Important summits in the USA, Russia, Copenhagen can be attended by the Prime Minister of India as he is not a Member of the Lok Sabha

Subroto Roy notes that since Dr Manmohan Singh is the first Indian Prime Minister ever to have chosen with deliberation not to be a member of the Lok Sabha, he has been free to hold important summits at the White House, Kremlin, Copenhagen etc while the Lok Sabha debates mundane matters like the Liberhan Commission report, inflation etc.

Do diplomatic parties help the common man?

From Facebook

Subroto Roy is afraid he does not think the interests of the common man and woman of India come to be served in the slightest by a fancy dinner-party whether given by the Queen of  England at Buckingham Palace for the President of India or by the President of the United States at the White House for the Prime Minister of India….(…though some businessmen and bureaucrats become happy…)

On the curious pre-9/11 quaintness of current criticism of India’s 1998 nuclear tests

I said towards the end of my June 4-5 2006 article in The Statesman “Pakistan’s Allies”

“…America and its allies would not be safe for long since the civil war they had left behind in Afghanistan while trying to defeat the USSR now became a brew from which arose a new threat of violent Islamism. Osama bin Laden and the Taliban, whom Pakistan’s military and the USA had promoted, now encouraged unprecedented attacks on the American mainland on September 11 2001 ~ causing physical and psychological damage which no Soviet, Chinese or Cuban missiles ever had been allowed to do….”

Earlier, in The Statesman of October 26 2005,  I had outlined a series of recent US espionage failures

“There have been three or four enormous failures of American espionage (i.e. intelligence and counter-intelligence) in the last 20 years. The collapse of the Berlin Wall and the end of Soviet communism were salubrious events but they had not been foreseen by the United States which was caught unawares by the speed and nature of the developments that took place. Other failures have been catastrophic.

First, there was the failure to prevent the attack that took place on the American mainland on September 11 2001. It killed several thousand civilians and caused vast, perhaps irreparable, psychological and physical destruction to the United States. The attack was without precedent. The December 7 1941 Japanese attack on Pearl Harbour in Hawaii, though a surprise, was carried out by one military against another military and did not affect very many civilians (except that thousands of American civilians of Japanese ancestry came to be persecuted and placed in concentration camps for years by the US Government). And the last time the American mainland had been attacked before 2001 was in 1814 when British troops marched south from Canada and burnt down the Capitol and the US President’s house in Washington.

Secondly, there has been a failure to discover any reasonable justification for the American-led attack on Iraq and its invasion and occupation. Without any doubt, America has lost, at the very least, an incalculable amount of international goodwill as a result of this, let aside suffering two thousand young soldiers killed, fifteen thousand wounded, and an unending cost in terms of prestige and resources in return for the thinnest of tangible gains. India at great cost liberated East Pakistan from the brutal military tyranny of Yahya Khan and Tikka Khan in December 1971 but the average Bangladeshi today could hardly care less. Regardless of what form of government emerges in Iraq now, there is no doubt the mass of the Iraqi people will cheer the departure of the bulk of foreign troops and tanks from their country (even if a permanent set of a dozen hermetically sealed American bases remain there for ever, as appears to have been planned).

When things go wrong in any democracy, it is natural and healthy to set up a committee to investigate, and America has done that several times now. For such committees to have any use at all they must be as candid as possible and perhaps the most candid of the American committees has been the US Government’s 9/11 Commission. But it too has appeared no closer to finding out who was the mastermind of the 9/11 attacks or who financed it and who, precisely, executed it. Osama Bin Laden may have been the ideological head of a movement allied to the perpetrators, and Bin Laden undoubtedly expressed his glee afterwards, but it beggars the imagination that Bin Laden could have been executive president in charge of this operation while crawling around Sudan, Pakistan and Afghanistan. If not him, then whom? Mossad the Israeli spy agency was supposed to have pointed to a super-secret invisible Lebanese terrorist but nobody really knows. The biggest modern mass murder remains unsolved.

As for solutions, the American 9/11 Commission went into the same politically correct formulae that came to be followed in 2005 by British PM Tony Blair’s New Labour Cabinet, namely, that “moderate” peace-loving Muslims must be encouraged and bribed not to turn to terrorism (indeed to expose those among them who do), while “extremist” Muslims must be stamped out with brute force. This rests on a mistaken premise that an economic carrot-and-stick policy can work in creating a set of external incentives and disincentives for Muslims, when in fact believing Muslims, like many other religious believers, are people who feel the power of their religion deep within themselves and so are unlikely to be significantly affected by external incentives or disincentives offered by non-believers.  Another committee has been the United States Senate’s Select Committee on Intelligence which reported in July 2004, and from whose findings have stemmed as an offshoot the current matter about whether high government officials broke the law that is being investigated by Special Prosecutor Patrick J. Fitzgerald.

Bertrand Russell said in his obituary of Ludwig Wittgenstein that he had once gone about looking under all the tables and chairs to prove to Wittgenstein that there was not a hippopotamus present in the room. In the present case, however, there is in fact a very large hippopotamus present in the room yet the entire American foreign policy establishment has seemed to refuse to wish to see it. Saddam Hussain and OBL are undoubtedly certifiable members of the international gallery of rogues – but the central fact remains they were rogues who were in alliance with America’s defined strategic interests in the 1980s. Saddam Hussain’s Iraq invaded Iran in 1980 and gassed the Kurds in 1986; an Iraqi Mirage on May 17 1987 fired two Exocet missiles at the USS Stark killing 37 American sailors and injuring 21. The Americans did nothing. The reason was that Saddam was still in favour at the time and had not yet become a demon in the political mythology of the American state, and it was expedient for nothing to be done. Indeed Saddam’s Iraq was explicitly removed in 1982 from the US Government’s list of states sponsoring terrorism because, according to the State Department’s Patterns of Global Terrorism, it had “moved closer to the policies of its moderate Arab neighbours”.

The very large hippopotamus that is present in the room at the moment is April Glaspie, the highly regarded professional career diplomat and American Ambassador to Iraq at the time of the 1990 Gulf War. Saddam Hussein as President had a famous meeting with her on July 25 1990, eight days before he invaded Kuwait. The place was the Presidential Palace in Baghdad and the Iraqis videotaped the meeting:

U.S. Ambassador Glaspie – “I have direct instructions from President (George Herbert Walker) Bush to improve our relations with Iraq. We have considerable sympathy for your quest for higher oil prices, the immediate cause of your confrontation with Kuwait. (pause) As you know, I lived here for years and admire your extraordinary efforts to rebuild your country. We know you need funds. We understand that, and our opinion is that you should have the opportunity to rebuild your country. (pause) We can see that you have deployed massive numbers of troops in the south. Normally that would be none of our business, but when this happens in the context of your threats against Kuwait, then it would be reasonable for us to be concerned. For this reason, I have received an instruction to ask you, in the spirit of friendship – not confrontation – regarding your intentions: Why are your troops massed so very close to Kuwait’s borders?

Saddam Hussein – As you know, for years now I have made every effort to reach a settlement on our dispute with Kuwait. There is to be a meeting in two days; I am prepared to give negotiations only this one more brief chance. (pause) When we (the Iraqis) meet (with the Kuwaitis) and we see there is hope, then nothing will happen. But if we are unable to find a solution, then it will be natural that Iraq will not accept death.

U. S. Ambassador Glaspie – What solutions would be acceptable?

Saddam Hussein – If we could keep the whole of the Shatt al Arab – our strategic goal in our war with Iran – we will make concessions (to the Kuwaitis). But, if we are forced to choose between keeping half of the Shatt and the whole of Iraq (i.e., in Saddam’ s view, including Kuwait ) then we will give up all of the Shatt to defend our claims on Kuwait to keep the whole of Iraq in the shape we wish it to be. (pause) What is the United States’ opinion on this?

U.S. Ambassador Glaspie – We have no opinion on your Arab – Arab conflicts, such as your dispute with Kuwait. Secretary (of State James) Baker has directed me to emphasize the instruction, first given to Iraq in the 1960’s, that the Kuwait issue is not associated with America. (Saddam smiles)

Saddam had seen himself fighting Islamic Iran on behalf of the Kuwaitis, Saudis and other Arabs, and Islamic Iran was of course the sworn adversary of the USA at least since Khomeini had deposed America’s ally, the Shah. Therefore Saddam could not be all bad in the eyes of the State Department. On August 2 1990, the Iraqi troops seen by American satellites amassed on the border, invaded and occupied Kuwait. On September 2 1990, the Iraqis released the videotape and transcript of the July 29 Saddam-Glaspie meeting and Glaspie was confronted by British journalists as she left the Embassy:

Journalist 1 – Are the transcripts (holding them up) correct, Madam Ambassador? (No answer from Glaspie)

Journalist 2 – You knew Saddam was going to invade (Kuwait ) but you didn’t warn him not to. You didn’t tell him America would defend Kuwait. You told him the opposite – that America was not associated with Kuwait.

Journalist 1 – You encouraged this aggression – his invasion. What were you thinking?

U.S. Ambassador Glaspie – Obviously, I didn’t think, and nobody else did, that the Iraqis were going to take all of Kuwait.

Journalist 1 – You thought he was just going to take some of it? But, how could you? Saddam told you that, if negotiations failed , he would give up his Iran(Shatt al Arab waterway) goal for the whole of Iraq, in the shape we wish it to be. You know that includes Kuwait, which the Iraqis have always viewed as a historic part of their country!

Journalist 1 – America green-lighted the invasion. At a minimum, you admit signalling Saddam that some aggression was okay – that the U.S. would not oppose a grab of the al-Rumeilah oil field, the disputed border strip and the Gulf Islands (including Bubiyan) – the territories claimed by Iraq?

Glaspie said nothing, the car door closed behind her, the car drove off. Nothing has been apparently heard from Glaspie ever since, and we may have to wait for her memoirs in 25 years when they are declassified to come to know what happened. It is astonishing, however, that the 521 page report of the US Senate’s Select Committee on espionage about Iraq before the 2003 war finds no cause whatsoever to mention Glaspie at all (at least in its public censored version). It is almost as if Glaspie has never existed and her conversation with Saddam never happened. Glaspie has disappeared down an Orwellian memory-hole. Yet her conversation with Saddam was the last official, recorded conversation between the Americans and Saddam while they were still on friendly terms.

There may be many causes explaining how such serious failures have come to occur in a country where billions of dollars have been annually spent on espionage. Among them must be that while America’s great strengths have included creation of the finest advanced scientific and technological base on earth, America’s great intellectual weaknesses in recent decades have included an impatience with historical and philosophical reflection of all sorts, and that includes reflection about her own as well as other cultures. This is exemplified too in the third palpable failure of intelligence of the last 20 years, which has been to have not foreseen or prevented atomic weapons from being developed by America and Britain’s Islamist ally and client-state, Pakistan, and thence to have failed to prevent the proliferation of such weapons in general. The consequences of that may yet turn out to be the most grave.”

Now as it happens, a couple of days ago, eleven years after the Government of India’s May 1998 underground nuclear tests at Pokhran, an Indian scientist who had something to do with them has engaged in a general discussion about the tests’ efficacy. Indian newspapers duly reported this as part of an ongoing domestic discussion about nuclear policy.

Oddly enough, there has been an instantaneous reaction from American critics of India’s nuclear activities – beginning with Dr Jeffrey Lewis:

“Yes, Virginia, India’s H-bomb fizzled.  K Santhanam (who was director of test site preparations for India’s 1998 nuclear tests… has admitted what everyone else has known for a long time — that India’s 1998 test of a thermonuclear device was unsuccessful.…”

Followed by Mark Hibbs:

“Is this cool or what? I remember what happened when I wrote that article in the fall of 1998 saying in the headline that the US had concluded that the Indian “H-Bomb failed.” Almost overnight after the article was published I got a huge bundle of papers from BARC and DAE sent to me by diplomatic pouch from Mumbai informing me with all kinds of numbers that I was wrong.  I gave the papers to laboratory geoscientists at several European countries and the US. One main CTBTO monitoring scientist told me explicitly: “Nope. The stuff in these papers is shitty science. They haven’t shown that you are wrong.” That having been said, please note however that, as PK Iyengar had made the case to me back a decade ago, once again this “news” is surfacing in India because their bomb makers want to keep testing. Some things in India are changing fast. Other things aren’t.”

Followed by Charles Mead:

“I got into a huge pissing match with the Indians on this issue as I was the principal author of Barker et. al. 1998 which had the yield estimates far below the Indian press releases. A number of Indian scientists tried to submit a comment to Science rebutting our analysis. We asked them to provide the in-country seismic data on which they based their analysis, but they refused. Luckily, in the end, their comment was rejected and never published.  On a related note, I saw the other day that wikipedia has a glowing description of the Indian 1998 tests, citing the inflated yields and saying the tests were a huge technical accomplishment. See http://en.wikipedia.org/wiki/Pokhran-II In the next day or so, I plan to submit a corrected analysis.”

Mark Hibbs:

“Charles, I recall one of your co-authors back then explained to me in nitty-gritty detail your frustration on this with these guys. Please do correct the record for posterity.”

Charles Meade:

“Their arguments at the time were quite remarkable. They said that our seismic data didn’t reflect the true yield because of a complex interference pattern caused by the simultaneous tests. Under these circumstances, they said that one could only obtain the correct yield from near field data. We said, “fine, show it to us”. They refused and that was the end of their paper.”

Yale Simkin:

“The Indian argument: ‘For us to have a nuclear deterrent we must weaponise. For this, we must have fusion weapons, because these are smaller, lighter, and more efficient than fission weapons.’ is a lot of hooey.  They claim to be building a deterrent force, not a war-fighting arsenal with a counter-force capability.  For the size and mass of their likely early-generation fusion designs, they can instead use basic fission bombs yielding in the multi-dekakiloton range – multiples of the hell weapons that incinerated Hiroshima and Nagasaki.  That should be sufficient to deter any rational adversary. And if they aren’t rational, then you have no deterrent.”

Hmmm.  The choice of terminology even within such a brief discussion might reveal a little of the mind-set: “shitty science”, “pissing match”, “a lot of hooey”…

Rather uncool, really.

Specifically:

“A number of Indian scientists tried to submit a comment to Science rebutting our analysis. We asked them to provide the in-country seismic data on which they based their analysis, but they refused. Luckily, in the end, their comment was rejected and never published…. Their arguments at the time were quite remarkable. They said that our seismic data didn’t reflect the true yield because of a complex interference pattern caused by the simultaneous tests. Under these circumstances, they said that one could only obtain the correct yield from near field data. We said, “fine, show it to us”. They refused and that was the end of their paper.

Hmmm — once more.  The words that I have placed in bold above might be prima facie evidence of incorrect and hence unfair editorial procedures having been followed at Science (distinguished as its general reputation may be as a journal).  Why were these here-unnamed “Indian scientists” not allowed to speak for themselves, rather than have their now-unknown statements be bowdlerised out of their critics’ memories a decade later (when these critics themselves had been the subject of the rebuttal)?  Perhaps the rebuttal should not have been refused publication even if it came with an editorial caveat that all the data deemed necessary had not been provided (which may have been the case, for example, due to a Government gag-order).  Readers today would have been able to judge for themselves.

I am happy to claim zero expertise in the field known rather sweetly as “Crater Morphology”; but post 9/11, post-Iraq war, it does seem to me a rather quaint form of prejudice to be using such words as those quoted above  in discussing the precise tonnage of the Indian explosions and how, really, India’s scientists were not up to it.  Perhaps,  when matters of public policy or international diplomacy become involved, science  everywhere is too important to be left to the scientists.

Are all the available data out there in the public domain on which to judge whether the Indian explosions in 1998 were or were not what was precisely claimed at the time?  Apparently not.

Does it matter to anything today?  Hardly.  Not even to the credibility of the Government of India (something on which I have had a lot to say over decades).

Do Governments lie?  Yes Virginia, they do.

Governments the world over, whether Indian, American, Russian, Chinese, British, French, Israeli, Arab, Pakistani or whatever, let aside inter-Governmental bodies constituted by these Governments, are prone to exaggeration, propaganda, self-delusion, self-deception as well as deliberate mendacity, perhaps routinely on a daily basis.

(For myself as an individual, I have had to battle the demonstrated and deliberate mendacity of the government of one of the fifty States in the US federal courts for two decades now, as told of elsewhere…)

An Age of Government Mendacity has seemed to descend upon the world — which makes the smugness expressed so quickly today by the critics of India’s 1998 explosions seem, as I have said, quaint.

Is the current Indian debate indicating something about keeping open the possibility of more tests and isn’t this related to the Indo-US civil nuclear deal?   It may well be, I do not know.  My position for what it is worth has been clear and described in several articles in The Statesman in recent years e.g.

1) Atoms for Peace (or War)  (March 5 2006)

“Atoms for Peace” was Dwight D. Eisenhower’s 1953 speech to the UN (presided over by Jawaharlal Nehru’s sister) from which arose the IAEA. Eisenhower was the warrior par excellence, having led the Allies to victory over Hitler a few years earlier.

Yet he was the first to see “no sane member of the human race” can discover victory in the “desolation, degradation and destruction” of nuclear war. “Occasional pages of history do record the faces of the ‘great destroyers’, but the whole book of history reveals mankind’s never-ending quest for peace and mankind’s God-given capacity to build.” Speaking of the atomic capacity of America’s communist adversary at the time, he said: “We never have, and never will, propose or suggest that the Soviet Union surrender what rightly belongs to it. We will never say that the peoples of the USSR are an enemy with whom we have no desire ever to deal or mingle in friendly and fruitful relationship.” Rather, “if the fearful trend of atomic military build-up can be reversed, this greatest of destructive forces can be developed into a great boon, for the benefit of all mankind…. if the entire body of the world’s scientists and engineers had adequate amounts of fissionable material… this capability would rapidly be transformed into universal, efficient and economic usage”. Eisenhower’s IAEA would receive contributions from national “stockpiles of normal uranium and fissionable materials”, and also impound, store and protect these and devise “methods whereby this fissionable material would be allocated to serve the peaceful pursuits of mankind.…to provide abundant electrical energy in the power-starved areas of the world… to serve the needs rather than the fears of mankind.” When Eisenhower visited India he was greeted as the “Prince of Peace” and a vast multitude threw rose petals as he drove by in an open limousine.

Now, half a century later, Dr Manmohan Singh read a speech in Parliament on February 27 relating to our nuclear discussions with America. But it seems unclear even his speech-writers or technical advisers knew how far it was rhetoric and how far grounded in factual realities. There is also tremendous naivete among India’s media anchors and political leaders as to what exactly has been agreed by the Americans on March 2.

Churchill once asked what might have happened if Lloyd George and Clemenceau told Woodrow Wilson: “Is it not true that nothing but your fixed and expiring tenure of office prevents you from being thrown out of power?” The same holds for George W. Bush today. Wilson made many promises to the world that came to be hit for a six by US legislators. In December 2005, Edward Markey (Democrat) and Fred Upton (Republican) promised to scuttle Bush’s agreements with India, and once the pleasant memories of his India visit fade, Bush may quite easily forget most things about us. All the Americans have actually agreed to do is to keep talking.

It needs to be understood that submarine-launched ballistic missiles are the only ultimate military deterrent. Land and air forces are all vulnerable to a massive first-strike. Only submarines lurking silently for long periods in waters near their target, to launch nuclear warheads upon learning their homeland had been hit by the enemy, act as a deterrent preventing that same enemy from making his attack at all. Indeed, the problem becomes how a submarine commander will receive such information and his instructions during such a war. (For India to acquire an ICBM capability beyond the MRBM Agni rockets is to possess an expensive backward technology — as retrograde as the idea India should spend scarce resources sending manned moon missions half a century after it has already been done. The secret is to do something new and beneficial for mankind, not repeat what others did long ago merely to show we can now do it too.) A nuclear-armed submarine needs to be submerged for long periods and also voyage long distances at sea, and hence needs to be nuclear-powered with a miniature version of a civilian nuclear reactor aboard in which, e.g. rods of enriched uranium are bombarded to release enough energy to run hydroelectric turbines to generate power. Patently, no complete separation of the use of atomic power for peace and war may be practically possible. If India creates e.g. its own thorium reactors for civilian power (and we have vast thorium reserves, the nuclear fuel of the future), and then miniaturised these somehow to manufacture reactors for submarines, the use would be both civilian and military. In 1988 the old USSR leased India a nuclear-powered submarine for “training” purposes, and the Americans did not like it at all. In January 2002, Russia’s Naval Chief announced India was paying to build and then lease from 2004 until 2009 two nuclear-powered Akula-class attack submarines, and Jaswant Singh reportedly said we were paying $1 thousand crore ($10 bn) for such a defence package. Whether the transaction has happened is not known. Once we have nuclear submarines permanently, that would be more than enough of the minimum deterrent sought.

Indeed, India’s public has been barely informed of civilian nuclear energy policy as well, and an opportunity now exists for a mature national debate to take place — both on what and why the military planning has been and what it costs (and whether any bribes have been paid), and also on the cost, efficiency and safety of the plans for greater civilian use of nuclear energy. Government behaviour after the Bhopal gas tragedy does not inspire confidence about Indian responses to a Three Mile Island/Chernobyl kind of catastrophic meltdown.

That being said, the central question remains why India or anyone else needs to be nuclear-armed at all. With Britain, France or Russia, there is no war though all three are always keen to sell India weapons. Indeed it has been a perennial question why France and Britain need their own deterrents. They have not fought one another for more than 100 years and play rugby instead. If Russia was an enemy, could they not count on America? Or could America itself conceivably become an enemy of Britain and France? America owes her origins to both, and though the Americans did fight the British until the early 1800s, they have never fought the French and love the City of Paris too much ever to do so.

Between China and India, regardless of what happened half a century ago, nuclear or any war other than border skirmishes in sparse barren lands is unlikely. Ever since Sun Yat-sen, China has been going through a complex process of self-discovery and self-definition. An ancient nation where Maoism despoiled the traditional culture and destroyed Tibet, China causes others to fear it because of its inscrutability. But it has not been aggressive in recent decades except with Taiwan. It has threatened nuclear war on America if the Americans stand up for Taiwan, but that is not a quarrel in which India has a cogent role. China (for seemingly commercial reasons) did join hands with Pakistan against India, but there is every indication the Chinese are quite bored with what Pakistan has become. With Pakistan, our situation is well-known, and there has been an implicit equilibrium since Pokhran II finally flushed out their capacity. Had India ever any ambition of using conventional war to knock out and occupy Pakistan as a country? Of course not. We are barely able to govern ourselves, let aside try to rule an ideologically hostile Muslim colony in the NorthWest. Pakistan’s purported reasons for acquiring nuclear bombs are spurious, and cruelly so in view of the abject failures of Pakistan’s domestic political economy. Could Pakistan’s Government use its bombs against India arising from its own self-delusions over J&K? Gohar Ayub Khan in 1998-1999 threatened to do so when he said the next war would be over in two hours with an Indian surrender. He thereby became the exception to Eisenhower’s rule requiring sanity. An India-Pakistan nuclear exchange is, unfortunately, not impossible, leaving J&K as Hell where Jahangir had once described it as Heaven on Earth.

America needs to end her recent jingoism and instead rediscover the legacy of Eisenhower. America can lead everyone in the world today including Russia, China, Israel, Iran and North Korea. But she can do so only by example. America can decommission many of her own nuclear weapons and then lead everyone else to the conference table to do at least some of the same. Like the UN, the IAEA (and its NPT) needs urgent reform itself. It is the right time for serious and new world parleys towards the safe use of atoms for peace and their abolition in war. But are there any Eisenhowers or Churchills to lead them?

2) Our  energy interests ( Aug 27-28 2006)

Americans are shrewd and practical people in commercial matters, and expect the same of people they do business with. Caveat emptor, “let the buyer beware”, is the motto they expect those on the other side of the table to be using. Let us not think they are doing us favours in the nuclear deal ~ they are grown-ups looking after their interests and naturally expect we shall look after our own and not expect charity while doing business. Equally, let us not blame the Americans if we find in later years (long after Manmohan Singh and Montek Ahluwalia have exited from India’s stage) that the deal has been implemented in a bad way for our masses of ordinary people.

That said, there is a remarkable disjoint between India’s national energy interests (nuclear interests in particular), and the manner in which the nuclear deal is being perceived and taken to implementation by the two sides. There may be a fundamental gap between the genuine positive benefits the Government of India says the deal contains, and the motivations American businessmen and through them Indian businessmen have had for lobbying American and Indian politicians to support it. An atmosphere of being at cross-purposes has been created, where for example Manmohan Singh is giving answers to questions different from the questions we may want to be asking Montek Ahluwalia. The fundamental gap between what is being said by our Government and what may be intended by the businessmen is something anyone can grasp, though first we shall need some elementary facts.

In 2004, the International Energy Agency estimated the new energy capacity required by rising economic growth in 2020 will derive 1400 GW from burning coal (half of it in China and India), 470 GW from burning oil, 430GW from hydro, and 400 GW from renewable sources like solar or wind power. Because gas prices are expected to remain low worldwide, construction of new nuclear reactors for electricity will be unprofitable. By 2030, new energy expected to be required worldwide is 4700GW, of which only 150GW is expected from new nuclear plants, which will be in any case replacing existing plants due to be retired. Rational choice between different energy sources depends on costs determined by history and geography. Out of some 441 civilian reactors worldwide, France has 59 and these generate 78 per cent of its electricity, the rest coming from hydro. Japan has 54 reactors, generating 34% of its electricity from them. The USA has 104 reactors but generates only 20 per cent of its electricity from them, given its vast alternative sources of power like hydro. In India as of 2003, installed power generating capacity was 107,533.3MW, of which 71 per cent came from burning fuels. Among India’s energy sources, the largest growth-potential is hydroelectric, which does not involve burning fuels ~ gravity moves water from the mountains to the oceans, and this force is harnessed for generation. Our hydro potential, mostly in the North and North-East, is some 150,000MW but our total installed hydro capacity with utilities was only 26,910MW (about 18 per cent of potential). Our 14 civilian nuclear reactors produced merely 4 per cent or less of the electricity being consumed in the country. Those 14 plants will come under “international safeguards” by 2014 under the nuclear deal.

It is extremely likely the international restrictions our existing nuclear plants have been under since the 1970s have hindered if not crippled their functioning and efficiency. At the same time, the restrictions may have caused us to be innovative too. Nuclear power arises from fission of radioactive uranium, plutonium or thorium. India has some 8 million tonnes of monazite deposits along the seacoast of which half may be mined, to yield 225,000 tonnes of thorium metal; we have one innovatively designed thorium reactor under construction. Almost all nuclear energy worldwide today arises from uranium of which there are practically unlimited reserves. Fission of a uranium atom produces 10 million times the energy produced by combustion of an atom of carbon from coal. Gas and fossil fuels may be cheap and in plentiful supply worldwide for generations to come but potential for cheap nuclear energy seems practically infinite. The uranium in seawater can satisfy mankind’s total electricity needs for 7 million years. There is more energy in the uranium impurity present in coal than can arise from actually burning the coal. There is plenty of uranium in granite. None of these become profitable for centuries because there is so much cheap uranium extractable from conventional ores. Design improvements in reactors will also improve productivity; e.g. “fast breeder” reactors “breed” more fissile material than they use, and may get 100 times as much energy from a kilogram of uranium as existing reactors do. India has about 95,000 tonnes of uranium metal that may be mined to yield about 61,000 tonnes net for power generation. Natural uranium is 99.3 per cent of the U-238 isotope and 0.7 per cent of the radioactive U-235 isotope. Nuclear power generation requires “enriched uranium” or “yellow cake” to be created in which U-235 has been increased from 0.7 per cent to 4 to 5 percent. (Nuclear bombs require highly enriched uranium with more than 90 per cent of U-235.) Yellow cake is broken into small pieces, put in metal rods placed in bundles, which are then bombarded by neutrons causing fission. In a reactor, the energy released turns water into steam, which moves turbines generating electricity. While there is no carbon dioxide “waste” as in burning fossil fuels, the “spent” rods of nuclear fuel and other products constitute grave radioactive waste, almost impossible to dispose of.

The plausible part of the Government of India’s official line on the Indo-US nuclear deal is that removing the international restrictions will ~ through importation of new technologies, inputs, fuel etc ~ improve functioning of our 14 existing civilian plants. That is a good thing. Essentially, the price being paid for that improvement is our willingness to commit that those 14 plants will not be used for military purposes. Fair enough: even if we might become less innovative as a result, the overall efficiency gains as a result of the deal will add something to India’s productivity. However, those purchasing decisions involved in enhancing India’s efficiency gains must be made by the Government’s nuclear scientists on technical grounds of improving the working of our existing nuclear infrastructure.

It is a different animal altogether to be purchasing new nuclear reactors on a turn-key basis from American or any other foreign businessmen in a purported attempt to improve India’s “energy security”. (Lalu Yadav has requested a new reactor for Bihar, plus of course Delhi will want one, etc.) The central question over such massive foreign purchases would no longer be the technical one of using the Indo-US deal to improve efficiency or productivity of our existing nuclear infrastructure. Instead it would become a question of calculating social costs and benefits of our investing in nuclear power relative to other sources like hydroelectric power. Even if all other sources of electricity remained constant, and our civilian nuclear capacity alone was made to grow by 100 per cent under the Manmohan-Montek deal-making, that would mean less than 8% of total Indian electricity produced.

This is where the oddities arise and a disjoint becomes apparent between what the Government of India is saying and what American and Indian businessmen have been doing. A “US-India Business Council” has existed for thirty years in Washington as “the premier business advocacy organization promoting US commercial interests in India.… the voice of the American private sector investing in India”. Before the nuclear or any other deals could be contemplated with American business, the USIBC insisted we pay up for Dabhol contracted by a previous Congress Government. The Maharashtra State Electricity Board ~ or rather, its sovereign guarantor the Government of India ~ duly paid out at least $140-$160 million each to General Electric and Bechtel Corporations in “an amicable settlement” of the Dabhol affair. Afterwards, General Electric’s CEO for India was kind enough to say “India is an important country to GE’s global growth. We look forward to working with our partners, customers, and State and Central Governments in helping India continue to develop into a leading world economy”.

Also, a new “US-India CEO Forum” then came about. For two Governments to sponsor private business via such a Forum was “unprecedented”, as noted by Washington’s press during Manmohan Singh’s visit in July 2005. America’s foreign ministry announced it saying: “Both our governments have agreed that we should create a high-level private sector forum to exchange business community views on key economic priorities…” The American side includes heads of AES Corporation, Cargill Inc., Citigroup, JP Morgan Chase, Honeywell, McGraw-Hill, Parsons Brinckerhoff Ltd, PepsiCo, Visa International and Xerox Corporation. The Indian side includes heads of Tata Group, Apollo Hospitals Group, Bharat Forge Ltd, Biocon India Group, HDFC, ICICI One Source, Infosys, ITC Ltd, Max India Group and Reliance Industries. Presiding over the Indian side has been Montek Ahluwalia, Manmohan’s trusted aide ~ and let it be remembered too that the Ahluwalias were Manmohan’s strongest backers in his failed South Delhi Lok Sabha bid. (Indeed it is not clear if the Ahluwalias have been US or Indian residents in recent years, and if it is the former, the onus is on them to clear any perception of conflict of interest arising in regard to roles regarding the nuclear deal or any other official Indo-US business.)

Also, before the Manmohan visit, the Confederation of Indian Industry registered as an official lobbyist in Washington, and went about spending half a million dollars lobbying American politicians for the nuclear deal. After the Manmohan visit, the US Foreign Commercial Service reportedly said American engineering firms, equipment suppliers and contractors faced a $1,000 billion (1 bn =100 crore) opportunity in India. Before President Bush’s visit to India in March 2006, Manmohan Singh signed vast purchases of commercial aircraft from Boeing and Airbus, as well as large weapons’ deals with France and Russia. After the Bush visit, the US Chamber of Commerce said the nuclear deal can cause $100 billion worth of new American business in India’s energy-sector alone. What is going on?

Finally, the main aspect of Manmohan Singh’s address to America’s legislature had to do with agreeing with President Bush “to enhance Indo-US cooperation in the field of civilian nuclear technology”. What precisely does this mean? If it means the Indo-US nuclear deal will help India improve or maintain its existing nuclear infrastructure, well and good. There may be legitimate business for American and other foreign companies in that cause, which also helps India make the efficiency and productivity gains mentioned. Or has the real motivation for the American businessmen driving the deal (with the help of the “CEO Forum” etc) been to sell India nuclear reactors on a turn-key basis (in collaboration with private Indian businessmen) at a time when building new nuclear reactors is unprofitable elsewhere in the world because of low gas prices? India’s citizens may demand to know from the Government whether the Manmohan-Montek deal-making is going to cause importation of new nuclear reactors, and if so, why such an expensive alternative is being considered (relative to e.g. India’s abundant hydroelectric potential) when it will have scant effect in satisfying the country’s energy needs and lead merely to a worsening of our macroeconomic problems. Both Manmohan Singh and Montek Ahluwalia have been already among those to preside over the growth of India’s macroeconomic problems through the 1980s and 1990s.

Lastly, an irrelevant distraction should be gotten out of the way. Are we a “nuclear weapons” state? Of course we are, but does it matter to anything but our vanity? Ronald Reagan and Mikhail Sergeyevich Gorbachev had control over vastly more nuclear weapons and they declared together twenty years ago: “A nuclear war cannot be won and must not be fought”, which is how the Cold War started to come to an end. We need to remind ourselves that India and Pakistan are large, populous countries with hundreds of millions of materially poor, ill-informed citizens, weak tax-bases, humongous internal and external public debts (i.e. debt owed by the Government to domestic and foreign creditors), non-investment grade credit- ratings in world financial markets, massive annual fiscal deficits, inconvertible currencies, nationalized banks, and runaway printing of paper-money. Discussing nuclear or other weapon-systems to attack one other with is mostly a pastime of our cowardly, irresponsible and yes, corrupt, elites.

3) Need for Clarity A poorly drafted treaty driven by business motives is a recipe for international misunderstanding  (August 19 2007)

Confusion prevails over the Indo-US Nuclear Deal. Businessmen, bureaucrats, politicians, diplomats, scientists and now the public at large have all joined in the cacophony in the last two years. On Wednesday August 15, America’s foreign ministry made the clearest most unequivocal statement possible as to the official American Government interpretation of the Indo-US nuclear deal: “The proposed 123 agreement has provisions in it that in an event of a nuclear test by India, then all nuclear co-operation is terminated, as well as there is provision for return of all materials, including reprocessed material covered by the agreement” (Sean McCormack). Yet our Prime Minister had told Parliament two days earlier: “The agreement does not in any way affect India’s right to undertake future nuclear tests, if it is necessary”. What is going on? Our politics are in uproar, and it has been suggested in these pages that the country go to a General Election to allow the people to speak on the matter. Clearly, we need some clarity.

Let us start at the beginning. How did it all originate? The private US nuclear industry prevailed upon India’s government bureaucrats and businessmen over several years that nuclear power is the way forward to solving India’s “infrastructure” problems. They would sell us, in words of the Manmohan-Montek Planning Commission’s energy adviser, “six to eight lightwater reactors” (especially as they may not be able to sell these anywhere else). Our usual prominent self-seeking retired bureaucrats started their waffling about the importance of “infrastructure”.

Then Manmohan Singh felt his foreign travels as PM could be hardly complete without a fife-and-drum visit to the White House. But before he could do so, Dabhol would have to be cleared up since American business in India was on a self-moratorium until GE and Bechtel were paid settlements of some $140-160 million each by the Governments of India and Maharashtra. GE’s CEO for India kindly said afterwards “India is an important country to GE’s global growth. We look forward to working with our partners, customers, and State and Central Governments in helping India continue to develop into a leading world economy”.

Also, before Manmohan’s USA trip, the Confederation of Indian Industry registered as an official Washington lobbyist and spent half a million dollars lobbying American politicians for the deal. (”Why?” would be a good question.)

So Dr Singh was able to make his White House visit, accompanied by US business lobbies saying the nuclear deal can generate $100 billion worth of new American business in India’s energy-sector alone. It is only when business has lubricated politics in America that so much agreement about the India-deal could arise. The “bottom-line” is that six to eight reactors must be sold to India, whatever politics and diplomacy it takes.

Now Dr Singh is not a PM who is a Member of the Lower House of Parliament commanding its confidence. He says his Government constitutes the Executive and can sign treaties on India’s behalf. This is unwise. If he signs a treaty and then the Congress Party loses the next General Election, a new Executive Government can use his same words to rescind the same treaty. What is sauce for the goose is sauce for the gander. One reason we are so confused is that India has not signed very many bilateral treaties, and there is barely a noted specialist in international law anywhere in the country. Dr Singh’s original mentor, PN Haksar, had gone about getting a treaty signed with the USSR back in 1971 which tided us over a war, though the USSR itself collapsed before that treaty ended.

Signing a treaty is much more than signing an international MOU. It requires a national consensus or a least a wide and deep understanding on the part of the public and the political class as to what necessitates the treaty. That plainly does not exist at present. Most people in India do not even know how nuclear power is generated, nor how small and insignificant nuclear power has been in India.

Natural uranium is 99.3 per cent of the U-238 isotope and 0.7 per cent the radioactive U-235 isotope. Nuclear power generation requires “enriched uranium” or “yellow cake” to be created in which U-235 has been increased from 0.7 per cent to 4 to 5 percent. (Nuclear bombs require “highly enriched” uranium with more than 90 per cent of U-235.) Yellow cake is broken into small pieces, put in metal rods placed in bundles, which are then bombarded by neutrons causing fission. In a reactor, the energy released turns water into steam, which moves turbines generating electricity. While there is no carbon dioxide “waste” as in burning fossil fuels, the “spent” rods of nuclear fuel and other products constitute grave radioactive waste, almost impossible to dispose of.

India’s 14 “civilian” nuclear reactors presently produce less than 4% of our total power. 70% of our power arises from burning fossil fuels, mainly coal. Much of the rest arises from hydro. We have vast hydroelectric potential in the North and Northeast but it would take a lot of serious political, administrative and civil engineering effort to organise all that, and there would not be any nice visits to Washington or Paris involved for politicians and bureaucrats.

Simple arithmetic says that even if all our principal energy sources stayed constant and only our tiny nuclear power sector grew by 100%, that would still hardly increase by very much our energy output overall. Placing a couple of expensive modern lightwater reactors around Delhi, a couple around Mumbai and a few other metros will, however, butter already buttered bread quite nicely and keep all those lifts and ACs running.

The agreed text of the “treaty” looks, from a legal standpoint, quite sloppily and hurriedly written ~ almost as if each side has cut and paste its own preferred terms in different places with a nod to the other side. For example, there is mention of “WMD” initially which is repeated as “weapons of mass destruction” just a little later. There is solemn mention of the “Government of India” and “Government of the United States of America” as the “Parties”, but this suddenly becomes merely “United States” and “India” in the middle and then reverts again to the formal usage.

Through the sloppiness comes scope for different interpretations. The Americans have said: try not to test, you don’t need to, we don’t test any more, and you have to know that if you do test, this deal is over, in fact it gets reversed. We have said, okay, we won’t test, and if we do test we know it is over with you but that does not mean it is over with others. Given such sloppy diplomacy and treaty-making, the scope for mutual misunderstanding, even war, remains immense long after all the public Indian moneys have found their way into private pockets worldwide. Will a future President Jeb Bush or Chelsea Clinton send F-22 bombers to bomb India’s nuclear facilities because India has carried out a test yet declined to return American equipment? Riding a tiger is not something generally to be recommended.

The answer to our present conundrum must be patience and the fullest transparency. What is the rush? If it is good or bad for us to buy six or eight new American reactors now, it will remain good or bad to do so a year or two from now after everyone has had a thorough think about everything that is involved. What the Manmohan-Montek Planning Commission needed to do first of all was a thorough cost-benefit analysis of India’s energy requirements but such elementary professionalism has been sorely lacking among our economists for decades.”

Subroto Roy

A Dozen Grown-Up Questions for Indian Politicians Dreaming of Becoming/Deciding India’s PM After the 2009 General Elections

The 2009 General Election campaign is supposed to elect a Parliament and a Head of Government for the Republic of India, not a Head Boy/Head Girl at an urban middle-class high school or the karta of a joint family. Unfortunately, our comprador national-level media seem to be docile  and juvenile enough in face of power and privilege to want to ask only touchy-feely koochi-woochi pretty baby questions of the “candidates” for PM (several of whom are not even running as candidates for the Lok Sabha but still seem to want to be PM).   Rival candidates themselves seem to want to hurl invective and innuendo at one another, as if all this was merely some public squabble between Delhi middle-class families.

So here are a set of grown-up adult questions instead:

1. Pakistan is politically and strategically our most important neighbour. Can you assure the country that a government headed by you will have a coherent policy on both war and peace with Pakistan? How would you achieve it?

2. Do you agree with the Reagan-Gorbachev opinion that “a nuclear war cannot be won and must never be fought”? If so, what would your Government do about it?

3. If there are Indian citizens in Jammu & Kashmir presently governed by Article 370 who wish to renounce Indian nationality and remain stateless or become Pakistani/Afghan/Iranian citizens instead, would you consider letting them do so and giving them Indian “green cards” for peaceful permanent residence in J&K and India as a whole?

4. Do you know where Chumbi Valley is? If so, would your Government consider reviving the decades-old idea with China to mutually exchange permanent leases to Aksai Chin and Chumbi Valley respectively?

5. Nuclear power presently accounts as a source of about 4% of total Indian electricity; do you agree that even if nuclear power capacity alone increased by 100% over the next ten years and all other sources of electricity remained constant, nuclear power would still account for less than 8% of the total?

6. The public debt of the country  may now amount to something like Rs 30 lakh crore (Rs 30 trillion); do you find that worrisome? If so, why so? If not, why not?

7. The Government of India may be paying something like Rs 3 lakh crore (Rs 3 trillion) annually on interest payments on its debt;  do you agree that tends to suck dry every public budget even before it can try to do something worthwhile?

8.  If our money supply growth is near 22% per annum, and the rate of growth of real income is near 7% per annum, would you agree the decline in the value of money (i.e., the rate of inflation) could be as high as 15% per annum?

9. Do you agree that giving poor people direct income subsidies is a far better way to help them than by distorting market prices for everybody? If not, why not?

10. How would you seek to improve the working of  (and reduce the corruption in) the following public institutions: (1) the Army and paramilitary; (2) the Judiciary and Police; (3) Universities and technical institutes?

11. There has never been a Prime Minister in any parliamentary democracy in the world throughout the 20th Century who was also not an elected member of the Lower House; do you agree BR Ambedkar and Jawaharlal Nehru intended that for the Republic of India as well and thought it  something so obvious as  not necessary to specify in the 1950 Constitution?  What will your Government do to improve the working of the Presidency, the Lok Sabha, Rajya Sabha and State Assemblies?

12. What, personally, is your vision for India after a five-year period of a Government led by you?

Subroto Roy,

Citizen & Voter

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On Jimmy Carter & the “India-US Nuclear Deal”

I have always rather liked Jimmy Carter, who was President of the United States when I first went to Blacksburg from Cambridge in the summer of 1980.  It astonished me, perhaps because I was naiive, to find the depth of animosity against him among my American colleagues.  For example, I remember the late Wilson Schmidt (in one of several kindly gestures towards me until his untimely death) taking me to my first game of College Football — and there singing the Star Spangled Banner with the words “except Carter” added after “home of the brave”.   Of course it was the time of the Iranian hostage crisis which had then seemed to be a debilitating humiliation.

 

Jimmy Carter will need a good biographer to assess him properly, whether now or in years to come, and he may not get one; objective historians are simply too scarce, especially perhaps in America.  Certainly it was undignified of the Democratic Party not to give him any role whatsoever during the recent Convention appointing Barack Obama.

 

In the International Herald Tribune of September 11 2008, President Carter has said about the India-USA nuclear deal:

 

“different interpretations of the same pact can lead only to harsh confrontations if future decisions are made in New Delhi that contravene what has been understood in our country.”

 

 

I flatter myself to think he or his research-staff may have perhaps read my August 19 2007 article “Need for Clarity” available here where I said:

“The agreed text of the “treaty” looks, from a legal standpoint, quite sloppily and hurriedly written ~ almost as if each side has cut and paste its own preferred terms in different places with a nod to the other side…. Through the sloppiness comes scope for different interpretations. The Americans have said: try not to test, you don’t need to, we don’t test any more, and you have to know that if you do test, this deal is over, in fact it gets reversed. We have said, okay, we won’t test, and if we do test we know it is over with you but that does not mean it is over with others. Given such sloppy diplomacy and treaty-making, the scope for mutual misunderstanding, even war, remains immense long after all the public Indian moneys have found their way into private pockets worldwide. Will a future President Jeb Bush or Chelsea Clinton send F-22 bombers to bomb India’s nuclear facilities because India has carried out a test yet declined to return American equipment? Riding a tiger is not something generally to be recommended.”

Nuksaan-Faida Analysis = Cost-Benefit Analysis in Hindi/Urdu

I have published about a half dozen or more articles, mainly in The Statesman‘s Editorial Page, on the India-US Nuclear Deal, e.g. “Imperialism Redux”14 March 2006, “Towards an Energy Policy” 2 April 2006, “India’s Energy Interests” 27-28 August 2006,  “Need for Clarity”, 19 August 2007.  One of my main complaints has been that the Prime Minister and his acolytes seem to have failed to do a proper cost-benefit analysis of the whole thing.  The same currency-risk that made the Dabhol-Enron project instantly unviable is also faced a fortiori in the idea of importing nuclear fuel and reactors.  The Finance Minister and Finance Secretary who failed to calculate that currency risk in the former project, and hence caused its failure, have now failed again as PM and Planning Commission chief while advocating the latter project. Is the Indian rupee destined to depreciate in the long run?  Of course it is: just look at the long run trends and compare our money supply growth rates and inflation rates with those of the USA or EU.   The cost of imported nuclear power in India must be recalculated under different scenarios for the exchange-rate of the Indian rupee including e.g. a 20% depreciation.

It is not as if the Government of India is ignorant of what Cost-Benefit Analysis is supposed to be!  For example, look up

“*Ministry of Personnel, Public Grievances and Pensions* * *THE INDIAN ADMINISTRATIVE SERVICES (PROBATIONERS’ FINAL EXAMINATION) REGULATIONS, 1955* * *In pursuance of rule 7 of the Indian Administrative Service (Probation) Rules, 1954, the Central Government, in consultation with the State Governments and the Union Public Service Commission, hereby makes the following regulations, namely* *1. Short title:- These regulations may be called the Indian Administrative Service (Probationers’ Final Examination) Regulations, 1955.* *2. Definition:- 2(1) In these regulations, unless the context otherwise requires,-* *(a) `Academay’ (sic) means Lal Bahadur Shastri National Academy of Administration;* *(b) [ ];* *(c) `Director’ means the Director of the Academy; and * *(d) `Schedule’ means a Schedule appended to these regulations.* *2(2) All other words and expressions used in these regulations and not defined shall have the meanings respectively assigned to them in the Indian Administrative Service (Probation) Rules, 1954.* *3. Final examination.- 3(1) Every probationer shall, at or about the end of the period of training in the Academy appear at a final examination.* *3(2) The examination shall be conducted by the 4Director in the manner laid down in these regulations….4. PUBLIC ADMINSTRATION AND MANAGEMENT* *Essentials of Administration-Organisational Structure of Governments, Role of Civil Servants, Administrative Ethics and Accountability, Delegation and Decentralisation-District and Local Administration-Personal Administration, Police Administration-Jail Administration Panchayati Raj Administration- CalamityAdministration-Administration of Development and Welfare Programmes- Budget and Role of Audit and general financial principles-Role of District Officer/SDO-Conduct of Elections.* *Management and Organisation* *Behavioural Science Motivation, Leadership, Decision-Making, MBO, Management of Conflicts, Management of Change ,Transactional Analysis, -MIS-O&M & Work study-Pert-CPM, Time Management Methodology of Presentation of a subject-Financial Management Capital Budgeting, Discountal Cash Flow, Ratio Analysis, Project Formulation, Cost benefit Analysis, Project Evaluation Interpretation of Balance Sheets….”  (emphasis added)

How come there has been none with the India-US nuclear deal then?   I think we need a new more comprehensible term for Cost-Benefit Analysis, and that should be, most simply, its Hindi/Urdu equivalent: “Nuksaan-Faida Analysis”.

What is the estimated Nuksaan?

What is the estimated Faida?

How do they compare?  It all becomes so much easier!

Subroto Roy

Assessing Manmohan: The Doctor of Deficit Finance should realise the currency is at stake

Assessing Manmohan:

The Doctor of Deficit Finance should realise the currency is at stake

by Subroto Roy

First published in The Statesman, Editorial Page Special Article, April 25 2008,

The best thing that may be said of the Manmohan Singh premiership is that when it began in May 2004, it seemed, for a short while, refreshing in comparison to the dysfunctional arrogance and brutality displayed by its predecessor. By the last months of the Vajpayee-Advani Government, there were party appointees who had ended all pretence of purportedly Hindu values and were raking it in shamelessly. The Golden Rule of Democracy is “Throw the rascals out”, which is what Indian democracy upheld as it has done time and again. By 2009, India’s electorate will have the chance to decide whether the incumbent government deserves the same fate.

Lok Sabha

Manmohan Singh was seriously discussed as the Congress’s putative nominee for PM as early as 2001. The idea brewing at the time with the party’s next generation of wannabe leaders (in their 50s and 60s, where Manmohan was near 70) was that they needed to maintain good relations with the Great White Queen and wait out one term of an inevitable Singh premiership before having a shot at the top job themselves.

What is surprising is Dr Singh appeared never to feel it necessary to educate himself privately on how to retool himself for the necessary transformation from being the archetypal bureaucrat he had been in his working career to becoming the national statesman he wished to be after retirement. It is doubtful, for example, if he ever stood in front of a mirror and practised an extempore political speech in Hindi in preparation for the highest executive post in the country, let aside writing a clear-headed, original vision or mission statement of substance as to where he wished to lead it. As Narasimha Rao’s Finance Minister, he could meekly take orders from his PM; it seemed he wished to continue in the same mode even when PM himself.

Jawaharlal Nehru is supposed to have been a hero of Dr Singh’s ~ but Nehru was a thorough parliamentarian, among the finest anywhere, and someone who always respected the Lok Sabha immensely. Dr Singh, after he lost to VK Malhotra for the South Delhi seat in 1999, made not the slightest effort to enter the Lok Sabha again, even when the Akalis indicated they might not oppose him in a Punjab contest. When asked specifically at a large press conference about not entering the Lok Sabha, Dr Singh murmured words to the effect he had better uses of his time ~ a display, if anything, of the misplaced arrogance of many New Delhi academics and intellectuals. Dr Singh may be the first PM in any parliamentary democracy never to have won a seat in the lower house nor felt a need to do so.

Dr Singh’s bureaucratic expertise assisted him well in the first national crisis that came his way, which was the Tsunami of 26 December 2004. There appeared to be an air of efficiency about the Government’s response and he seemed in his element as commander of bureaucratic forces while working with Pranab Mukherjee in enlisting the military. George W. Bush (not a great geographer or historian) was apparently impressed to see on a map that India had naval forces deployed as far as the Andamans.

By 2005 though, Dr Singh’s bureaucratic mindset had its negative impact. Montek Ahluwalia had been his Finance Secretary when he was Finance Minister. Mr Ahluwalia’s spouse had been a main supporter of Dr Singh’s unsuccessful Lok Sabha attempt. During the Vajpayee Government, Mr Ahluwalia remained a Planning Commission Member for several years before moving to Washington. With Dr Singh as PM, Mr Ahluwalia returned from the USA in mid 2004 to become Deputy Chair at the Planning Commission. Simultaneously with his return, the idea that the American nuclear industry would like to sell “six to eight lightwater reactors” to India arose.

That is as much as is presently known in public. Dr Singh and Mr Ahluwalia may in the national interest want to frankly and precisely explain to the Indian people the full story of the sudden origins of this idea. Certainly, none of the lessons of the Dabhol fiasco a decade earlier seemed to have been learnt, and the Maharasthtra Government (and hence the Government of India) ended up paying some $300 million to General Electric and Bechtel Corporation for Dabhol before any nuclear talks with the USA could begin. Nor had any serious cost-benefit analysis been done or discussion taken place comparing nuclear energy with coal, hydro and other sources in the Indian case.

Indian foreign policy became frozen in its focus on nuclear negotiations with the USA, swirling around Dr Singh’s fife-and-drum welcome at the White House and President Bush’s return visit to India. At the same time arose the issue of Paul Volcker’s UN committee mentioning the name of India’s foreign minister. As The Statesman put it, regardless of the latter’s involvement, “the damage to India’s diplomatic reputation in the world” was done and it was inevitable a new foreign minister would be necessary. After dilly-dallying and much 10 Janpath to-and-fro, Dr Singh followed Nehru’s mistake of becoming his own foreign minister. The idea was that this would be temporary but it became almost a year.

Instead of transforming himself towards Indian political statesmanship, Dr Singh advanced other retired bureaucrats’ ambitions on similar career-paths. Foreign policy went out of the MEA’s control and seemingly into the control of the new “National Security Adviser”. Dr Singh, sometimes with MK Narayanan beside him, travelled a large number of countries from Brazil to Finland and Uzbekistan to South Africa and Japan. Dr Singh also found time and willingness to accept honorary degrees from British and Russian universities during these short months.

While Dr Singh seemed thus preoccupied, two of India’s main neighbours underwent massive democratic revolutions (leave aside magnificent Bhutan). Nepal’s people practically stormed their Bastille while Dr Singh and Mr Narayanan visited Germany to discuss BMWs. Pakistan’s democratic forces could hardly believe the cold indifference shown to them by a New Delhi merely following Bush’s support for Pervez Musharraf. While Pakistan and Nepal, and to lesser extent Bangladesh, saw movements towards better governance, Sri Lanka descended towards civil war ~ India’s PM remained obsessed with the magic wand that the nuclear deal was supposed to be.

Inflation

Then suddenly the magic vanished ~ Dr Singh seemed to finally come to a silent private recognition that the economics of the nuclear deal simply did not add up if it meant India importing “six to eight lightwater reactors” on a turnkey basis from the USA or anywhere else. Dr Singh seemed to come out of his self-imposed trance and return a little better to reality. By the time he visited China, although he was as deferential to Hu Jintao in his body language as he had been to Bush and Musharraf and even accepted an indoor guard of honour, he also seemed willing to stand up for India. The Arunachal visit was a reality-check.

Now there is inflation ~ and one year left in the UPA’s term. What the country needs is tough sensible macroeconomics and clean public finance. A pandering profligate budget in February was not a healthy sign. Instructing Mr Ahluwalia to close down the Planning Commission and make it a minor R&D wing of the Finance Ministry would be instead a good step. Instructing the RBI to clean up its bureaucratic wastefulness and prepare itself for institutional independence from the Finance Ministry would be even better. Getting proper financial control over every Union and State government entity spending public money and resources would be most important of all. Such major institutional changes in the policy-making process are what an economist might expect of an economist prime minister who wishes to lead India in the 21st Century. India’s currency is at stake.

(See also:  “The Politics of Dr Singh”, May 2006; “Mistaken Macroeconomics”, June 2009, etc.)

India-USA interests: Elements of a serious Indian foreign policy (2007)

India-USA interests: Elements of a serious Indian foreign policy

by

Subroto Roy

First published in The Statesman, Editorial Page Special Article, Oct 30 2007

If there is a “natural alliance” between India and the United States, it arises to the extent that both are large democracies and more or less free societies that happen to be placed half way across the globe and pose no perceptible military threat to one another. The real long-term strategic and political dimensions of such an alliance are quite independent of the business interests driving the “nuclear deal” or selfish interests of the few million “elite” Indians who have fled to the USA as immigrants in recent decades. The interests of Indian immigrants in the USA and interests of the vast masses in India are, after all, quite distinct. Also, America derives most if its own energy not from nuclear reactors but from abundant hydroelectric resources. If the nuclear deal has been ill-conceived and fails in implementation at any stage, India will not import expensive nuclear reactors but can still learn much from the USA in developing hydroelectric power which constitutes India’s greatest energy potential as well.

 

China and Pakistan

Key strategic interests of India and the USA are fully convergent in East Asia, especially in respect of Communist China. But in West Asia, American attitudes and actions towards the Muslim world, specifically the invasion and occupation of Iraq and now a possible assault on Iran, have been deeply disconcerting for India which has some 120 million Muslim citizens.

It is not a coincidence that Pakistan, an overtly religious Muslim state, has had a marriage of convenience with Communist China, an overtly atheistic anti-religious state. Both have been militarist dictatorships that have seen democratic India as a strategic adversary, especially over territorial claims. It was Pakistan that facilitated President Nixon’s desired opening to Communist China and later permitted President Reagan’s attack on the soft underbelly of the USSR in the Afghan civil war (an attack in which China participated too). With the USSR’s collapse, the USA removed its main strategic adversary only to be left with two new adversaries: Islamic fundamentalism in the short run and China in the long run!

Indian diplomacy can credit a rare (indeed exceptional) success in having warned the USA from the early 1990s onwards of the dangers brewing in the jihadist camps in Pakistan sponsored by the ISI. The US Government has now declassified its assessments of those dangers and what it tried to do as early as 1995 and as late as 2000 through the Saudis with the Taliban’s Mullah Omar ~ who refused to hand over Osama Bin Laden to Saudi Arabia and openly spoke of plans for revenge against American interests. With a continuing Cold-War mindset, US policy-makers thought state-actors like Saddam Hussein were a graver risk to Israel than non-state or  pan-state actors like Osama could be to the American mainland. Having distracted itself with Saddam, the US Government’s response to Osama has been far too much far too late ~ the maddened bull chasing the matador’s cape, in Stephen Holmes’s recent metaphor.

Pakistan’s consistent motivation was one of gaining advantage with the Americans in the hope of undermining India, and indeed the nexus created in Washington by Pakistan’s bureaucrats, politicians and military over decades has been the envy of all lobbyists. But Pakistan overplayed its hand, and once the 9/11 genie was let out of the bottle it could not be put back in again. Meanwhile, Pakistan allowing Gwadar port to become a haven for China’s Navy would have obvious new strategic repercussions.

American interests in West Asia are to protect Israel, to protect trade-routes and to defend against non-state or pan-state terrorism. American interests in East Asia are to protect Japan, South Korea and Taiwan from communist attack, to protect trade-routes and to defend against new terrorism arising from places like Indonesia or the  Philippines. All American interests in Asia would be facilitated by appearance of genuine multiparty democracy and free societies in China and Pakistan.

China as a two-party or multi-party democracy and a free society, even on the Taiwan-model, is unlikely to be an expansionist militarist aggressor in the way it has been as a dictatorship and unfree society. Communist China in the early 21st Century makes the same outrageous unlawful claims on Indian territory as it did half a century ago. Only the USA came to India’s assistance in a tangible way when Communist China attacked in Ladakh and Arunachal in the late months of 1962. John Kenneth Galbraith was President Kennedy’s Ambassador in New Delhi and his memoirs tell the tale of the landings of C-130 aircraft in Kolkata carrying infantry weapons, light artillery and quartermaster stores for the beleaguered Indian Army in Tezpur and Leh.

 scan0010

Nehru, Krishna Menon and India’s whole political and diplomatic leadership revealed gross incompetence as did the Army’s top brass. Indian Communists virtually betrayed the country. The Chinese massed in the Chumbi Valley near Nathu La, and had they attacked all the way to Siliguri, India’s North East would have been cut off. As a demonstration, the Chinese in division strength took and held the whole of Arunachal for a month, withdrawing before there could be anyIndian attempt to retaliate or cut supply lines. The geography has not changed in fifty years. What can yet change is the ideology, away from the communism that has ruined China’s great people, to a new and bold commitment to liberal democracy and the Rule of Law.

As for Pakistan, its people under crude military rule have hardly allowed themselves to become the source of Muslim culture that Iqbal had dreamt of. Pakistan today is not a place even the most ardent pro-Pakistani person in Jammu & Kashmir can find very appealing or inspiring. If there was multiparty democracy and a free society in which the military had a normal small role of defence (as opposed to a large purportedly offensive role against India), Pakistan could calm down from its neuroses and become a normal country for the first time~ one in which the so-called “extremists” of today are transformed into a politically legitimate religious conservatism, who could seek to take power responsibly through the ballot box.

Neutrality

India should be a friendly neutral in the conflict between the West and Muslim world, doing whatever we can to bring better understanding between the two sides. Both have been invaders in Indian history, bringing both evil and good in their wake. India’s culture absorbed and assimilated their influences and became more resilient as a consequence. India also was a haven for Jews and Zoroastrians fleeing persecution. India as a country must condemn fanatical terrorist attacks on the West and bizarre reactionary attempts to return to a caliphate in the world of modern science. Equally, India must condemn vicious racist bombing and warfare unleashed by technologically advanced countries upon ancient societies and cultures struggling to enter the modern world in their own way.

As for the central issue of Israel in Palestine, Martin Buber (1878-1965), the eminent Zionist scholar and philosopher of Judaism, said to Rabindranath Tagore in 1926 that the Jewish purpose should be one of “pursuing the settlement effort in Palestine in agreement, nay, alliance with the peoples of the East, so as to erect with them together a great federative structure, which might learn and receive from the West whatever positive aims and means might be learnt and received from it, without, however, succumbing to the influence of its inner disarray and aimlessness.” If India could guide the region towards such a “great federative structure” of reason and tranquillity, while encouraging democracy in China and Pakistan, the aim of our “natural alliance” with the United States half way across the globe would have been fulfilled.

see also

https://independentindian.com/2006/01/31/diplomatic-wisdom/

https://independentindian.com/2006/10/09/new-foreign-policy-kiss-up-kick-down/
https://independentindian.com/2006/06/05/pakistans-allies/

https://independentindian.com/2011/10/13/my-seventy-one-notes-at-facebook-etc-on-kashmir-pakistan-and-of-course-india-listed-thanks-to-jd/

https://independentindian.com/2009/09/19/my-ten-articles-on-china-tibet-xinjiang-taiwan-in-relation-to-india/

https://independentindian.com/2007/08/19/to-clarity-from-confusion-on-indo-us-nuclear-deal/

https://independentindian.com/2009/11/25/on-the-zenith-and-nadir-of-us-india-relations/

Against Quackery

Against Quackery

 

 

First published in two parts in The Sunday Statesman, September 23 2007, The Statesman September 24 2007

 

by

Subroto Roy

 

 

Manmohan and Sonia have violated Rajiv Gandhi’s intended reforms; the Communists have been appeased or bought; the BJP is incompetent

 

 

WASTE, fraud and abuse are inevitable in the use and allocation of public property and resources in India as elsewhere, but Government is supposed to fight and resist such tendencies. The Sonia-Manmohan Government have done the opposite, aiding and abetting a wasteful anti-economics ~ i.e., an economic quackery. Vajpayee-Advani and other Governments, including Narasimha-Manmohan in 1991-1996, were just as complicit in the perverse policy-making. So have been State Governments of all regional parties like the CPI-M in West Bengal, DMK/ AIADMK in Tamil Nadu, Congress/NCP/ BJP/Sena in Maharashtra, TDP /Congress in Andhra Pradesh, SP/BJP/BSP in Uttar Pradesh etc. Our dismal politics merely has the pot calling the kettle black while national self-delusion and superstition reign in the absence of reason.

 

 

The general pattern is one of well-informed, moneyed, mostly city-based special interest groups (especially including organised capital and organised labour) dominating government agendas at the cost of ill-informed, diffused anonymous individual citizens ~ peasants, small businessmen, non-unionized workers, old people, housewives, medical students etc. The extremely expensive “nuclear deal” with the USA is merely one example of such interest group politics.

 

 

Nuclear power is and shall always remain of tiny significance as a source of India’s electricity (compared to e.g. coal and hydro); hence the deal has practically nothing to do with the purported (and mendacious) aim of improving the country’s “energy security” in the long run. It has mostly to do with big business lobbies and senior bureaucrats and politicians making a grab, as they always have done, for India’s public purse, especially access to foreign currency assets. Some $300 million of India’s public money had to be paid to GE and Bechtel Corporation before any nuclear talks could begin in 2004-2005 ~ the reason was the Dabhol fiasco of the 1990s, a sheer waste for India’s ordinary people. Who was responsible for that loss? Pawar-Mahajan-Munde-Thackeray certainly but also India’s Finance Minister at the time, Manmohan Singh, and his top Finance Ministry bureaucrat, Montek Ahluwalia ~ who should never have let the fiasco get off the ground but instead actively promoted and approved it.

 

 

Cost-benefit analysis prior to any public project is textbook operating procedure for economists, and any half-competent economist would have accounted for the scenario of possible currency-depreciation which made Dabhol instantly unviable. Dr Singh and Mr Ahluwalia failed that test badly and it cost India dearly. The purchase of foreign nuclear reactors on a turnkey basis upon their recommendation now reflects similar financial dangers for the country on a vastly larger scale over decades.

 

 

Our Government seems to function most expeditiously in purchasing foreign arms, aircraft etc ~ not in improving the courts, prisons, police, public utilities, public debt. When the purchase of 43 Airbus aircraft surfaced, accusations of impropriety were made by Boeing ~ until the local Airbus representative said on TV that Boeing need not complain because they were going to be rewarded too and soon 68 aircraft were ordered from Boeing!

 

 

India imports all passenger and most military aircraft, besides spare parts and high-octane jet fuel. Domestic aviation generates near zero forex revenues and incurs large forex costs ~ a debit in India’s balance of payments. Domestic airline passengers act as importers subsidised by our meagre exporters of textiles, leather, handicrafts, tea, etc. What a managerially-minded PM and Aviation Minister needed to do before yielding to temptations of buying new aircraft was to get tough with the pampered managements and unions of the nationalized airlines and stand up on behalf of ordinary citizens and taxpayers, who, after all, are mostly rail or road-travellers not jet-setters.

 

 

The same pattern of negligent policy-behaviour led Finance Minister P. Chidambaram in an unprecedented step to mention in his 2007 Union Budget Speech the private American companies Blackstone and GE ~ endorsing the Ahluwalia/Deepak Parekh idea that India’s forex reserves may be made available to be lent out to favoured private businesses for purported “infrastructure” development. We may now see chunks of India’s foreign exchange reserves being “borrowed” and never returned ~ a monumental scam in front of the CBI’s noses.

 

 

The Reserve Bank’s highest echelons may have become complicit in all this, permitting and encouraging a large capital flight to take place among the few million Indians who read the English newspapers and have family-members abroad. Resident Indians have been officially permitted to open bank accounts of US $100,000 abroad, as well as transfer gifts of $50,000 per annum to their adult children already exported abroad ~ converting their largely untaxed paper rupees at an artificially favourable exchange-rate.

 

 

In particular, Mr Ratan Tata (under a misapprehension he may do whatever Lakshmi Mittal does) has been allowed to convert Indian rupees into some US$13,000,000,000 to make a cash purchase of a European steel company. The same has been allowed of the Birlas, Wipro, Dr Reddy’s and numerous other Indian corporations in the organised sector ~ three hundred million dollars here, five hundred million dollars there, etc. Western businessmen now know all they have to do is flatter the egos of Indian boxwallahs enough and they might have found a buyer for their otherwise bankrupt or sick local enterprise. Many newcomers to New York City have been sold the Brooklyn Bridge before. “There’s a sucker born every minute” is the classic saying of American capitalism.

 

 

The Sonia-Manmohan Government, instead of hobnobbing with business chambers, needed to get Indian corporations to improve their accounting, audit and governance, and reduce managerial pilfering and embezzlement, which is possible only if Government first set an example.

 

 

Why have Indian foreign currency reserves zoomed up in recent years? Not mainly because we are exporting more textiles, tea, software engineers, call centre services or new products to the world, but because Indian corporations have been allowed to borrow abroad, converting their hoards of paper rupees into foreign debt. Forex reserves are a residual in a country’s international balance of payments and are not like tax-resources available to be spent by Government; India’s reserves largely constitute foreign liabilities of Indian residents. This may bear endless repetition as the PM and his key acolytes seem impervious to normal postgraduate-level economics textbooks.

 

 

Other official fallacies include thinking India’s savings rate is near 32 per cent and that clever bureaucratic use of it can cause high growth. In fact, real growth arises not because of what politicians and bureaucrats do but because of spontaneous technological progress, improved productivity and learning-by-doing of the general population ~ mostly despite not because of an exploitative parasitic State. What has been mismeasured as high savings is actually expansion of bank-deposits in a fractional reserve banking system caused by runaway government deficit-spending.

 

 

Another fallacy has been that agriculture retards growth, leading to nationwide politically-backed attempts at land-grabbing by wily city industrialists and real estate developers. In a hyperinflation-prone economy with wild deficit-spending and runaway money-printing, cheating poor unorganised peasants of their land, when that land is an asset that is due to appreciate in value, has seemed like child’s play.

 

 

What of the Opposition? The BJP/RSS have no economists who are not quacks though opportunists were happy to say what pleased them to hear when they were in power; they also have much implicit support among organised business lobbies and the anti-Muslim senior bureaucracy. The official Communists have been appeased or bought, sometimes so cheaply as with a few airline tickets here and there. The nonsensical “Rural Employment Guarantee” is descending into the wasteland of corruption it was always going to be. The “Domestic Violence Act” as expected has started to destroy India’s families the way Western families have been destroyed. The Arjun-DMK OBC quota corrodes higher education further from its already dismal state. All these were schemes that Congress and Communist cabals created or wholeheartedly backed, and which the BJP were too scared or ignorant to resist.

 

 

And then came Singur and Nandigram ~ where the sheer greed driving the alliance between the Sonia-Manmohan-Pranab Congress and the CPI-M mask that is Buddhadeb, came to be exposed by a handful of brave women like Mamata and Medha.

 

 

A Fiscal U-Turn is Needed For India to Go in The Right Economic Direction

 

Rajiv Gandhi had a sense of noblesse oblige out of remembrance of his father and maternal grandfather. After his assassination, the comprador business press credited Narasimha Rao and Manmohan Singh with having originated the 1991 economic reform. In May 2002, however, the Congress Party itself passed a resolution proposed by Digvijay Singh explicitly stating Rajiv and not either of them was to be so credited. The resolution was intended to flatter Sonia Gandhi but there was truth in it too. Rajiv, a pilot who knew no political economy, was a quick learner with intelligence to know a good idea when he saw one and enough grace to acknowledge it.

 

 

Rule of Law

 

The first time Dr Manmohan Singh’s name arose in contemporary post-Indira politics was on 22 March 1991 when M K Rasgotra challenged the present author to answer how Dr Singh would respond to proposals being drafted for a planned economic liberalisation that had been authorised by Rajiv, as Congress President and Opposition Leader, since September 1990. It was replied that Dr Singh’s response was unknown and he had been heading the “South-South Commission” for Tanzania’s Julius Nyerere, while what needed to be done urgently was make a clear forceful statement to restore India’s credit-worthiness and the confidence of international markets, showing that the Congress at least knew its economics and was planning to take bold new steps in the direction of progress.

 

 

There is no evidence Dr Singh or his acolytes were committed to any economic liberalism prior to 1991 as that term is understood worldwide, and scant evidence they have originated liberal economic ideas for India afterwards. Precisely because they represented the decrepit old intellectual order of statist ”Ma-Bap Sarkari” policy-making, they were not asked in the mid-1980s to be part of a “perestroika-for-India” project done at a foreign university ~ the results of which were received, thanks to Siddhartha Shankar Ray, by Rajiv Gandhi in hand at 10 Janpath on 18 September 1990 and specifically sparked the change in the direction of his economic thinking.

 

 

India is a large, populous country with hundreds of millions of materially poor citizens, a weak tax-base, a vast internal and external public debt (i.e. debt owed by the Government to domestic and foreign creditors), massive annual fiscal deficits, an inconvertible currency, and runaway printing of paper-money. It is unsurprising Pakistan’s economy is similar, since it is born of the same land and people. Certainly there have been real political problems between India and Pakistan since the chaotic demobilisation and disintegration of the old British Indian Army caused the subcontinent to plunge into war-like or “cold peace” conditions for six decades beginning with a bloody Partition and civil war in J&K. High military expenditures have been necessitated due to mutual and foreign tensions, but this cannot be a permanent state if India and Pakistan wish for genuine mass economic well-being.

 

 

Even with the continuing mutual antagonism, there is vast scope for a critical review of Indian military expenditures towards greatly improving the “teeth-to-tail” ratio of its fighting forces. The abuse of public property and privilege by senior echelons of the armed forces (some of whom have been keen most of all to export their children preferably to America) is also no great secret.

 

 

On the domestic front, Rajiv was entirely convinced when the suggestion was made to him in September 1990 that an enormous infusion of public resources was needed into the judicial system for promotion and improvement of the Rule of Law in the country, a pre-requisite almost for a new market orientation. Capitalism without the Rule of Law can quickly degenerate into an illiberal hell of cronyism and anarchy which is what has tended to happen since 1991.

 

 

The Madhava Menon Committee on criminal justice policy in July proposed a Hong Kong model of “a single high-tech integrated Criminal Justice complex in every district headquarters which may be a multi-storied structure, devoting the ground floor for the police station including a video-installed interrogation room; the first floor for the police-lockups/sub-jail and the Magistrate’s Court; the second floor for the prosecutor’s office, witness rooms, crime laboratories and legal aid services; the third floor for the Sessions Court and the fourth for the administrative offices etc…. (Government of India) should take steps to evolve such an efficient model… and not only recommend it to the States but subsidize its construction…” The question arises: Why is this being proposed for the first time in 2007 after sixty years of Independence? Why was it not something designed and implemented starting in the 1950s?

 

 

The resources put since Independence to the proper working of our judiciary from the Supreme Court and High Courts downwards have been abysmal, while the state of prisons, borstals, mental asylums and other institutions of involuntary detention is nothing short of pathetic. Only police forces, like the military, paramilitary and bureaucracies, have bloated in size.

 

 

Neither Sonia-Manmohan nor the BJP or Communists have thought promotion of the Rule of Law in India to be worth much serious thought ~ certainly less important than attending bogus international conclaves and summits to sign expensive deals for arms, aircraft, reactors etc. Yet Rajiv Gandhi, at a 10 Janpath meeting on 23 March 1991 when he received the liberalisation proposals he had authorized, explicitly avowed the importance of greater resources towards the Judiciary. Dr Singh and his acolytes were not in that loop, indeed they precisely represented the bureaucratic ancien regime intended to be changed, and hence have seemed quite uncomprehending of the roots of the intended reforms ever since 1991.

 

 

Similarly, Rajiv comprehended when it was said to him that the primary fiscal problem faced by India is the vast and uncontrolled public debt, interest payments on which suck dry all public budgets leaving no room for provision of public goods.

 

 

 

Government accounts


Government has been routinely “rolling over” its domestic debt in the asset-portfolios of the nationalised banks while displaying and highlighting only its new additional borrowing in a year as the “Fiscal Deficit”. More than two dozen States have been doing the same and their liabilities ultimately accrue to the Union too. The stock of public debt in India is Rs 30 trillion (Rs 30 lakh crore) at least, and portends a hyperinflation in the future.

 

 

There has been no serious recognition of this since it is political and bureaucratic actions that have been causing the problem. Proper recognition would entail systematically cleaning up the budgets and accounts of every single governmental entity in the country: the Union, every State, every district and municipality, every publicly funded entity or organisation, and at the same time improving public decision-making capacity so that once budgets and accounts recover from grave sickness over decades, functioning institutions exist for their proper future management. All this would also stop corruption in its tracks, and release resources for valuable public goods and services like the Judiciary, School Education and Basic Health. Institutions for improved political and administrative decision-making are needed throughout the country if public preferences with respect to raising and allocating common resources are to be elicited and then translated into actual delivery of public goods and services. Our dysfunctional legislatures will have to do at least a little of what they are supposed to. When public budgets and accounts are healthy and we have functioning public goods and services, macroeconomic conditions would have been created for the paper-rupee to once more become a money as good as gold ~ a convertible world currency for all of India’s people, not merely the metropolitan special interest groups that have been controlling our governments and their agendas.

Posted in Accounting and audit, asymmetric information, Banking, Big Business and Big Labour, BJP, Communists, Congress Party, Deposit multiplication, DMK, Economic Policy, Economic quackery, Economics of Public Finance, Governance, Government accounting, Government Budget Constraint, Government of India, India's Big Business, India's savings rate, India's stock and debt markets, India's 1991 Economic Reform, India's aviation, India's balance of payments, India's Banking, India's Budget, India's Capital Markets, India's communists, India's corporate governance, India's corruption, India's Democracy, India's Economic History, India's Economy, India's Energy, India's Exports, India's Families, India's Foreign Exchange Reserves, India's Foreign Trade, India's Government Budget Constraint, India's Government Expenditure, India's Industry, India's inflation, India's Judiciary, India's Land, India's Macroeconomics, India's Monetary & Fiscal Policy, India's nomenclatura, India's political lobbyists, India's Politics, India's Polity, India's pork-barrel politics, India's poverty, India's Public Finance, India's Reserve Bank, India's State Finances, India's Union-State relations, India-Pakistan peace process, India-US Nuclear Deal, Indira Gandhi, Inflation, Interest group politics, Mamata Banerjee, Manmohan Singh, Mendacity in politics, Non-Resident Indians, Pakistan, Balochistan, Afghanistan, Iran, Political corruption, Political cynicism, Political Economy, Political mendacity, Political Philosophy, Politics, Pork-barrel politics, Power-elites and nomenclatura, Public Choice/Public Finance, Public property waste fraud, Rajiv Gandhi, Reason, Redeposits, Singur and Nandigram, Sonia Gandhi, Unorganised capital markets, Welfare Economics. 2 Comments »

To Clarity from Confusion on Indo-US Nuclear Deal

(Author’s Note September 3 2008: This article “Need for Clarity” published in The Statesman last year was one of several I have published on the subject; see also, for example, “Towards an Energy Policy”, “India’s Energy Interests” , “Against Quackery” all published first in The Statesman in 2006 and 2007; also “India and ‘Energy Security'” which was my lecture to a KAF conference on the subject.  It seems quite prescient in that it anticipated by a few  months the “secret”  letter from the US Executive Branch to the Legislative Branch, released by the Washington Post today . India’s UPA Government has put forward a junior spokesman from the Congress Party  to waffle around with a purported explanation. )

 

 

 

 

Need for Clarity 

A poorly drafted treaty driven by business motives is a recipe for international misunderstanding

First published in The Sunday Statesman, August 19 2007, Editorial Page Special Article

by

SUBROTO ROY

 

 

Confusion prevails over the Indo-US Nuclear Deal. Businessmen, bureaucrats, politicians, diplomats, scientists and now the public at large have all joined in the cacophony in the last two years.

 

On Wednesday August 15, America’s foreign ministry made the clearest most unequivocal statement possible as to the official American Government interpretation of the Indo-US nuclear deal: “The proposed 123 agreement has provisions in it that in an event of a nuclear test by India, then all nuclear co-operation is terminated, as well as there is provision for return of all materials, including reprocessed material covered by the agreement” (Sean McCormack). Yet our Prime Minister had told Parliament two days earlier: “The agreement does not in any way affect India’s right to undertake future nuclear tests, if it is necessary”. What is going on? Our politics are in uproar, and it has been suggested in these pages that the country go to a General Election to allow the people to speak on the matter. Clearly, we need some clarity.

 

Let us start at the beginning. How did it all originate? The private US nuclear industry prevailed upon India’s government bureaucrats and businessmen over several years that nuclear power is the way forward to solving India’s “infrastructure” problems. They would sell us, in words of the Manmohan-Montek Planning Commission’s energy adviser, “six to eight lightwater reactors” (especially as they may not be able to sell these anywhere else). Our usual prominent self-seeking retired bureaucrats started their waffling about the importance of “infrastructure”.

 

 

Then Manmohan Singh felt his foreign travels as PM could be hardly complete without a fife-and-drum visit to the White House. But before he could do so, Dabhol would have to be cleared up since American business in India was on a self-moratorium until GE and Bechtel were paid settlements of some $140-160 million each by the Governments of India and Maharashtra. GE’s CEO for India kindly said afterwards “India is an important country to GE’s global growth. We look forward to working with our partners, customers, and State and Central Governments in helping India continue to develop into a leading world economy”.

 

 

Also, before Manmohan’s USA trip, the Confederation of Indian Industry registered as an official Washington lobbyist and spent half a million dollars lobbying American politicians for the deal. (“Why?” would be a good question.)

 

 

So Dr Singh was able to make his White House visit, accompanied by US business lobbies saying the nuclear deal can generate $100 billion worth of new American business in India’s energy-sector alone. It is only when business has lubricated politics in America that so much agreement about the India-deal could arise. The “bottom-line” is that six to eight reactors must be sold to India, whatever politics and diplomacy it takes.

 

 

Now Dr Singh is not a PM who is a Member of the Lower House of Parliament commanding its confidence. He says his Government constitutes the Executive and can sign treaties on India’s behalf. This is unwise. If he signs a treaty and then the Congress Party loses the next General Election, a new Executive Government can use his same words to rescind the same treaty. What is sauce for the goose is sauce for the gander. One reason we are so confused is that India has not signed very many bilateral treaties, and there is barely a noted specialist in international law anywhere in the country. Dr Singh’s original mentor, PN Haksar, had gone about getting a treaty signed with the USSR back in 1971 which tided us over a war, though the USSR itself collapsed before that treaty ended.

 

 

Signing a treaty is much more than signing an international MOU. It requires a national consensus or a least a wide and deep understanding on the part of the public and the political class as to what necessitates the treaty. That plainly does not exist at present. Most people in India do not even know how nuclear power is generated, nor how small and insignificant nuclear power has been in India.

 

 

Natural uranium is 99.3 per cent of the U-238 isotope and 0.7 per cent the radioactive U-235 isotope. Nuclear power generation requires “enriched uranium” or “yellow cake” to be created in which U-235 has been increased from 0.7 per cent to 4 to 5 percent. (Nuclear bombs require “highly enriched” uranium with more than 90 per cent of U-235.) Yellow cake is broken into small pieces, put in metal rods placed in bundles, which are then bombarded by neutrons causing fission. In a reactor, the energy released turns water into steam, which moves turbines generating electricity. While there is no carbon dioxide “waste” as in burning fossil fuels, the “spent” rods of nuclear fuel and other products constitute grave radioactive waste, almost impossible to dispose of.

 

 

India’s 14 “civilian” nuclear reactors presently produce less than 4% of our total power. 70% of our power arises from burning fossil fuels, mainly coal. Much of the rest arises from hydro. We have vast hydroelectric potential in the North and Northeast but it would take a lot of serious political, administrative and civil engineering effort to organise all that, and there would not be any nice visits to Washington or Paris involved for politicians and bureaucrats.

 

 

Simple arithmetic says that even if all our principal energy sources stayed constant and only our tiny nuclear power sector grew by 100%, that would still hardly increase by very much our energy output overall. Placing a couple of expensive modern lightwater reactors around Delhi, a couple around Mumbai and a few other metros will, however, butter already buttered bread quite nicely and keep all those lifts and ACs running.

 

 

The agreed text of the “treaty” looks, from a legal standpoint, quite sloppily and hurriedly written ~ almost as if each side has cut and paste its own preferred terms in different places with a nod to the other side. For example, there is mention of “WMD” initially which is repeated as “weapons of mass destruction” just a little later. There is solemn mention of the “Government of India” and “Government of the United States of America” as the “Parties”, but this suddenly becomes merely “United States” and “India” in the middle and then reverts again to the formal usage.

 

 

Through the sloppiness comes scope for different interpretations. The Americans have said: try not to test, you don’t need to, we don’t test any more, and you have to know that if you do test, this deal is over, in fact it gets reversed. We have said, okay, we won’t test, and if we do test we know it is over with you but that does not mean it is over with others. Given such sloppy diplomacy and treaty-making, the scope for mutual misunderstanding, even war, remains immense long after all the public Indian moneys have found their way into private pockets worldwide. Will a future President Jeb Bush or Chelsea Clinton send F-22 bombers to bomb India’s nuclear facilities because India has carried out a test yet declined to return American equipment? Riding a tiger is not something generally to be recommended.

 

 The answer to our present conundrum must be patience and the fullest transparency. What is the rush? If it is good or bad for us to buy six or eight new American reactors now, it will remain good or bad to do so a year or two from now after everyone has had a thorough think about everything that is involved. What the Manmohan-Montek Planning Commission needed to do first of all was a thorough cost-benefit analysis of India’s energy requirements but such elementary professionalism has been sorely lacking among our economists for decades.

 

America’s Pakistan-India Policy

US Pak-India Policy
Delhi & Islamabad Still Look West In Defining Their Relationship

First published in The Statesman, Editorial Page Special Article,

July 27, 2007

By Subroto Roy

“Balance of power” between other nations while pursuing one’s own commercial and political self-interest, was the leitmotif of British foreign policy throughout the 19th Century and up until World War I. This came to be broadly absorbed and imitated by US foreign policy-makers afterwards. It remains the clear leitmotif of US policy between and towards Pakistan and India in recent years, especially since the 9/11 attacks on New York and Washington. Pakistan’s armed forces have been induced through the usual incentives of modern weapons like F-16s, comfortable officer-visits to US military academies, and hard cash to behave cooperatively with perceived American objectives.

Osama bin Laden
For some bizarre and unknown reason (though it might be as simple as ignorance and thoughtlessness), the USA has made itself believe that arch-enemy Osama bin Laden has remained in the Pashtun areas ever since the American attack took place on the-then Taliban Government in late 2001. The Taliban’s leader Mullah Omar certainly remained there or in Balochistan, but anyone who recalls the reported last conversation between Omar and Osama at the time may well have surmised that Osama was planning a long and permanent trip away from Afghanistan and Pakistan. The present author’s own speculation has been that Osama bin Laden probably moved westwards and has been in a safe and comfortable hideout somewhere in the deserts of North Africa ~ while everyone continues to frantically and ridiculously look for him very far away from where he is.

American policy towards Pakistan has been determined by the parameters of the new policy towards Afghanistan ~ which has been to prop up the Hamid Karzai Government in the hope a pro-American “moderate” “modern” Pashtun like Mr Karzai might one day become a constructive role model for all other Pashtuns, while NATO extends itself “pacifying” any new Pashtun insurgency and attacking poppy-crops on the pattern of the anti-narcotics war in Colombia, and US “Special Forces” continue to look for Osama and friends. Pakistan’s Musharraf has been expected to play along with this, and, in order for him to release and transfer some 80,000 soldiers towards that end, India has been requested not to give him a reason not to want to do so.

General Musharraf was one of the major beneficiaries of the officer-exchange programmes between the US and Pakistan militaries in the past. Like Benazir Bhutto, he is a “known” quantity, well-understood and hence rendered predictable by the American military and diplomatic establishment. Both are also explained and advocated for by their go-betweens, the extremely influential Pakistani bureaucrats within the Washington Beltway and their K-Street lobbyists. Musharraf’s departure to a nice retirement/exile in the USA helped by royalties from his book etc as well as his already-exported son, presumably constitutes a well-planned exit strategy for him personally.

The American problem is that Musharraf may be among the last if not the last of such pliable old-style Pakistani generals ~ the officer-exchange programmes came to slow down or end after the USA pulled out following the defeat of the USSR in Afghanistan, and at the same time Zia ul-Haq had initiated an overt Islamisation of younger officers of the Pakistan military. With such a level of uncertainty as to where the post-Musharraf Pakistan military can or would take itself (along with the country and its nuclear weapons), the only strategy has been to buy them out.

In the current Foreign Affairs, Daniel Markey of the US State Department and Council on Foreign Relations says as much (amid the usual little rhetoric about supporting Pakistani democracy): “Washington must win the trust and confidence of Pakistan’s army. This goal can only be achieved through closer working relationships and tangible investments that lock the United States into a long-term commitment to the region” (italics added).

If American policy towards Pakistan has been to pay to pacify Pakistan’s unpredictable nuclear-armed military, the policy towards India has been one of business, business, and more business. The “US-India Business Council” is merely an official Washington lobbyist protecting American business interests in India such as getting the Governments of India and Maharashtra to pay several hundred million dollars over the Dabhol-Enron fiasco. Yet that is where senior Indian politicians, like the Finance and Commerce Ministers, feel the need to routinely visit on pilgrimage if only to be made to feel important while in the USA. Even Dr Manmohan Singh felt the need to send a personal emissary to gift Condoleeza Rice a basket of Indian mangoes not at her office in the US State Department but when she was addressing a closed-door meeting of that business-lobbyist.

Certainly in case of the so-called “nuclear deal”, there is a political motivation on the American side that India must be prevented from conducting future nuclear explosions, although this may be something mostly symbolic as US intelligence agencies had notoriously failed to predict Pokhran I and Pokhran II. And there is doubtless some reliance that the Indian side to the negotiations has not really properly understood the intricacies of the American political and administrative system, e.g. the insignificance of a Presidential “signing statement”. Hence, if the deal goes through as seems likely now, it will certainly indicate the American side is more than comfortable that if a future Indian Government does not do what the US-side has intended in the nuclear deal (whether or not the Indian negotiators have understood that now), a future US Congress and President will be able to reverse the deal without too much difficulty.

What has mainly driven the deal on the American side is the prospect of very large nuclear business ~ specifically, that India will import six to eight American lightwater reactors. As I have said before in these pages, India’s national energy outlook will barely improve through the nuclear deal (given the miniscule size of the nuclear sector compared to coal and hydro), though a few favoured metros, and Delhi for sure, may see improvement after a decade or two when and if these expensive nuclear reactors become operational.

Short-sightedness
The short-sightedness and indeed sheer imbecility of Indian and Pakistani foreign policy is made clear by the fact we are unable to properly communicate with one another about our common interests as neighbouring countries with the same history and geography except through Washington. The elites of both countries have either fled already or would like to flee or at least travel to the USA to visit their exported adult children as often as possible. It is not dissimilar to our imperial relationship with Britain, where Indians had to travel to London to have their Round Table Conference, England being of course a place of national pilgrimage as the USA has now become. The result is not merely that the militaries and polities of Pakistan and India have wasted vast immeasurable resources in struggles against one another and continue to do so, but also and as importantly, have failed to define robust national identities after six decades.

 

India and “Energy Security”

First published in India’s Energy Security edited by Anant Sudarshan and Ligia Noronha, Konrad Adenauer Stiftung, New Delhi 2007

“On the Political Economy of India’s Energy Policy: One Citizen’s Viewpoint”

by

Subroto Roy

For the idea of “energy security” to have meaning, “energy insecurity” must hold meaning as well.  Looking back a generation, the average American, European and  Japanese citizen became anxious and insecure when the cartel power of the oil exporting countries was first exercised, and energy prices quadrupled.   The idea of the US Government accumulating a “strategic reserve” of petroleum originated due to the oil crisis, and amounted to no more than a buffer-stock or commodity price-stabilisation scheme so “cheap gasoline” could be had always, and lifestyles would not be suddenly inconvenienced, and hence presidential popularity ratings would not suddenly drop.

In many ways energy insecurity has been a creation of bad design.  Hawaii is a good example of this.  Hawaii’s renowned climate is cooled by the magnificent trade-winds which blow all year long except in September.   Architecture suitable to those trade-winds would have created homes a few stories high with windows which could be opened.   Instead, Honolulu has become a city of high-rises and skyscrapers in the middle of the Pacific Ocean — many with New York-style permanently closed windows and centralised airconditioning.

Energy Insecurity, and hence Energy Security, may be notions mostly relevant to advanced Western economies.  North American, European and Japanese homes, lifestyles, architectures and urban sprawls are all highly capital-intensive and inelastically dependant on domestic or imported energy.   The reason a vague undefined notion of “Energy Security” tends to make New Delhi anxious is because many inside the Delhi Beltway live in dreamlands or fantasy-worlds where they would like to imitate Western lifestyles in their personal lives.    But New Delhi is not Europe or America and certainly India is not New Delhi.

There are hundreds of millions of Indians in rural India.  What is the appropriate National Energy Policy for them?   It quite simply is for there to be genuine electrification of India’s 600,000 villages (where more than 70% of the rural Indian population still have no electric lighting even according to Government data), as well as better trains, better all-weather feeder-roads to reach bus routes and primary schools, and conditions to arise for technological change and normal prosperity among ordinary people, so those who are today transporting a whole family of four on a bicycle, are able in a few years to do so on a motor-scooter, and some years after that perhaps in a small private car.      Economic theory speaks of preferences, resources and technologies.   Preferences define and give rise to the demand-side; resources and technologies define and give rise to the supply-side.   Relative prices (which include interest-rates, reflecting the force of the present relative to the future) tend to intermediate equilibria between demand and supply conditions.    In policy-making, private preferences for public goods and services must somehow become translated through a tolerable political process into reasonable public preferences.   It must have seemed a good idea privately to someone to create skyscrapers with closed windows in Honolulu forgetting the trade winds and ignoring the energy-dependence of the Hawaiian Islands, yet in retrospect that may seem to have been publicly unwise.   Similarly, India is a coal-abundant coal-exporting and diesel-importing country yet we got rid of all our steam locomotives and replaced these with diesel engines – if there were enough reasons to do so, I at least remain ignorant of what they were.   One problem with our energy policy-making that has emerged in the current nuclear deal-making with American businessmen and politicians, is that it has seemed to lack rational assessments being made of relative costs and benefits in the Indian case of nuclear/fossil fuel/renewable energy, especially hydroelectric energy.  Indeed it reveals the same lack of transparency as other policy-making in this country – like the $12 billion worth of commercial aircraft from Boeing and Airbus bought for our bankrupt nationalized airlines.

Moving from preference-formation to resources and technologies, it will be recalled that no economist of any school of thought anywhere ever backed the Club of Rome/“Limits to Growth” idea a generation ago that mankind was doomed in some sense to run out of resources.   There are always alternatives, each with a relative cost attached to it, and there are always new and unpredictable opportunities and ingenuities arising which dynamically change the set of alternatives on offer at a given time.   Prices and costs tend to adjust when possible to make myriad individual decisions consistent with one another, and in fact, futures, forward and option markets for petroleum products are among the most active and well-traded that there are in the world.  Design improvements in nuclear reactors will also improve productivity; e.g.  “fast breeder” reactors “breed” more fissile material than they use, and may get 100 times as much energy from a kilogram of uranium as existing reactors do.    We in India also have one innovatively designed thorium reactor under construction.

Coming to the nuclear deal, the plausible part of the Government of India’s official line on the Indo-US nuclear deal is that removing these international restrictions will — through importation of new technologies, inputs, fuel etc — improve the functioning of the 14 existing nuclear plants that are going to be designated as “civilian”.   However, those purchasing decisions involved in enhancing India’s efficiency gains must be made by the Government’s nuclear scientists on technical grounds of improving the working of our existing nuclear infrastructure.

It would be a different animal altogether to be purchasing new nuclear reactors on a turnkey basis from American, French or any other foreign businessmen in a purported attempt to improve India’s “energy security”.   The central question over such massive foreign purchases no longer would be the technical one of using the Indo-US deal to improve efficiency or productivity of our existing inefficient and even crippled nuclear infrastructure.   Instead it would become a question of calculating social costs and benefits of our newly investing in nuclear power relative to other sources like hydroelectric power.   The contribution of nuclear power to India’s electricity production has been close to negligible.  Among India’s energy sources, the largest growth-potential has remained hydroelectric.  Even if all other sources of electricity remained constant, and our civilian nuclear capacity alone was made to grow by 100% under the deal that Dr Manmohan Singh and Mr Montek Singh Ahluwalia have been promoting, that would still make up less than 8% of total Indian electricity produced.

In 2004, the International Energy Agency’s estimated that the new energy capacity required by rising economic growth in 2020 will derive 1400 GW from burning coal (half of it in China and India), 470 GW from burning oil, 430 GW from hydro, and 400 GW from renewable sources like solar or wind power.  Because gas prices are expected to remain low worldwide, construction of new nuclear reactors for electricity will mostly remain  unprofitable.   By 2030, new energy expected to be required worldwide is 4700 GW, of which only 150 GW is expected from new nuclear plants which in any case will replacing existing plants due to be retired.   I am afraid the thought cannot be avoided that a proper cost-benefit analysis may reveal that the reason why potential American, French and other sellers of new nuclear reactors to India are becoming so keen on India using civilian nuclear energy is that they are unable to sell these reactors under free market principles elsewhere in the world  economy.    There is enough circumstantial evidence that the current nuclear deal-making has been promoted mostly by big business lobbies and has had little to do with anything else.    The nuclear deal was promoted by the US-India Business Council and the US-India CEO Forum. The Confederation of Indian Industry registered as an official lobbyist in Washington, and went about spending half a million dollars lobbying American politicians for the nuclear deal.  After President Bush’s visit to India, the US Foreign Commercial Service reportedly said American engineering firms, equipment suppliers and contractors faced a $1,000 billion opportunity in India, and the US Chamber of Commerce said the nuclear deal can cause $100 billion worth of new American business in India’s energy-sector alone.

If the Indo-US nuclear deal helps India improve or maintain its existing nuclear infrastructure, well and good.  If in fact the underlying motivation of the local and foreign business lobbies driving the deal has been to sell India nuclear reactors on a turnkey basis at a time when nuclear energy is uneconomical elsewhere in the world because of low gas prices, then India’s ordinary citizens may demand to know from the Government whether the deal is principally aimed at allowing such importation of new nuclear reactors, and if so, why such an expensive alternative is being considered.  Thus must include a realisation that while the transactions, organisation and political costs of getting new hydroelectric power investments off the ground are high, it is hydroelectric and not nuclear power where India’s real future potential exists.   As a general rule, I put it to you that we need to be less worried about “Energy Security” anywhere and more worried about thoughtless irresponsible corrupt governments everywhere.     There is no shortage of energy or resources as such anywhere in the world; what should be making us feel insecure is the shortage of  wisdom in political decision-making.  That there is everywhere.

Maharashtra’s Money

Maharashtra Govt Finance 2004 Table

 

Maharashtra’s Money: Those Who Are Part Of The Problem Are Unlikely To Be A Part Of Its Solution

first published in The Statesman April 24 2007, Editorial Page

by Subroto Roy

Mr Percy Mistry, according to the World Bank’s official chronology, worked there with Moeen Qureshi, and S Javed Burki. Mr Qureshi was doyen of Pakistani bureaucrats in Washington and something of a king-maker back home, briefly becoming Pakistan’s PM himself; Mr Burki briefly became Pakistan’s Finance Minister and is an author in the book Foundations of Pakistan’s Political Economy created by WE James and myself in the 1980s in the USA. Although Mr Mistry claims no special expertise about India’s monetary economy or public finances, he was appointed by Finance Minister P. Chidambaram to head an official committee that has given an opinion on a crucial monetary issue facing the country today, namely, the rupee’s convertibility. Mr Mistry apparently authored the report but resigned before its release, making it unclear who is responsible for its contents.

 

Mr Mistry has glossed over India’s present fiscal circumstances, said nothing of the limitless waste, fraud and abuse of the public purse the Sonia-Manmohan Government have been indulging in (like their Vajpayee-Advani predecessor) yet declared the rupee should be freed in 2008 ~ telling Business Standard a convertible rupee will allow people like “Ratan” and “Kumar” to raise capital in India for their foreign purchases, and not have to go to London as they must do now, poor things. All this in a report purporting to be a plan to make Mumbai an “international financial centre”, which is a different subject altogether.

Mr Mistry thus becomes a certifiable member of the “Dream Team” of Dr Singh, Mr Chidambaram, Mr Montek Ahluwalia, Mr Deepak Parekh and their big business/big labour/big media friends across political parties. Dreaming involves constructs in which normal logic and facts have no place. In the waking world, India is a labour-rich, capital-scarce country where wages are lower and interest-rates are higher respectively than in labour-scarce, capital-rich Western countries; hence India will be importing not exporting capital. In the real world too, Mumbai is not an off-shore island-resort outside India (like the so-called SEZs are going to be from a legal standpoint) but happens to be located in Maharashtra, whose public finances urgently require hard investigation and sober thought.

 

Now there used to be a “Bombay State” coinciding with the old Bombay Presidency plus “princely states” plus Marathi-majority districts of MP and Hyderabad and excluding Kannada-majority districts to Mysore. On May 1 1960, after much agitation, this became the new States of Gujarat and Maharashtra. There was talk of making Bombay city a Union Territory but the Marathis would have none of it. In fact, within a few weeks, Maharashtra reverted to calling itself “Bombay State” and it was not until the end of the year the Government of India officially declared it must be called Maharashtra.

 

The same quest for, or confusion about, cultural and political identity continues in recent times and may be at the root of the Shiv Sena’s erratic political behaviour which rocks Maharashtra politics so frequently. “Bombay” may be “Mumba Bai” or “Mumba Devi” but it had not been a Marathi town any more than Calcutta had been a Bengali town. Bombay’s traders and businessmen descended there while it developed after the decline of Surat, where the British initially came to trade in the 17th Century. Modern Bombay retains some of its “all-India” character and even today you cannot make money in its markets unless you speak Gujarati. Marathi-speakers have tended to wish Maharashtra was “Maratha-rashtra” reminiscent of the great Shivaji Bhonsla (1627-1680) but others have read the name only as “Great State”.

 

This continuing identity crisis had its most devastating costly impact through the Dabhol-Enron fiasco. As recently as March 4 2007, Chief Minister Vilasrao Deshmukh said frankly “We could not generate a single megawatt of electricity in the last 10 years due to the Enron issue”, adding demand for electric power had been growing in the State at 10% per annum.

 

Indeed, before the 2005-2006 nuclear or any other deal could be contemplated with the Americans, the US-India Business Council, the American business lobbyist (and recent guest and soon-to-be host of the CPI-M’s Buddhadeb Bhattacharya), insisted India pay up fully for the Dabhol-Enron fiasco. Maharashtra and its sovereign guarantor the Government of India, duly paid out at least $140-$160 million ($14-$16 crore) to each General Electric and Bechtel Corporation in “an amicable settlement”. It was only then that Dr Manmohan Singh could be hosted in the White House and in turn play host to President George W. Bush.

 

Without entering the intricacies of the fiasco, it may be still asked who was responsible. And in retrospect the finger must point both at the Mahajan-Munde BJP/ Thakeray-Joshi Shiv Sena, and at the Sharad Pawar Government and Manmohan-Montek Union Finance Ministry at the time. The BJP-Shiv Sena declared an intent to “throw Enron into the Arabian Sea” and thus vitiated the atmosphere with the Americans. Americans are shrewd and practical people in commercial matters and accounted for such contingencies in their deal-making, tidily earning their money anyway, winning the arbitration awards in due course. Maharashtra’s identity confusion was exemplified by Rebecca Mark having to visit Bal Thakeray before a policy flip-flop could be permitted.

 

If the basic technical cause Enron’s electricity became too expensive was that it was denominated in dollar prices and the rupee depreciated rapidly during and after the deal-making, then the financial responsibility for the fiasco must be ultimately traced to India’s Finance Minister in the early 1990s, namely Dr Singh, and his chief acolyte and Finance Secretary Mr Ahluwalia. Maharasthtra is not a sovereign country, and it was the Union Finance Ministry’s responsibility to oversee the necessary cost-benefit and project appraisal analyses, and these if properly done would have accounted for exchange-rate depreciation scenarios. It is no wonder the World Bank later refused to finance the project because they had done their studies better. The same kind of cavalier unprofessional attitude in spending scarce foreign moneys earned by India’s public has been displayed now more than a decade later by the Manmohan-Montek duo, though on a vastly larger scale, in regard to the planned purchase of nuclear reactors from Russia, the USA etc on a turnkey basis.

 

Maharashtra may be a Great State but its public finances are in as great a shambles as any other. The table for 2003-2004 (before the Enron payments were made) reveals the very high continuing public indebtedness, and the same pattern as the budgets of West Bengal and Uttar Pradesh described in these columns earlier. A closer look would reveal, e.g., that Rs 814.36 crore (Rs. 8.14 billion) were spent in collecting Rs1,205.97 crore. (Rs. 12.05 billion) of “Vehicle Tax”! There is much that Mumbai’s and Maharashtra’s and India’s citizens have to ponder over and act upon before serious thought can be put to restoring the integrity of India’s money. In that process, those who have been part of the problem are unlikely to be part of its solution.

 

Govt. of Maharashtra Finances 2003-04
EXPENDITURE ACTIVITIES: RsBn (Hundred Crore)
governance & local governance 18.19 2.58%
judiciary 2.96 0.42%
police (including vigilance etc) 19.81 2.81%
prisons 0.86 0.12%
bureaucracy 27.97 3.97%
collecting land revenue & taxes 42.25 6.00%
government employee pensions 26.36 3.74%
schools, colleges, universities, institutes 93.74 13.31%
health, nutrition & family welfare 23.42 3.33%
water supply & sanitation 10.22 1.45%
roads, bridges, transport etc. 12.96 1.84%
electricity 16.96 2.41%
irrigation, flood control, environ, ecology 70.79 10.05%
agricultural subsidies, rural development 41.30 5.86%
industrial subsidies 2.60 0.37%
capital city development 6.25 0.89%
social security, SC, ST, OBC, lab.welfare 25.40 3.61%
tourism 0.89 0.13%
arts, archaeology, libraries, museums 0.75 0.11%
miscellaneous -0.47 -0.07%
debt amortization & debt servicing 261.03 37.07%
total expenditure 704.22

INCOME SOURCES:
tax revenue 285.52
operational income 35.49
grants from Union 22.70
loans recovered 4.82
total income 348.53

GOVT. BORROWING REQUIREMENT (total expenditure minus total income) 355.70

financed by:
new public debt issued 317.02
use of Trust Funds etc 38.68
355.70
from author’s research and using C&AG data

India’s Energy Interests

OUR ENERGY INTERESTS
Subroto Roy

First published in The Sunday Statesman, August 27 2006, The Statesman August 28 2006, Editorial Page Special Article, www.thestatesman.net

Americans are shrewd and practical people in commercial matters, and expect the same of people they do business with. Caveat emptor, “let the buyer beware”, is the motto they expect those on the other side of the table to be using. Let us not think they are doing us favours in the nuclear deal ~ they are grown-ups looking after their interests and naturally expect we shall look after our own and not expect charity while doing business. Equally, let us not blame the Americans if we find in later years (long after Manmohan Singh and Montek Ahluwalia have exited from India’s stage) that the deal has been implemented in a bad way for our masses of ordinary people.

That said, there is a remarkable disjoint between India’s national energy interests (nuclear interests in particular), and the manner in which the nuclear deal is being perceived and taken to implementation by the two sides. There may be a fundamental gap between the genuine positive benefits the Government of India says the deal contains, and the motivations American businessmen and through them Indian businessmen have had for lobbying American and Indian politicians to support it. An atmosphere of being at cross-purposes has been created, where for example Manmohan Singh is giving answers to questions different from the questions we may want to be asking Montek Ahluwalia. The fundamental gap between what is being said by our Government and what may be intended by the businessmen is something anyone can grasp, though first we shall need some elementary facts.

In 2004, the International Energy Agency estimated the new energy capacity required by rising economic growth in 2020 will derive 1400 GW from burning coal (half of it in China and India), 470 GW from burning oil, 430GW from hydro, and 400 GW from renewable sources like solar or wind power. Because gas prices are expected to remain low worldwide, construction of new nuclear reactors for electricity will be unprofitable. By 2030, new energy expected to be required worldwide is 4700GW, of which only 150GW is expected from new nuclear plants, which will be in any case replacing existing plants due to be retired. Rational choice between different energy sources depends on costs determined by history and geography. Out of some 441 civilian reactors worldwide, France has 59 and these generate 78 per cent of its electricity, the rest coming from hydro. Japan has 54 reactors, generating 34% of its electricity from them. The USA has 104 reactors but generates only 20 per cent of its electricity from them, given its vast alternative sources of power like hydro. In India as of 2003, installed power generating capacity was 107,533.3MW, of which 71 per cent came from burning fuels. Among India’s energy sources, the largest growth-potential is hydroelectric, which does not involve burning fuels ~ gravity moves water from the mountains to the oceans, and this force is harnessed for generation. Our hydro potential, mostly in the North and North-East, is some 150,000MW but our total installed hydro capacity with utilities was only 26,910MW (about 18 per cent of potential). Our 14 civilian nuclear reactors produced merely 4 per cent or less of the electricity being consumed in the country. Those 14 plants will come under “international safeguards” by 2014 under the nuclear deal.

It is extremely likely the international restrictions our existing nuclear plants have been under since the 1970s have hindered if not crippled their functioning and efficiency. At the same time, the restrictions may have caused us to be innovative too. Nuclear power arises from fission of radioactive uranium, plutonium or thorium. India has some 8 million tonnes of monazite deposits along the seacoast of which half may be mined, to yield 225,000 tonnes of thorium metal; we have one innovatively designed thorium reactor under construction. Almost all nuclear energy worldwide today arises from uranium of which there are practically unlimited reserves. Fission of a uranium atom produces 10 million times the energy produced by combustion of an atom of carbon from coal. Gas and fossil fuels may be cheap and in plentiful supply worldwide for generations to come but potential for cheap nuclear energy seems practically infinite. The uranium in seawater can satisfy mankind’s total electricity needs for 7 million years. There is more energy in the uranium impurity present in coal than can arise from actually burning the coal. There is plenty of uranium in granite. None of these become profitable for centuries because there is so much cheap uranium extractable from conventional ores. Design improvements in reactors will also improve productivity; e.g. “fast breeder” reactors “breed” more fissile material than they use, and may get 100 times as much energy from a kilogram of uranium as existing reactors do. India has about 95,000 tonnes of uranium metal that may be mined to yield about 61,000 tonnes net for power generation. Natural uranium is 99.3 per cent of the U-238 isotope and 0.7 per cent of the radioactive U-235 isotope. Nuclear power generation requires “enriched uranium” or “yellow cake” to be created in which U-235 has been increased from 0.7 per cent to 4 to 5 percent. (Nuclear bombs require highly enriched uranium with more than 90 per cent of U-235.) Yellow cake is broken into small pieces, put in metal rods placed in bundles, which are then bombarded by neutrons causing fission. In a reactor, the energy released turns water into steam, which moves turbines generating electricity. While there is no carbon dioxide “waste” as in burning fossil fuels, the “spent” rods of nuclear fuel and other products constitute grave radioactive waste, almost impossible to dispose of.

The plausible part of the Government of India’s official line on the Indo-US nuclear deal is that removing the international restrictions will ~ through importation of new technologies, inputs, fuel etc ~ improve functioning of our 14 existing civilian plants. That is a good thing. Essentially, the price being paid for that improvement is our willingness to commit that those 14 plants will not be used for military purposes. Fair enough: even if we might become less innovative as a result, the overall efficiency gains as a result of the deal will add something to India’s productivity. However, those purchasing decisions involved in enhancing India’s efficiency gains must be made by the Government’s nuclear scientists on technical grounds of improving the working of our existing nuclear infrastructure.

It is a different animal altogether to be purchasing new nuclear reactors on a turn-key basis from American or any other foreign businessmen in a purported attempt to improve India’s “energy security”. (Lalu Yadav has requested a new reactor for Bihar, plus of course Delhi will want one, etc.) The central question over such massive foreign purchases would no longer be the technical one of using the Indo-US deal to improve efficiency or productivity of our existing nuclear infrastructure. Instead it would become a question of calculating social costs and benefits of our investing in nuclear power relative to other sources like hydroelectric power. Even if all other sources of electricity remained constant, and our civilian nuclear capacity alone was made to grow by 100 per cent under the Manmohan-Montek deal-making, that would mean less than 8% of total Indian electricity produced.

This is where the oddities arise and a disjoint becomes apparent between what the Government of India is saying and what American and Indian businessmen have been doing. A “US-India Business Council” has existed for thirty years in Washington as “the premier business advocacy organization promoting US commercial interests in India.… the voice of the American private sector investing in India”. Before the nuclear or any other deals could be contemplated with American business, the USIBC insisted we pay up for Dabhol contracted by a previous Congress Government. The Maharashtra State Electricity Board ~ or rather, its sovereign guarantor the Government of India ~ duly paid out at least $140-$160 million each to General Electric and Bechtel Corporations in “an amicable settlement” of the Dabhol affair. Afterwards, General Electric’s CEO for India was kind enough to say “India is an important country to GE’s global growth. We look forward to working with our partners, customers, and State and Central Governments in helping India continue to develop into a leading world economy”.

Also, a new “US-India CEO Forum” then came about. For two Governments to sponsor private business via such a Forum was “unprecedented”, as noted by Washington’s press during Manmohan Singh’s visit in July 2005. America’s foreign ministry announced it saying: “Both our governments have agreed that we should create a high-level private sector forum to exchange business community views on key economic priorities…” The American side includes heads of AES Corporation, Cargill Inc., Citigroup, JP Morgan Chase, Honeywell, McGraw-Hill, Parsons Brinckerhoff Ltd, PepsiCo, Visa International and Xerox Corporation. The Indian side includes heads of Tata Group, Apollo Hospitals Group, Bharat Forge Ltd, Biocon India Group, HDFC, ICICI One Source, Infosys, ITC Ltd, Max India Group and Reliance Industries. Presiding over the Indian side has been Montek Ahluwalia, Manmohan’s trusted aide ~ and let it be remembered too that the Ahluwalias were Manmohan’s strongest backers in his failed South Delhi Lok Sabha bid. (Indeed it is not clear if the Ahluwalias have been US or Indian residents in recent years, and if it is the former, the onus is on them to clear any perception of conflict of interest arising in regard to roles regarding the nuclear deal or any other official Indo-US business.)

Also, before the Manmohan visit, the Confederation of Indian Industry registered as an official lobbyist in Washington, and went about spending half a million dollars lobbying American politicians for the nuclear deal. After the Manmohan visit, the US Foreign Commercial Service reportedly said American engineering firms, equipment suppliers and contractors faced a $1,000 billion (1 bn =100 crore) opportunity in India. Before President Bush’s visit to India in March 2006, Manmohan Singh signed vast purchases of commercial aircraft from Boeing and Airbus, as well as large weapons’ deals with France and Russia. After the Bush visit, the US Chamber of Commerce said the nuclear deal can cause $100 billion worth of new American business in India’s energy-sector alone. What is going on?

Finally, the main aspect of Manmohan Singh’s address to America’s legislature had to do with agreeing with President Bush “to enhance Indo-US cooperation in the field of civilian nuclear technology”. What precisely does this mean? If it means the Indo-US nuclear deal will help India improve or maintain its existing nuclear infrastructure, well and good. There may be legitimate business for American and other foreign companies in that cause, which also helps India make the efficiency and productivity gains mentioned. Or has the real motivation for the American businessmen driving the deal (with the help of the “CEO Forum” etc) been to sell India nuclear reactors on a turn-key basis (in collaboration with private Indian businessmen) at a time when building new nuclear reactors is unprofitable elsewhere in the world because of low gas prices? India’s citizens may demand to know from the Government whether the Manmohan-Montek deal-making is going to cause importation of new nuclear reactors, and if so, why such an expensive alternative is being considered (relative to e.g. India’s abundant hydroelectric potential) when it will have scant effect in satisfying the country’s energy needs and lead merely to a worsening of our macroeconomic problems. Both Manmohan Singh and Montek Ahluwalia have been already among those to preside over the growth of India’s macroeconomic problems through the 1980s and 1990s.

Lastly, an irrelevant distraction should be gotten out of the way. Are we a “nuclear weapons” state? Of course we are, but does it matter to anything but our vanity? Ronald Reagan and Mikhail Sergeyevich Gorbachev had control over vastly more nuclear weapons and they declared together twenty years ago: “A nuclear war cannot be won and must not be fought”, which is how the Cold War started to come to an end. We need to remind ourselves that India and Pakistan are large, populous countries with hundreds of millions of materially poor, ill-informed citizens, weak tax-bases, humongous internal and external public debts (i.e. debt owed by the Government to domestic and foreign creditors), non-investment grade credit- ratings in world financial markets, massive annual fiscal deficits, inconvertible currencies, nationalized banks, and runaway printing of paper-money. Discussing nuclear or other weapon-systems to attack one other with is mostly a pastime of our cowardly, irresponsible and yes, corrupt, elites.

Iran’s Nationalism

IRAN’S NATIONALISM

Is America close to breaking its pledged word?

First published in The Statesman Editorial Page, 6 April 2006

by

Subroto Roy

Ayatollah Khomeini was the Ho Chi Minh of Iran. Ho was both a communist and a Vietnamese nationalist, but America’s Presidents from Eisenhower to Nixon failed to see the latter. Khomeini was both a devout Shia Muslim and an Iranian nationalist yet America’s Presidents from Carter to W. Bush refused to see his Revolution being as much about Iranian nationalism as about creating an Islamic Republic. As a general rule, Western countries allow for nationalism among other Western countries but not among non-Western countries. Immanuel Kant’s dictum of treating everyone as an end in himself/herself and not as a means towards one’s own ends, is applied in intra-Western international relations but often not when the West deals with others. But Indians did not have to be communists to sympathise with Vietnam’s struggle against first France and then America, and Indians do not have to be Shia Muslims to sympathise with Iran’s struggle against an impending Anglo-American aggression. The opaque Manmohan- Montek deal-making with America on behalf of India’s people may need to be set aside in such a context — while it might benefit several dozen businesses on both sides and several hundred bureaucrats may become even fatter with bribes, it may have next to nothing to do with any dimension of India’s national interests.

US pledge 1981, policy 2006

On January 19 1981, the Government of the United States signed what came to be called the Algiers Accord, the first point of which stated: “Non-Intervention in Iranian Affairs: The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs.” This was part of a comprehensive truce between Khomeini’s Iran and the USA in regard to the war-like conditions then prevailing between them. That pledge now seems about to be broken. British newspapers reported on April 2 2006 that the Blair Government is holding “secret talks” with its own Chief of Defence Staff, Chief of Defence Intelligence and others to discuss “an American-led attack, designed to destroy Iran’s ability to develop a nuclear bomb… if Tehran’s leaders fail to comply with United Nations demands to freeze their uranium enrichment programme.” This is despite the British foreign minister saying last month “that a military attack against Iran was ‘inconceivable’”. America’s “National Security Strategy” dated March 16 2006 states the policy clearly: “We may face no greater challenge from a single country than from Iran. For almost 20 years, the Iranian regime hid many of its key nuclear efforts from the international community. Yet the regime continues to claim that it does not seek to develop nuclear weapons. The Iranian regime’s true intentions are clearly revealed by the regime’s refusal to negotiate in good faith; its refusal to come into compliance with its international obligations by providing the IAEA access to nuclear sites and resolving troubling questions; and the aggressive statements of its President calling for Israel to ‘be wiped off the face of the earth’. The United States has joined with our EU partners and Russia to pressure Iran to meet its international obligations and provide objective guarantees that its nuclear program is only for peaceful purposes. This diplomatic effort must succeed if confrontation is to be avoided. As important as are these nuclear issues, the United States has broader concerns regarding Iran. The Iranian regime sponsors terrorism; threatens Israel; seeks to thwart Middle East peace; disrupts democracy in Iraq; and denies the aspirations of its people for freedom. The nuclear issue and our other concerns can ultimately be resolved only if the Iranian regime makes the strategic decision to change these policies, open up its political system, and afford freedom to its people. This is the ultimate goal of U.S. policy. In the interim, we will continue to take all necessary measures to protect our national and economic security against the adverse effects of their bad conduct. The problems lie with the illicit behavior and dangerous ambition of the Iranian regime, not the legitimate aspirations and interests of the Iranian people. Our strategy is to block the threats posed by the regime while expanding our engagement and outreach to the people the regime is oppressing.“

Attack scenario

In one scenario, America will make a surprise cruise-missile attack on Iranian buildings “suspected” of producing biological weapons. If the Iranians respond in any way other than total submission, it will be sufficient to launch a major bombing of Iran’s military facilities using B-2 bombers based in Diego Garcia, England and other American bases, possibly using nuclear “earth penetrating” weapons to attack underground facilities. Of course it is not impossible the British and Americans are merely setting up a bluff to scare the Iranians into complying without a fight, but the existence of aggressive war plans and preparations cannot be doubted.

Now it is possible the Americans will say they are not bound by the pledge made in the Algiers Accord in January 1981 to not intervene in Iran’s affairs. In breach of all diplomatic law, 66 Americans had been taken captive by Iranians seizing the American Embassy on November 4 1979. Six others escaped with the help of the Canadian and Swedish embassies. Of the 66, 13 women and black Americans were released two weeks later; one man was released due to ill-health in July 1980. The remaining 52 including two women and one black American were released on January 20 1981 by the terms of the Algiers Accord just before Ronald Reagan took over as President of the United States. Eight American military personnel were killed on April 25 1980 in a failed attempt to rescue them. The official designations of the 52 (who had been held captive for 444 days) included 10 military attachés; 6 “communications and electronics specialists”; 8 political and administrative officers, and 12 diplomatic/consular staff. In addition there were 12 guards and 4 others. Even if the US Embassy in Tehran was a den of spies as the Iranians claimed, the Revolutionary Government could have ordered them all to leave and to have ended diplomatic relations in accordance with international law. What explained Iranians’ anger for them to have violated international law so brazenly? That was the age before terrorism, and nor was Iran a player in the conflict between Israel and the Arabs.

Iran’s anger stemmed from having felt being used by Britain, America and Soviet Russia for half a century before the 1979 Khomeini Revolution – from having been merely means towards their ends in violation of the Kantian dictum. It was almost as if Britain and America had said to Iran and the entire Middle East, “We invented the internal combustion engine and the automobile which uses it, and we also discovered the petroleum that runs it; the mere fact you happen to sit on this petroleum does not make you own it; we own it too and we will take it by force whenever necessary.” During the Cold War, the USSR followed suit, and now after the Cold War has ended, the new Russia is a Western ally in the same kind of attempted domination over non-Western countries like Iran (or Pakistan and India, who get sold a lot of useless weapons to fight each other with).

Mossadeq the democrat

Specifically, if the January 1981 Algiers Accord was signed by the USA under duress, the Iranians could say that Iran had been cheated into signing the 25 year agreement of September 1954 with an international oil consortium led by the Anglo-Iranian Oil Company. Iran would receive 50% profit on all Iranian oil exported, after paying the AIOC ₤25 million in compensation for having nationalised it in 1951 under the democratic government of Mohammad Mossadeq which had broken off diplomatic relations with Britain. Mossadeq was overthrown by an Anglo-American coup détat in August 1953, and replaced by the compliant General Fazlollah Zahedi and Shah Mohammad Reza Pahlavi. Arthur Millspaugh, an American invited by the Iranians to help their public finances, once wrote: “Persia cannot be left to herself, even if the Russians were to keep their hands off politically. …Persia has never yet proved its capacity for independent self-government.” Millspaugh’s 1925 book titled America’s Task in Persia seems to have remained the handbook of Western policy towards Iran. Khomeini’s Revolution was its antithesis.

Towards an Energy Policy

Note:  This article  may have initiated the public debate on the economics of the Indo-US nuclear deal.  It was published as a Special Article on the Editorial Page of The Sunday Statesman of April 2 2006 but it failed to be uploaded at the website http://www.thestatesman.net because there had been a fire on March 31 2006.  The politicians who led the  parliamentary debate  in 2006 subsequently made reference to it.

 

 

See also  republished elsewhere here e.g. “India’s Energy Interests”, “India and Energy Security”, “Need for Clarity”/”From Confusion to Clarity”, “Against Quackery”, “Jimmy Carter and the Indo-US Nuclear Deal””, NuksaanFaida Analysis”.

 

 

“Towards an Energy Policy”

 

by Subroto Roy

 

First published in

The Sunday Statesman, Editorial Page Special Article 2 April 2006

 

When was the last time we heard a thorough, well informed debate in Parliament about India’s long-term energy needs and policy-alternatives? The answer is never. Just as Pakistan tends to be run by Islamabad’s generals, we tend to be run by New Delhi’s bureaucrats; both are a legacy of the Raj which was run by small numbers of pompous civil servants and soldiers. Bureaucrats keep as much decision-making information as they can to themselves, give it to Parliament only under duress and then too in garbled opaque form, and share it voluntarily with the public never at all. A bureaucrat of conscience who shares vital information transparently becomes a “whistleblower”, and may risk his/her life and career because assorted mafias invariably surround all government contracting, and, like vampire bats, cannot stand the light of day shed upon them.

 

The problem with the Manmohan/Montek deal-making with the USA on behalf of India’s people has less to do with rational assessments not having been made of the relative costs and benefits of e.g. nuclear/fossil fuel/renewable energy, as it has to do with the fact it reflects the same lack of transparency (and is accompanied by the same politically correct propaganda) as has existed in other policy-making – like the $12 billion worth of commercial aircraft from Boeing and Airbus bought for our bankrupt nationalized airlines, or spending untold billions of borrowed dollars on new weapons from France, Russia, Britain or whomever to fight unknown enemies in unimagined wars, or throwing newly printed paper-money at every government project that any fool or knave cares to mention.

 

To be fair, the UPA/Communist dispensation of the public’s largesse is no worse than that of the NDA/RSS. Both are part of New Delhi’s own “Inside-the-Beltway” syndrome, and turn up at the same celebrity wedding-receptions and iftehar parties. Neither minds too much when the other is in power so long as they can keep their government accommodation. Our fundamental political problem may be the absence of any serious party of Left or of Right which is secular, scientific, liberal, nationalist, clean, law-abiding, and fiscally prudent.

 

Since no national debate on energy-policy has been offered by New Delhi, ordinary citizens will have to create such a debate for themselves. What follows constitutes a few of the barest facts needed to start such an analysis of India’s alternative energy scenarios and their respective costs.

 

Hydroelectric power does not involve burning any fuels. Instead, the gravitational force of the movement of water from the mountains to the oceans is harnessed to generate electricity. But hydroelectric projects (like the Narmada Dam) can displace people, who must be then compensated and resettled. Burning of organic “fossil fuels” like coal, gas and oil, causes atmospheric oxygen to turn into carbon dioxide, which may affect climate in unknown ways. In 2004, the International Energy Agency’s estimated the new energy capacity worldwide required by rising economic growth in the year 2020 will derive 1400 GW from burning coal (half of it in China and India), 470 GW from burning oil, 430GW from hydro, and 400 GW from renewable sources (like solar or wind power). On the Agency’s assumptions, gas prices will remain low, making construction of new nuclear plants for electricity uneconomical. By 2030, new energy expected to be required worldwide is 4700GW, of which only 150GW is expected from new nuclear plants — which will be replacing existing nuclear plants due to be retired. (Such is the scenario before any new nuclear plants were going to be exported by e.g. USA to India).

 

Now the fission of an atom of uranium produces perhaps 10 million times the energy produced by combustion of an atom of carbon from coal. Gas and fossil fuels may be cheap and in plentiful supply worldwide for generations to come but the potential for cheap energy from nuclear sources seems practically infinite. Nuclear power can arise from fission of radioactive uranium, plutonium or thorium. India has perhaps 8 million tonnes of monazite deposits along the seacoast of which half may be mined, to yield 225,000 tonnes of thorium metal; we have one innovatively designed thorium reactor under construction. But almost all nuclear energy worldwide today arises from uranium, and there are practically unlimited reserves of that. There is so much uranium in sea water that mankind’s total electricity needs can be satisfied for 7 million years. There is more energy in the uranium impurity present in coal than can arise from actually burning the coal. There is plenty of uranium in granite. None of these sources will become profitable for centuries because there is so much cheap uranium possible to be extracted from conventional ores. In 2001, uranium cost about US$20 per kg or so, translating to US$0.0004 per kwh of electricity. The known reserves of uranium that can be profitably sold at $120 per kg are enough for at least a hundred years. Design improvements in reactors will also improve productivity; e.g. “fast breeder” reactors “breed” more fissile material than they use, and may get 100 times as much energy from a kilogram of uranium as existing reactors do. India has about 95,000 tonnes of uranium metal which may be mined to yield about 61,000 tonnes net for power generation.

Natural uranium is 99.3 percent of the U-238 isotope and 0.7 percent of the radioactive U-235 isotope. Nuclear power requires “enriched uranium” or “yellow cake” in which U-235 has been increased from 0.7 percent to 4 to 5 percent, and that “separation” process is expensive. (Nuclear bombs require highly enriched uranium with more than 90% of U-235). Yellow cake is broken into small pieces, put in metal rods placed in bundles, which are then bombarded by neutrons causing fission. In nuclear bombs, the fission occurs in a small space, and the blast that results kills all life for miles around it by sucking up all the atmospheric oxygen, besides causing firestorms, shock waves and radioactivity. In a civilian reactor, the energy released turns water into steam, which moves turbines powering the generation of electricity. However, while there is no carbon dioxide “waste” as in burning fossil fuels, the “spent” rods of nuclear fuel and other products constitute grave radioactive waste, which is hard if not impossible to dispose of. Many countries like the USA just bury their nuclear waste in remote thinly populated desert areas.

Rational choice between energy sources depends on costs determined by history and geography. France has 59 of the 441 or so civilian nuclear reactors in the world, and generates 78% of its electricity from them, 22% from hydroelectricity. Japan has 54 reactors and generates 34% of its electricity from them. The USA has 104 reactors but generates only 20% of its electricity from them, principally because it has vast alternative sources of energy. In India, installed power generating capacity as of 2003 was 107,533.3MW, of which 71% was from burning fossil fuels. Hydroelectric potential is 150,000MWe. In 2003, total installed hydro capacity with utilities was 26,910MWe (about 18% of the potential). More than 70% of India’s hydroelectric potential is in the North and NorthEast regions put together.


India’s 14 nuclear reactors produce less than 4% of the total electricity being consumed in the country. Even if all other sources of electricity remained constant, and our civilian nuclear capacity alone was made to grow by 100% under the Manmohan-Montek deal with the USA, that would mean less than 8% of total Indian electricity produced. So the first question India’s citizens must ask is why such a fuss has been created about the Manmohan-Montek deal with America. Clearly, the Government of India must come wholly clean with all the facts and analysis it has available on the whole problem of India’s energy future in all its complexity and detail. If and when it does so, we may simply find that the fault lies not in the stars but in ourselves. Whether the US-India nuclear deal stands or falls, it will have scant effect in satisfying the country’s energy needs.

Imperialism redux

IMPERIALISM REDUX

Business, Energy, Weapons And Foreign Policy

First published in The Statesman March 14 2006 Editorial Page Special Article

By Subroto Roy

If souls can transmigrate, so may souls of companies, and future historians might well look back and say that the new US-India “CEO Forum” heralded the modern rebirth of the East India Company. Like the old Company, the new Forum has many ambitious, competent people. The American side includes heads of AES Corporation, Cargill Inc., Citigroup, JP Morgan Chase, Honeywell, McGraw-Hill, Parsons Brinckerhoff Ltd, PepsiCo, Visa International and Xerox Corporation. The Indian side includes heads of Tata Group, Apollo Hospitals Group, Bharat Forge Ltd, Biocon India Group, HDFC, ICICI One Source, Infosys, ITC Ltd, Max India Group and Reliance Industries — all stalwarts of what Mr Kanu Sanyal’s Naxals would have termed India’s “comprador bourgeoisie”.

Business advocacy
Presiding over the Indian side has been Prime Minister Manmohan Singh’s trusted confidante, Montek Singh Ahluwalia (whose family moved to the USA after 20 years in India). Indeed it may have been his idea to have a government-sponsored business initiative. A “US-India Business Council” has existed for thirty years in Washington as “the premier business advocacy organization promoting US commercial interests in India.… the voice of the American private sector investing in India”. But for both Governments to sponsor private business via the Forum was “unprecedented” as noted by Washington’s press during Dr Singh’s visit in July 2005. The State Department (America’s foreign ministry) announced it saying: “Both our governments have agreed that we should create a high-level private sector forum to exchange business community views on key economic priorities…”

The Forum seems to have gone well beyond exchanging business community views, and has had a clear impact in the sudden redefinition of the direction of India’s foreign, military and energy policy. When Dr Singh addressed America’s legislature, the main aspect of the speech he read there had to do with agreeing with the American President “to enhance Indo-US cooperation in the field of civilian nuclear technology”. And nuclear energy has suddenly begun to dominate India’s news and national political agenda — even though the 2503MW of nuclear power produced in the country accounts for merely 4% of our civilian energy needs, barely significant. But before nuclear or any other deals could be contemplated with American business, the Dabhol payouts were required to be made. The Maharashtra State Electricity Board — or rather, its sovereign guarantor the Government of India — paid out at least $140-$160 million each to General Electric and Bechtel Corporations in “an amicable settlement” of the Dabhol affair. (When is the last word going to be said on that?) Afterwards, General Electric’s CEO for India was kind enough to say “India is an important country to GE’s global growth. We look forward to working with our partners, customers, and State and Central Governments in helping India continue to develop into a leading world economy”.

A weak and corrupt Delhi
Such nice rhetoric was on close display during the deal-making leading up to and beyond President George W. Bush’s recent India visit. America’s Ambassadors are mostly political appointees and special friends of the President of the day; the present Ambassador to India is a prominent Texas businessman, and business has been driving American thinking with India all the way. After Dr Singh’s visit, the US Foreign Commercial Service reportedly said American engineering firms, equipment suppliers and contractors faced a $1000 bn (1 bn = 100 crore) opportunity in India. Before the Bush visit, Dr Singh signed vast purchases of commercial aircraft from Boeing and Airbus, as well as large weapons’ deals with France and Russia. After the Bush visit, the US Chamber of Commerce has said the nuclear deal can cause $100 bn worth of new American business in India’s energy-sector alone. Getting American legislators to agree will require “massive grassroots efforts” at lobbying politicians, saying that “energy-starved” India will now become open “to US investment in key areas from IT and telecom to pharmaceuticals and insurance”. Mr Bush’s foreign minister Condoleezza Rice (who has authored the political aspects of the new India-orientation) and her pointman Nicholas Burns have said, “we are suggesting India-specific amendments to the Atomic Energy Act of 1954… It’s a waiver authority … We are not seeking relief from US law for any country in the world except India and we don’t anticipate putting any country forward. So it is India specific.” India will separate by 2014 closely entwined civilian and military nuclear facilities and put 14 of 22 civilian nuclear reactors under international inspection.

Now the East India Company had not intended to rule India but ended up dictating to a weak and corrupt Delhi, waging wars across Bengal, the Deccan and North India, and inducing “regime change” all over the place among local satraps. In the modern context, the American Government and its businessman Ambassador to the Delhi Court have made it crystal-clear India’s support has been expected in the matter of American policy towards Iran. Dr Singh has been his own Foreign Minister, crafting his America policy aided by Mr Ahluwalia on one hand and Mr M. K. Narayanan on the other. None of the three has diplomatic, historical or foreign policy-making experience. Mr Narayanan is a retired officer of domestic counter-intelligence (which is traditionally Pakistan-specific). Dr Singh and Mr Ahluwalia are retired economic officials. None has ever outlined for public scrutiny any views on India’s history, politics or foreign policy in any book or essay. India’s historians and career diplomats (and not just the most loquacious and greedy ones) have been silenced. Yet this is a time when a well-respected Indian world figure (though unfortunately there may be none, except Zubin Mehta) could have brought Iran and Israel to the conference table together. Iran must recognise Israel and the two countries must exchange ambassadors if the present tension is not to degenerate into more war in our region. Israel needs to declare itself a nuclear weapons’ power and not be belligerent towards Muslims, and Iran could be allowed to pursue its nuclear research within reason. It is in India’s and Pakistan’s common interests to see that Jimmy Carter’s extension of the Monroe doctrine to include the Persian Gulf be replaced by the Zionist philosopher Martin Buber’s idea of a “federative structure” for the peoples of the East. Instead the reverse is happening.

What economics does say
Dr Singh and Mr Ahluwalia may say economics has been driving their new foreign policy. But what economics actually says is that Government should have nothing to do with any kind of business. Government should encourage competition in all avenues of economic activity and prevent or regulate monopoly, and also see to it that firms pay taxes they are due to pay. But that is it. It is as bad for Government to pamper organised business and organised labour with subsidies of any kind as it is to make enterprise difficult with red tape and hurdles. Businessmen are grown ups and should be allowed to freely risk their capital and make their profits or their losses without public intervention. Government’s role is to raise taxes and provide public goods and services properly. We need to remind ourselves that India is a large, populous country with hundreds of millions of materially poor ill-informed citizens, a weak tax-base, a humongous internal and external public debt (i.e. debt owed by the Government to domestic and foreign creditors), a non-investment grade credit-rating in world financial markets, massive annual fiscal deficits, an inconvertible currency, nationalized banks, and runaway printing of paper-money. There is plenty of serious economics that has yet to begin to be done in the country. New Delhi must wake up from its self-induced dreaming.

Atoms for Peace (or War)

Atoms for Peace (or War)

by Subroto Roy

First published in The Sunday Statesman, March 5 2006 Editorial Page Special Article,

“Atoms for Peace” was Dwight D. Eisenhower’s 1953 speech to the UN (presided over by Jawaharlal Nehru’s sister) from which arose the IAEA. Eisenhower was the warrior par excellence, having led the Allies to victory over Hitler a few years earlier.

Yet he was the first to see “no sane member of the human race” can discover victory in the “desolation, degradation and destruction” of nuclear war. “Occasional pages of history do record the faces of the ‘great destroyers’, but the whole book of history reveals mankind’s never-ending quest for peace and mankind’s God-given capacity to build.” Speaking of the atomic capacity of America’s communist adversary at the time, he said: “We never have, and never will, propose or suggest that the Soviet Union surrender what rightly belongs to it. We will never say that the peoples of the USSR are an enemy with whom we have no desire ever to deal or mingle in friendly and fruitful relationship.” Rather, “if the fearful trend of atomic military build-up can be reversed, this greatest of destructive forces can be developed into a great boon, for the benefit of all mankind…. if the entire body of the world’s scientists and engineers had adequate amounts of fissionable material… this capability would rapidly be transformed into universal, efficient and economic usage”. Eisenhower’s IAEA would receive contributions from national “stockpiles of normal uranium and fissionable materials”, and also impound, store and protect these and devise “methods whereby this fissionable material would be allocated to serve the peaceful pursuits of mankind.…to provide abundant electrical energy in the power-starved areas of the world… to serve the needs rather than the fears of mankind.” When Eisenhower visited India he was greeted as the “Prince of Peace” and a vast multitude threw rose petals as he drove by in an open limousine.

Now, half a century later, Dr Manmohan Singh read a speech in Parliament on February 27 relating to our nuclear discussions with America. But it seems unclear even his speech-writers or technical advisers knew how far it was rhetoric and how far grounded in factual realities. There is also tremendous naivete among India’s media anchors and political leaders as to what exactly has been agreed by the Americans on March 2.

Churchill once asked what might have happened if Lloyd George and Clemenceau told Woodrow Wilson: “Is it not true that nothing but your fixed and expiring tenure of office prevents you from being thrown out of power?” The same holds for George W. Bush today. Wilson made many promises to the world that came to be hit for a six by US legislators. In December 2005, Edward Markey (Democrat) and Fred Upton (Republican) promised to scuttle Bush’s agreements with India, and once the pleasant memories of his India visit fade, Bush may quite easily forget most things about us. All the Americans have actually agreed to do is to keep talking.

It needs to be understood that submarine-launched ballistic missiles are the only ultimate military deterrent. Land and air forces are all vulnerable to a massive first-strike. Only submarines lurking silently for long periods in waters near their target, to launch nuclear warheads upon learning their homeland had been hit by the enemy, act as a deterrent preventing that same enemy from making his attack at all. Indeed, the problem becomes how a submarine commander will receive such information and his instructions during such a war. (For India to acquire an ICBM capability beyond the MRBM Agni rockets is to possess an expensive backward technology — as retrograde as the idea India should spend scarce resources sending manned moon missions half a century after it has already been done. The secret is to do something new and beneficial for mankind, not repeat what others did long ago merely to show we can now do it too.) A nuclear-armed submarine needs to be submerged for long periods and also voyage long distances at sea, and hence needs to be nuclear-powered with a miniature version of a civilian nuclear reactor aboard in which, e.g. rods of enriched uranium are bombarded to release enough energy to run hydroelectric turbines to generate power. Patently, no complete separation of the use of atomic power for peace and war may be practically possible. If India creates e.g. its own thorium reactors for civilian power (and we have vast thorium reserves, the nuclear fuel of the future), and then miniaturised these somehow to manufacture reactors for submarines, the use would be both civilian and military. In 1988 the old USSR leased India a nuclear-powered submarine for “training” purposes, and the Americans did not like it at all. In January 2002, Russia’s Naval Chief announced India was paying to build and then lease from 2004 until 2009 two nuclear-powered Akula-class attack submarines, and Jaswant Singh reportedly said we were paying $1 thousand crore ($10 bn) for such a defence package. Whether the transaction has happened is not known. Once we have nuclear submarines permanently, that would be more than enough of the minimum deterrent sought.

Indeed, India’s public has been barely informed of civilian nuclear energy policy as well, and an opportunity now exists for a mature national debate to take place — both on what and why the military planning has been and what it costs (and whether any bribes have been paid), and also on the cost, efficiency and safety of the plans for greater civilian use of nuclear energy. Government behaviour after the Bhopal gas tragedy does not inspire confidence about Indian responses to a Three Mile Island/Chernobyl kind of catastrophic meltdown.

That being said, the central question remains why India or anyone else needs to be nuclear-armed at all. With Britain, France or Russia, there is no war though all three are always keen to sell India weapons. Indeed it has been a perennial question why France and Britain need their own deterrents. They have not fought one another for more than 100 years and play rugby instead. If Russia was an enemy, could they not count on America? Or could America itself conceivably become an enemy of Britain and France? America owes her origins to both, and though the Americans did fight the British until the early 1800s, they have never fought the French and love the City of Paris too much ever to do so.

Between China and India, regardless of what happened half a century ago, nuclear or any war other than border skirmishes in sparse barren lands is unlikely. Ever since Sun Yat-sen, China has been going through a complex process of self-discovery and self-definition. An ancient nation where Maoism despoiled the traditional culture and destroyed Tibet, China causes others to fear it because of its inscrutability. But it has not been aggressive in recent decades except with Taiwan. It has threatened nuclear war on America if the Americans stand up for Taiwan, but that is not a quarrel in which India has a cogent role. China (for seemingly commercial reasons) did join hands with Pakistan against India, but there is every indication the Chinese are quite bored with what Pakistan has become. With Pakistan, our situation is well-known, and there has been an implicit equilibrium since Pokhran II finally flushed out their capacity. Had India ever any ambition of using conventional war to knock out and occupy Pakistan as a country? Of course not. We are barely able to govern ourselves, let aside try to rule an ideologically hostile Muslim colony in the NorthWest. Pakistan’s purported reasons for acquiring nuclear bombs are spurious, and cruelly so in view of the abject failures of Pakistan’s domestic political economy. Could Pakistan’s Government use its bombs against India arising from its own self-delusions over J&K? Gohar Ayub Khan in 1998-1999 threatened to do so when he said the next war would be over in two hours with an Indian surrender. He thereby became the exception to Eisenhower’s rule requiring sanity. An India-Pakistan nuclear exchange is, unfortunately, not impossible, leaving J&K as Hell where Jahangir had once described it as Heaven on Earth.

America needs to end her recent jingoism and instead rediscover the legacy of Eisenhower. America can lead everyone in the world today including Russia, China, Israel, Iran and North Korea. But she can do so only by example. America can decommission many of her own nuclear weapons and then lead everyone else to the conference table to do at least some of the same. Like the UN, the IAEA (and its NPT) needs urgent reform itself. It is the right time for serious and new world parleys towards the safe use of atoms for peace and their abolition in war. But are there any Eisenhowers or Churchills to lead them?