No shortage of land, no environment clearance, no social impact assessment, massive tax holidays, and still SEZs failed to perform.

I still remember vividly. Several years back, the former Prime Minister Manmohan Singh was presiding over an annual corporate awards function organized by a business newspaper. After Manmohan Singh’s address, the floor was set open for some questions from the audience.

Industrialist Anand Mahindra got up and asked a question which went something like this: “Mr Prime Minister, what should a young graduate from an Indian Institute of Management look up to in today’s not-so-attractive business environment?” To this, Manmohan Singh gave an answer, the gist of which was: “We are determined to set up exclusive export zones providing required incentive and support for the young entrepreneurs. Special Economic Zone (SEZ) is an idea whose time has come.”

The SEZ Act was passed in 2005. There was so much of excitement all around that all farmer protests over land grab were simply brushed aside.

Seven years later, the SEZ turned out to be a misplaced idea. According to an economic newspaper it was an idea long past its expiry date. With more than 50 per cent land allotted remaining unused, and with no significant role in creating employment and boosting exports, most of the SEZs that have been approved have turned into real estate havens. Not meeting the intended objectives of spearheading a manufacturing revolution, these SEZs were effectively used by the IT companies to avail tax incentives by shifting their offices into these zones.

A Parliamentary Standing Committee had in June 2007 estimated a revenue loss of Rs 1.75 lakh crore from tax holidays granted between 2005 and 2010. Reading the performance audit of the SEZs operations, between 2007-2013, by the Controller and Auditor General (CAG) tells us the magnitude of the SEZ scam. Of the 576 SEZ projects approved, 392 were notified and only 170 are operational. While less than 48 per cent of the existing SEZs are engaged in any export activity, only 3.8 per cent exports came from these zones in 2013-14.

“Out of the 45,635.63 hectares of land notified for the development of SEZs, actual operations took place in only 28,488.49 hectares or 62 per cent of the land acquired,” the report states. In a scathing comment, CAG says “Acquisition of land from the public by the government is proving to be a major transfer of wealth from the rural populace to the corporate world.” With 50 per cent land lying idle, many developers had put the land to other industrial uses or used it for building real estate hubs and even mortgaged it to raise finances.

Interestingly, the Commerce Ministry had turned a blind eye to the gross mismanagement and violations of the SEZ Act. It is now considering to allow developers of SEZs to throw open apartments, schools and hospitals to people who live outside these zones. Land has also been used for setting up residential complexes or used for other industrial activity, not permitted under the SEZ Act.

Just to give you an idea as to what all kinds of tax exemptions were accorded, here is a list. The SEZs were given complete exemption from excise duty, custom duty, sales tax, octroi, mandi tax, turnover tax, as well as income tax holiday for ten years. Also spelled out were provisions for 100 per cent foreign direct investment, exemption on income tax on infrastructure capital fund and individual investment, and an assurance of round-the-clock electricity and water supply. The SEZ promoters were also been given a waiver from carrying out an Environment Impact Assessment.

Permitted to indulge in commodity hedging, external commercial borrowings up to US $500 million without any maturity restrictions, freedom to bring in export proceeds without any time limit and make foreign investments from it, exemption from interest rate on import finance, and setting up off-shore banking units with income tax exemption for three years and subsequently 50 per cent tax for another two years are some of the financial enticements. And if these SEZ units were to sub-contract production to local manufacturers outside the princely estates, there would be duty drawbacks, exemption from state levies and income tax benefits.

With these kinds of generous tax exemptions, and with huge tracts of land being made available, I fail to understand why the SEZs did not perform. This assumes significance at a time when a Land Acquisition Ordinance has been brought in simply to overcome the delays in getting land for the industries. If 45, 635 hectares of land and with practically no obligation for paying taxes, the industry has failed miserably to perform, what is the guarantee that more land for the industry will usher in a manufacturing revolution?

It was certainly a badly conceived idea. The undue haste with which the SEZ Act was passed in Parliament, and the swiftness with which the Ministry of Commerce had drafted the rules and implemented the Act remains unprecedented. At a meeting I had with the then Joint Secretary in charge of SEZs, I was told that I was the only one who was questioning the role of SEZs. “Everyone I meet is all praise for this great opportunity for boosting export growth and creating jobs,” I was told.

This only illustrates how the economic policies and frameworks are put into practice. Ministry of Commerce had gone ahead in its wisdom to aggressively promote SEZs without first assessing whether it will work or not. Nor did it care to have widespread consultations or any social and environmental impact assessments. This myopic approach led to a massive scam. Massive land resources were misused, and resulted in huge revenue losses.

To ensure that such a scam is not repeated, I have two suggestions: First, the then Commerce Minister and the concerned officials should be held accountable for the SEZ scandal. Good governance can never be enforced without holding ministers/bureaucrats responsible for their decisions. Secondly, the erring companies must be penalized for the failure to perform and land and other resources recovered from them with penalties. The industry must be made to understand that there are no free lunches. Such a step will send a right kind of signal to the industry. It must perform or perish. #

Orissa Post: Scam-tainted SEZ Feb 4, 2015
http://www.orissapost.com/epaper/040215/p8.htm

DNA Mumbai: Economic Disaster Zones. Feb 20, 2014
dnai.in/cA8b   

India Together: Why easy land is no guarantee of Industrial growth, Feb 9, 2015
http://indiatogether.org/sez-failure-implications-for-land-acquisition-and-industry-growth-economy

Why does the world need SHG's, just ask World Bank to perform the rope trick !

For 60 years, India made a half-hearted attempt to reduce poverty. Why I say a half-hearted attempt is because the way the Planning Commission worked out a stringently low poverty line all these years, aimed more at ensuring a low budget outlay for fighting poverty, it lacked any meaningful commitment to make poverty history.  

Let me explain why it didn’t work. Perhaps this story will better explain. A poor person fell down in a 100-feet deep village well. Listening to his cry for help, a number of villagers collected and were exploring the options of pulling him out. Meanwhile, an economist, who happened to be passing by, saw the crowd and walked it to know what was happening. He told the villagers to step aside as he could be of help. Looking at the depth of the well, he immediately worked out that the man in the well probably had to energy to climb the walls to about 50 feet. So he told villagers to bring a rope of 50 feet that can pull out the man to safety.

The poor man, who was crying for help, finally was drowned.

This story tells you how all these years a futile half-hearted attempt was made, despite substantial budgetary outlays, knowing well that the poverty eradication strategy will not work.

In the last three decades, policy makers found a still better way of removing poverty. Knowing that much of the half-attempts being made was going waste, they realized the best way to remove poverty is to sweep the number of poor under the carpet. I still remember when Pranab Mukherjee was the deputy chairman of the Planning Commission (1991-96),  he brought down poverty in one shot from 37 per cent to 19 per cent. It was only after the next government took over, and replaced the Planning Commission members, that poverty was once again restored back to 37 per cent.

The business of poverty that actually extends to sweeping the poor under the carpet has now grown worldwide.  

Over the years I find that while most governments across the world have failed to stem poverty (except in countries like China), the international financial institutions are bending backwards to demonstrate that economic liberalisation helps in reducing poverty, and often drastically. This is being achieved by tampering with statistics, and often providing social indicators that don't actually measure up. One such classic example is the dollar a day measure adopted by the World Bank to define the percentage of the population living in extreme poverty.

Global empirical evidence is now emerging challenging the World Bank's deliberate underestimation of poverty. Recent studies have conclusively shown that in Latin America for instance actual poverty rates are twice than what the World Bank had projected. More recently, on April 11, 2014, a study by the University of Bristol concludes that the World Bank is painting a 'rosy' picture by keeping poverty too low due to its narrow definition. Dr Christopher Deeming of the Bristol University's School of Geographical Sciences is quoted as saying: "Our findings suggest that the current international poverty line of a dollar a day seriously underestimates global poverty."

Not even caring for such voices, World Bank has found another magic rope trick to remove poverty. Using the Purchasing Power Parity (PPP) index, it has in its latest poverty vanishing trick reduced India’s poverty in one stroke from 400 million in 2005 to a very impressive 98 million in 2010. What Planning Commission could not do in 60 years, World Bank has done remarkably well in just five years – between 2005 and 2010.

I find the World Bank behaving like a pigeon when comes face to face with a cat. By closing it eyes, the pigeon fatally pays for its mistake thinking that the danger has gone away. Similarly, removing poverty by a statistical jugglery is a dangerous exercise. It’s therefore time for India not to bask in the glory of fake poverty reduction figures but to accept the dark reality.

Poverty in India is actually growing. If you raise the existing global poverty line from 1.25 dollars a day to just 1.5 dollars a day, as Asian Development Bank has shown, India’s poverty line swells to 584 million or 47.7 per cent of the population. In simple words, if the poverty line extends to Rs 90/day, which is a more realistic benchmark, the number of people below poverty line in India will be at least five times more than what the World Bank has estimated.

And makes me wonder. Why does the world need to move towards the next series of targets under the SHGs? Just ask World Bank to play around with statistics. 

Making Poverty History: All it needs is statistical jugglery. ABPLive Jan 21, 2015.

bit.ly/1yKY93b

This is how the World Bank destroys economies.

The moment you read an analysis like India to Become Fastest Growing Big Economy published in Wall Street Journal on Jan 14, 2015 (http://blogs.wsj.com/indiarealtime/2015/01/14/world-bank-india-set-to-become-worlds-fastest-growing-big-economy/?mod=e2tw) you realise how the World Bank destroys economies.

The article is based on a World Bank analysis. It says: "The Washington-based development institution raised its forecast for India, saying growth in Asia's third largest economy would accelerate in the coming years even as much of the world is slowing down. The reason? New Delhi is implementing changes that will make the country's economy more efficient and vibrant."

This is almost similar to how the World Bank had eulogised the economic policies of the previous NDA regime that led to the coining of the popular slogan: Shining India. The political debacle the ruling party had suffered as a consequence drove them out of power for the next 10 years. That's a slogan the party does not want to be reminded of.

But then, World Bank has nothing to lose. At a time when the global economy is down in dumps, World Bank needs a saviour to justify its existence. Such is the desperation for increasing growth that countries like Britain and Italy have already started including prostitution and drug sales in its growth computations. That surely is some development that the world should be proud of !

Going the China path is being aggressively advocated for India while at a time China itself has changed its growth roadmap. Former Chinese President had acknowledged that 12 to 14 per cent GDP growth was unsustainable and China will try to operate at an average of 7 per cent or so. After all these years of phenomenal growth in manufacturing, China now faces a slump. Its manufacturing exports have come down by 2.3 per cent, and as a study shows its manufacturing is now becoming uncompetitive. The first Chinese manufacturing company has already moved offshore to Africa, and it is expected China will lose 85 million jobs to Africa in the next few years.  With agriculture destroyed deliberately, and with farm lands turning unproductive because of massive pollution and also with more fertile land forcibly acquired, the bigger question the world faces is: Who will feed China in the years to come?

China is the world's worst environmental disaster. World Bank would never talk about the dark side. The reason? The bigger the disaster, the higher is the GDP. That's not the path that India needs to follow. India should be able to carve out a sustainable pathway for itself rather than following blindly the World Bank prescription. It surely has the acumen to work out an economic model that meets the aspirations of the person at the extreme end, and at the same time not push the country's environment into a disaster mode. I am hopeful that Prime Minister Narendra Modi would see through the global design, and not bend backwards to adjust to the failed economic thinking. As Jospeh Stiglitz rightly says the world is witnessing economic madness.

Some years back, the then Chinese deputy Minister for Environment Pan Yue had in an interview to the German publication Der Spiegel (Mar 7, 2005) had said: 'The Chinese miracle will end soon'. I share this interview again with the hope there would be some sensible people who would understand the disastrous implications of the World Bank prescription. It's an interview that every policy maker must read:

The world has been dazzled in recent years by the economic strides being made by China. But it has come at a huge cost to the country's environment. Pollution is a serious and costly problem. Pan Yue of the ministry of the environment says these problems will soon overwhelm the country and will create millions of "environmental refugees.

SPIEGEL: China is dazzling the world with its booming economy, which grew by 9.5 percent. Aren't you pleased with this speed of growth?

Pan: Of course I am pleased with the success of China's economy. But at the same time I am worried. We are using too many raw materials to sustain this growth. To produce goods worth $10,000, for example, we need seven times more resources than Japan, nearly six times more than the United States and, perhaps most embarrassing, nearly three times more than India. Things can't, nor should they be allowed to go on like that.

SPIEGEL: Such a viewpoint is not exactly widespread in your country.

Pan: Many factors are coming together here: Our raw materials are scarce, we don't have enough land, and our population is constantly growing. Currently, there are 1.3 billion people living in China, that's twice as many as 50 years ago. In 2020, there will be 1.5 billion people in China. Cities are growing but desert areas are expanding at the same time; habitable and usable land has been halved over the past 50 years.

SPIEGEL: Still, each year China is strengthening its reputation as an economic Wonderland.

Pan: This miracle will end soon because the environment can no longer keep pace. Acid rain is falling on one third of the Chinese territory, half of the water in our seven largest rivers is completely useless, while one fourth of our citizens does not have access to clean drinking water. One third of the urban population is breathing polluted air, and less than 20 percent of the trash in cities is treated and processed in an environmentally sustainable manner. Finally, five of the ten most polluted cities worldwide are in China.

Read the full interview here: http://archive.dea.org.au/~deaorg/archive_site/node/64

India awakening to desi breeds. This will give boost to A2 milk consumption.

India is finally waking up to the importance of its native cow breeds. After the Govt provided some funds for the Gokul Mission, Ministry of Agriculture is setting up two research stations for improve the neglected breeds. One is in Mathura, the location of the other is still not finalized. Rajasthan is the first State to appoint a Minister for Cow Affairs. Haryana Chief Minister M L Khattar has signed a MoU with Gujarat under which semen of Gir cows will be made available for developing 100,000 cows of local breeds, including Haryanavi cattle.

 

A few years back when I first talked of how Brazil has become the biggest exporters of Indian breeds of cows, not many could believe that the cows that roam the streets in our country feeding on all kinds of garbage could be the prized possession of farmers far away in Brazil. So much so that in August last year, a prized pure bred Gir progeny bull in Brazil was auctioned in equivalent of more than Rs 6 crore.

 

It is generally believed that Indian cows are low in productivity. It is for this reason that Indian cows are despised at home. But over half a dozen Indian cow breeds – Gir, Kankrej, Ongole, Sahiwalamong others -- are doing exceptionally well in Brazil. Milk yield from Gir in Brazil has now crossed 70 litres. Ironically, semen of pure bred Indian breeds is now being imported from Brazil into India.

 

But more recently, world over there is a growing awareness about the nutritional superiority of the milk of the native breeds. This is measured in the form of A2 milk. Sale of healthy A2 milk in Britain and Ireland has reached Rs 10- crore in just one year after its launch. A2 milk is now available in 1,000 stores across UK and Ireland, including big retailers like Tesco, Morrison and Co-op. In Australia and New Zealand, A2 milk is now the fastest growing with a share of 8 per cent of the milk market, the sales increasing by 57 per cent in a year.

 

Pepsi Foods too has been on the forefront, and now plans to take A2 milk to the European market outside Britain. Meanwhile, China too has emerged as a strong market for A2 milk after the scandal surrounding the sale of spurious baby milk powder some years back. It is expected, China’s intake of A2 milk in the rapidly growing infant food market will double by 2020.

You will ask me what is A2 milk? Well, A2 is actually a beta-casein protein in the milk – A2 allele gene – that makes milk healthy and nutritious. Or to put it simply it is a particular character in some cow breeds that makes it milk qualitatively superior than what you have been drinking. What makes it more significant and relevant for us is that most desi cows and buffalo breeds contain A2 allele gene. In other words, 100 per cent of milk of desi cattle breeds contains the A2 allele making it richer in nutrients and much healthier than the milk of exotic cattle breeds.

If you are not drinking A2 milk, the chances are that in the long term you are likely to suffer from allergies, diabetes, obesity and cardio-vascular diseases. While the exotic cattle breeds may be producing higher milk but because of the concentration of A1 allele gene in their bodies, the milk they produce is much inferior in quality.

Studies by the National Bureau of Animal Genetic Resources (NBAGR), Karnal, have established the superiority of A2 milk in Indian breeds. In a detailed study scanning 22 desi breeds recently, it found A2 allele to be 100 per cent available in the five high-yielding milk breeds – Red Sindhi, Gir, Rathi, Shahiwal and Tharparkar.In the remaining breeds, the availability of A2 allele gene was 94 per cent. Comparatively, in the exotic breeds Jersey and Holstein Friesian, the availability of A2 allele gene is very low. 

The economic cost of promoting desi breeds is relatively much higher given the health advantages, especially in a population where diabetes, cardio-vascular diseases, allergies, digestive disorders are on an upswing. Since A2 milk builds up immunity, it certainly offers a big advantage over the commonly sold milk. In India, I am sure consumers would be willing to pay a premium if Mother Dairy and Amul for instance is able to sell A2 milk in pouches. At the same time, promotion for A2 milk will help farmers shift to traditional breeds which very well integrate with natural farming systems. Promotion of A2 milk will also make hundreds of gaushalasspread across the State turn economically viable. #

1. A2 Milk may be the answer for appalling child malnutrition, and deteriorating health of Indians ABPLive.in  http://goo.gl/V0Cp76  Jan 14, 2014

2.  Cows of a different kind. Orissa Post. Jan 15, 2014. http://www.orissapost.com/epaper/150115/p8.htm

Like Yoga, it’s time for an International Day of Safe Food

Not only yoga, with health problems accentuating in the recent past, the trend is also increasingly moving towards safe food. But while the popularity of yoga received a shot in the arm when Prime Minister Narendra Modi’s suggestion of celebrating an International Day of Yoga was accepted by the UN, safe food has yet to get a political backing.

Although Michelle Obama has taken to organic farming in the premises of the White House, and is known to serve chemical-free food to guests, she has still not been able to convince the UN to have a special day marked for safe food. Nevertheless, the preference and intake for non-chemical farm produce has grown globally over the years, and is growing at a phenomenal pace.

According to the Soil Association’s Organic Market Report 2013 sale of organic food has grown by more than 25 per cent since 2008. While in the US it is expected to grow at a compound annual growth rate of 14 per cent between 2014 and 2018; in India too, the growth looks very promising.

The Indian organic food market is likely to grow by a phenomenal annual compound growth rate of 19 per cent between 2012 and 2016.

Interestingly, not everyone keen on organic food is banking upon an organic certification. For several decades now I have seen farmers in Punjab and Haryana, comprising the wheat bowl of the country, keep a small patch of cultivated land free of chemical pesticides and fertilizers for home consumption. While they drench the crops meant for the market with whole lot of pesticides, they ensure safe food for their own consumption.

I have also watched with interest a silent food revolution taking place. In the entire northwestern parts of the country, more and more households are relying on organic wheat – the Sharbati variety – coming from Madhya Pradesh. The organic wheat that is being imported from MP comes with no certificate. It is only through goodwill and faith that people are willing to pay a higher price for what they are told is a better quality produce. The atta from Sharbati wheat is relatively expensive but people are willing to pay a price for healthy food.

Several years back, India Today (Oct 15, 2007) had reported on its growing appeal in the metros. In a report entitled Grains of Gold, http://indiatoday.intoday.in/story/Grains+of+gold/1/1561.html) it wrote: "India's granary Punjab still produces the lion's share of the country's wheat. But when it comes to taste, quality and other attributes, Madhya Pradesh's Sharbati tops the charts in demand in the metros. The lustrous, golden-hued grain commands premium price, being re-christened golden or premium wheat in wholesale and retail markets of Mumbai, Pune, Ahmedabad and Hyderabad or simply, MP wheat in major North Indian markets like Delhi.” 

The primary reason behind the increasing consumer preference for non-chemical food products are the resulting health impacts. More and more people now realize that most babies born today carry persistent pesticides and other chemicals in their bodies. Lately, scientists have found 21 different chemicals in umbilical cord blood. With lifestyle diseases becoming more and more common, people are linking it to the food they eat. So whether we like it or not, the world is quietly moving towards safe food.

This will require changes at two levels. First of all, there are essentially two kinds of improved crops that have been developed by agricultural scientists: the high-yielding varieties (HYV) that need chemical pesticides to be sprayed to take care of insects and pests; and the genetically-modified (GM) crops that creates poison within the plant to kill certain kinds of insects, and at the same time require potent chemicals to be sprayed from outside too keep the other pests under control. Agricultural scientists need to now shift research focus towards organic breeding of crop varieties, which means developing crop varieties that are responsive to organic farming methods. 

Secondly, it’s time that the government steps in to encourage farmers to move towards non-chemical agriculture. Every year, huge stocks of wheat in Punjab and Haryana are spoiled in storage. At the same time, huge quantity of Sharbati wheat is imported from Madhya Pradesh to meet the local demand.

You will agree it will make tremendous economic sense for the Punjab (and also for Haryana) governments to encourage farmers to grow wheat without chemicals to cater to the growing local preference rather than allow its chemically-infested wheat to rot. And I see no reason why this can’t be done. If Punjab government can provide a subsidy of Rs 4,000 per acre for the paddy farmers to shift to cotton cultivation, I am sure a similar amount can be provided to wheat farmers to shift from chemical farming to non-chemical farming.   

Source: Like Yoga, it's time for an International Day of Safe Food
http://www.abplive.in/india/2015/01/07/article471236.ece/Like-Yoga-it%E2%80%99s-time-for-an-International-Day-of-Safe-Food