Make no mistake, all countries seek to strike a balance between narrow self interest and broad-minded idealism in adopting positions on international affairs. If French President Nicholas Sarkozy and British Prime Minister David Cameron are so exercised about lack of democracy in Libya, it is as much to do, perhaps even more, with their sagging domestic image and enduring economic interests as it is to do with their commitment to human rights in the Arab world. If US President Barrack Obama is dithering about how much force to use in Libya to protect Libyan lives, it has as much to do with domestic politics as it has to do with oil economics, even if dithering has become second nature to Mr Obama. Perhaps a new great game is afoot in the Arab world, perhaps it is not and what we see is what there is to see &mdash; support for an uprising against a repressive regime.

India and Libya

Business Standard

With Parliament hardly able to conduct any legislative business, the campaign against the latest draft of the Seed Bill 2010, spearheaded by Bihar chief minister Nitish Kumar and backed by several farmers&rsquo; organisations and major opposition parties, will not be the only reason for a further delay in the bill&rsquo;s approval by parliament. The Bill was drafted after a prolonged process of consultation involving all stakeholders and members of the parliamentary standing committee. Its purpose is to regulate the quality, production, distribution, import and export of seeds, besides promoting private participation in the seed sector. It also creates a legal framework for the production and distribution of genetically-modified (GM) seeds, ending the current practice of introducing them merely after getting the approval of the Genetic Engineering Approval Committee (GEAC) and the environment ministry.

Sowing dissent

It is a measure of the clout of the prosperous private sector healthcare industry in India that not only did Union finance minister Pranab Mukherjee succumb to the crocodile tears of all those who decried his so-called &lsquo;misery tax&rsquo; but elected representatives of the people in Parliament thumped their desks in mock concern for the common man and most of the media hailed this act of temporary benevolence. Temporary, because Mr Mukherjee has made it be known that the 5 per cent service tax on private hospitals of a certain category that was introduced by him through this year&rsquo;s annual budget was part of the time table of transition to a generalised goods and services (GST) tax. So, when a GST comes, this &lsquo;misery tax&rsquo; will have to return. Hand it to the millionaire entrepreneur-doctors that they were so very successful in their campaign, first having smartly dubbed the proposal a &lsquo;misery tax&rsquo;.

Mr Mukherjee's teaser

It would seem that disappointment or controversy is never too far away from India&rsquo;s energy sector. The recent admission by the Union ministry of power that even the &lsquo;revised&rsquo; target of 62,000 MW for the 11th five year plan (the initial plan target was 78,000 MW) would be missed by 20 per cent, while disappointing, barely surprised those familiar with the Power Ministry&rsquo;s record of meeting set targets. A recent report by The Energy Research Institute (TERI) pricks the sanguine belief, widely held, about India&rsquo;s limitless coal reserves, deemed adequate to support a significant proportion of India&rsquo;s energy ambitions well into the next century. Total coal reserves in India are estimated to be of the order of 276 billion tonnes, of which 110 billion tonnes are &lsquo;proven&rsquo; resources. These estimates are based on the Indian Standard Procedure (ISP), a time honoured practice to estimate all minerals, dating back to the 19th century.

Carrying coals to New Delhi

Two state Budgets &mdash; one presented on Tuesday by the Delhi government and the other, a day later, by the Maharashtra government &mdash; have turned the spotlight on fiscal reforms in a manner that has many lessons for policy makers at the Centre. Among the many measures the government of Shiela Dikshit unveiled, the move to impose an additional tax on diesel-run cars sold in the Capital deserves special attention. It is a steep levy raising the registration tax burden on diesel-run passenger cars by 25 per cent. The inspiration for this levy has undoubtedly come from the recommendations made more than a year ago by an official committee, headed by former Planning Commission Member, Kirit Parikh. The committee had suggested that diesel-run cars should pay a special one-time tax to the exchequer since the fuel they use is heavily subsidised by the Union government. The Union government had accepted the report&rsquo;s findings, but fell short of implementing all its recommendations.

Spotlight on tax reforms

The union finance ministry&rsquo;s decision to partially subside capital investment in healthcare and education by extending the &ldquo;viability gap funding&rdquo; facility to these sectors is welcome as they are vital areas of social infrastructure, which are no less important than roads and bridges. But every sector has its own complexity and the nuancing that the health ministry has sought for such subsidy to healthcare infrastructure needs serious attention.

Subsidising healthcare

No one grudges Warren Buffet and Bill Gates their desire to donate part of their considerable wealth to good causes in India. If their visits encourage more of our indigenous tycoons to emulate them, so much the better. The question that arises is whether their visits warranted the level of saturation coverage that the media, both electronic and print, has accorded them. The issue is not just magnitude but also tenor.

Philanthropy-mongering as PR

Speaking at the annual Business Standard Awards function last Friday, Prime Minister Manmohan Singh ended on a reassuring and hopeful note when he said, &ldquo;Let me assure you that I do have my finger on the pulse of India today. I sense a mood for renewal, as I did 20 years ago. We did not disappoint India in the summer of 1991. We will grasp the nettle once again, in the summer of 2011.&rdquo; Dr Singh was referring to the economic reforms of 1991, whose 20th anniversary was celebrated at the function with a panel discussion involving some of the key players, like P Chidambaram, C Rangarajan, Montek Singh Ahluwalia and Shankar Acharya. Why does the PM hope he can do more in the summer of 2011 than he has been able to till now? At least one reason would be the boost to Congress Party and United Progressive Alliance morale from the widely forecast historic defeat of the Left Front in West Bengal, after 30 years of uninterrupted rule.

Spring in summer

There are limits to what even the Supreme Court of India can do to discipline Indians into more socially acceptable behaviour. The SC&rsquo;s order imposing a ban on the use of plastic bags has met with as much success, or failure, as earlier attempts by the civic authorities in Mumbai and Delhi.

Banning plastic bags

Time was when Tamil Nadu&rsquo;s voters would handsomely reward their political leaders for getting rice at one rupee a kilo. That simple promise swept the patriarch of the undivided Dravida Munnetra Kazhagam (DMK), Anna Durai, to power less than half a century ago, ending the Congress Party&rsquo;s two decade reign. It is, perhaps, a measure of the level of Tamil Nadu&rsquo;s development, of the changing needs or the growing greed of its voters that in place of &lsquo;rice-for-one-rupee-a-kilo&rsquo; promise, Tamil Nadu&rsquo;s contending factions of the original DMK are now vying with one another to offer a variety of gifts to voters rather than focus on governance. Admittedly, Tamil Nadu is one of India&rsquo;s better administered and more developed states, even if its politics is anachronistic.

Manifesto merchandise 

The Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the Amul brand, is likely to do more of something that it has initiated in recent months, procure raw milk from states other than the home turf of Gujarat to meet burgeoning demand in recent years with rise in incomes. This is resulting in milk cooperatives in states like Maharashtra, West Bengal and Bihar finding more of organised buying for their produce.

The milk that cheers

Every time the Indian stock market goes up, there is an eager tribe of market pundits willing to talk it down. So, the current debate is whether the benchmark index of the Bombay Stock Exchange will correct by 10 per cent to 16,000 before zooming to 21,000 by the end of the year. Some see an imminent correction, despite a smart recovery last week, and here&rsquo;s why.

Bulls in a Mumbai shop

Trinamool Congress (TMC) leader Mamata Banerjee remains an enigma to many, despite her long years in politics and her record in government at the Centre, and the jury is still out on what kind of government she will offer West Bengal if her party defeats the long incumbent Left front. Ms Banerjee&rsquo;s recent record in the Union railway ministry is mixed &mdash; neither too worrisome nor too inspiring. The Indian Railways may not be in desperate need of a turnaround, but the hapless state of West Bengal is. Most political pundits expect Ms Banerjee to win the elections to the state assembly because the people of Bengal are fed up with three uninterrupted decades of Left Front rule. It is a negative vote, an anti-incumbency vote at long last, rather than a positive vote that most expect will bring Ms Banerjee to office in Kolkata. Curiously, she has herself chosen not to contest the elections, stating that she needs all the time to campaign for others. This cannot be the real reason.

Mamata's promises

The operating environment of small and medium enterprises (SMEs) in India has never been an object of envy. Despite accounting for 40 per cent of manufactured goods exports and over 70 per cent of sectoral employment, SMEs have consistently been the Cinderella of the Indian economy. The inability to revitalise the SME sector has arguably been the primary reason for India being reduced to simply admiring China&rsquo;s manufacturing prowess from afar. Concerns about inclusive growth will continue to ring hollow as long as this very important sector of the economy is allowed to languish. SMEs have traditionally been perceived as a lending risk by financial institutions, which have made it extremely difficult for them to borrow in both domestic and international markets. While the Reserve Bank of India moved to relax lending rules in 2008, it left the actual decision to lend to individual banks, which have yet to shed their earlier misgivings.

Double whammy for SMEs

Since its inception in 2003, the Competition Commission of India (CCI) has been in the news, and for all the wrong reasons. The Competition Act, under whose dispensation the CCI was born, came into being a year earlier in 2002, but soon ran into a strong headwind. Members of the judiciary challenged those provisions of the Act that they perceived to be an encroachment into their jurisdiction. In particular, they questioned the legality of the clauses under which the government could exclude members of the judiciary while considering candidates for heading the CCI. The legal tangle was so complicated that Deepak Chatterjee, who was the commerce secretary at the time and was to head the CCI, could not take charge of his new responsibility. The legal battle remained unresolved for several years, weakening the institution since its inception.

End regulatory stasis

Markets are expected to open marginally higher following positive global cues, but profit booking may be seen in later half of the day on account of derivatives expiry today.

Pre-market: Flat opening seen, eye on F&O expiry

Ireland is a relatively small economy, contributing roughly a quarter of percent of global GDP and 2 per cent of eurozone. The exposure of global financial institutions to both Irish sovereign and bank debt is somewhat small and the Irish government seems to be all set to be bailed out by Europe&rsquo;s stability fund and the IMF. Market estimates put the bailout package at roughly &curren;100 billion, a sum that is by no means hefty by the standards of rescue packages offered over the last couple of years. Despite this, financial markets remain edgy and the pressure on the euro, and indeed on risky assets on the whole, doesn&rsquo;t seem to be showing any signs of abating. Thus, the significance of the crisis in Ireland seems to be potentially much wider than either Ireland&rsquo;s size or its fiscal dent would suggest. The reason could be that the crisis has forced the markets to turn their attention back to the bigger picture in Europe.

The Irish question

The Directorate General of Civil Aviation&rsquo;s (DGCA&rsquo;s) attempts to curb soaring air fares is well-meaning but misdirected and, probably, ineffective as previous such attempts have demonstrated. If anything, its recent strictures against airlines&rsquo; opaque fare structures highlight the urgent need to fast-track the formation of a truly independent regulator &mdash; that means sans a former civil service officer as its head &mdash; for a market that is increasingly demonstrating signs of covert cartelisation. Theoretically, the DGCA directive is unexceptionable and it is also understandable why the minister, Praful Patel, has jumped on this populist bandwagon. It is asking airlines to declare the price band for each sector and notify any changes in air fares within 24 hours.

Fare game

The Union government is entirely correct to say that the opposition political parties cannot hold Parliament to ransom to force the government to accept its terms in the current stand-off on an enquiry into the so-called telecom scam. In a parliamentary democracy, the government of the day must either be allowed to function by Parliament or be voted out by it. If the opposition political parties have the numbers to press their opinion on the government, the right thing for them to do would be to get Parliament to express a vote of no-confidence against the government. Let Parliament function according to its norms. If the Opposition does not have the numbers to get its viewpoint accepted, then it must accept the ruling coalition&rsquo;s viewpoint or seek a compromise. The Union government has gone out of its way to offer a variety of compromise solutions.

Parliament derailed

Several factors ranging from disappointing growth numbers coming out of trans-Atlantic economies to China&rsquo;s slower-than-expected growth rate seem to have contributed to a tapering off of commodity prices in the past year. Several commodities, especially metals, witnessed some 5-10 per cent decline in prices this month, compared to their October levels. The trigger for this weakening came from China which has, over a period, emerged as a dominant player in the international commodities market, both as a buyer and a seller. In the past month, there has been a perceptible drop in Chinese import, as well as export, of most commodities. China&rsquo;s battle against inflation may have also contributed to this.

Commodity price uncertainties

About 50 million private sector employees have earned a percentage point increase in interest income from their deposits with the Employees Provident Fund Organisation (EPFO) simply because one of its trustees detected a calculation error, apparently being made for several years, and quickly corrected that to provide additional funds to take care of a higher interest payment burden. This is Kafkaesque not just because of the manner in which it happened but also because of the uncomfortable questions it has raised about the governance and safety of these funds. Employees and members of the central board of trustees, overseeing the EPFO, were mentally prepared to accept an 8.5 per cent interest rate on its accumulated deposits during 2010-11, as the Organisation did not have the necessary funds to meet the demand for a higher rate.

Accounting for errors

Incisive columns and editorial comment by top opinion leaders

Page 634 - Editorial Comment