A rational fertiliser policy always seems to be sabotaged by the very minister who is expected to implement it. Union Fertiliser Minister M K Alagiri has come out against the idea of decontrolling urea prices, ostensibly in the name of the farmer. The nutrient-based subsidy (NBS) system, as opposed to product-based subsidy, is unworkable if producers do not have the freedom to fix sale price. The fundamental objective of this system is to promote balanced use of fertilisers and rationalisation of the ever-mounting fertiliser subsidy. What the fertiliser minister is disregarding is that the NBS regime has been working well ever since it was introduced for phosphatic (P) and potassic (K) fertilisers in April 2010 and was subsequently extended to several other plant nutrients, barring N (urea).

Fertilising policy

Business Standard

The Union government cannot expect the media and Parliament to remain silent on the news report that Finance Minister Pranab Mukherjee had written Prime Minister Manmohan Singh a letter demanding an inquiry into a possible breach of security in the Union finance ministry, involving the possible placing of listening devices in the rooms of the finance minister, his personal secretary and advisor. These are key functionaries of a highly sensitive ministry. The finance ministry would rank on a par with the defence ministry and the Prime Minister&rsquo;s Office as far as the need for foolproof security is concerned. Any leak of classified information and privileged conversations can have significant economic and national security ramifications.

Chewing the bubblegum

Just when it seemed that stable fuel supply linkages to the domestic power sector were crystallising comes the double whammy of lower domestic gas availability (mainly from the Krishna-Godavari basin) and higher prospective price of coal imports due to a global surge of &ldquo;resource nationalism&rdquo; in countries ranging from Australia to Indonesia. The downstream effects are beginning to be felt, particularly in the domestic power and fertiliser industries.

Downstream dilemmas

Remember the food riots of 2008? Is the world heading towards another food crisis? That, worryingly, seems to be the conclusion that a new publication on food prices and availability in the next decade (2011-20), issued jointly by the Organisation for Economic Cooperation and Development (OECD) and the United Nations Food and Agricultural Organisation (FAO), arrives at. The OECD-FAO report forecasts agricultural commodity prices, in real terms, remaining higher over the next 10 years than the price levels registered over the previous decade. This would put poor consumers at a higher risk of malnutrition. Cereal prices are forecast to swell, on an average, by 20 per cent and meat prices by 30 per cent. Worse, the world&rsquo;s food production is foreseen to grow annually between 2011 and 2020 only by 1.7 per cent, compared with 2.6 per cent in the previous decade. The slowdown in crop productivity growth will, obviously, exert pressure on international prices.

A spoonful of policy

The United States may have become increasingly insular both in terms of economic policy and foreign and security policy, returning to an isolationist phase that it has lived through time and again. But as the world&rsquo;s largest and still globally important economy, it continues to have an impact on the fortunes of big and small economies around the world. What the US government, Congress and the country&rsquo;s macroeconomic authorities do has a bearing on currencies, markets, and capital and trade flows around the world.

A new Washington consensus

The Union government has brought the protests against the the fuel price increase on itself by opting for a one-time sharp price escalation over gradual and graduated increases in response to global market trends. It is understandable that there would be some amount of public resentment, and that opposition political parties would try to exploit that. However, the government has a strong case, especially for increasing the prices of kerosene, diesel and LPG, so it should educate public opinion, defend itself and stay the course. The Union government should have known that it would be damned if it increased prices and damned if it didn&rsquo;t. India cannot endlessly afford the luxury of subsidising energy, especially imported energy.

Getting prices right

The announcement by the Indian Space Research Organisation (Isro) that the Geosynchronous Satellite Launch Vehicle (GSLV) will launch India&rsquo;s most sophisticated communications satellite, GSAT-14, in 2012 with an indigenous cryogenic engine has been greeted with a mixture of caution and hope. Despite considerable progress in developing indigenous capabilities in the design and launching of satellites, the final frontier &ndash; a reliable capacity to place payloads of at least four tonnes in orbit &ndash; continues to elude Isro. The celebrated launch of the 3.1-tonne GSAT-8 late last month from Arianne&rsquo;s space facility in French Guiana could barely conceal Isro&rsquo;s own lack of confidence to propel payloads of this magnitude through its indigenous launch vehicle, the GSLV.

Financing its flight

The Department of Industrial Policy and Promotion&rsquo;s, or DIPP&rsquo;s, latest proposal on allowing foreign direct investment (FDI) in &ldquo;sensitive&rdquo; sectors represents a classic half-solution to a festering issue. It has suggested that FDI in these sectors &ndash; multi-brand retail being the principal one but also defence and media &ndash; should be allowed via an indirect downstream route. Under this route, ingeniously thought up in Press Notes 2 and 4 of 2009, entities with up to 49 per cent FDI and controlled by Indians can invest in these areas through downstream units. So, if Walmart, for example, wants to set up a chain in India, it only needs to invest in a holding company with an Indian partner who holds 51 per cent which will, in turn, invest in a downstream entity that actually operates the retail chain.

Green signal for FDI

Politics in Karnataka temporarily left its own arena and sought to use the religious space to settle scores, with poor results. Things took a new turn recently when former chief minister and Janata Dal (Secular) leader, H D Kumaraswamy, made a startling allegation that Chief Minister B S Yeddyurappa had sent a personal emissary to him offering truce in return for getting his work done through government expeditiously. Instead of simply refuting the allegation, the chief minister brought the Gods into the conflict by challenging Mr Kumaraswamy to utter his allegation under oath before the presiding deity of Dharmasthala, Lord Manjunatha, while he himself would repeat his denial in the same manner. This is because the customary belief is that anyone uttering falsehood before the deity will come to grief. Things went a bit awry for Mr Yeddyurappa thereafter.

Not fit for the Gods 

The Planning Commission, the ministry of statistics and programme implementation, the Central Statistical Organisation (CSO) and the National Sample Survey Organisation (NSSO) are being overseen by some of the brightest minds in the Indian government for many years now. Both together and individually they have made a travesty of the data being brought out, debated and used for policy making. Thus, whether it is poverty or employment, the figures are so far away from reality that it is unclear whether they should be used even in an indicative manner.

A poverty of statistics

No one can deny that in a country like India, wasting food and ostentatious consumption at social gatherings are a social crime. A social movement espousing moderation in consumption habits would instantly strike a chord with a large number of Indians. Also, few would deny that India&rsquo;s newly rich and upwardly mobile like to indulge in conspicuous consumption to show off to their peers and neighbours that they have arrived. From your neighbourhood get-rich-quick real estate broker to the new billionaires, everyone who has come into wealth likes to show off, especially at family events like a wedding or a birthday party. So, the idea of promoting temperance and moderation, of campaigning against wastage, is well taken. Yet, visible prosperity of the upwardly mobile has the positive social externality of encouraging the less energetic to work harder and be smarter.

Wasting food

For a government that has been busy granting the people of India rights to employment, education and food, the United Progress Alliance has been lackadaisical in protecting the citizens&rsquo; right to privacy. Industrialist Ratan Tata was, therefore, right to seek the protection of the Supreme Court in the matter relating to leaked tapes of telephone tapping undertaken by the Union government&rsquo;s tax authorities.

The right to privacy

Rebellion is not new to the Indian National Congress, nor indeed to party president Sonia Gandhi. Once a famous rebel, Maratha strongman Sharad Pawar is now an ally! So, the Congress party need not be rattled by the revolt of Y S Jagan Mohan Reddy, Congress member of Parliament from Andhra Pradesh, son of former chief minister the late Y S Rajasekhar Reddy, now also a media baron and businessman. The young man is at once gripped by a sense of injustice and vaulting ambition.

The mess in Hyderabad

The gross domestic product (GDP) estimates for the second quarter (July-September) of fiscal 2010-11 were a welcome reassurance that the economic recovery witnessed over the past year is on track. Data released by the Central Statistical Organisation (CSO) estimated that GDP in the second quarter of FY11 at constant prices was 8.9 per cent higher than the corresponding period in FY10. GDP growth rates exceeding 8.5 per cent in successive quarters seems to indicate that the economic momentum gathered over the previous year has solid foundations and the annual target of 9 per cent is imminently achievable. The balanced contribution from various sectors of the economy was even more heartening. Agriculture (including forestry and fishing), the traditional underperformer, registered a year-on-year (y-o-y) growth of 4.4 per cent during the period, due to bountiful rainfall over significant portions of the country, particularly the major food-producing states.

The growth imperative

Now that the unique identity (UID) or Aadhaar rollout has started and is slated to gather steam, a few key decisions need to be taken to derive the best advantage from the technological feat that the project represents. One is to make the UID number adequate proof of identity for the purpose of accessing basic financial services like opening a bank account. The other is to protect the privacy of individuals which can be threatened by wrongful use of the humongous amount of data that the project will collect. The UID authorities are already discussing the former with the banking regulator, the Reserve Bank of India, and the Union finance ministry but it needs to be emphasised that this should be allowed and soon. Currently, banks mostly accept a new customer when she is introduced by an existing customer. It is easy to see how this does not take financial inclusion forward. The problem of getting an introduction gets more acute in the case of a migrant labourer.

Agenda for Aadhaar

While officials of the Reserve Bank of India (RBI) had publicly stated that the central bank was keen on ensuring a cash deficit of Rs 50,000 crore on average in the banking system (forcing banks to borrow from RBI through the repo window), the average shortfall over the past month has been well over Rs 100,000 crore. In its keenness to rein in inflation, has RBI&rsquo;s liquidity squeeze been a case of overkill? What could have contributed to this? There could be several reasons for this. For one, a one percentage point increase in the cash reserve ratio or CRR (the fraction of deposits that banks are mandated to keep with RBI) over the last two years has reduced the amounts of spare cash that banks have. In the process, the so-called money multiplier has declined and the pace of money creation in the economy has slowed.

RBI and cash famine

Edible oil imports have surged to a record 9.24 million tonnes last year and were estimated to be nearly Rs 38,000 crore. They have emerged as the third most important import item, next only to petroleum products and gold. India is now the world&rsquo;s largest importer of cooking fats, meeting more than half of its requirement through overseas supplies. Considering the country&rsquo;s huge and fast-growing demand for cooking oils, such high import dependence should be a cause for concern. This is especially so because palm oil, which accounts for 80 per cent of the imports, is available chiefly in only two countries, Malaysia and Indonesia. Any shortage of supply owing to crop failure or disruption of inflows will cause scarcity in the domestic market. What is even more disquieting is that the gap between domestic demand and supply of vegetable fats is set to widen, since indigenous production of oilseeds is stagnant while the demand continues to grow.

Oiling the oilseeds economy

China: Beijing wants to tighten monetary policy to be more &quot;prudent&quot;. Yet it also pledges more public spending. These contradictory goals may compromise the ruling party's ability to contain inflation, while raised interest rates will put more upward pressure on the yuan.

Dear prudence

The Phonegate transcripts saw the media roundly &mdash; and rightly &mdash; censured for the evidence of collusion with corporate groups and lobbyists that they clearly revealed. But little has been said about the role of the public relations (PR) industry in this controversy. In her sometimes fevered conversations with journalists and others in the transcripts that are in the public domain, Ms Niira Radia of Vaishnavi Communications, with clients like Ratan Tata and Mukesh Ambani, can be said to have done her job efficiently. But as any public relations professional will attest, there is a difference between the practice of lobbying, on the one hand, and advocacy on the other and Ms Radia was certainly talking the thin line between the two. Indeed, if Phonegate revealed anything, it is the urgent need to create the conditions for transparency and accountability in the public relations business.

How about a Lobbying Act?

The construction of extra floor space, violating the sanctioned master plan, may have helped make New Delhi&rsquo;s new airport terminal, T3, among the world&rsquo;s biggest airport terminals, but bad planning seems to have given T3 a new meaning &mdash; &ldquo;terribly tedious terminal&rdquo;! While a cost audit report submitted to the Airports Economic Regulatory Authority has its focus on the escalation of cost of construction as a consequence of the extra floor space built, most passengers using the terminal complain about the long distances that have to be covered in negotiating the terminal, both inside and outside. The distance from the car park to the terminal, the logistics of entry and exit of vehicles and the parallel bays for various categories of vehicles have all irritated visitors to the airport.

Terribly tedious terminal

India has come a long way from the days when a visiting managing director of the International Monetary Fund (IMF) would, on the one hand, be greeted with hostile demonstrations from unions and other opposition parties, and, on the other, go away after sermonising his hosts. The IMF&rsquo;s MD, Dominique Strauss-Kahn, neither faced angry crowds in New Delhi, during his visit last week, nor did he have to lecture his hosts on policy. On the contrary, he paid compliments to India&rsquo;s macroeconomic authorities and commended them for their policies and their record of economic management in difficult times. He went beyond the call of duty when he endorsed the government&rsquo;s views on capital inflows.

Strauss-Kahn and the Fund

Incisive columns and editorial comment by top opinion leaders

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