Better Government to Government Efforts Needed to Rejuvenate Nepal-India Relations

Hari Bansh Jha

Background

People-to-people relations are always pivotal for maintaining long-term bilateral relations between two countries. But such a relation gets new lease of life if it is backed by due understanding at the level of heads of government of two countries. This is true anywhere in the world, but it is more so with context to Nepal and India.

Relations at people-to-people level between the two countries have remained harmonious since time immemorial. But at times jerks have been experienced at the government-to-government level in the relations between the two countries to the great disadvantage of the people of the two countries.

In view of the proximity between Nepal and India, any development in Nepal would have far reaching implications in India and vice versa. Hence, it bestows greater responsibility to the heads of governments of Nepal and India for developing better understanding at the government-to-government level. Such an understanding might not only prove potential in opening new vistas of economic cooperation, but it might also remove distrust, if any, in the relations between the two countries. It is all the more necessary to develop due understanding at the government-to-government level between the two countries as Nepal is constrained by political logjam and there is growing influence of foreign forces in the country.

Unique relation

No two countries in the world is bound as much by cultural, religious, geo-economic, political and strategic ties as Nepal and India. Therefore, people in India regard the Nepalese as closest to them and so is the attitude of people of Nepal towards the Indian people. Such people-to-people relation is unique, which is also made possible through the open border system for the people of one country to the other. Thousands of Nepalese and Indians marry each other taking advantage of the open border regime. Millions of Nepalese benefit from employment opportunities across the border in India. Many Indians also work in Nepal. Each day, the Nepalese go for shopping in India and the Indians come to Nepal. This uniqueness in relations between the two countries has really made the Nepal-India border as borderless.

It is this unique relation between Nepal and India that gave way to 1950 Treaty of Peace and Friendship. Security interests of the two countries were locked through this Treaty. Each country made commitment for taking joint initiative in case there was external threat to any of them. Perhaps, this bound of common security made the Nepalese Prime Minister Martika Prasad Koirala to publicly announce in 1950s that the defence of India was the defence of Nepal. Equally, true is the fact that the defence of Nepal is the defence of India.

No less remarkable are the views expressed by the Nepalese Prime Minister K.I. Singh on Nepal-India relations. A foreign journalist asked him, “Why is it that the Nepalese value India so high when the Western countries and multilateral institutions pour so much money in Nepal in the form of foreign aid?” In his reply, Singh asked, “Why is it that Sita, the daughter of Nepal, had none else than Ram, son of India, to marry? Why is it that Ram had no one else other than Sita to marry?”

For the purity of one’s household chores or religious activities in Nepal, it is unavoidable to sprinkleGangajal i.e. the holy water of the Ganga river flowing through the Indian territory. No ritual is possible from birth to the death in this country without gangajal. Even the ashes of dead bodies in Nepal have to be emerged into the Ganga. Souls of the ancestors in this country rest in peace until certain rituals are performed in Gaya in India. People in Nepal have as much faith in Kashi, Ayodhya, Mathura, Vrindavan, Balaju or Rameshwar in India as the people in India have in Janakpur (the birthplace of Sita), Pashupatinath and Muktinath in Nepal.

Long Gap in Visit by Indian Prime Minister

However, it is a pity that there has been a long gap in high-level visit of Indian Prime Minister to Nepal. For nearly 15 years, no Indian Prime Minister visited Nepal. I.K. Gujral was the last Prime Minister of India to visit Nepal. Of course, Atal Bihari Vajpayee visited Nepal in January 2002, but the purpose of his visit to Nepal at that time was merely to participate in 11^th SAARC summit.

Turbulence in Nepal

Coincidently, the last 15 years has been the most turbulent period in Nepal’s history. Official records show that 17,828 people were killed during the Communist Party of Nepal (Maoist) lead People’s war between 1996 and 2006.¹There was colossal loss of property and widespread destruction of government schools, offices, roads and other infrastructural facilities in the country during that time.

Following the historical Peace Accord between the government and the Maoists in 2006, the 239-year old monarchical institution collapsed in 2008. But even after six years of signing of the Peace Accord, the Maoist combatants are only partially laid off under the voluntary retirement scheme. The law and order situation in the country is still in fragile state. Armed groups have proliferated, particularly in the Terai region of Nepal. Most of the industries are closed on account of growing labour militancy, political instability, strikes, bandh, inadequate supply of power and raw materials. Forced donations and abductions have plagued the entire society. Because of the lack of employment opportunities at home, the number of youth fleeing the country for overseas employment (countries other than India) formed 600 per day until 2010, which more than doubled to 1,500 in 2011-12.

Nepal’s Challenges

The greatest challenge that Nepal is facing today is the failure of the Constituent Assembly to draft the constitution. As it is well known, the elections for 601-member Constituent Assembly were held in 2008 to make constitution within two years. Yet the there is no substantial progress in constitution making despite the fact that the tenure of the Constituent Assembly was extended several times in last two years. If the Constituent Assembly is not able to make constitution until May 27, 2012 when perhaps its final tenure expires, it would be a great set back to political stability in Nepal.

According to World Development Report 2012, Nepal’s per capita income is as low as $490. Even in Nepal's neighborhood, the per capita income in India is $1,340 – almost three times more than what Nepal does have. In 2010, Bangladesh’s per capita income was $640, Pakistan’s per capita income was $1,050 and Sri Lanka’s per capita income was $2,290.²

Nepal recorded economic growth rate of 2.7 per cent in 2009-10; whereas during that period India’s rate of economic growth was 8.3 per cent and China’s rate of economic growth was 9.9 per cent.

Though many of the schools, colleges and universities have been opened in Nepal, the quality of the academic institutions is often questioned. They do not meet the expectations of the students. So there is a tendency on the part of many of the students to pursue education in countries outside Nepal. However, certain country/countries admit Nepalese students not for imparting quality education but for other political interests.

Issues of Concern between Nepal and India

Even after more than one-and-half decade of the signing of 6000 MW Mahakali Treaty between Nepal and India in 1996, it has not been implemented. So much so that even the hydropower projects with Indian investments, including the GMR Group working on 900 MW Upper Karnali and Upper Marshyangdi has been targeted despite the fact that the nation is finding acute load shedding of 14 hours a day. At the moment, Nepal produces power to the extent of 692 MW in the summer season against the demand for 860 MW. In the winter, the country produces only 393 MW of power when the demand is 588 MW.³

Some other joint venture projects between Nepal and India, including Dabur Nepal and Surya Nepal have also been targeted. For last several years, no new joint venture project has come from India to Nepal. Even those joint ventures which are in operation in Nepal increasingly feel insecure. Unfortunately, the investment climate in Nepal could not improve despite the fact that Bilateral Investment Promotion and Protection Agreement (BIPPA) aimed at protecting investment was duly signed between Nepal and India on October 21, 2011

The shortage of Indian currency (IC) has seriously affected trade and increased hardships to the common people, travelers and consumers all along the Nepalese-Indian border. In 2008-09, Nepal sold $1.5 million to buy IC amounting to Rs. 73.4 billion. ⁴ Furthermore, Nepal Rastra Bank sold $2.7 million in 2010-11 to buy IC worth Rs. 123.8 billion. In view of the shortage of IC, the Nepalese bankers have asked Nepal Rastra Bank, the central bank of Nepal, to allow them to purchase IC either directly from the market in Nepal or from across the border in India. The IC is in short supply in Nepal partly due to the trade deficit with India and partly for its demand to finance illegal imports mainly in the form of gold. Nepal Rastra Bank directive allows banks to exchange IC up to IRs. 25,000 in a day or up to IRs. 200,000 in a month. But it hardly complies this directive.⁵

Nepal’s trade deficit with India almost doubled from Rs. 121 billion in 2008-09 to Rs. 218 billion in 2010-11. The country imports goods worth Rs. 261 billion from India against its exports of Rs. 43 billion to that country.

Of particular concern are the growing cases of duplication of popular Indian trademarks by some unscrupulous elements in Nepal. This not only harmed Indian interest but also harmed the interests of Nepalese consumers. The Nepalese consumers have had to compromise with the quality of such products, which is detrimental to their health. Cases of duplication of popular trademarks of India by the local Nepalese companies are found in all such areas as the soap, detergent, shampoo, adhesive, T.V. sets, hair oil, cosmetics, powder, stationery, toilet paper, furniture, textile and garment, footwear, vegetable ghee, oil, razor, incense, medicines, toothbrush, battery, fan, electric bulb, pressure cooker, tobacco, chocolate, saving cream, alcohol, Gutkha, spices, Pan Masala, biscuits, rice, atta, etc. Such activities also create negative environment for investment in Nepal.

Quite often, the cases of smuggling of fake Indian Currency Notes through the Nepalese territory to India are published in the media, which by all accounts is counter-productive and against the interests of both the countries. There are reports that about Rs. 20 crore worth of fake Indian currency is smuggled through the Nepalese territory to India each year.⁶

Development of Nepal-India border region is neglected all through the history, though it is of crucial interest to the growth of the two countries. Because of the British legacy to keep this region underdeveloped, very little could be done by the Indian government even after its independence for the growth of the region. In Nepal, too, the rulers have been reluctant in developing the peripheral border region of the Terai for their own vested interests.

In the pretext of launching development work, there are NGOs, INGOs and foreign missionaries that have been luring mostly the weaker sections of the population in Nepal for religious conversion. If they are not tamed, it is likely that more than half of Nepal’s total population would be converted into alien faith in next 20 years. Such activities could have far reaching implications on Nepal-India relations in the long-term perspective.

Besides, certain groups of people in Nepal suffer from the notion of ‘small country’ syndrome vis-à-vis India. They do not want to have any positive deal with India – be it in water resources or other sectors. These are the people who target infrastructural facilities, including hydro-power projects in Nepal, even at the cost of plunging the country in dark. The government has no control on elements who want to make the country hostage of perpetual poverty. Even on the Indian part, many of the bureaucrats dealing Nepal suffer from ‘big country syndrome’ mentality. They take it for granted that Nepal should do all at their command. In fact, both the ‘small country syndrome’ and ‘big country syndrome’ mentality among certain elite groups in Nepal and India are detrimental to initiating new era of economic cooperation between the two countries.

What is that India should do?

India could establish a few Delhi Public Schools in Nepal. Besides, academic institutions like that of Jawaharlal Nehru University, Indian Institute of Technology and Indian Institute of Management could be established in Nepal. Even India could establish medical colleges of same standard as the one established by this country at Dharan. Besides, India might think of opening standard journalism courses as there is no any such institution throughout the Terai region of Nepal. With the opening of such world class academic institutions, much of the resources that are spent by Nepal on the education of the students in third countries will be saved.

Since India has made outstanding performance in Information Technology (IT) sector, it could establish its unit/units in Nepal. In 1996-97, India exported software to the tune of $1 billion, which increased spectacularly to $23.4 billion in 2005-6⁷ and $63 billion as of March 31, 2008.⁸

Prospects are also quite high for the development Export Processing Zones along the Terai region of Nepal to take the advantage of proximity factor with India. Such zones, if established along the dry port region and having backing of all the infrastructural facilities as road, rail and air connectivity, apart from the availability of electricity, raw materials and cheap labour, could accelerate the pace of industrialization and generate huge employment opportunities in the country. Prospects are also high for the growth of such industries in Nepal as pharmaceuticals, water resource based ventures like water supply and sanitation, fruit and vegetable processing, textiles, carpet, garment and local handicrafts.

In order to help Nepal reduce its balance of trade with India, there could be provision of free trade with common tariff with India. With this development, many of the Indian industries would make further investment in Nepal. Goods thus produced in Nepal could be exported to India. Besides, the consumers in Nepal would be getting products at the same price as it is available to the Indian consumers.

Nepal’s rate of economic growth largely depends on the growth of infrastructural facilities. India, therefore, should speed up the construction of its projects in Nepal, which include Postal/Hulaqi highway, Broad Gauze Railway line connecting Jaynagar (India) to Bardibas (Nepal) via Janakpur and Mechi-Mahakali railway line, and Kamala diversion project. India could also speed up construction of link roads connecting the Terai region of Nepal with India along such points as Janakpur-Pipraun-Darbhanga, Japakpur-Bhitamore-Sitamadhi and Birgunj-Raxaul-Motihari. Besides, Indian government could complete the work of Brihattar Janakpur Parikrama Sadak (Larger Janakpur Circumbulation Road) that covers part of Nepalese territory and part of Indian territory. India might also think of developing such religious cum historical regions of Nepalese Terai as Birat, Baraha, Salhesh, Simraungadh and Lumbini and try to link them with the other religious spots in Bihar and Uttar Pradesh for the growth of religious tourism in both parts of Nepal and India.

India could talk to the Nepalese authorities for setting up a high level umbrella organization of the two countries “Nepal-India Border Authority” with a view to addressing such problems as flood, drought, crimes, counterfeit currency, smuggling and other such activities along the border region. There should also be increased cooperation between the security agencies of the two countries to address some of these problems.

Both Nepal and India should see to it that political instability and weak socio-economic structure in Nepal should not give room to certain external power/powers to have free play in the country. Such foreign powers in their game plan have been trying to erode, if not eliminate, the age-old special relations existing between Nepal and India.

A Way Forward

There is a tremendous scope for improving government-to-government level cooperation between Nepal and India at various levels. Considering India’s growing strength in economic front, the country needs to share part of its resources for the establishment of academic institutions of excellence at all the levels from school, college to the university levels in Nepal. Both Nepal and India should see to it that the bottlenecks in implementation of hydro-power projects, including in Pancheshwor project and Upper Karnali are removed. Free trade area with provision of common tariff regime is established to address the problem of growing trade deficit between the two countries. Work in the Indian aided projects in roads, rail and other sector is speeded up. Focus is given to the development of Nepal-India border region by establishing high level body such as “Nepal-India Border Authority.” However, the road map for Nepal-India cooperation does not appear to be that smooth given the turmoil in Nepalese polity. Yet the Indian Prime Minister Manmohan Singh should use his diplomatic acumen in order to bring the war-torn and underdeveloped Nepal on the forefront of economic growth of South Asian countries through cooperation at all the levels. Peace and prosperity of Nepal is in best interest of India and therefore India should extend all possible support to Nepal even if certain cost is involved in it.

Reference :< /b>

1. RSS, “Displaced haven’t received relief,” The Himalayan Times, March 28, 2012 in

1. The World Bank. 2012. World Development Report 2012. Washington, DC., pp. 392-93.

1. Editorial, “Lacking steam,” The Himalayan Times, February 25, 2012.

1. The Himalayan Times, September 22, 2011.

1. My Republica, March 1, 2011.

1. Lalita Panicker, “It’s time to see red” in the Hindustan Times, 2 May 2011.

1. Jagdish N. Bhagwati and Charles W. Calomiris (Ed.). 2008. "Introduction" in Sustaining India's Growth Miracle. New Delhi: Stanza, p. 4.

1. Prem Shankar Jha. 2010. India and China: The Battle between Soft and Hard Power. New Delhi: Penguin Books India Pvt. Ltd., pp. 31-32.

A Perspective on Subsidies in Our Economy

Dr. M.N. Buch

One of the favourite whipping boys of economists with a free market bias, neo-liberals, businessmen and ultra conservative right wing politicians is the question of subsidies. The whole economic scenario in India is said to be vitiated by subsidies given by the government, which is causing the budget to be skewed and keeping the fiscal deficit at a high level. According to them if subsidies are abolished the economy will suddenly revive and India will prosper.

One begins with an assumption that even the so-called neo-liberals will concede that the Government of India and its policies will conform to the Constitution. The Preamble mandates social, economic and political justice and Article 38 directs the State to secure a social order for the promotion of welfare of the people. Article 39 directs the State to ensure that the material resources of the community are distributed as best to subserve the common good and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. A social order aimed at promoting the welfare of people contains within itself the principle of equity as the guiding star for our economic policies. If production of wealth is one of the major objectives of society in India, the promotion of equity is one of the principal duties of government. It is in this context that the subsidy regime has to be viewed. The word subsidy is defined in the Chambers 21st Century Dictionary as “a sum of money given, e.g., by a government to an industry, to help with running costs or to keep product prices low”. It also means help or assistance, especially to those who need such assistance in order to remain afloat. By itself the word subsidy is neutral, that is, it is not really intrinsically either good or bad. Quite often subsidy is paid for activities or to persons who need assistance and could not have survived without such help. The entire social security regime in the United States and much of Western Europe is based on the principle that the State must provide for those who are unemployed, indigent, unable to afford basic health care and are in need of social support. Such a system is obviously predicated on taxing the more prosperous citizens and using this money to support those in need.

One can safely state that there is no country in the world which does not have one form of subsidy or the other for a selected group of people. Corruption which is tolerated or, because of the policy of the rulers, is encouraged is itself a form of subsidising the rich and influential by looting the common man. A governmental system which facilitates corruption by its officials at the cost of citizens is a form of subsidising a group of persons in power. The entire sordid horse-trading in our Legislatures in order to obtain and retain power is a form of subsidy to the corrupt. Assistance by the United States to Israel above and beyond that country’s minimum security needs is a subsidy to Israel indirectly at the cost of its Arab neighbours. Almost every single proxy war is fought on the basis of subsidies, including the low intensity conflict indulged in by Pakistan against India through surrogates. Arms for the Pakistan Army given by the United States and partially passed on to the Taliban also form part of the subsidy regime. How are these subsidies better than a subsidy given by the Indian Government on diesel and LPG which would benefit the farmer, the worker and the lower and middle income group people of India?

Let us come to the Indian context. Regardless of the jugglery of figures by the Planning Commission and the claim by government that India has been successfully able to make a substantial dent in poverty. India still remains a country with huge numbers of people who are so poor as to be unable to sustain themselves. One estimate is that anything between forty percent and fifty percent of children are under nourished. Malnutrition is not a function of lack of knowledge of what constitutes a healthy diet. Malnutrition is a direct consequence of the parents not being able to afford to feed the child and, therefore, the child is perpetually hungry and physically underdeveloped, prone to disease and cumulatively liable to have serious intellectual deficiency. One cannot expect the brain of a child who is physically underdeveloped to reach a level of growth of the brain of a well-nourished child. Malnutrition, therefore, seriously affects both the physical and mental health of an entire nation. Which State, whose avowed objective is the welfare of the people, can afford to leave such vast masses of its citizens to their own device without intervening strongly for their economic upliftment? Which State can afford to allow its children to starve or the people to die of hunger? Certainly not the democratic India in which we live. Ideally the State must create gainful employment for the masses so that everyone is able to make a reasonable living and feed his children. However, till that happy day arrives does not the State have a duty to make available the wherewithal to the poor to be able to survive? This would be by way of a subsidy, call it what you will.

We are not ignorant of affluence, which is why so many of our businessmen figure in every international list of billionaires. Our Parliament and, following suit, our Legislatures have voted themselves substantial increases in emoluments at frequent intervals. Today the position is that a Member of Parliament has the following emoluments and perquisites: -

1. Salary : Rs. 50,000 per month (increased from Rs. 16,000)

1. Daily allowance

 for every sitting of Parliament or of a parliamentary committee, subject to an additional three days allowance before and three days after a parliamentary session and two days before and after all the meetings of a committee – Rs. 2,000 per day. (Increased from Rs. 1,000 per day)

1. Constituency Allowance:

 Rs. 45,000 per month

1. Office Expenses:

 Rs. 45,000 per month

1. Travel facilities:

1. Accommodation:

 A Member of Parliament is entitled to official accommodation in Delhi and to annual supply of forty lakh litres of water and fifty thousand units of electric power free of cost. The water and power allowances can be carried over to the next year. In addition, the MP is entitled to purchase of furniture worth Rs. 60,000 plus Rs. 15,000 worth of non-durable furnishing items. In addition, every three months the cost of washing of sofa covers and curtains will be borne by the State.

1. Telephone facilities:

 A Member of Parliament is entitled to three telephones to be installed. He is entitled to a mobile telephone also, and 1,50,000 local calls per year and broadband internet charges of Rs. 1,500 per month

1. Medical facilities:

 On payment of Rs. 500 per month a Member of Parliament is entitled to complete CGHS coverage.

1. Ex-Members:

 Every Ex-Member of Parliament is entitled to a pension of Rs. 20,000 per month and an additional Rs. 1,500 per month for every year in excess of five years of membership. His or her spouse would be entitled to fifty percent of the pension as family pension. Rail travel facilities for an Ex-Member of Parliament would be unlimited first class A.C. travel if he goes alone and two second A.C. travel facilities if he or she goes with a companion.

1. a) To attend a session of Parliament, meeting of a committee or any other duty as a member: First class A.C. for self plus one first class and one second class AC fare for rail travel, or one and one-fourth air fare if the travel is by air and Rs. 16 per kilometre if the travel is by road.
   b) Additional air travel facilities: Every M.P is entitled to 34 single air journeys in a year anywhere in India, together with a spouse and unlimited number of companions and relatives. If there is an unspent balance of air travel it can be carried over to the next year.
   c) For rail travel a MP is allowed unlimited first class air-conditioned travel for himself/herself and his/her spouse, plus one companion who will be accommodated in A.C two-tier.

The above emoluments and perquisites of the MPs have been given in detail to show that our Members of Parliament are in the top income-earning bracket in India, at least in the public sector. With no disrespect to our legislators it is clear that they are well above the poverty level income recently prescribed by the Planning Commission as Rs. 28 per day in an urban area and Rs. 22 per day in a rural area. Is this not a form of subsidy?

Let us take another form of subsidies. In a completely free market economy (one does not refer here to the virtual economic piracy of the bad old days of American capitalism as practiced by Henry Ford, Vanderbilt or Rockefeller) industry has to fend for itself in the matter of land, infrastructure, capital, labour, cost of production and marketing. The State will not acquire land and make it available at concessional rates to industry. All our industry is located on land given free or very cheap by government through either allotment of government land whose opportunity cost is thus foregone, or by acquiring it at low rates from farmers. The entire cost of infrastructure has so far been borne by the State and will continue to be borne by it. Power, water, communication connectivity and transport facilities have been provided by the State either free of cost or at highly concessional rates, government gives tax breaks and, where the industry is really influential, then government frames policies which create semi-monopolistic conditions in the industry. When industry turns sick government bails it out. Many industries are defaulters in the matter of taxes and user charges. Kingfisher Airlines is one such an industry. Very often the power connection of an industry is not discontinued because of default of payment of electricity dues, the argument being that if industry closes workers will become unemployed. In other words, the amount due, by not being recovered, is a form of subsidy to that industry. One does not hear the neo-liberal crying out in horror at such subsidies.

The argument given for concessions to industries are that it is only when industries are set up that there will be job creation and, therefore, any incentive offered to industry is in fact a welfare measure because people thereby gain employment. The Indian businessman being such a philanthropist, one supposes that he draws no benefit from the largesse given by government! The exact opposite is in fact the truth. In many of the so-called backward areas industrial schemes, where large industrial estates were created, most of the industries have closed. The industrialists took full advantage of the land, the tax breaks, the subsidised loans and other facilities given by government, set up some token industries and when the period of concessions was completed, transferred the assets to their main units located in more traditional areas where there is an advantage of cluster. Malanpur in Bhind District, adjacent to Gwalior and virtually its suburb, was an industrial area developed under the backward areas scheme. Today most of the industries have moved away, the landscape is one of stripped factories which look like the wreckage of a war zone and the industrialists, after enjoying subsidies, have moved elsewhere. Why is there no neo-liberal outcry against this? The whole policy of industrial location through subsidies has just not worked. In fact the Gujarat policy is better, where land and infrastructure are available in such inhospitable regions as Kutch and industry is invited to establish there. Now industrialists make an economic decision. The cost of establishing in Surat District is prohibitively high, whereas in Kutch it is relatively low. Because infrastructure is available in Kutch the industrialists prefer to locate there. An industrialist is given no subsidy, but he does find that it makes economic sense to locate in Kutch rather than in Baroda. In a way this is a subsidy which does not ignore market forces.

Let us see the areas in which the poorer half of India is subsidised and that, too, very inefficiently. The largest, of course, is the National Rural Employment Guarantee Scheme. It is a subsidy in that even where it is honestly administered, which is almost nowhere, in terms of output the scheme is not very productive because it has not been designed as an assets creation programme but as only a programme for providing employment for a hundred days per year. Nevertheless, with all the corruption and inefficiency which plague this scheme, it has brought a little more money to the very poor in rural areas. One positive effect is that it has created some hope in rural Bihar so that migration of cheap labour to rich agricultural areas such as the Punjab is substantially reduced. This has forced the Punjabi farmer to pay attractive wages to the Bihari labour to persuade it to work in the Punjab. This is a form of subsidy which does promote welfare. Tied to this would be the entire subsidy regime for agriculture, whether it is by way of subsidised seed and fertilizer subsidised water rate for irrigation, subsidised power and more money being pumped into rural infrastructure so that there is both employment creation and general upgradation of the economic and social infrastructure of rural areas. Here what we need is not less of subsidies but rather a complete redesigning of the administrative system so that the schemes of subsidy are honestly and efficiently administered.

We have a subsidy on petroleum products. Petrol and aviation fuel are used by affluent people and by the airlines for operation of their aircraft. This is fuel for the rich and can be taxed. LPG is used for cooking purpose across a wide spectrum of society, including the lower income groups and a substantial number of people of the economically weaker sections. It is said that on every cylinder of gas the oil companies take a substantial loss and have to be subsidied by government. Similarly, it is said that heavy losses are being incurred on account of diesel. Diesel is the fuel for all our goods transport vehicles, the locomotives of the Indian Railways on non-electrified sections and it powers tractors and pump sets used in the agriculture sector. Every paisa of additional cost added to diesel would push up the cost of transport and, therefore, the price of goods that the average citizen uses. It also pushes up the cost of agriculture because cost of running of tractors and of non-electrified pump sets increases. This pushes up the price of food grains and contributes to inflation. If LPG become more costly and people turn to alternative fuels, God help our trees because they would be cut down in increasing numbers even in urban areas. A subsidy on fuel, therefore, if fully justified.

Why are fuel costs high? Partially it is the cost of crude oil but more importantly it is the taxes such as import duty, excise duties, various types of sales tax and value added tax is what keep the price of petroleum products high. The revenue earned from petroleum products is what is passed on by government as subsidy to the oil firms. Government wants to keep earning that revenue, but it wants to transfer the burden of subsidies to the consumers, many of whom would have a major economic slide back and reduction in life style if the subsidy were withdrawn. Why is government not prepared to forego that revenue so that fuel prices may remain affordable? Should the neo-liberals not answer this question?

Let us take education and health care. Under Article 47 the State is directed to raise the level of nutrition and the standard of living of its people and to make health care amongst its primary duties. In Britain the National Health Service gives health coverage to everyone living in the British Isles. In India most State Governments are allowing the health facilities in the public domain to run down so that the private health care facilities can prosper. Is this not a clear violation of the primary duty of the State? Similarly, in education it is the duty of the State to provide free and compulsory school education. Government seems to be willing to invest thousands of crores of rupees in setting up eight new Indian Institutes of Technology and seven new Indian Institutes of Management. School education, however, is woefully neglected. Here the public-private partnership mode is advocated by our dear Planning Commission, even though in the America which is beloved of the Planning Commission, school education is firmly in the public domain. At the lowest end of the spectrum of education neglect of school education has resulted in our having one of the worst run school systems in the world. At the top of this spectrum the Indian Institutes of Management charge an unrealistically high fee, which students can afford only by taking a hefty loan, the nightmare of whose repayment looms large before them. Therefore, instead of acquiring knowledge the students only try and acquire a higher employability profile so that they can be immediately employed on high remuneration. Genuine education, research and development go by the board. Neglect at one end and high fees at the other have given us exactly the same result, a complete lack of genuine education. Is this what the free market economy is designed to do?

Subsidies come with a price. One has to find funds for subsidies and a government which will not progressively tax the affluent naturally resorts to deficit financing. If, for example, Mukesh Ambani had to pay an expenditure tax of Rs. 650 crores on the Rs. 650 crores he spent on constructing his new house in Bombay, or the Swaminarayan sect had to pay Rs. 1,500 crores tax on the Rs. 1,500 crores spent on the Akshardham temple at Delhi, government would have the funds for genuine subsidies. The alternative would be for potential big spenders to demonstrably prove that they are diverting luxury spending to physical or social infrastructure development, thus relieving pressure on the budget. In any case deficit financing for a defined purpose is not really evil, as any Keynesian economist will vouch, provided it creates assets which begin to contribute to economic development.

The administration of subsidies is our biggest weakness. First and foremost subsidies cannot be a means of populism and both the need for subsidy and its quantum and time span must be carefully thought out. The administration of each subsidy has to be made over to a dedicated officer or organisation, whose area of responsibility and accountability must be defined. Within the organisation there must be interlocking accountability, with the sins of the subordinate being visited on the superior. Punishment must be swift and sure and there has to be ruthlessness in awarding it. Equally important is reward for good work. The supervisory, monitoring and evaluation has to be tight knit and the subsidiary regime must be free of politics, completely open and amenable to public viewing and review. I refuse to believe that we cannot run a system efficiently and honestly because I personally have run systems accordingly. I know government has many officers better than I --- all they need is a sense of direction, a motivation to succeed and freedom to operate without interference, badgering or worse.

In the ultimate analysis the key word is equity. If equity is to be ensured in a country with massive income differentials, then effective use of subsidies has to be one of our major weapons. Let us not shy away from it.

Author is Visiting Fellow in Vivekananda International Foundation

A Wrong Move on Lanka

Kanwal Sibal

Many arguments can be made against our decision to vote against Sri Lanka in the Human Rights Council in Geneva, a decision highly questionable from the foreign policy point of view. Domestic compulsions seem to have outweighed foreign policy considerations in this case.

India and the West have been at odds on how best to address the issue of human rights internationally. India shares the view that the West uses the issue to embarrass, destabilise or topple politically uncongenial governments.

During the Cold War the Soviet Union was succesfully destabilized through the human rights basket of the Helsinki Accords. Cuba has been a favourite target year after year.

After the Cold War ended many countries have come under the West’s scanner on human rights issues, ranging from Libya, Iraq and erstwhile Yugoslavia to Iran, China and Russia. Belarus is under pressure on this count and so is Syria. India, until recently, has been under stress too.

Hypocrisy

With improved India-US ties the US government now disregards periodic reports from international human rights organizations on our alleged human rights infringements in J&K in particular, but the issue has not disappeared.

Because the West uses the issue of human rights selectively, targetting adversaries and protecting allies, India has taken a principled position all these years at Geneva to oppose or abstain on human rights resolutions against individual countries in the Human Rights Commission and its re-incarnation under US pressure as the Human Rights Council.

India has not believed in this name and shame game played for cynical ends by powerful countries who claim the high moral ground on humanitarian issues, but whose own international actions, often hugely costly in human terms, are shielded from any formal censure because of their dominant position.

India also believes that the principle of sovereignty of states and non-interference in their internal affairs should be respected. While India shares the values of democracy, pluralism and human freedoms with the West, it differs with it on the degree of activism to spread these values world-wide.

In India’s thinking promotion of values should not be a cover for an aggressive promotion of self-interest. India does not want to be in the business of shaping the global order according to the values it espouses as a country, as that entails passing judgments on how countries run their internal affairs and assuming burdens on behalf of the citizens of a foreign country that rightly fall within the purview of national governments.

In the case of the vote on Sri Lanka, irrespective of the reality of the human rights situation there, we have departed from our principled position on these matters. The irony is that in the past we have stood on the side, explicitly or implicitly, of China, Sudan, Belarus, Zimbabwe, Turkmenistan, North Korea, Iran, Syria and so on by voting against or abstaining on resolutions.

Are these countries closer to us than Sri Lanka? If we had to move from principle to pragmatism on human rights issues, should we have begun with Sri Lanka, where bilateral sensitivities are far more acute than in any other case?

Once we drift from our moorings of principle at Geneva, we will not be able to escape taking up positions on human rights issues involving specific countries.

Tomorrow how will we justify not voting against Iran, or for that matter China? And, if for delicate political reasons we do not want to rock our relations with these countries by joining others in indicting them, how will we justify in retrospect our vote against Sri Lanka?

In voting against Sri Lanka on a western sponsored resolution, have we now concluded that the West’s treatment of human rights issues has become universally acceptable and even-handed in its treatment of friends and adversaries?

Diplomacy

Our vote against Sri Lanka in a multilateral forum should have followed a public hardening of posture bilaterally with our neighbour. We should have appeared to have exhausted bilateral diplomacy before joining the West at Geneva to summon Sri Lanka to assume its human rights responsibilities towards its own population. We have, however, maintained an intensive dialogue with Sri Lanka on the Tamilian question and are undertaking rehabilitation and reconstruction operations in the North.

We have not given any impression of a diplomatic impasse with Sri Lanka even as we have continued to press it to discard triumphalist thinking and move forward on reconciliation and devolution.

That we amended the US/EU sponsored resolution to make it less intrusive, more balanced and more respectful of Sri Lankan sovereignty is not sufficient justification for joining with distant powers to pick on Sri Lanka at Geneva.

We should be in control of our relationship with Sri Lanka instead of following the lead of others or seeking to achieve our own political ends through them. Those in India advocating that we should have taken the lead at Geneva to move against Sri Lanka are implicitly endorsing the manipulative dimension of western human rights policies, while forgetting that this instrument has been used against us in the past and can be in the future. Those who argue that in censuring Sri Lanka India has shown its readiness to act as a responsible power subscribe to demeaning criticism of India in western circles as well as the fiction that western policies are inherently responsible.

While democracies have to be sensitive to public opinion, should our foreign policy be held hostage to coalition politics? Should individual states be allowed to dictate to the centre foreign policy decisions whose implications go beyond immediate domestic political equations? Our foreign policy risks becoming erratic and capricious if domestic pulls become overly influential in shaping its direction.

Indian Maoists: The Extent of Their External Linkages

Dr. N. Manoharan

It is untrue to consider Left-wing Extremism as purely local and self-sustaining. The extent of external linkages of the Indian Maoists is vast. The actors with which Naxals have linkages include Maoists of Nepal, militant groups operating in the northeast India, anti-Indian actors – state and non-state – based in Pakistan, and umbrella organisations at regional and global levels. The motives for the linkages are wide-ranging: to procure different varieties of arms, obtain training assistance, strengthen finances, trade drugs, ideological affinities, and to forge a broad front against the “common enemy” – India – in achieving the overall objective of capturing state power. Contextualising and justifying external linkages within the Maoist thought, the Naxals hold that

There are two different kinds of United Fronts. One, between people, and the other between people and enemy (a section/group/persons from enemy classes) using the contradictions among the enemy. [Maoist] Party has to do that. This scope is there to some extent on some issues. We call it the indirect reserves of the revolution which can be used carefully. If we have clear understanding that they are not our class allies, then we would not have right opportunist deviations. We need united fronts of this kind for the success of the revolution.¹

The Indian Maoists have of late been found more than suitable for its agenda by the Inter-Services Intelligence (ISI), in its attempts to rope-in India-based militant groups. The overall intention of the ISI is to give an impression to the outside world that all terror attacks in India are home-grown.² Indo-Nepal and Indo-Bangladesh borders are used extensively by the Pakistan-based Islamic groups as transit routes to reach out to Naxals. At the same time, Naxals are somewhat cautious in their liaison with jihadist groups because of long-term consequences. Therefore, the Naxal leadership is said to be in favour of “specific and need-based exchanges’’ with these groups that could be restricted to “consequential solidarity”. ³ The Maoists are aware of the fact that if the LeT-Maoists alliance is comprehensive and deep, it would be easier for the Indian state to club LWE also under anti-terrorism and respond accordingly. Naxals would not wish such a state response that could be more ruthless than the present “holistic” one. At the end of the day, ideology and objectives of these groups are quite different. However, even limited cooperation is a cause for concern, as Naxals are desperately looking outwards to enhance their military potential vis-à-vis the Indian state’s ongoing military push.

Naxal dominated areas are not only rich in minerals, but also popular drug cultivating tracts (cannabis and poppy in particular) in the states of Madhya Pradesh, Maharashtra, Chhattisgarh, Bihar, Jharkhand, Orissa and Andhra Pradesh. Apart from being world's largest producer of licit opium and the only authorised user of the gum method of opium production for pharmaceutical preparations, India is also sandwiched between ‘Golden Crescent’ and ‘Golden Triangle’, the two major drug producing and trafficking regions of the world.⁴ This geo-economic factor has not only helped Maoists to collect protection money from drug cultivators, traders and traffickers, but also to involve themselves directly in drug-trafficking. This is evident in seizure of large contrabands of marijuana that was being brought from states and specifically areas which are Naxal-infested.⁵ They are the latest entrants in this trade to fund their activities. Drugs like marijuana from Naxal areas are found for street sale even in remote areas of southern states like Kerala. The marijuana cultivated in the Naxalite-dominated forests bordering Orissa and Andhra Pradesh (called “Sheelavathi” in local name) is said to have higher tetrahydrocannabinol content, a psychoactive compound, than that of locally produced drugs (called locally as “Neelachadayan”). These drugs are peddled by Naxal-linked middlemen in large quantities by rail and road, including on buses conducting inter-State services. ⁶

Despite in ceasefire mode and under UN monitoring, the Nepali Maoists have been extending “full support and cooperation” to their counterparts of India not only on ideological basis but also for arms procurement, drugs trade, training and resource mobilisation. ⁷ The Maoists on both sides of borders have also formed the Indo-Nepal Border Region Committee to coordinate their activities in North Bihar and along the India-Nepal border. Porous open border between India and Nepal has facilitated smooth coordination between the groups.⁸ The People’s Liberation Army, the military wing of the Communist Party of Nepal (Maoists), has been involved in providing military training and bomb making to sections of Naxalites. ⁹ The Lashkar-e-Toiba operatives are also said to be involved in the training, especially in the use of IEDs, in Maoists-run camps of Nepal.¹⁰

Till recently, Naxals had working relations with the Liberation Tigers of Tamil Eelam (LTTE) especially on training. When the LTTE was active and fighting for Eelam in the northeast of Sri Lanka, it regularly supplied arms and ammunition to Naxal groups delivered mostly at the coasts of Andhra Pradesh. ¹¹Naxals came to know of the LTTE through the Tamil Nadu Communist Party-Marxist-Leninist (TNCP-ML) that was formed in 1984-85 after a split between Communist Party of India – Marxist Leninist (CPI-ML) and its Tamil Nadu unit.

The Indian Maoists have good network with several key militant groups of the northeast India. In fact, with some groups, the exact modalities of working – formal, semi-formal and informal – are spelled out through “memoranda of understanding”. The Naxals get arms and training from the northeast militant groups like National Socialist Council of Nagaland (NSCN-IM), United Liberation Front of Asom (ULFA), People’s Liberation Army (PLA), People’s Revolutionary Party of Kangleipak (Prepak), Revolutionary People’s Front (RPF), Kamtapur Liberation Organisation (KLO), Gorkha Liberation Tiger Force (GLTF), Gurkha Liberation Organisation (GLO), Adibasi National Liberation Army and National Democratic Front of Bodoland (NDFB). Chinese small arms find their way to the ‘Red Corridor’ mainly through the northeast militant groups.¹² The mutual support between Naxals and northeast militant groups is not just restricted to material, but extends to moral aspects as well. While Naxals have strongly supported “people’s movements” of the northeast, the northeast militant groups have stood by “revolutionaries”. “Enemy’s enemy is a friend” is the guiding maxim in this case as well. It is through the northeast groups the Maoists have good access to militant groups of Myanmar. There are also attempts by the Naxals to set up support bases in tea garden areas in upper Assam and some of the tribal areas in the hilly interiors. Presently, the Krishak Mukti Sangram Samiti of Assam is working as a front of Maoists in Assam. ¹³

According to Maoists “it is important for the success of the Indian revolution as an inseparable part of great world socialist revolution to actively defend Maoism, fight imperialism and support the class struggle throughout the world and also take the support of the International Maoist Parties/Organizations/Forces, proletariat and people.”¹⁴ It is for this purpose they maintain fraternal relations with Maoist and “anti-imperialist forces” through several umbrella organisations that exist at regional and global levels.

Prominent among them is CCOMPOSA (Coordination Committee of Maoist Parties and Organisations of South Asia), formed in July 2001, with a purpose to unify and coordinate the activities of “genuine” Maoist parties and organisations in South Asia. The present constituent parties of CCOMPOSA are, apart from CPI (Maoists), Purbo Banglar Movement (Bangladesh), Communist Party of Ceylon (Sri Lanka), United Communist Party of Nepal (Maoist), Poorba Bangladesh Sarvahara Party (CC), Communist Party of East Bengal (ML), Red Flag Communist Party of Bhutan(MLM), Communist Party of India (MLM), and Communist Party of India (ML) (Naxalbari). The CCOMPOSA members have agreed to share each others’ experiences and strengthen one another in “fighting back the enemies in the respective countries” and “making South Asia a blazing center of world revolution.”¹⁵ The aim of the organisation was identified to “develop mass movements against the common enemy, i.e. Indian Expansionism, the world imperialist system, particularly US imperialism, the No. 1 enemy of the world people; and to overthrow the existing system in the countries of South Asia.”¹⁶ Conferences are held from time-to-time to take stock of the situation and plan responses. So far, only five such conferences have been held since the formation of the body – once in two years on an average. However, CCOMPOSA received a setback with the Nepali Maoists joining political mainstream renouncing violence.

At the global level, FOIR is an important umbrella organisation whose representatives abroad seek to raise finances in several countries, especially that of the West, for the “cause” of the Indian “revolution”. Then there are bodies like International Conference of Marxist-Leninist Parties and Organisations (ICMLPO), Revolutionary Internationalist Movement (RIM), World People’s Resistance Movement (WPRM) and International Communist Movement (ICM) that link LWE groups located all over the world stretching from Peru in the West to Philippines in the East. They sustain fraternal ties and jointly conduct programmes that are mutually beneficial.¹⁷ This does not mean that the Maoists are unanimous in their opinion on linkages with international communist movements. For instance, before the merger of Maoists Communist Center (MCC) and People’s War Group (PWG) to form CPI (Maoists), the MCC had joined RIM in 2002, but the PWG opposed the idea. After the merger, the MCC pulled out of RIM as per the decision of the new Party. The RIM went out of action anyway.

Reference :

1. Interview with Ganapathy, the General Secretary of the CPI (Maoists), by Jan Myrdal and Gautam Navlakha, January 2010, accessed on 20 April 2011.

1. Sandeep Unnithan, “Karachi Project,” India Today, 18 February 2010.

1. Anupam Dasgupta, “LeThal enemy,” The Week, 17 April 2011

1. Bureau of International Narcotics and Law Enforcement Affairs, International Narcotics Control Strategy Report (INCSR)-2011, Vol. 1, 03 March 2011, p. 301.

1. “Drug menace: Narcotics Control Bureau tightens screw,” Daily News & Analysis, 06 April 2011.

1. Ganja trail leads to Naxal belt,” The Hindu, 24 August 2010.

1. “Nepal Maoists admit link with Indian Naxals,” The Times of India, 03 November 2009

1. “For Naxals, the Bihar-Nepal border is line of no control,” The Indian Express, 26 August 2004.

1. “India ‘concerned’ over Nepal Maoists’ link with Naxalites,” Hindustan Times, 06 November 2010.

1. “Let send Nepal conduits to build Naxal links,” The Indian Express, 28 May 2010.

1. “LTTE, Naxal tryst on high seas,” The Times of India, 17 June 2004.

1. “Security forces recover Chinese arms from Naxals, militants,” Daily News & Analysis, 16 November 2009.

1. “Cornered Naxals are cozying up to NE ultras,” Rediff News, 25 February 2011.

1. Interview with Ganapathy, the General Secretary of the CPI (Maoists), by Jan Myrdal and Gautam Navlakha, January 2010, accessed on 20 April 2011.

1. Press Release of 5th Conference of CCOMPOSA, 23 March 2011, accessed on 25 May 2011.

1. Press Statement of CCOMPOSA, People’s March, Vol. 4, No. 8, August 2003.

1. “Support for Naxals goes global,” People’s Review, 24 February 2011.