Ways to reduce the subsidy burden

Rather than direct action, the government chose moral persuasion to make people give up subsidies. The focus then shifted to relying on technological solutions. We need to take a few more steps forward

When the new government assumed office there were great expectations of bold measures to reduce subsidies and redirecting expenditure to public investment. As global crude prices plummeted, progress was made on diesel and petrol. The pace slowed down in the context of liquefied petroleum gas (LPG). Rather than direct action, the government chose moral persuasion. Now the discourse seems to have changed to relying on technological solutions for reducing subsidies.

Let's start with the magnitude of the problem. In 2014-15, subsidies accounted for Rs 2.7 lakh crore or 2.1 per cent of gross domestic product (GDP). Subsidies pre-empted 23.7 per cent of the entire revenue receipts of the central government. In terms of opportunity cost (read lost), subsidies were 2.64 times the entire Capital Plan Expenditure for 2014-15. Food, fertilisers and oil-based subsidies account for 95 per cent of all subsidies. Will technological solutions suffice, especially after the mandatory use of Aadhaar has effectively been proscribed?

Food subsidies are the political hot potato. The grounds for a cutback are all well-known. First, apart from the intended beneficiaries, that is, below poverty line (BPL) families, the subsidies reach many others. Second, there are large leakages in the public distribution system, for example, grains finding their way to roller flour mills and thence to the market (bread, biscuit and savoury makers). The subsidy then shows up as a profit of some traders and producers at the cost of the government exchequer! Third, the subsidy pays for the carrying cost of stocks built up with the Food Corporation of India (FCI) and all inefficiency in the management of such stocks (rotted grains). Fourth, there are losses ascribable to graft when procuring grains of less than Fair Average Quality.

The food subsidy is on staples, wheat and rice. It seems naïve to believe that the poor live on grains alone. And, on other food items, the last decade has seen an inflation of 10 per cent or more per annum. Surely, a modest increase in price would have been tolerable. Nevertheless, central issue prices have not been changed in 15 years.

Fertiliser subsidies are facing worse outcomes. First, the greatest beneficiaries are farmers with large holdings (kulak). Such subsidies cannot accrue to the poor, landless labourers or in any significant measure to small holders. Second, there are long-term economic losses. Excessive fertiliser usage has led to serious deterioration in soil quality. Under-pricing is responsible for ecological damage. Third, there is the widely accepted position that subsidies support inefficient domestic fertiliser production, that is, they do not actually reach the farmers. Even if fertilisers have to be subsidised, why not import them and then provide a subsidy? The budgetary outgo would be less in that case. Economists call this a "make-or-buy choice". Why make when it is cheaper to buy? However, the reality is that "make" is the revealed preference, a throwback to the self-reliant (import substitution) era.

The case for reducing kerosene subsidies is much the same. There are unintended beneficiaries, not only (or mainly) the intended beneficiaries - the poor. There are big leakages. And, the use of kerosene as an adulterant entails other economic costs.

Technological solutions can only take us so far. We need to look beyond. And, there is simply no escaping from at least moving towards getting the prices right.

Take food subsidies. Technological solutions will reduce some losses due to unintended beneficiaries. But unless price distortions are addressed, no headway can be made to plug leakages in the system. Further, technological solutions cannot address losses on the FCI's carrying costs, rotting stocks, or graft in procurement; price adjustment can. Technological solutions offer virtually no relief on fertiliser subsidies. They cannot address the unintended beneficiary problem. And, fertiliser overuse can only be tackled by reducing the price distortion. Further, import price discipline is the easiest way to induce efficiency improvements in domestic fertiliser production. On kerosene, the argument is the same: no significant impact can result unless the price differential (distortion) is reduced.

Economists use the criterion of Pareto superiority to assess outcomes. Simply put, if a change results in an outcome in which gainers can compensate losers, and still be better off, the changed outcome is deemed Pareto superior. The gainer from subsidy reduction is the government. Surely it can redirect expenditure savings back to intended beneficiaries, for example, a 20 per cent reduction yields Rs 53,000 crore. If Rs 34,000 crore of this is used for MGNREGA, it would double the outlay on a programme where self-selection ensures better targeting. An amount of Rs 14,000 crore extra would double the outlay on 'Housing for All'; Rs 4,500 crore would double the outlay on Rashtriya Krishi Vikas Yojana; and Rs 5,300 crore would double the outlay on the Krishi Sinchai Yojana.

To address the issue of the FCI's losses requires price and non-price adjustments. We need an enduring reduction in stocks and a review of the minimum support price regime where relative prices distort productive incentives. An overhaul of the FCI system can no longer be delayed. On fertilisers, the 'make' decision needs review. If the concern is the vagaries of international markets, can't we replicate the Indian Farmers Fertiliser Cooperative/Krishak Bharati Cooperative Limited-Oman Oil type of joint venture?

Any serious action on subsidies ought to be taken in the early years of a new government, when political goodwill is still alive and election fever some time away. Mr Prime Minister, the first majority government in India in the last 30 years is expected to take action. If you won't, who will?

India a Credible Actor on Climate Change

As the world is preparing for a legally binding  agreement on climate change in Paris this December, countries are submitting their respective INDCs (Intended Nationally Determined Contributions) as decided at the Conference Of Parties meeting (COP 20) at Lima in December 2014. India being a deciding nation for any workable climate agreement is all prepared to submit the same ahead of the Prime Minister’s scheduled speech on climate change at the UN General Assembly this month. But a sense of misgiving emerged on India's stand on climate related issues when the Chief Economic Advisor, Arvind Subramaniam, suggested, in a note to the Prime Minister and Finance Minister, that India should not insist on climate financing for adaptation from the developed world.1 However, at a high level round table held on 27 August 2015, Minister of State for Environment, Forest and Climate Change, Prakash Javadekar, reiterated that India will continue asking the developed countries to meet their obligations to provide finance and technology to developing and least developed countries in order to better adapt to the changing climate.2
Often criticised as an obstructionist or stubborn negotiator, India now holds considerable credibility as a leader when it comes to climate related pledges. India continues to maintain that the UNFCC (United Nations Framework Convention on Climate Change) is the most justified framework to deal with climate change negotiations and that it should not be rewritten even if the world were to come up with a substantial climate agreement at Paris in December 2015.3 The rationale for this stance is that the UNFCC framework focuses on the principles of common but differentiated responsibilities (CBDR) and equity based on historical emissions by the developed world. These principles provide a fair opportunity for every developing nation to grow accordingly. Thus it is supported by most of the emerging economies like Brazil, South Africa and China. The axis of India's approach towards climate related issues has always been a sustainable one. It was India’s concern for the environment and ever growing need for fossil fuel that led to the formation of the Indian Renewable Department Agency in 1987, years before the formation of the UNFCC in 1992.4 India now shares ample number of joint statements and bilateral agreements with major nations to attest its approach towards climate change. Such steps signal that India is action oriented when it comes to climate policies and shares this vison with many states. India supports any agreement which identifies the six elements under UNFCC, i.e., mitigation, adaptation, finance, technology development and transfer, capacity building, and transparency of action and support, in a balanced manner.
India is approaching COP-21 at Paris from a position of strength and sustainability. It has always been proactive in the realm of steps taken to combat the issues related to climate change. The new government, under Prime Minister Modi, is spearheading the agenda of climate change and related issues in each and every foreign visit. The record of India’s action oriented approach is exemplary. The decision to hike taxes on petroleum products in spite of the steep decline in international energy prices is one example. Another novelty is India insisting on informal talks to be held among states before the climate talks in Paris.
India is moving towards the Paris talks with a comprehensive set of INDCs. This consists of a two phased approach. The first phase covers mitigation. Being the principal phase, it focuses on the policies already implemented by the government to mitigate the challenges of climate change. The National Solar Mission with 2,970 MW of Grid Connected Solar generation and 364.27 MW5 of off-grid solar application,6 the National Mission for Enhanced Efficiency with PAT cycle-1, which covers 478 plants in eight energy intensive industrial sectors, and the National Electric Mobility Mission Plan 2020 introduced in 2013, to promote the adoption of hybrid and electric vehicles are the principal programmes to be followed through in this phase.
The second phase covers adaptation, which includes: the National Wind Mission which has an initial target of producing about 50,000 to 60,000 MW of power by the year 2022; the Sustainable Habitat Mission which  focuses on energy conservation in old and new buildings; the Sustaining Himalayan Ecosystem Mission to maintain track of the ever changing glacier systems; the National Adaptation Fund which devotes Rs. 100 crore for supporting projects at the Centre and State levels; the National Health Mission which deals with climate impacts on human health; the National Mission for  Coastal Areas to formulate integrated coastal resource management plan and map vulnerabilities along the entire shoreline; and  the National Mission for Waste to Energy to incentivise efforts towards harnessing energy from all kinds of waste to lower dependence on coal, oil and gas for power production. This phase principally focuses on adapting to the effects of climate change and cultivating a sense of awareness among the people with respect to the changing climate.
A holistic view of India’s policy with respect to climate change satisfies a major commitment which neither the U.S. nor China fulfils. India’s two-phased approach satisfies the Durban Platform’s second mandate and its commitment period (most of the mitigation related missions of India are targeted for 2020). Therefore, India is expecting an agreement which guarantees the provision of affordable technologies for the developing world to adapt to the changing climate.
India’s stand on climate change is in tandem with the stances of both the north and south. Indeed, it stands as a bridge between the developed north and the developing south.

‘Make in India’ in Defence Sector: An Overview of the Dhirendra Singh Committee Report

In a significant departure, the Ministry of Defence (MoD) has made public the report of the 10-memebr Experts Committee that was set up in May 2015 to both evolve a policy framework for facilitating ‘Make in India’ within the purview of the Defence Procurement Procedure (DPP) and streamline the procurement process.1 More significantly, the report has been put in the public domain even before the government has taken action on its key recommendations, indicating the keenness to solicit views from the wider public on the vital issue of self-reliance, which has so far dogged policy makers despite several policy announcements in the past decade-and-a-half. This Issue Brief examines the key recommendations of the Experts Committee, especially those that pertain to the defence industry.

About the Committee and the Structure of the Report

Like many other MoD appointed committees, the Experts Committee included members from all the key stakeholder institutions: the armed forces, various wings of the MoD [Department of Defence Production (DDP), Department of Defence (DoD) and Defence Research and Development Organisation (DRDO)], and the industry. Chaired by Dhirendra Singh, a former Director General (Acquisition) (DG (Acq.)), the Committee had also the benefit of the expertise of another former DG (Acq.) – Satish B. Agnihotri – who has had hands-on experience of DPP-2013, the latest procurement manual in vogue for capital acquisition. As expected, the Committee had interacted with a vast range of stakeholders including industry (both domestic and foreign), various wings of the defence establishment, thinks tanks (including the Institute for Defence Studies and Analyses) and other relevant stakeholders. To the credit of the Committee, the voluminous 263-page report has been submitted to the government in a record time of three months.
The Report of the Committee is divided into seven chapters, with the last chapter being devoted to “enabling framework and summary of observations and recommendations”. The first two chapters – Defence Materiel and Defence Industry –although more of an introductory in nature, nonetheless have a vital bearing on some of the key recommendations made in the subsequent chapters. The next four chapters – Make in India, DPP, Trust and Oversight and Beyond DPP – deal with issues pertaining to procurement and industry. What is significant about the report is its detailed analysis of each problem affecting the defence industry (particularly the private sector) and the procurement system as well as the ease with which the various complex issues have been analysed.

Key Recommendations

The report contains 43 recommendations. Of these, the Committee identifies 15 recommendations as pertaining directly to ‘Make in India’ while the remainder relates to DPP. However, given that many of the DPP provisions have a direct impact on indigenous arms production, the industry related recommendations (both direct and indirect) are therefore more than what the Committee has identified. Some of the key recommendations that would have an impact on the ‘Make in India’ initiative are:

Strategic Partnership Model

The signature recommendation of the Experts Committee pertains to various models for the private sector. After taking into account the unique nature of defence equipment and the configuration of the global defence industry, the Committee has arrived at three models for the Indian set up ­– Strategic Partnership, Developmental Partnership and Competitive Partnership. According to the Committee, the choice of the model should be based on “strategic needs, quality criticality and cost competitiveness.”
Among the three models, Strategic Partnership is somewhat akin to the Raksha Udyog Ratna (RUR) concept. First suggested by the Kelkar Committee, RUR failed to take off apparently due to objections from trade unions affiliated with public sector defence companies and reservations expressed by some industry players on the manner in which the Prabir Sengupta Committee had identified a dozen or so companies as RURs. Surprisingly, the Dhirendra Singh Committee has neither referred to the RUR concept of the Kelkar Committee nor to the RURs identified by the Sengupta Committee. Nonetheless, like the RUR concept, the strategic partnership model also visualises selective identification of a few big private players and nurturing them through preferential treatment, which would entail co-opting them for ‘Buy and Make’ and Government-to-Government procurement programmes.
While suggesting the strategic partnership model, the Experts Committee has also identified the following six segments in which Strategic Partners (SP) from the private sector would be identified:

• Aircraft: fighter, transport and helicopter and their major systems.
• Warships of stated displacements, and submarines and their major systems.
• Armoured fighting vehicles and their major systems.
• Complex weapons which rely on guidance systems to achieve precision hits, which may include anti-ship, air defence, air-to-air, air-to-surface, anti-submarine, land attack.
• Command, control, communication and computers, intelligence, surveillance, target acquisition and reconnaissance.
• Critical materials (titanium alloys, aluminium alloys, carbon composites, nickel/cobalt alloys etc.).

It may be noted that while identifying the different segments, the committee has categorically suggested that just one or two private players would be identified in each segment, limiting the number of players to almost the same number of players identified through the RUR selection process. In order to prevent ‘conglomerate monopoly’, the Committee has further suggested that only one SP should be permitted in one segment, and once it chosen in a particular segment it should not be considered directly or indirectly (through cross holdings in another company) in the other segments. This has apparently not gone down well in the industry, especially the bigger ones which aspire to play a larger role in different segments of defence production. The industry’s reservations notwithstanding, the idea of strategic partnership is as relevant as the earlier RUR concept since India cannot afford to have a very large and frequently changing number of players in every segment of major defence platforms. Even in the United States, the biggest defence market in the world, the production of major platforms and weapon systems is consolidated among a few major companies. Having said this, the major challenge for the government now is to select the SP in each segment. Given the earlier experience in the selection of RURs, it would be worth watching how the government proceeds on the SP concept.

Industry Friendly Procurement System

A major focus of the Expert Committee is on streamlining the acquisition process and structure so as to create more opportunities for the local industry. The Committee argues that for ‘Make in India’ to succeed, the procurement system must recognise the unique and strategic nature of defence equipment, which is characterised by high-technology content, stringent quality standard, limited vendor base, low production rate, rapid obsolescence and restricted mobility across borders. In such a scenario, for the local industry to prosper, there is a need to take it into confidence in every possible procurement step, beginning with the planning process. Highlighting the current weakness whereby the local industry does not have information about the type and nature of the long term equipment requirement of the armed forces, the Committee has suggested that the relevant information as contained in various plans and other documents be shared with the industry with the sole objective of enabling the latter to make a concrete decision on investment or technology partnership. In specific terms, the Committee has suggested the revision of the current Technology Perspective Capability Roadmap (TPCR) so as to reflect the type and nature of the equipment required by the armed forces in the next 15 years. At the same time, the Committee has also suggested that schemes amenable to ‘Make’ projects be shared with the industry along with the details of other schemes as contained in the 5-year Services Capital Acquisition Plan (SCAP).
The Committee is of the opinion that for the Indian industry to contribute meaningfully to ‘Make in India’, the procurement system needs to move towards indigenous design, development and production or ‘Make’ projects. In this regard, the Committee while broadly agreeing with the MoD’s revised and simplified ‘Make’ procedure, also makes some specific suggestions to further strengthen it. It rightly argues that since ‘Make’ projects involve a long-gestation period, the decision on such projects must precede that of other categories by at least one plan period (five year) or more. Such pre-positioning of ‘Make’ projects would give much needed leeway to the industry and the services to iron out any issue that may arise at the developmental stage without significantly disturbing the planned induction schedule. The eligibility criteria for soliciting expression of interest (EoI) from the industry should be liberal to include not only the big players but also all the ‘innovative and agile industry’ including from the Micro Small & Medium Enterprises (MSME) sector. Moreover, the industry executing the ‘Make’ project should be given tax incentives by way of allowing their developmental cost (of 20 per cent) as being qualified as R&D expenditure.
The Committee is also of the firm opinion that for the local industry to grow, the current approach of the procurement system towards single vendor situations needs a relook. As the Committee rightly observes, single bid situation is an emerging reality, particularly in cases involving ‘Buy and Make’ and ‘Buy and Make (Indian)’ projects. Rejecting such proposals for the sake of competition not only delays acquisition, but hampers the interest of the local industry which is now expected to play a much larger role under the ‘Make in India’ initiative. Aligning with the concept of strategic partnership, the Committee therefore recommends suitable changes in the DPP to reflect the emerging reality.
One of the positive things that has clearly emerged from the Experts Committee report is the increase in the last two years of the share of ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ categories (see Table 1). The Committee attributes this to a critical change brought in DPP-2013, which provides a higher preference to these categories over others. To build on the progress, the Committee has further suggested a ‘decision flow chart’ to be incorporated in the DPP that would guide the procurement authorities to arrive at suitable procurement categories in a more credible way and consistently.

Table 1. Category-Wise Acceptance of Necessity (AoN)
(Rs in Crore)

Year	Buy (Indian)	Buy & Make (Indian)	Make (Indian)	Buy & Make	Buy (Global)	Total
2010-11	60835	16710	15845	19450	40547	153387
2011-12	28561	2032	0	5747	20500	56840
2012-13	18689	385	1004	13460	27114	60652
2013-14	21001	2733	0	3504	371	27609
2014-15	38318	72750	0	0	6759	117827
Total	167404	94610	16849	42161	95293	416317

Commenting on the existing procurement structure, which was set up in pursuance of the implementation of the 2001 report of the Group of Ministers (GoM), the Committee notes that “time is ripe for a second set of reforms.” It argues that the existing structure neither has the mandate nor the expertise to further the interest of the local industry, which is expected to play a larger role under the Make in India initiative. It therefore suggests that a specialised organisation, physically separate from the defence ministry, would go a long way in bridging this vital gap. The Committee also suggests that the functionaries posted in the organisation should have a longer tenure and be well trained for which a detailed curriculum should be prepared by the Headquarters Integrated Defence Staff (HQ IDS).

Emphasis on Greater Indigenisation

The Experts Committee is of view that ‘Make in India’ should not “become assemble in India with no IPR [intellectual property rights] and design control and thereby perpetuating our dependence on the foreign suppliers.” To guard against such a situation, the experts group has emphasised on progressively increasing the indigenisation content, to be ensured not only through DPP-driven procurement but also by entities like DRDO, DPSUs and OFs – the three traditional players in the defence industry set up. With regard to these entities the experts group has specifically suggested that they need to imbibe an indigenisation culture and reflect it in their sourcing of parts, components and raw materials and also the final product. To ensure greater indigenisation through the DPP route, the group has suggested an incremental upward revision of the local content requirement stipulated in various procurement categories in successive DPPs. For DPP-2015, which is in the offing, the Committee has recommended that the ingenious requirement under ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ should be increased to 40 per cent and 60 per cent, respectively, from the present 30 per cent and 50 per cent. And for ‘Make (Indian)’ projects, the indigenisation content should be increased from the present 30 per cent to 40 per cent in DPP-2015.
While suggesting the above mentioned local content thresholds under various procurement categories, the Committee has, however, not lost sight of situations that would demand a different approach. For instance, there could be a situation involving particular air platforms in which the domestic capability is minimal and where the local industry is likely to face difficulties in achieving the stipulated local content. To cater for such a situation, the Committee has given the flexibility to the procurement authorities to lower the local content requirement. At the same time, in systems in which local capability is relatively developed, authorities would have the option of enhancing the indigenisation requirement.

Human Resource Development

Identifying human resource (HR) as a poor focus area in Indian’s defence industrialisation process so far, the Committee has made a number of vital recommendations. These include setting up a defence manufacturing sector skill council, initiating a joint MoD-industry sponsored internship programme, a provision to enable skill development through the offset route, setting up of tool rooms around defence industry clusters, and a university programme for military engineering. Although vital for creating a healthy pool of engineers and other technicians, these recommendations may not however prove sufficient to meet the critical requirements of high end manufacturing and R&D, which require a vast workforce nurtured in various defence technology disciplines. To address the HR issues affecting India’s defence R&D establishments in particular, the Rama Rao Committee, which submitted a review report in 2008 on the functioning of the DRDO, had suggested the creation of a dedicated defence technology university on the lines of the ones set up by the departments of atomic energy and space. The Prime Minister had also promised in his Aero India 2015 address to “set up special universities … to cater to our defence industry, just as we have done in atomic energy and space”. Surprisingly, the Experts Committee has neither referred to the prime minister’s address nor to the Rama Rao Committee report on this vital aspect of HR development.

Conducive Financial Framework

The Experts Committee has laid much emphasis on creating a conducive financial framework for the local industry, particularly the private sector, to do business in the defence sector. The committee has taken note of the concerns voiced by the private sector on various aspects of taxes, duties, payments terms, exchange rate variation, and cost of capital, which render its products uncompetitive vis-à-vis the products of public sector companies as well as foreign vendors. The Committee has also taken note of the discrimination towards the defence manufacturing sector vis-à-vis other sectors such as power, telecom, refinery, etc., which enjoy a host of tax benefits and other incentives.  One of the glaring discriminations meted out to the local entities is in the domain of offsets, according to the Expert Committee. It has observed that the current taxation policy prevents the development of in-house system integration capacity through the offset route as foreign companies do not find it cost-competitive. In its recommendations, the Committee has suggested that deliveries by the Indian Offset Partners (IOP) may be covered under the list of ‘declared goods’ and also given the ‘deemed export’ status, which will provide the necessary incentive to foster local capability in the high-end spectrum of defence manufacturing. At the same time, the Committee has also suggested various other incentives to the local industry including the benefits of 300 per cent weighted tax deduction to the Industry’s for its contribution towards ‘Make’ projects.

Other Recommendations

In addition to the above, the Committee has also made a number of other recommendations for the benefits of the local industry. These include provisions:

• To prepare a competency map of local capability and a registry of Indian industry to facilitate decision making.
• To allow foreign companies to discharge offset obligations through subscription to defence specific venture capital funds.
• To consolidate the four defence public sector shipyards (Mazagon Dock Ltd., Garden Reach Shipbuilders and Engineers Ltd., Goa Shipyard Ltd. and Hindustan Shipyard Ltd.) into one corporate entity to take advantage of the single management of a large entity.
•  To issue tenders to Indian companies having industrial license (IL) in the relevant domain.
• To allow private sector companies access to public funded R&D infrastructure and testing and proof firing ranges.
• To provide liberalised funding to MSME though the MoD’s proposed Technology Development Fund (TDF).
• To develop a robust quality assurance and standardisation system.
• To set up an independent body to ensure single window clearance for defence exports.
• To create a single window mechanism to provide regulatory and other clearances to the industry to do business under the ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ projects.

In addition, the Committee has also endorsed the recommendations of past committees with regard to corporatisation of the OFs and setting up of an export arm of the DRDO on the lines of the Antrix Corporation of the Indian Space Research Organisation (ISRO).
Besides, the Committee has recommended the formulation of a 10-year roadmap for the local industry, giving specifically the measureable targets to achieve. The task of formulating the road map is assigned to the DDP. The DDP’s role in such a vital task notwithstanding, the outcome of such an exercise is in doubt as there is no high powered institutional mechanism to enforce the objectives of the roadmap. It may be noted that various stakeholders, particularly the R&D agency, manufactures and users, often work in different directions, hampering the interest of the local industry. It may also be noted that bringing all the stakeholders to a common cause has perhaps been the single biggest problem in the defence industrialisation process. A recent example is the Army’s June 2015 global request for information (RFI) to acquire what it terms the future ready combat vehicle (FRCV). The Army’s efforts have clearly upset the DRDO, which is trying to develop a future main battle tank (FMBT) through in-house design and developmental efforts. The tug of war between these two vital players is the least that the ‘Make in India’ initiative would like to bother about.
Recognising the absence of an institutional mechanism as a major handicap in India’s defence industrial growth, the GoM has suggested the creation of the Defence Minister’s Council on Production (DMCP) with its membership drawn not only from the top leadership of the defence establishment but also from other high-end science and technology ministries/departments as well as local industry. The DMCP was visualised to lay the long-term roadmap, and ensure that every possible roadblock for its implementation is removed. However, like the RUR concept of the Kelkar Committee, and the idea of a dedicated technology university of the Rama Rao Committee, the idea of DMCP has not been referred to by the Experts Committee.

Conclusion: What Next?

While making a host of recommendations, the Dhirendra Singh Committee has been cautious in assessing their impact on the domestic industry. It has therefore set 2027 as the target year by which the elusive goal of 70 per cent self-reliance can be achieved. Incidentally, the target year coincides with the term of the current Long Term Integrated Perspective Plan (LTIPP) 2012-27 of the armed forces. Evidently, if the armed forces are to be inducted with 70 per cent indigenous equipment by 2027, the recommendations of the Committee have to be implemented in right earnest and in the least possible time frame. The government has done the right thing by placing the complete report in the public domain, thereby opening its subsequent actions on each of the Committee’s recommendations to public scrutiny. All eyes would now be on the MoD as to how it proceeds with the Committee report. To say the least, a historic opportunity to establish a credible defence industry should not be allowed to wither away.

A Glitch In The Model Reservation; agitation points to the deficiencies in Gujarat’s development policy. -

Friends from all over the world had been sending messages, asking if it was true that the finance ministry was taking away the central bank’s power to use the bank rate as an instrument of monetary policy. The RBI governor, whom we expected would take a firm stand since interest rates and debt management are not just prosaic activities in macro policymaking but the heart of monetary policy, was correctly appreciative of the need for a monetary policy committee, but was willing, apparently, to give up the present role of his office in it. He did, however, make the point that the final say would be of the governor since he would have a casting vote.

Arvind Panagariya has raised the level of the policy debate by laying on the table the issue of the growth rate and land-use policies. It is correct to state that an annual growth rate of 8 per cent-plus is feasible. The question is how? Investment levels have been falling since 2012, as also in each quarter this year. Yes, GDP growth is robust according to the new numbers, but we are not sure why. We do know that the manufacturing sector is not flying as the latest releases show. The handling of labour-related issues will be this government’s acid test. Finally, as we showed with a small model in our book, The Future of Indian Agriculture, trade shares will have to rise to 4 per cent of GDP. This has already happened, although there could possibly be some slippage this year.

India needs a land-use plan to temper the present chaos and corruption in land markets. The government has wisely given up the attempt to go back to the bad old colonial ways. Corporates will have to pay the price for land. It makes sense to insist on this in a liberalising regime.

Spatial planning may be needed since transport infrastructure leads to locational advantages and agglomeration effects. The movement of millions of Indians to Census Towns has been a preoccupation, but this project hasn’t been mirrored in policy. The 100 smart cities are not going to be smart enough to connect with the kisan as he moves to sell his wares in a growing economy. Companies will want land close to centres of demand or resource requirements, even if it is good agricultural land. A land-use plan would send these companies to barren land with good transport links. Also, powerful corporations may not like them, for land-use plans take time to yield market benefits, and land is, after all, also an asset in the short run.

Our objective is certainly not to discourage industrial growth. A year ago, 1,000 tractors descended on Gandhinagar from an area called the Chuwal, the land of 44 villages, which Kanaiyalal Munshi had immortalised in Patan ni Prabhuta. Their leader was Lalji Desai. I joined them with my friend Sanat Mehta, who recently passed away. I pleaded that we were not against industry, but that roads could be built in a manner such that the best lands were not ravaged. This isn’t a popular position, but I hope good sense will prevail.

Meanwhile, another Lalji, Lalji Patel, is the joint leader, along with Hardik Patel, of the Patidars demanding reservations. When agriculture grows as fast as it has in Gujarat, at 6, not 10 per cent, per year, you want infrastructure in market towns for marketing and agro-processing. I had pointed out this shortcoming in Gujarat’s development policy even as I extolled its high growth. But I was pilloried and abused by savvy economists. Now the chickens have come home to roost. Certain economists who argued with naysayers on the nature of Gujarat’s admittedly fast growth have much to answer for.

If in Gujarat’s Census Towns we had a hundred Amuls or producer companies and Patidar youth had jobs that gave them Rs 15,000 a month, perhaps life would have been easier. Patel leaders who built co-ops would have set up a thousand producer companies. It would be shortsighted to dismiss this as a local problem. Much the same may happen elsewhere

A new multilateralism

A new multilateralism
As Prime Minister Narendra Modi heads to the United States this week for engagements ranging from the United Nations in New York to Silicon Valley in California, the demands of multilateralism have begun to loom larger on India’s diplomacy. New Delhi’s challenge is not just about reforming the UN and winning a permanent seat at the UN Security Council. For, a seat at the high table is of no consequence if India does not modernise its multilateralism.
Whether it is Modi’s meetings with US President Barack Obama in New York or Facebook’s Mark Zuckerberg in Silicon Valley, India’s approach to critical issues like climate change and internet governance is likely to figure at the top of the agenda. At the UN itself, the challenges of sustainable development and reforming international peacekeeping are being taken up for special discussion this year.
Having recast many of India’s key bilateral relations, Modi now has an opportunity to end the defensiveness that had crept into India’s multilateralism in recent decades. India, under Jawaharlal Nehru, punched way above its international weight at the UN on issues ranging from human rights to nuclear arms control. India was not a permanent member of the UNSC, but it had big ideas on governing the world. By the 1960s though, India’s multilateralism had degenerated into what Shashi Tharoor called a “moralistic running commentary” on world affairs. As India’s “third worldism” reached its peak in the 1970s, Delhi’s multilateralism became increasingly dysfunctional.
As Delhi set more ambitious global goals — such as the New International Economic Order — India’s voice became less effective. Some of its campaigns — notably the one for the New International Information Order — ran headlong into India’s core political values like democracy. It was no coincidence that Delhi’s rhetoric on the New International Information Order coincided with the imposition of Emergency at home four decades ago.
Worse still, India often acted against its own interests on the world stage. In the 1970s and 1980s, Delhi opposed the very technologies that would empower its people and improve its international leverage — for example, direct broadcast satellites and transborder information flows — all in the name of territorial sovereignty.
Delhi’s dysfunctional multilateralism was made more acute by the relative decline of India’s economic weight. The situation was only reversed in the 1990s, when India began to post higher growth rates. That India’s reform era coincided with the end of the Cold War, however, created political complications. The new hubris in the West, that history had come to an end, was matched by the conviction that supra-national institutions could replace the traditional sovereign units of the global system and fix all problems in the world through effective interventions.
If the new Western rhetoric made India nervous about the internationalisation of the Kashmir question, Delhi was constantly torn between the imperatives of economic reform demanded by the new era of globalisation and limited domestic support for structural change. The adaptation, therefore, was grudging and incremental.
The new realism guiding Indian diplomacy after the Cold War recognised that an improved relationship with America was one instrument to fend off various multilateral pressures. It rightly saw that Delhi could not end the atomic apartheid against India through pious rhetoric on nuclear disarmament and the claim that it had an “impeccable record” on non-proliferation. The change in India’s position in the global nuclear order would only come through a political deal with the dominant power in the international system. That precisely was the meaning of the historic civil nuclear initiative of 2005 signed by then PM Manmohan Singh and then President George W. Bush.
But entrenched opposition to reform, barely concealed xenophobia on the left and right of the political spectrum, and deep-rooted suspicion of the West meant it was very difficult to overcome India’s defensive approach to globalisation. As elsewhere on foreign policy, Modi has signalled some interesting shifts in India’s multilateralism.
After initially rejecting the Bali accord on food security, Modi worked with Obama to find a mutually acceptable compromise. On climate change, Modi has hinted at greater flexibility by underlining the urgency of mitigating climate change and India’s commitment to constructive outcomes at the Paris talks later this year. On internet governance, Modi has moved India from an excessive state-centric approach to “multistakeholderism” that recognises the role of the private sector and civil society.
These changes fit into Modi’s ambition of making India a “leading power” on the global stage. Any substantive reorientation of India’s multilateralism, however, must rest on three broad principles.
The first is the recognition that multilateralism really matters for India’s future growth and national security. India’s expanding economic interdependence — trade is now nearly 50 per cent of the GDP — demands that Delhi must actively shape the international environment by becoming a rule-maker. Being a conscientious objector might have been politically cute once, but it could be rather costly at the current juncture.
Second, India cannot treat multilateral diplomacy as a boutique corner of the foreign office dispensing moral platitudes. It must be a tool for the pursuit of India’s national interests as well as the expression of its universalist ideals. Finding a better balance between the two imperatives is the key to successful multilateralism.
Third, Delhi cannot forget that multilateral negotiations are deeply influenced by the nature of international power hierarchies. While it must bargain hard, Delhi must also have the flexibility to make reasonable compromises. Unlike in the past, India today has the economic weight and the market size to negotiate effectively and generate sensible outcomes that are in tune with its national interest as well as global public good.
The world is probably ready to accommodate India’s special interests on such global issues as climate change and internet governance if Modi moves Delhi down the path of pragmatic multilateralism. For the PM though, the challenge is really at home, where getting the system to reform itself or discard the inherited defensiveness has not been easy.

Swavlamban Health Insurance Scheme” to provide affordable Health Insurance to the persons with disabilities (PwDs)

Swavlamban Health Insurance Scheme” to provide affordable Health Insurance to the persons with disabilities (PwDs).

MoU inked between Trust Fund for Empowerment of Persons with Disabilities and The New India Assurance Company Limited, on 21.9.2015 to launch Group Mediclaim Policy for empowerment of persons with disabilities – “Swavlamban Health Insurance Scheme”

The Trust Fund for Empowerment of Persons with Disabilities, under the Department of Empowerment of People with Disabilities, Ministry of Social Justice and Empowerment, signed a Memorandum of Understanding (MoU) with the The New India Assurance Company Limited on providing a comprehensive and affordable Health Insurance Scheme - “Swavlamban Health Insurance Scheme” - for the Persons with Disabilities (PwDs), here today. Shri Awanish Kumar Awasthi, Honorary Secretary, Trust Fund for Empowerment of Persons with Disabilities and Ms. Neera Saxena, Deputy General Manager, The New India Assurance Company Limited, inked the MoU in the presence of Mr. Luv Verma, Secretary, Department of Empowerment of People with Disabilities.

Health services and its access to persons with disabilities assume a very significant role in order to enable and empower persons with disabilities (PwDs) to live independently and with dignity as possible. In this context, the Health Insurance facility becomes important but presently such products are not easily available for persons with developmental disabilities. In such a situation, a tailor made Group Health Insurance Scheme like “Swavlamban Health Insurance Scheme” has been conceived with the objective of providing affordable Health Insurance to persons with blindness, low vision, leprosy-cured, hearing impairment, loco-motor Disability, mental Retardation and mental Illness. It also aims to improve the general Health condition & quality of life of persons with disabilities.

The scheme has been designed to deliver comprehensive cover to the beneficiary as well as his family (PwD, Spouse & up to two children), has a single premium across age band and can be availed by PwDs aged between 18 years and 65 years with family annual income of less than Rs. 3,00,000 per annum. The scheme also ensures coverage of any pre-existing condition and a health Insurance cover up to Rs. 2,00,000 per annum as family floater. The scheme will be implemented through active participation of the National Institutes and Composite Regional Centres for Persons with Disabilities (CRC’s) under the DEPwD, MOSJ&E. The registered organizations shall liaise with the Insurance Company, MOSJ&E, Health service providers, National Institutes, CRCs and all the stakeholders concerned for awareness generation and enrolment. Under the MoU, the New India Assurance Company Limited will create a network of Hospitals, where the Insured persons can get cashless treatment.

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