State Visits to Japan, United States and State Visits from Australia and China,samveg ias dehradun

The Prime Minister visited Japan and United 

States, while the Australian Prime Minister and 

the Chinese President visited India in September. 

Details of these visits are given below: 

Japan: Prime Minister Narendra Modi visited 

Japan from August 30 to September 3, 2014. 

Japan promised $35 billion investment in India 

over five years. MoUs and other agreements

were signed with regard to: (i) cooperation in 

defence, (ii) partnership between Varanasi and 

Kyoto, (iii) loan for a coal-fired power plant in 

Uttar Pradesh, (iv) new and renewable energy, 

(v) infrastructure development, (vi) healthcare, 

(vii) transport, and (viii) cooperation in 

humanities and social sciences research.36,37

United States, and the UNGA session: Prime 

Minister Narendra Modi visited the United States 

from September 26-30, 2014.38

 He attended the 

69th session of the United Nations General Assembly in New York, and made a statement 

before the General Assembly.39 He also 

conducted bilateral meetings with the Secretary 

General of the United Nations, Ban Ki-Moon, 

Prime Minister of Nepal, Sushil Koirala, Prime 

Minister of Bangladesh, Sheikh Hasina, 

President of Sri Lanka, Mahinda Rajapaksa, and 

Prime Minister of Israel, Benyamin Netanyahu

during the visit. He concluded the visit with a 

meeting with the President of the United States, 

Barack Obama.40Australia: Prime Minister of Australia, Tony 

Abbott, visited India from September 4-5, 2014. 

An agreement on nuclear energy was signed 

between the two countries which allows for 

supply of uranium from Australia, among other 

things. Three other MoUs were concluded 

during the visit on cooperation in sports, water 

resources management, and technical and 

vocational education/ training.4China: Chinese President, Xi Jinping, visited 

India from September 17-19, 2014. During this 

visit, China promised $20 billion investment in 

India in the next five years. The establishment of 

two Chinese industrial parks, one each in Gujarat 

and Maharashtra, was also announced. MoUs 

and agreements were signed regarding bilateral 

economic engagement in the next five years, 

Task Forces for the FSLRC set up

The Ministry of Finance has, upon the
recommendation of the Financial Sector
Regulatory Reforms Commission, set up four
Task Forces to assist the Ministry in preparing
the roadmap for the establishment of new
agencies. The four Task Forces are
 Task Force on Public Debt Management
Agency (Ch: Mr. Dhirendra Swarup)16
 Task Force on Financial Sector Appellate
Tribunal (Ch: Justice N.K. Sodhi)17
 Task Force on Financial Data Management
Centre (Ch: Dr. Subir Gokarn)18
 Task Force on Resolution Corporation (Ch:
Mr. M. Damodaran)19
The Task Force will complete its task within one
year. 

Half step forward Follow-up reforms needed after diesel decontrol, gas price hike

On Saturday, the Union Cabinet of the National Democratic Alliance government met and took several important decisions, especially some dealing with petroleum products. A new formula for pricing natural gas in the domestic market was determined; the decontrol of diesel prices was announced; and the scheme that directly transferred subsidies to bank accounts of users of liquefied petroleum gas (LPG) cylinders was modified and relaunched. It is good news that the government has taken these progressive steps; all three of them are broadly in the right direction. However, they are not quite enough in each case, and the government must follow up with further action.

The decision on natural gas pricing was politically controversial and long delayed. The new formula is an improvement on the previous candidate, derived by a committee headed by C Rangarajan, who was the chairman of the economic advisory council of former prime minister, Manmohan Singh. Many problematic elements in the Rangarajan formula have been dropped, such as the Japan price, which is inflated because that country is only a consumer market and its price includes many hidden margins. The India price based on the landed cost of  imported gas has also been left out, which is sensible. Further, until arbitration with Reliance ends, the gas from the disputed blocks in the Krishna-Godavari basin will not be included in the price hike — which is fair. But a 34 per cent price rise will nevertheless increase costs. Some downstream user industries, such as fertilisers, have prices that are not yet freed. Unless those prices are also freed, this increase in gas prices will inflate the government’s subsidy bill. There is a similar problem when it comes to the power sector, where tariff differentials for sectors have already played havoc. The gas price revision will prove expensive to the taxpayer unless the government follows up with freeing end-user prices in gas-intensive industries. It is important to note, however, that in some major ways the government is retaining control over pricing in a bid to attract investments into gas exploration. For example, a “premium” has been promised for making investments in higher-cost areas, such as for deep-sea exploration. It is not clear what norms will be followed to determine this premium, and how transparent the process will be. If it is purely a ministerial decision, that would be a step backward.

Diesel price decontrol is the planned end-point of the gradual increase in diesel prices since January 2013. It will be hailed, certainly, when crude oil prices are going down, as they are today. The political establishment, however, must show equal firmness about following market principles when crude oil prices go up. The important point here is that the government should completely distance itself from pricing decisions; those should be taken entirely by the oil companies. The decisions taken by oil marketing companies will now be carefully watched to see if this decontrol is genuine. Indeed now that both petrol and diesel prices are decontrolled, the oil companies should be allowed to move away from co-ordinating their prices. The true test of whether market-based pricing has been introduced is if individual oil companies use price movements to compete with each other.

Finally, there is the reworking of direct benefit transfers, or DBT, for LPG cylinders. But, again, it is meaningless unless the real hard work of fixing the back-end is undertaken — seeding bank accounts with Aadhaar numbers. Real political capital has not been expended here, though. Genuine reform would be to limit or eliminate an LPG subsidy for families that are above the poverty line.

A chowkidar for state banks

Narendra Modi's many passionate election speeches last year and earlier this year were punctuated by a very colourful expression. "Send me to Delhi as your chowkidar and I will protect your wealth," he claimed. This was accompanied by another colourful expression: "Na khata hoon, na khane deta hoon" (I neither make money, nor do I allow others to make money).

We hope that at some stage Mr Modi starts applying these two of his many pre-election promises where they matter the most: government-owned banks.

Public-sector banks (PSBs) dominate the Indian financial sector. They hold the bulk of people's savings. They are the main source of loans to small businesses and large projects alike. They are vehicles for his ambitious Jan Dhan Yojana. They are also inefficient, poorly governed and beset by largescale corruption.

In May, the All India Bank Employees Association (AIBEA) assessed wilful defaults worth Rs 70,300 crore in 400 PSB loan accounts. They also estimated that over the past seven years, there were fresh bad loans worth Rs 4.95 lakh crore in the PSBs - while during the same period, these banks wrote off bad debts worth Rs 1.4 lakh crore. Gross non-performing assets (NPAs) and bad loans in these banks had increased more than three times to Rs 1.64 lakh crore on March 31, 2013, from Rs 39,000 crore on March 31, 2008.

Thousands of crores of write-offs are happening without accountability. Spectacular defaults such as Deccan Chronicle and Kingfisher Airlines have led to no action against defaulters or against the senior bank officials and chairmen who allowed the loans to go far beyond enforceable collateral. This is a huge scandal, which should get the chowkidar worried, because the reasons for such massive bad loans and write-offs are deep-seated. Forget about maximum governance, even minimum governance in missing in the PSBs. And has been for decades.

In the 1970s, the government used the PSBs to mainly fund its various socially oriented loan schemes and public-sector projects, which often left a big hole in the banks' books. Throughout this period, private-sector companies also relied on government-owned banks and financial institutions for loans. Since the lenders insisted that promoters bring in substantial amounts of cash, borrowers would inflate the cost project and siphon off the money.

Therefore, contrary to all prudent norms, projects were more than fully funded by government banks, with most promoters having no skin in the game. Naturally, many projects turned sick while the promoters enriched themselves. Bankruptcy laws were weak. Nothing could curb the corrupt nexus between PSBs and their defaulting borrowers. When such poor lending weakened the banks, the government would step in and "recapitalise" them for the game to continue.

From the mid-1990s, amid the euphoria of economic liberalisation, Indian businesses expanded their capacities rapidly with the help of loans from PSBs and so the inherent weakness of the government banking system got magnified manifold. By 2001-2002, bad loans had reached an alarming 13 per cent of advances.

After 30 years of unaccountable lending, banks started complaining that they need tougher laws to enforce collaterals. In response, the government created the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) of 2002, designed to help banks in the recovery of bad loans.

One of the key provisions of the Act is for banks to be able to auction the assets of defaulting borrowers. But notice that even after getting a tougher law, banks have not been able to claw back much money from Vijay Mallya of Kingfisher or the Reddy brothers of Deccan Chronicle. The answer is obvious: bank officials have lent money without adequate collateral, as part of their nexus with promoters. Yet neither the Reserve Bank of India (RBI) nor the finance ministry is questioning the officials or directors involved.

Indeed State Bank of India (SBI) Chairman Arundhati Bhattacharya, in an interview with the Financial Times last week, has called for a shake-up in the regulatory system and asked for tougher rules for defaulters, as well as "a proper bankruptcy law to help get orderly resolution of [bad] assets".

That is a smokescreen. Working with the same set of laws, ICICI Bank, Axis Bank and HDFC Bank have negligible bad loans. Why? The real issue is corruption in various forms, starting with how bank chairmen are appointed.

Appointment of PSB chairmen is an elaborate process. It starts with intense lobbying by various senior bankers. Finance-ministry bureaucrats play favourites. Selection is often influenced by quid pro quo - a promise to be pliant and sanction certain loans that are bound to go bad. The RBI usually rubber-stamps this selection process.

Who will go after a chairman when he enjoys the ministry of finance's support and the RBI is hands-off?

Mr Modi has repeatedly talked about governance. The first step in governance of PSBs is to fix responsibility on their top brass for loans that have turned bad. Right now, accountability in the PSBs is a black hole despite the fact that banks have stringent credit-appraisal process.

Small businesses complain of onerous conditions imposed by banks before loans are sanctioned. Often banks arm-twist borrowers to buy some expensive insurance as an unwritten precondition. And yet loans worth tens of thousands of crores have gone bad - something that should happen only in exceptional situation, such as a natural disaster. A loan such as that of Kingfisher goes progressively bad, not overnight. What were banks doing at each stage that Vijay Mallya's collateral was falling short? Would they extend the same courtesy to a small borrower?

The fact is, borrowers have repeatedly siphoned off money from the banking system in connivance with bankers, no matter what kind of regulatory system and process we have had.

The previous prime ministers did not claim to be chowkidars. Mr Modi has. For the first time in 45 years, can taxpayers hope that accountability in the PSBs will be fixed?

Make for India, not just in India

he government’s policies have unwittingly tilted the balance in favour of innovating for the world rather than creating conditions that encourage innovations for India’s own needs

With a large engineering workforce and links with the English language, India already has some natural advantages in providing knowledge workers to global corporations. In addition, government policies that have made foreign investment increasingly easy, coupled with tax holidays in Special Economic Zones that only large corporations can afford to move into, have provided excellent incentives for setting up export-oriented captives in India.

In the last 10 years, the number of global research and development (R&D) captives in India has been progressively increasing. A recent study by Zinnov Consulting found that nearly half of the top 500 global R&D spenders have set up shop in India. These captives and their service providers together have created a globally exposed and competent workforce in India in addition to a new wealthy class of a few white collared professionals. The positive impact that this has made to the country is significant and real, even if it is limited to a small percentage of the population. To replicate this success in manufacturing seems a worthy objective, but with lessons from the past, we can and should aim higher.

Innovation has two beneficiaries — producers and consumers. For example, creating the light bulb was a profitable venture for Thomas Alva Edison but it also benefitted millions of consumers with the innovation.

Sharing value

In most cases, the knowledge workers seem to be pursuing problems of their employers in western countries. The output of their work often tends to be irrelevant in India. Thus in this increasingly interconnected world, one can effectively create islands of producers and consumers that are far removed from each other. The value created is shared by a few producers in India and a lot of consumers in western countries. The recent ‘Make in India’ campaign is trying to extend this trend into manufacturing from services.

There is a silver lining to this approach. While the output of what workers create is removed from the needs of their country of residence, the skills and capacity that they develop in the process are transferable. For example, workers from the very same pool, using similar tools and processes, created the first of its kind Unique Identification project in India. Aadhar aims to give a billion unique biometric IDs to Indian residents and has already achieved half of its target within a few years.

However, where government policies in attracting more FDI and in encouraging the Indian outsourcing industry have been a success, the track record in encouraging companies to innovate and make in India and for India has been poor. With a dismal rank in the ease of doing business index, there is a systemic advantage that existing businesses enjoy versus the problems that new innovative companies seeking to disrupt them have to face. However, improving the country’s rank on this well-established score doesn’t seem to be an important priority for the Indian government. Apart from the many sound bites, no concrete action is forthcoming.

 The track record in encouraging companies to make in India and for India has been poor 

The initiative of implementing a uniform Goods and Services Tax will do more to create an integrated domestic market than anything else. Equally important is to be able to move goods across state borders without being subjected to harassment.

However, an export-oriented manufacturing policy sidesteps this issue since the goods produced will mostly go out. Another key issue in India is a broken credit system that makes it difficult for new businesses to raise debt. The ‘Make in India’ initiative will even further tilt the balance in favour of large domestic firms that hog all credit and can also tap international markets or foreign firms that have better access to capital in their home country. These are barely two in a long list of reforms that India awaits.

Software as a service

We can already see examples that frustrate businesses trying to make for India in the software sector. The recent trend of delivering software as a service has proved to be an ideal solution for a capital-scarce country where consumers and small businesses are happier with a pay-as-you-go system rather than investing upfront for using software tools. However, the one thing that such businesses need — an ability to easily collect recurring payments online — is tedious in India. This makes it is easier for an Indian company to serve customers in the U.S. than in India. This is tragic, apart from being strange.

The collateral advantage of learning from exposure to western markets also comes with the inherent bias for creating products and services more relevant for the richer countries. Innovations perfected in India on that scale would also find relevance in emerging economies all over the world.

However, that is an unlikely scenario given the current policies we are pursuing. Right now, we are trying to encourage creation of figurative islands in India with a red carpet for setting up factories and exporting those goods. We have done that successfully in services and seen the limitations. A focus on ‘Make for India’ will spur ‘Make in India’ export-oriented businesses too but the reverse doesn’t happen automatically. We have the opportunity to get it right this time

Series of power project clearances for Uttarakhand

While, the Supreme Court continues its stay on 24 hydroelectric power projects in the Alaknanda and the Bhagirathi Basins with an installed capacity of 3,065 MW, the Uttarakhand Government has shifted focus on getting clearances from the Centre for other projects across the State.

In a major step towards restarting work on stalled projects, work on the 5,600 MW Pancheshwar multipurpose project, which was stalled for over 18 years, started after the proposal to restart work was discussed during the bilateral talks between Prime Minister Narendra Modi and his Nepalese counterpart Sushil Koirala, in August.

The proposed 5,600 MW dam is to be built on the Indo-Nepal border in Champawat district.

The 300-MW Lakhwar project, which is located in the Upper Yamuna River Basin in Dehradun district, is another project for which the State government has been striving to attain clearance. However, after being delayed under the Congress regime at the Centre, the project is set to attain final clearance after which the project work would begin.

Chief Secretary Subhash Kumar said: “The investment clearance for the Lakhwar project is expected within two to three weeks after which we could begin construction work at the project site.”

The project had received clearance in 1986 when it was under Uttar Pradesh’s Irrigation Department. Work continued till about 1992. The project work was later transferred to the Uttarakhand Jal Vidyut Nigam Limited (UJVNL). A change in the authority undertaking the project required a new clearance, which is what the State Government was trying to seek.

The project work was stalled even after 30 per cent work was already complete.

Work on a project proposed on the Tons river – 660 MW Kishau multi-purpose dam – was caught in disputes which were recently resolved by the Centre. The Centre agreed to bear 90 percent cost of power component of the project. The Centre also dismissed Himachal’s demand of a 50 per cent share in the enhanced power that would be generated in the existing downstream projects due to the project.

In another development, the State government has proposed to restart work on the 600 MW Loharinag Pala HEP on the Bhagirathi river in Uttarkashi district. The project was scrapped in the year 2010. The State government has suggested for the project to be a joint venture between the State government and the NTPC Limited – the agency that was undertaking constructing of the project before it got scrapped.

Mr. Kumar said the Centre had not cleared the Loharinag Pala project for reconstruction but, talks were underway.

Clearance for the 300-MW Bawla Nandprayag project on the Alaknanda in Chamoli district would soon be attained, Mr. Kumar said, adding that public hearing had been conducted for the project and the locals had given their approval for it.

National Air Quality Index (AQI) launched

The Minister for Environment, Forests & Climate Change Shri Prakash Javadekar today launched ‘The National Air Quality Index’ (AQI) in New Delhi.Speaking on the occasion, Shri Javadekar outlined the AQI, as ‘One Number- One Colour-One Description’ for the common man to judge the air quality within his vicinity. The formulation of the index was a continuation of the initiatives under Swachh Bharat Mission envisioned by the Hon’ble Prime Minister Shri NarendraModi.

Elaborating further, the Minister stated that the index constituted part of the Government’s mission to introduce the culture of cleanliness. Institutional and infrastructural measures were being undertaken in order to ensure that the mandate of cleanliness was fulfilled across the country. As a part of the process, he mentioned that clean air would be a part of Peoples’ campaignto take up the issue in a mission mode. In order to widen the ambit of the culture of cleanliness, the Ministry proposed to discuss the issues concerned regarding quality of air with the Ministry of Human Resource Development in order to include this issue as part of the sensitizationprogramme in the course curriculum.

Under the new measurement process, Shri Javadekar stated that an effort had been made to include a comprehensive set of parameters. While the earlier measuring index was limited to three indicators, the current measurement index had been made quite comprehensive by the addition of five additional parameters. Under the current measurement of air quality, 8 parameters. The initiatives undertaken by the Ministry recently aimed at balancing environment and conservation and development.

Air pollution has been a matter of environmental and health concerns,particularly in urban areas. Central Pollution Control Board along with State Pollution Control Boards has been operating National Air Monitoring Program (NAMP) covering 240 cities of the country. In addition, continuous monitoring systems that provide data on near real-time basis are also installed in a few cities.

Traditionally, air quality status has been reported through voluminous data. Thus, it was important that information on air quality is put up in public domain in simple linguistic terms that is easily understood by a common person. Air Quality Index (AQI) is one such tool for effective dissemination of air quality information to people. An Expert Group comprising medical professionals, air quality experts, academia, advocacy groups, and SPCBs was constitutedand a technical study was awarded to IIT Kanpur. IIT Kanpur and the Expert Group recommended an AQI scheme.

There are six AQI categories, namely Good, Satisfactory, Moderately polluted, Poor, Very Poor, and Severe.  The proposed AQI will consider eight pollutants (PM10, PM2.5, NO2, SO2, CO, O3, NH3, and Pb) for which short-term (up to 24-hourly averaging period) National Ambient Air Quality Standards are prescribed.

Based on the measured ambient concentrations, corresponding standards and likely health impact, a sub-index is calculated for each of these pollutants. The worst sub-index reflects overall AQI. Associated likely health impacts for different AQI categories and pollutants have been also been suggested, with primary inputs from the medical expert members of the group.