August 27, 2012

p-notes are no longer needed

There is an unhealthy reliance among several Indian policymakers, companies and financial investors on the flows coming into India from foreign companies and foreign investors. Just as Government of India provides maximum sops, open and hidden, to large Indian corporates the same is done for all foreign investors.

Here is something connected to this issue I wrote earlier this month in an editorial contribution to the newspaper I work for.

Don't revive redundant P-notes

Re-look into recent tax policy measures should not end up prodding regressive foreign flows through P-notes

Nothing can be more un-healthy if the consequences, intended or un-intended, of the finance ministry's assurances to foreign companies investing in India of re-examining recent tax policy announcements such as the general anti avoidance rules (GAAR) if it leads to encouragement of illegitimate and tax-avoiding fund flow in the Indian securities market and financial system. 

The rise in foreign institutional investors' participatory notes exposure in June after a couple of months of subdued levels, as reported in this paper on Monday, points potentially to such an adverse encouragement. A controversial matter such as retrospective taxation has merit in being debated and revisited but surely the country can ill-afford to play a cheerleader to those who use double taxation avoidance treaties more as tax-avoiding means than as facilitators of legitimate exchange of trade and business between countries. 

The new finance minister, P Chidambaram, is an old hand in the finance ministry having been the FM during 2004-08 and earlier during 1996-97. It will be most unfortunate if he is does not sift the chaff from the wheat. He did issue a lengthy official statement on Monday with regard to bringing economy back on desired track and laying down a map for recovery and touched upon all aspects including taxation and foreign investment flows. While it is hard to predict what will be the final outcome of various recent policy measures hanging in limbo one hopes the clock is not turned backwards. 

At least on the participatory notes issue Chidambaram is on familiar ground. After all, he was the finance minister when the capital market regulator, Sebi, in October 2007, tightened the screws on FIIs issuing participatory notes. P-notes are nothing but non-exchange-traded derivative instruments issued offshore by FIIs, mostly FII sub-accounts. These have Indian equities traded on domestic exchanges as their underlying and are issued to investors and funds who for reasons good and bad do not want to go through the process of registering themselves as FIIs with Sebi and then invest directly in Indian equities. Back then their share in total FII investments exceeded 35 per cent and was generally considered a backdoor route for Indian black money flowing in from P-notes which were largely issued by Mauritius-based FIIs. 

Various analyses had at that time indicated that FIIs issuing P-notes had major investments in stocks beyond Nifty or Sensex stocks. Way back in 2006, Reserve Bank of India had in a dissent note to an government-appointed expert group's report on encouraging FII Flows and checking the vulnerability to speculative flows recommended winding down of P-notes. Sebi's later restrictions proved effective in curbing the extent of P-notes and its share to total FII investments is currently hovering between 10 and 15 per cent. 

Given that Sebi has recently opened the doors to qualified foreign investors and made it possible for genuine foreign investors to invest in Indian equities without having to register as FIIs. It is time P-notes are made redundant completely through a regulatory ban on its issuance by Sebi. But the FM in his Monday's statement has already linked exchange rate stability to a rise in capital flows through FDI and FII route and gone on to state that his ministry intends to fine tune policies and procedures that will facilitate capital flows into India. 

This may make it difficult for Sebi to hammer the final nail on the P-notes coffin. Even in October 2007 it was a fast-strengthening rupee that was hurting exporters and prompted the curbing of foreign flows through the P-note restriction. Should we keep fiddling with policies to encourage or rein in capital flows or should we have a stable regime based on intrinsically sound principles?

August 21, 2012

moderate the demand for electricity

A couple of weeks ago, I contributed an editorial, for the newspaper I write for, on the issue of power/electricity crisis in India. I share it below:

Go for new bright solutions

Power crisis must push government and users to moderate demand and use renewable energy

The severe two-day power crisis that enveloped half of India earlier this week led to the torchlight falling upon the usual suspects -- severe shortage of coal for power plants, supply not keeping pace with demand leading to overdrawing of power by some states from the national grid. Most solutions to the power crisis tend to veer around rapidly increasing coal production in the country to meet the relentless growth in demand. But the time has to come to inculcate fresh thinking in the matter. 

To begin with, we have to be open to embracing the idea of moderation in the demand from everyone except those who have yet to enjoy the benefit of electrification and those who receive electricity but only rarely. We should not forever remain a hostage to the pressure of high GDP growth since that is based on extremely high consumption of power. 

A 10 per cent moderation in demand is possible overnight if users simply do not waste electricity due to carelessness in switching off when not using it and due to wrong or frivolous usage. Due to lack of sensitivity among users, whether retail, corporate, businesses, industrial or government this quick reduction is not happening currently. 

Awareness and sensitisation campaigns by government and private sector need to get going right away. Another 10 per cent reduction in demand can take place with the use of energy-efficient appliances. Urban usage of power-hungry incandescent light bulbs should not be tolerated any more. Fluorescent tubes are giving way energy-efficient compact fluorescent lamps but the pace ought to be accelerated. Corporate offices should, in fact, be goaded to graduate to LED lights which, though more expensive than CFLs, consume the least power among all types of lighting. Only five-star rated air-conditioners should be allowed for commercial customers.

 With government intervention and voluntary contribution by users, a 20 per cent reduction in power demand is very much possible. Power demand that can not be curtailed need to increasingly use renewable sources of energy no matter their high costs. 

Due to frequent power cuts, majority of households, shops, corporate offices, industrial establishments and agricultural tractors and pumps are anyway forced to depend on diesel-powered power generators. This leads to high cost anyway. If and when subsidies on diesel go the cost will go up still more. 

Cost of solar power is increasingly coming down and the difference between diesel and solar is bound to get bridged very soon. The government's solar mission, although flawed and myopic in some implementation areas, is increasingly providing cost subsidies to solar equipments. 

Solar lighting is already a hit with widespread small and big manufacturers and consumers. Innovation in solar energy field is taking place every single day. Just the other day a large-sized energy equpiment manufacturer began advertising for a hybrid solar-grid UPS where its battery, once fully charged from solar panel or power grid, will block power flow from main grid and run appliances on solar power. 

This is just one of several innovations already available in the marketplace. Cost subsidies from government will make more users switch to them and reduce the pressure on the power grid. When demand gets controlled supply-related problems will not result in a crisis in the conventional power grid.

August 20, 2012

extremely sad newsreport of a 11-year old girl set on fire in bangalore

I just stumbled upon a news report that saddened me. I know that that incident which the news report covered is not the first of its kind but it does not pain any less. The news report, which I provide below in full, was about a few young men setting on fire a 11-year old girl in Bangalore because they had a dispute with the girl's father. 

This is a murder most terrible. I pray for the soul of the little girl to heal. My heart goes to the girl's family. 

I really hope and pray for violent-minded individuals in our society to shed their violence. And if they don't then I really wish that the laws of the state and the state enforcement machinery provide stringent deterrents to violence and murder. In the case of this little girl, the onus is on the police of Bangalore to ensure a watertight case is built on the actual murderers and the planners of the murder.

11-yr-old girl set ablaze loses battle for life

 An 11-year-old girl, who was set ablaze by a gang and battling for life at Victoria Hospital, Bengaluru for the last two days, died on Saturday morning. Kavitha had sustained 90 per cent burns after she was set ablaze by four to five people early on Thursday morning. Kavitha, a resident of Weavers’ Colony in Hulimavu and a fifth standard student at the Bannerghatta Government School, was on her way to school with her younger sister, eight-year-old Kavya. Her sister asked Kavitha to go ahead as she wanted to meet some friends and go to a temple. No sooner than they parted, the gang caught hold of Kavitha, doused her with kerosene and set her ablaze. Kavitha’s father Venkatesh, a cab driver with a travel agency, who was washing his car hardly 500 feet away from the scene of the incident, saw his daughter on fire and rushed to her rescue. He

The victim Kavitha, who died at Victoria Hospital, Bengaluru on Saturday morning.

put out the fire, and immediately shifted her to Victoria Hospital. Venkatesh told Deccan Chronicle that he suspected area rowdies behind the incident. “They were extorting money from me for years. They came around asking for Rs 1,000, and sometimes their demand went up to Rs 3,000. When their visits became too frequent, I lodged a complaint with the Hulimavu police.” But after a year, some influential people from the area pressured Venkatesh to withdraw the complaint. “I never thought that filing a complaint would lead to such a tragedy and I would lose my daughter one day,” said an inconsolable Venkatesh. 

But he could sense that the rowdies were following him and keeping a watch on him for the last 15-20 days. Kavitha, in a moment of consciousness, told Venkatesh that her attackers had dyed their hair blond. Venkatesh’s younger brother Shiva said: “Venkatesh is innocent and sincere in his work. Kavitha was a friendly and jovial child. She was very active in sports and studies.” Dr Ramesh, head of the plastic surgery department in Victoria Hospital, said: “Kavitha had sustained over 90 per cent of burns all over her body, and we had treated her on an emergency basis. We put her on oxygen support, and administered painkillers and antibiotics. She was not fully conscious, but was responding to some queries. But since the injuries were deep and her neck and parts of her brain were burnt, her chances of survival were very less.” 

The Hulimavu police have arrested Kavitha’s uncle Harish (32), his friend Srinivas (26), and seven others for the crime. They suspect a family dispute behind the incident. They said Harish allegedly asked Srinivas to carry out the attack along with his associates. The other arrested, who are all residents of Pinaganahalli, are: Manjunath (28), Babu (24), Raghu (21), Raju (24), Puttaraju (26), Ramesh (26) and H. Harish (25). The accused have been sent to judicial custody.

August 06, 2012

mcx stock exchange reports a loss during FY12

MCX Stock Exchange Ltd has reported a loss for financial year April 2011 to March 2012. The exact amount of loss is, however, not known as yet.

In a recent statutory filing, the company stated "The Exchange has commenced charging transaction fees since August 22, 2011 and has been making month-on-month profits ever since. However, there was still marginal loss during the financial 2011-12 since the commencement of transaction fees levy started after nearly five months of commencement of the financial year."

The stock exchange company's filing also gave an account of its past financial performance. It stated, "As per the audited figures for the period ended March 31, 2011, the Company had a total income of Rs 39.15 crore and incurred a net loss after tax of Rs 57.80 crore."

In a recent move, MCX Stock Exchange increased the remuneration of its managing director-cum-chief executive officer (MD-cum-CEO), Joseph Massey to Rs 2.4 crore per annum from Rs 1.8 crore.

The stock exchange company's statutory filing of the EGM (extra-ordinary general meeting) resolution of June 2, 2012, in this regard, stated "Resolved that... consent of the Company be and is hereby accorded for the re-appointment of Mr. Joseph Massey as the Managing Director and Chief Executive Officer of the Company for a further period of three years with effect from June 1, 2012 on a remuneration in the range of Rs 2.4 crore per annum to Rs 3.5 crore per annum (cost to company basis), with the starting remuneration being Rs 2.4 crore per annum."

As per the explanatory statement to this resolution giving in that filing, Joseph Massey was drawing a remuneration of Rs 1.8 crore in his first term as MD & CEO that was from June 1, 2009 to May 31, 2012.

MCX Stock Exchange is the latest stock exchange to receive regulatory approval to launch equity products and equity derivatives products. It has so far been trading in currency derivatives products.

August 05, 2012

tragic killings of innocents in assam recently

A few places in the state of Assam in India has been witness to extreme form of violence against certain sections of the population recently.

The ones doing the killing felt justified in their action on account of various perceived wrongs done to them by the community whose members bore the brunt of the violence. 

But their reasoning is horrendously wrong as it usually is, whether it is violence in Delhi in 1984, or in Bombay, Surat etc in 1993, or in the whole of Gujarat in 2002. Perceived wrongs, whether accurate partially, fully or not at all, gives no one the license to take the lives of others and destroy their property.

Below is a detailed news feature by Outlook magazine on the recent happenings in Assam. It offers some useful information and insights.

Sandipan Chatterjee
Out cast Reshma Biwi prepares a meal for her family at a Muslim relief camp in Raniganj, Kokrajhar district
A Bridge Too Far
The state and civil society need to mount a Herculean effort to bridge the chasm between Bodos and others

Assam is going through one of those phases of history so bereft of light where one is capable of believing the worst about fellow humans—or to wonder what it is to be human. A visit to some of the 300-odd camps, which have sprung up during the last fortnight, gave us a taste of the language of hate and horror that has clouded the Bodo Territorial Area Districts (BTAD) and its adjoining districts in lower Assam. Listen to Jayashree Mushahamyan, a twentysomething Bodo woman at the Commerce College relief camp in Kokrajhar: “Muslims are so cruel and greedy. I heard one of them slit the throat of his pregnant wife so that he could claim compensation from the government for those who died in the violence last week.” It’s pointless to ask if this is real, or merely an apocryphal tale spun to make sense of a local universe gone toxic. We are driving through Chirang, Dhubri and Kokrajhar a week after one of the worst Bodo-Muslim clashes have ripped people apart. It’s like travelling through a war zone. Charred houses surround us, and every few kilometres we come across public buildings converted into refugee camps. They are crammed with people, spilling out on to the road.
It has been a week since the clashes, and fatigue has set in. The inmates are no longer filled with talk about the terror unleashed on them between July 20 and 26, when mobs attacked them, set their houses on fire, and forced them to flee. The refrain across camps now is: “How long do we have to live like this?” It is now more about “getting the hell out of here and going back home,” explains one of the men.

Charred Khudeja before her burnt down hut in Paschim Dologaon. (Photograph by Sandipan Chatterjee)
No wonder, for the stench of unwashed bodies hits you even before 12-year-old Majeda Begum can begin complaining. “None of us has had a shower for over a week.” Forget water for bathing, most of these public buildings do not even have enough water for drinking. “We don’t have clothes to change into. We left everything back in our village when we fled,” cuts in Majeda’s friend Nazrina Begum. Her comment evokes a rare display of black humour from fellow inmate Masuma Begum: “It’s good in a sense that we don’t have clothes; if we did, we would have to change in front of the men.”


“It is not enough to promise rehabilitation. The first step is to rebuild confidence in the minds of the people.”Pramod Bodo president, All Bodo Students Union


The various kinds of reasoning and coping mechanisms people resort to—amplifying it, or the opposite—can’t hide basic facts. The violence killed 61 at last count. That may seem modest to a nation inured to catastrophes. But it also displaced over four lakh. Never before in independent India have we had to deal with such a large number displaced because of violence. Prime minister Manmohan Singh, during his visit to the region on July 28, described the crisis as “a blot on our nation”. It was an understatement. This is India’s gravest humanitarian crisis. The scale of the crisis is accentuated by the estimated 1,80,000 people who have already been living in camps in Assam, displaced by the recurring bouts of terror since 1993 and fearful that any attempted return to what was once their home would unleash renewed wrath of “the other”. It’s equally unlikely that those who have just arrived at the camps will return home any time soon, notwithstanding the August 15 deadline set by the state government.
The ethnic-communal divide is evident in how the relief camps are situated. There are an estimated 178 of them in the Muslim-populated Dhubri district, where most of the Muslims from the neighbouring Bodo-dominated Kokrajhar have fled. The 108 camps in Kokrajhar, on the other hand, is where the Bodos have come for refuge.
One such camp in Kokrajhar—at the Commerce College—houses over 1,500 people. Others host 3,000 refugees or more. While Assam chief minister Tarun Gogoi has promised rehabilitation in a month (see interview), All Bodo Students Union (ABSU) president Pramod Bodo says, “It is not enough to promise rehabilitation. We must rebuild confidence in the minds of the people. Police protection has to be provided in sensitive areas so that people can go back and resume normal lives.”
This is not the first time the two groups have clashed (see timeline). A lot of the animosity between Bodos, the original inhabitants, and Muslims, is traced to the former’s real and perceived loss of land. Primarily agriculturists, Bodos leased out portions of their land to Muslim farm labour, but there have been reports of late of illegal, forceful occupation of land. It doesn’t help either that there are no land ownership records.
“The Bodos are already squeezed between Bhutan and Bangladesh and the state has done little to guarantee their rights,” says Namrata Goswami, an expert on conflict resolution at the New Delhi-based Institute for Defence Studies and Analyses. While the Bodos once rallied against the Assamese, much of their anger is now directed at Bengali Muslim settlers.
The settlers, on the other hand, have repeatedly felt their rights given a short shrift under a Bodo administration. Tensions flare at protests by either side, whether it’s the Bodos pressing for a full-fledged state or the non-Bodos wanting villages where they are in a majority to be excluded from the administrative control of the Bodos. Over the last few years, the Muslims have organised themselves into several groups to aggressively press for their rights—something that has angered the Bodos. Even the latest round of violence, according to varying accounts, can be traced to localised altercations over land or those that took place during bandhs in May this year.
“But,” as Suhas Chakma, the director of the Asian Centre for Human Rights in New Delhi, says, “these incidents of violence have been occurring with such consistency now that one would have expected the state to identify riot-prone areas by now.” And though ABSU president Pramod Bodo maintains that “the Muslim retaliation was greater as you will not find a single Bodo person left in Dhubri District,” it’s equally difficult, if not impossible, to find a Muslim in Kokrajhar.
While public buildings and spaces—schools, colleges, parks and fields—are bursting at the seams with people who’ve fled their homes, the villages in these districts are completely deserted. Household goods, school textbooks, cassette recorders are strewn around, along with rotting carcasses of animals shot dead—haunting reminders of villages once humming with life.

Lined in misery A Bodo relief camp in Nowapara, Chirang district. (Photograph by Sandipan Chatterjee)
The Muslims, angry at being routinely described as illegal migrants, are also apprehensive. “With our houses gutted and documents burnt, they will now claim that we are all foreigners and harass us to prove our citizenship,” they tell anyone who cares to listen. They also point to refugee camps which have existed for decades and wonder if they’ll ever be able to rebuild their lives.


“The Bodos have no aversion to the Muslims. The local administration in Bodoland has to be more inclusive of the non-Bodos.”Namrata Goswami, Conflict resolution expert, IDSA, New Delhi


The Bongaigaon District Muslim Refugee Committee’s camp, for instance, has existed since 1993. “It happened exactly the same way 20 years ago. One night, when we were asleep, we were awakened by the sound of gunshots. I remember I was 25 then. I came out and saw huts on fire and, in the light of the flames, I could see people striking each other with daggers and others running in all directions. I too ran like hell and hid in a jungle,” recalls Abdul Jamal, the committee’s secretary. “Many of us lost members of our family at that time. Some were lucky to at least know their kin had perished. Others never found out where they went; whether they are dead or alive.” With every year, hopes of returning to their homes have receded. “Even I hoped that one day I would go back home to my village in Kokrajhar,” says 60-year-old Munira Begum. “But now I am resigned to my fate. I went through the humiliation of having my daughter married off from this relief camp. I had my own house with a garden and our own land but the Bodos want everything. So they grabbed it.”
The Bodos, on the other hand, blame the recent spate of violence on infiltration from across the border. “We lived side by side with Muslims harmoniously,” says Mushahamyan at the Commerce College camp. “Some of them were my friends. But when their relatives come from across the border with guns and bombs, they wouldn’t stand up to them. In fact, sometimes, they warned us in advance and tell us to leave. The people from across the border are dangerous. They’re smugglers and want to grab our land.”
Lack of any reliable data on migration from Bangladesh has only helped stoke fears of an “invasion”. “What needs to be done is to have a dataset on migration so we have an idea of how many people are coming in. But the state has made no effort to produce any data,” says IDSA’s Goswami. She argues migration cannot be stopped entirely, but can at least be regulated via a system of work permits. “After all, people are coming not to create trouble but to work for a living.”


“The growing marginalisation of moderate elements among the Bodos in the post-BTC phase has made the situation worse.”Akhil Ranjan Dutta, Associate professor of political science, Gauhati University


The failure of the Indian state is apparent on other counts. Although 3,000 people were killed in the infamous Nellie massacre way back in 1983, not a single perpetrator has so far been identified or punished. Similarly, when the Union government signed a fresh Bodoland accord in 2003, it did not insist that Bodo militants surrender their arms. These are the same groups who erode the authority of the Bodoland Territorial Council. Going by historical logic, it allowed the integration of areas even where Bodos were in a minority into regions administered by the Bodo Territorial Council. And while it provided that land could no longer be bought or sold by non-Bodos in the area, it also allowed Muslim settlers to retain their “existing rights”, effectively negating the ban on land alienation. All these years of churning had an effect at other levels. The state’s DGP, J.N. Choudhury, confesses that he no longer recognises his state. Having stayed away on postings outside the state, Choudhury returned as DGP barely six months ago and is shocked at the changes. Attitudes have hardened and people are more concerned about their own identity. Even before the present crisis, he concedes, the surface calm was deceptive and the state was sitting on a tinderbox.
A moderate Bodo leader, U.G. Brahma, who is at the forefront of a separate Bodoland movement, suspects a political conspiracy to derail the “democratic movement for a separate state”. He told Outlook that while there are terrorist groups in the state opposed to the government, there are also terrorist groups that are patronised by the government. There cannot be peace without disarming these groups among both Muslims and Bodos, he says.

Resigned to their fate The Commerce College camp in Kokrajhar. (Photograph by Sandipan Chatterjee)
While illegal migration has been blamed for the crisis, both by the Bodos and the BJP, the Border Security Force denies such allegations. To prove its point, the BSF’s eastern command took Outlook to the riverine borders between India and Bangladesh divided by the channels of the Brahmaputra and Damodar rivers. At a river border outpost, a BSF commander demonstrates the state-of-the-art equipment at their disposal, be it night-vision binoculars or searchlights. P.K. Wahal, the BSF IG, eastern command, told Outlook, “Infiltration isn’t the source of the problem. It has come down substantially over the years. Most of the migration took place pre-1971.”
However, strict border patrolling alone is not going to bring in peace. Akhil Ranjan Dutta, an associate professor of political science at the Gauhati University, says that, to begin with, law and order has to be enforced “adequately and comprehensively”. Land security of the Bodos and Muslims has to be addressed too, along with the entitlement of the non-Bodos, including the Muslim peasants. “It also has to be stressed that peace is beneficial both for the Bodos and non-Bodos and that there are non-violent means to resolve their conflict.” What it requires is an honest effort.
Homeless In The Homeland
How an endless cycle of violence and devastating floods has displaced hundreds of thousands in Assam since 1993 but without attracting any attention from the mainland
  • October 1993 Bodos and Muslims clash in Kokrajhar and Bongaigaon; 18,000 displaced
  • May 1996 Violence between Bodos, adivasis in Bongaigaon, displacing 2,62,682 persons
  • September 1998 Ethnic conflict between Bodos, adivasis in Bongaigaon displaces 3,14,342
  • September-November 2005 43,819 persons displaced in clashes in Karbi Anglong between Karbi, Dimasa tribals
  • August 2008 Conflict between Bodos and Muslims in Darrang and Udalguri; 2,00,000 displaced
  • March-May 2009 Dimasas, Nagas clash in North Cachar hills, displacing 11,737
  • January 2011 Rabha-Garo conflict displaces over 50,000
  • July 2012 Bodo-Muslim clashes displace 3,92,000 persons. Before this round, 1,80,000 internally displaced people living in camps: 33,600 in Kokrajhar, 13,722 in Bongaigaon, 1,20,545 in Darrang, 11,737 in North Cachar Hills.
Source: Asian Centre for Human Rights
  • The humanitarian tragedy sparked by clashes, conflicts and riots in Assam is compounded manifold with the addition of those displaced by the surging waters of the Brahmaputra. The recent floods displaced around 10,00,000, many of whom are now living in relief camps.
Also Displaced
  • 2,50,000 Kashmiri Pandits from the Kashmir Valley since 1990
  • Naxalite conflict in Central India: at least 1,48,000 displaced
  • Communal violence in Gujarat in 2002 and the riots in Orissa: 29,000 people
Source: Internal Displacement Monitoring Centre

By Dola Mitra in Kokrajhar with Debarshi Dasgupta and Uttam Sengupta in Delhi; Photographs by Sandipan Chatterjee