort to electricity price hikes - this would still rest with the state, for starters.

Once T&D losses have been minimized & distribution networks improved, further steps toward more privatization can be taken.

It would be foolish to open up the entire power sector for privatization at one go.

murali772's picture

so, FRBM be damned?

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@ public agenda - So, here you want us to follow the US example, and allow a free for all - FRBM etc be damned!

And, what about the capacity of governments to manage things?

The following is a quote from the latest India Today cover story - "Everything that is in the domain of private India is getting cheaper--from mobile phones to cars to anything that is manufactured. Everything with a government interface is costlier by the day. This apathetic state of affairs is best symbolised by the raging prices of essential commodities - for the full text, click here".

Is there an answer for that?

Muralidhar Rao
idontspam's picture

Disconnected conclusion

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If you are pasting from sources make sure it makes sense when read together.

US budget has a fiscal deficit of US 1.54 TRILLION though %age was not mentioned

That is more than 10% of the GDP. Zimbabwe had 79,600,000,000% inflation rate. Whats your point?

what we need is more food production like the PM said yesterday.

What does this have to do with FRBM? 

is dues to the fcat that Karnataka in the SMK / WB regime granted the nation the Fiscal responsibility act

This is nonsense, FRBM is an act passed by the parliament in 2003

This essay also investigates the price paid by Kerala, an outlier where receipts do not keep pace with expenditure growth, because of the mechanical constraints imposed by the fiscal responsibility legislation.

Obviously a CPI ruled Kerala would have cared 2 hoots for fiscal responsibility. Reciepts not keeping pace with expenditure is called Overspending. FRBM is intended to address these very people.

 the constraint on expenditure is imposed by the Fiscal Responsibility and Budgetary Management Acts passed by the centre and most state governments; the cash surplus phenomenon is a perverse outcome of such legislation.

How can you maintain a large cash balance unless you are not in surplus? And if you are in surplus why does the FRBM constraints on deficit have anything to do with it? 

I really hope the basis for the cancellation of any laon for Power privatisation will made public.

What is this to do with FRBM?

idontspam's picture

Yield not volume

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what we need is more food production like the PM said yesterday

No he did not, please read carefully. I paste the key point

 He, accordingly, urged the state governments, too, to focus their energies on farm productivity and said there was great scope for improving the yields of major crops and hoped to see greater efforts in achieving this. "Our agricultural productivity still ranks far below the best in the world."

I will quote some stats here. In 2009 Karnataka tur dal sowing was higher than the target at 6.03 hectares. 51% of this was lost in the drought and 47% was lost due to the floods. Ultimately the total remaining produce was 3%. In this day and age is it excusable to allow for drought to ruin 50% of your crops? How much technology and mechanization is being made available to the farmers? This is regardless of the seed variety etc being considered.

Today the govt is having to play middleman, purchase produce from the farmer at a higher price and sell to people (BPL only?)at a subsidy. Farmer gets higher price but doesnt do anything to increase his yield. Consumers get artificial benefit for a short time. Govt gets to enter the retail business now, hope this doesnt become a habit.

Public Agenda's picture

FRA and FRBM

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The Karnataka FRA is passed in 2002 and the FRBM A was introduced in parliemnt in 2003 (NDA) and passed in 2004 (UPA). Late in 2004 the date to achieve the target was pushed back to 2009 by then FM - PC,

But the Karnataka FRA came about in the SMK / World Bank regime  Karnataka also had a proto - SEZ Bill and also the falied IT corridor Bill  and a host of others, Karanataka has had so much Structural adjustment that the state govt was a darling of the WB/ ADB/ IMF etc for favouring business freindly reforms except that the NDA govt nixed the plans for the last WB loan for power privatisation in Nov 2003 while the WB was ready since this was a Cong govt

So thats why I hope the actual reason for nixing the loan will come out maybe RTI is the ony way forward?

But my main point which you could answer is about the high urban and rural poverty as well as jobless growth at 6-7% annual GSDP after the FRA 2002 was imposed on karnataka by the WB condition

Many other investment and industry and corporate freindly measures like Karanatak Udyog Mitra and SLHCC were also taken during the same time ....

Also do get a copy if the article and read the full thing including some RBI reports of the time

Thomas Isaac could be faulted by non- leftists but what about the RBI and also the  Centre for Budget and Governance Accountability (CBGA), New Delhi, India, CBGA India

http://www.cbgaindia.org/...

Please read the whole report and see why they want the FRBMA to be scrapped.


idontspam's picture

Fiscal irresponsibility

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Has any of the fiscal controls imposed by the FRBM/FRA strategy reduced our GDP/GSDP growth rate since 2003?

This whole remove FRBM debate ignores the capacity of using private borrowings to stimulate growth, create employment, create scale to tap the demographic dividend in lieu of unilateral govt spending. 

FRBM is symbolic of discipline and also increases accountability by ensuring that govt provides proper reasons before hiking up the deficits and is not a unilateral move to spend more on the so called 'poverty alleviation' programmes

FRA and FRBM needs to remain but take into account the economic cycles. Removal or abolishing of the same will just send us hurtling back into chaos especially in these times of pressure to catch up with china. 

Public Agenda's picture

Tendulkar Comm report 2009

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Tendulkar Comm report 2009 says increase in rural poverty of over 6 % by the new parameters. So the Q to ask is whether growth has briought down poverty by mid 2005. May not be ..... not after 15 years of data

Same in Karnataka also by 2005 Eco Census data

so since there was huge jobless growth, bretween 6 -- 9 % / year it means that rate of growth economics delibereately left the issue of Poverty alleviation out of the Agenda...

@murali772 seems when the Govt joins the private sector to become a profiteer it allows Major food inflation but really the whole process of structural adjustment pushes any govt in the direction of Corporatisation and fiscal fundamentalisms ....

Maybe the govt will need to balance Keynesian economics even in the urban sector for employment like NREGS since growth alone cannot eliminate poverty


idontspam's picture

Misplaced priorities

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so since there was huge jobless growth, bretween 6 -- 9 % / year it means that rate of growth economics delibereately left the issue of Poverty alleviation out of the Agenda

Has nothing to do with fiscal deficit per se but more to do with how the spread of capital investment has been imprudent. Govt spending has been more on current items like wages and subsidies rather than on capital investment needed to get the growth going. Wages are a direct result of growing direct govt employment rather than utilising private sector competitive growth to create job multipliers.

IT sector has been spurring the the growth and international respect needed, but to rely on just the IT sector to create the poverty alleviating jobs for the whole country is plain nonsense. India needs to spread the product basket. Instead of relying on the old economy manufacturing Govt needs to encourage areas thrown open by climate change to create the much needed manufacturing jobs.

Take the case of airports, capital investment in train connectivity to the airport and cities will create jobs & an economy to make the airports & airlines viable instead we spend time undercutting the operators and in the process cutting of passengers to the airlines. The while sector is operating on thin margins while trains are overflowing with monopoly operator keeping train supply artifically low. Deregulation in the train laws are required to remove controls from IR and allow states to lay their own lines.

Pass some laws which make carbon efficient technologies mandatory for the future. The windmills, solar panels & other items required need to come from this country. China is already onto it we dont have too much time to lose. 

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