Thursday, November 29, 2012


Merely taxing diesel vehicles can backfire!

The debate on subsidy on diesel price never seems to reach a consensus. On one hand, diesel subsidies are important to keep food prices and transport prices under check, while on the other hand, this subsidy is being exploited by luxury car owners and owners of commercial hubs. In simple words, tax paid by the aam adami which is meant for societal development is latently being directed as subsidies to industrialists and rich business houses! Thus it becomes far more important for the government to either come up with a differential pricing system or some other model which categorises these two different set of users under two different price bands.

In the same light, the Supreme Court has recently floated a proposal to impose “a green tax on new and existing private diesel vehicles to check pollution in the National Capital Region.” The bench proposed to tax diesel vehicles with a green tax that would be 25 per cent of the cost of the vehicle. This is to make sure that the subsidy being offered in form of lower diesel prices comes back to the government. The initiative looks quite promising but then there are lots of misses between the cup and the lip. These taxes may later increase the sale of second hand diesel vehicles (which is more polluting) and may deter the sale of new diesel cars.

Contrarily, green taxes are a globally practiced method of encouraging green-vehicles and not the other way around. A report by Professor Robert N Stavins of Harvard Kennedy School published by Harvard University states that such initiatives can accrue ‘double dividend’ as it will discourage non-green vehicles and also would be a source of new revenue for the government. However, merely collecting taxes and fines won’t solve the purpose. There needs to be a system of using the collected amount in more judicious manner, especially towards refurbishment of traffic and transport structure. As per Media report published in November 2012, Pune despite of collecting Rs 4 crore (out of polluting vehicles in form of green taxes) failed to utilise the money for any purpose, leave aside using the same for pollution control. Nagpur is another example wherein they raked in Rs 1.30 crore but again didn't use the money for any pollution control measures. The same is true for cities across the nation.

Almost all countries across the world are tweaking with their green taxes with an objective of eliminating polluting vehicles in next couple of decades. Sweden is all set to increase taxes by almost 35 per cent on polluting cars while exempt taxes on electric vehicles to push green-electric vehicles on the road. Similar measures are being adopted by other EU nations including Germany that went steps ahead in implementing taxes that would encourage the manufacturers to design greener cars! Similar systems are also present in UK, US and Australia.

The proposal suggested by the Supreme Court should, along with taxing polluting vehicles, have provision of floating market with affordable electric and hybrid cars and cars running on gases. This multi-dimensional policy would serve dual purpose of both preventing misallocation of diesel subsidy and enhancing pollution control measures. The Supreme Court recent decision should also keep in consideration the cost of manufacturing diesel vehicles. Given the fact that diesel vehicles are relatively expensive than their petrol counterparts, such taxes can further dent the automobile market. The Supreme Court and the policy makers should include clause that provides incentive to green vehicles manufactures and dealers. Let this policy be not a half-backed and self-destructive one!


Thursday, November 22, 2012


Expos and trade fair needs to match the global standards

The importance of trade fairs has never been so profound. The recent IITF 2012 opened the gates for budding as well as established enterprises to showcase their products and services that eventually allows them to display and project their services not only to their potential customers but to the entire region at large. The power of trade fairs notwithstanding, it is fascinating to delve into its genesis that dates back to the medieval era in Europe. Since then, its impact has grown from strength to strength through the industrial revolution in Britain and Europe and later in North America. The trade fairs, in fact, became the face of industrial revolution that reflected its vitality and showcased the same to the world.

The trade fairs, unlike consumer fairs, do not have any restrictions to curtail the entry of the general public. Thus, the hype that surrounds the event invites the participation of not only professionals and company representatives but also the intrigued public. The large trade fairs are gala affairs that attract an onslaught of advertisements and media frenzy that is, even sometimes, carried on as developmental strategy for the host city. The biggest trade fair in India is India International Trade Fair (IIFT) which takes place at Pragati Maidan in New Delhi. It has entered its 32nd year in the 2012 event with a deep reservoir of strength in their roster of 7,000 exhibitors that include 350 overseas firms’ participation across 28 countries. It can also boast of 1 million visitors last year that turned the organisers proud that a world class trade fair atlas is beginning to take shape in India. Some of the other Indian trade fairs include the India Int’l Maritime Logistics Expo in Mumbai, International Leather Goods Fair in Kolkata, India International Leather Fair in Chennai, Arogya in Trissur and Aahar – The Int’l Food Fair in Shillong, to name a few.

However, in spite of commendable efforts to retool and upgrade the Indian trade fairs, it’s still way below the global standards. The Canton Fair held in Guangzhou, China draws 207,103 participants from across the globe taking place at a state-of-theart venue with world class infrastructure that’s beyond the imagination of the IIFT’s unglamorous grind. The total size of exhibitors in Guangzhou crossed 24,415 professionals hailing from over 200 countries with total business transaction touching a humongous $ 36,800 million last year. It boasts of wonderfully craft ed pavilions separately for national and international participants drawing huge pool of visitors. In its 105th session, the data for number of booths surpassed 55,800 with business turnover of $ 262.3 million and was attended by 165,436 visitors. In Germany, Angela Merkel endorsed a massive 134 international trade fairs that encompassed 159,945 exhibitors of whom 55.4 per cent are foreign nationals. Leading the pack of quality as well quantity gap is United States, which host 2,500 trade shows every year! The coveted top position is occupied by Consumer Electronics Association’s International CES held every year at Las Vegas Convention Center with an expansive 1,442,000 sq ft floor space, followed by The Association for Manufacturing Technology’s biennial International Manufacturing Technology Show in Chicago and Packaging Machinery Manufacturers Institute’s biennial Pack Expo also held in Las Vegas. These are world shows where Indian trade fairs don’t stand a chance to compete, be it scope, size or frequency. Indian shows, run-down and neglected looks need a boost at the earliest because in this age of publicity, Indian products and services along with its image should be light-years ahead of where Indian trade fairs are stuck in today!


Thursday, November 15, 2012


Parties’ uses development plans as election campaigns

Unlike many post-colonial nations, which have descended to dictatorships or sham democracies, India has sustained to a reasonably stable democracy unhindered since independence. However, the success of the very same democracy in India would raise numerous eye brows if benchmarked against the best examples of it. Certain basic deficiencies in the country’s social and political dynamics have never allowed the nation to maintain a free and fair democratic setup.

India’s political outfits have time and again exploited the short memories of poor and illiterate (or at best the semi-educated) masses that forms the basis of the country’s electoral pattern. Therefore, the inefficiency and status quo of the country’s/state’s incumbent governments are ratified by the voters on the merit of just few months of developmental work, particularly before the elections. It is disappointing to see how voters are insensitively influenced by politicians, who otherwise are busy manipulating the nation and it is much more disappointing to see how people fail to see the devil in the stealth of such politicians! Every now and then, projects worth hundreds of crores are announced and brandished before election to tilt the electoral balance in favour of the ruling parties. And such is electorates’ psychographics that in many instances it works too! The best example of it has been in West Bengal, where for 34 years of Left Front rule there were no anti-incumbency factors at all despite their shoddy and slapdash work during the tenure. They derived latitudes by tall talks and announcing projects before elections that were either never implemented or remained incomplete once the election was over. The flaunting of projects and schemes just before election has become a norm throughout the nation in the hope of shaving down opposition’s margins. Before the Surat Municipal Corporation (SMC) election this year projects worth Rs. 519 crores were announced along with major reforms in the transport sector worth hundreds of crores. There are innumerable such cases.

To beat this, the Election Commission of India in its model ‘Code of Conduct’ has specified strict Do’s and Don’ts for the political parties. It has banned announcement of new schemes, projects, financial grants and laying foundation stones that are rooted towards the sole effort to influence the voters. Yet, the parties escape these rules by announcing schemes just before they come into effect, as has been the case in West Bengal, Gujarat and other places. The cliché is followed by each and every party, which provides no alternatives for the voters that can crystalize into a realistic change in governance.

Another interesting signal that helps decipher a phenomenon before election is the unearthing of scams and financial embezzlement! Every time one come across a infrastructure development or reconstruction of roads and drains, one can gauge that elections are round the corner. Such initiatives are not only a latent election campaigns but also are a way of generating funds through fixing tenders and kick-bagging.

Election Commission and Supreme Court should immediately bring such populist construction under the ambit of direct election campaign and should check any construction after the stipulated date prior to elections. Moreover, all projects announced during the tenure should be made to complete much before the election campaigns starts, thus keeping the essence of both the ends – election and developmental initiatives- intact!


Thursday, November 8, 2012


Part-time jobs can rejuvenate our economy

As against the conventional wisdom of building a service career as a permanent employee, corporates are increasingly rolling out part time jobs and the employees are only too happy to lap it up. It’s developing into a trend that is evolving at the speed of light speed which is benefitting both employers and employees. The informal workers in the organised companies have risen from a moderate 32 per cent in 2000 to a most expansive 68 per cent in 2010. The figure of part-time workers’ growth in 2009 was over 10 per cent and in 2010 the figure settled at 18 per cent! It shows the lucre that goes with the proposition of temporary jobs, a trend that is ever rising in most of the developing countries, according to the World Development Report, a publication wing of World Bank.

It can be deciphered generically that at least a sizeable proportion of these part time jobs have a reasonably high productivity. And as it happens, it augurs economic efficiency for an economy. Taking up part-time jobs had been common place phenomena in the developed economies and that’s exactly what is brewing quickly in India. The labour reallocation is particularly easy in temporary jobs as it is not confined by the labour regulations, which applies to permanent jobs, and in spite of series of reforms organised jobs are still mired by strict labour guidelines that hinder our economic growth path. Th us the part-time jobs encourage labour flexibility as well as breeds new entrepreneurship that increase the growth and development, a prerequisite to sustain a rise of 7 million working people every year. The part time job spree is also facilitating startups and entrepreneurship. This in turn portends confidence in the country’s future as a high growth economy. Even housewives, who probably were skilled but had to quit jobs for family commitments are earning a handful through the temporary jobs.

The part-time jobs’ credo provides an answer to the unsettling poverty and unemployment through rapid urbanisation in which there is better chance in poverty reduction. The urbanisation actually hasn’t taken off in India in last two decades. In fact India was at par with China in 1990 with 27 per cent of its population living in urban centres but India with its slothful infrastructure and labour laws’ deficiencies have choked the urbanisation growth. The rise in temporary jobs are in a way a policy backlash to faulty labour policies that have pushed the employers towards unorganised jobs more for their firms.

However, part-time jobs are still in low skill-requirement areas. The chance of getting a part time job depends on the industry segment. Teaching was one area where the availability of part time employment was high for a long time, but in recent years, increase of jobs in accounting, business development, pathological lab assistants, data entry operation and many more have shown enough promise for even qualified personnel opting for them. It’s in fact a win-win situation where the employers benefits on cost variability as well as flexibility in their staffing, while the employees can add up to their income without committing a whole time to their company. It has been a big employment generator and very strong anti-poverty measure that needs to pick up more, like in the West, with a shift of attitude that tends to look down upon the part-time jobs. For that, government should take initiative to encourage the trend more so that many in the poverty cycle can break it and come up to overcome scrimp on pay for a decent living.


Thursday, November 1, 2012


FDI would revive India's ignored agriculture

The incumbent government is grinding it out in their apparent effort to convince the farming community that allowance of FDI in retail will actually benefit them. So much effort to convince the truth is required because of a highly charged political surrounding that is reflected in the Opposition’s stand against the move. However, the farming community came together organically and enthusiastically in the difficult task of voicing open support for FDI in retail. A farmers’ delegation recently have thanked Sonia Gandhi eagerly that they feel the move will benefit both farmers as well as consumers. They submitted a memorandum stating that this move has the potential to re-energise the farming sector and projected an air of confidence that it can also prevent the sector from a probable breakdown.

What the retail giants like Wal-Mart can do is a vertical integration in the supply chain, and there by choking the middlemen’s involvement from the system. It is already noticed from certain regions of the country, where deep pocket corporates like Reliance and ITC operate, that farmers have benefited from the organised retail giants’ venture. The model has succeeded because the organised retail has sourced the agricultural produce directly from farmers, which allowed them, to pay the farmers more than what the middlemen could have paid. It is often argued by the people opposed to it that the MNCs would require large farms and thus neglecting small farmers, or the retailers can leave a farmer for better opportunities, even flouting the contract with the farmers. In any of the cases the farmers are not really met with adverse effects. The moot point that is missing with the opposition is that in imperfect distribution channels the benefits of farm products’ price rise are mostly hushed up by the middlemen depriving the farmers completely on the financial gains.

APMC Acts require the agricultural produce to pass through the channels of authorized middlemen before it reaches the end users, portending financial loss for the farmers. Further, Essential Commodities Act, too, is a restrictive instrument that put caps on the volume and distribution of the farm produces, ratcheting the farmers’ despair. Despite some serious efforts by the government, it has failed to bring about any major changes in the APMC Act, as any effort to trim the middlemen attracted strong opposition of state’s traders lobby in the fear of putting their employment at risk. An integration of supply chain is needed that can be transformational in the way agricultural distribution is carried on in the country since independence; by reducing the farm and retail price gap. Unfortunately farmers’ unions are not as strong as middle men’s lobby, which stifle the voice of the farmer in the bargaining power of agricultural marketing. Thus all states should take measures to strengthen the producers association so that their say in the marketing value addition of the farm products can be taken into account. Even the urban people share this point of view that organized retail is a boon. An Ipsos initiated survey conducted in 6 Indian cities, reveal that 51 per cent of the respondents believe that FDI in retail will stoke up the economic prosperity for the farmers and for the country’s economy.

The stage seems set as Starbucks in JV with Tata Tea recently opened its first outlet in Mumbai. With Starbucks coming to India, hundreds of coffee farmers who were once committing suicide (from coffee-growing states of Kerala and Karnataka) should get a new lifeline. The JV aims at sourcing coffee from the local farmers and provides them with training to increase productivity. Starbucks is trying to do something that the government should have done long before. If the same was done by our government then today, Starbucks would have found much steeper competition in the domestic market.