Editorial News India

It’s an ISI Choice This is an hour of reckoning for Pakistan — its civilian leaders, the Army, the notorious Inter-Services Intelligence (ISI), and the society at large — as to whether it can rise as a sovereign democratic nation-state or whether it has already sunk beyond recovery. As it confronts terror perpetrated by Al-Qaeda and the Taliban that hold large parts of its restive northern areas under their control, Pakistan’s tryst with democracy seems to be bereft of meaning. The suicide attack outside Marriott Hotel in Islamabad last week — one of the worst fidayeen attacks in Pakistan — was a message of that kind. The terrorists have proved the weaknesses of the administration by punching holes in its security blanket with an incredible alacrity. They have demonstrated their resolve to undo the making of democracy and emergence of Pakistan as a modern nation-state. But there is more to it. As India’s pre-eminent strategic affairs analyst K Subrahmanyam says in a newspaper article, ‘‘Everyone in Pakistan knows that Mullah Omar, leader of the Afghan Taliban, is in Quetta and enjoys the hospitality of the Pakistani army and the ISI... If the Pakistani army takes the final decision to fight the Taliban and the ISI can be disciplined and controlled to ensure that there is no leakage of information to the Taliban, then there will be less need for US troops to operate on their own in Pakistani territory...’’ The fact of the matter is that it is the Pakistan Army and the ISI that are mainly responsible for the consolidation of extremist groups in that country. There are reports of routine leakage of information to the Pakistan Taliban by the ISI, with the latter desperately trying to make the best strategic bargain of the time in Afghanistan by being sympathetic to the Taliban and overlooking its terror game. Many influential officers in the ISI do not approve of Pakistan being a US ally in the US-led war on terror and are determined to defeat the alliance by providing support to the Pakistan Taliban. So while the newly elected President, Asif Ali Zardari, vows to eliminate the ‘‘cancer’’ of terrorism and has no option but to continue with the strategic arrangement with Washington (hoping in return economic aid which Pakistan direly needs), the most powerful wing of Pakistan’s most well-entrenched establishment — ISI — continues to nourish the cells of that cancerous growth. It is clear that there is an unsettling dichotomy as far as the functioning of the Pakistani state is concerned. This choice of the ISI has already brought Pakistan to a ruinous state of affairs. If the ISI still thinks it can go about its business of promoting terrorism because it has to sustain its commercial interests, including of course the narcotics trade originating in Afghanistan, and its commercial ventures have the Taliban too as stakeholders who will never obviously want an end to their most paying business, it must be told that it does not have the interest of Pakistanis in its heart — and it will be incumbent on none but every single Pakistani to bluntly tell the ISI to either contribute to democracy and help the state counter terror by securing its foundations or to disband itself and directly lead the rank and file of the Taliban and other terror groups. It is a deciding moment for the Pakistani civil society. In its assertion will depend peace not just in Pakistan but in the entire region as well. While India would keenly watch the unfolding of events in Pakistan, it should also ensure that the ISI does not open a new front against India after being frustrated in the Pakistan Taliban game that is looking increasingly uncertain — as much as the Pakistan democracy is. source: sentinel assam

Not Education An independent study commissioned by the HRD Ministry — in which student activities in classrooms in schools were observed every three minutes in a 30-minute period in the States of Asom, Haryana, Karnataka, Maharashtra and Orissa — has found that 45 to 55 per cent of time is spent by students in passive activities such as listening to teachers or taking dictation, whereas only 20 to 32 per cent is spent in active learning such as studying on their own, peer learning, answering, seeking clarification and doing assignments. The study finds that between 10 and 17 per cent of a child’s time in the classroom is spent in doing mechanical work such as reading loud, copying and rote memorization. No wonder then that what is being imparted as classroom lesson does not educate them in the true sense of the term; it fails to inspire them on creative lines because the so-called education process does not in any way prompt the students into thinking differently. Worse, the education stereotype then gets carried, with a huge majority of the students believing even at the university level that education cannot be any different. Thus we have an education regime that produces a vast army of youth who are doubtless qualified because they have university degrees to flaunt, but who are yet to be educated. source: sentinel assam

Some Thought on the Coal Scenario RK Padmapati For many years domestic coal production could meet the demand of our country. But in the last few years it has become difficult to meet the demand of our country internally. India, along with its northeastern States, has experienced energy shortage during these days. Among many other reasons prevailing, coal crisis at the generating stations may be termed as the major contributing factor towards the present power shortage. As on July 31, 2008, the total monitored coal-based installed capacity of India amounts to 77,198.88 MW, representing 53.08 per cent of the total capacity of the country. Thus any shortfall of coal supply at site project will have a direct bearing on power generation. India as a whole is a power-deficit country, and if we look at the power generation status for the period April 2008 to July 2008 it reveals a power deficit of 10.4 per cent and peak deficit of 14.6 per cent on an all-India basis. For the northeastern States, the deficit stands at 23 per cent occupying second position next to the Western region of 25.7 per cent on peak demand basis for the same period. Electricity demand is expected to grow at the rate of six to eight per cent annually and could be much higher if power shortage is to be reduced. The country’s economy is expected to grow at the rate of eight to nine per cent yearly, and 79,000 MW (thermal, hydro and nuclear) capacity addition has been planned ending at 2011-12 of which 10,000 MW (thermal) will be added during the year 2008-09. As a result of capacity addition, all-India coal consumption for power generation has been increased drastically from 240 MT in 2001-02 to 330 MT in the year 2007-08. It is a much higher consumption rate than the world average. The consumption increased by 5.3 per cent a year during 1976-2006 as compared to two per cent in the rest of the world. In 2005-06, increase in consumption was 7.1 per cent against 4.5 per cent in the rest of the world. The working group for coal and lignite has assessed the coal demand of 731 MT in the year 2011-12. The annual growth of coal demand is assessed to be nine per cent for all the coal consuming sectors. The all-India coal demand for the year 2008-09 has been projected to be 555 MT, and internally only 497.2 MT would be available. This demand and supply gap of 58.16 MT is proposed to be met by importing coal mainly from Australia and Indonesia. Most of the Indian coal is extracted in the east of the country and consumed in the north and southwest. On an average Indian coal has to travel 600-700 km to reach the generating stations. Rail transport bottleneck and non-availability of wagons are compounding the problem further. The important modes of supply of coal are railways representing 56 per cent, road 17 per cent, MGR 23 per cent and others four per cent. Again, to handle such an increasing demand of imported coal, our port facilities are to be upgraded. The production growth of raw coal during 2004-05, 2005-06 and 2006-07 has been 5.92 per cent, 6.38 per cent and 5.85 per cent respectively, and for lignite it is 6.12 per cent, 5.87 per cent and 5.68 per cent for the same period. Coal India Limited (CIL) and its subsidiaries are the major coal producers in India and account for 88 per cent of the total output. If we observe the performance during the first half of April-September 2007, the CIL produced 157.88 MT against a target of 170.82 MT, a shortfall of 12.94 MT. But it showed a growth of 0.7 per cent compared to the previous year for the same period. It was due to a variety of reasons like hot summer, then unprecedented rainfall, forest clearance, physical possession of land, law and order problems etc. However, for the second half of the period from October 2007 to March 2008, it achieved a production of 221.61 MT against a target of 213.6 per cent, showing a growth of 7.92 per cent and a growth of 8.7 per cent compared to the last year of the same period. The ECL, a subsidiary of CIL, showed a negative growth of 6.41 per cent and a few others showed signs of a very marginal growth or no growth. But the major performance highlight in the year 2007-08 is that the declining trend in the underground coal production has been arrested in all the companies except BCCL, CCL and NEC. The growth achieved in SECL is 3.3 per cent. In the current year, during April-July 2008, CIL coal supply to power sector showed a growth of 3.4 per cent over the same period last year, and there has been a growth of 6.4 per cent in coal production for the same period as compared to the same period last year. However, it falls short of planned growth of 7.6 per cent, and hence the shortage of coal. Actually, in terms of power position in 2007- 08 on an all-India basis, it was 9.9 per cent deficit. In the case of the northeastern States, the energy shortage was 12.3 per cent — it was 8.4 per cent deficit in the case of Assam for the same period. Assam imported a total of 417.8 MU, which mostly came from NTPC (Eastern Region) amounting to 330.8 MU, while from Karnataka it was 76.8 MU. Inter-regional coordination has allotted 50 MW of power for Assam from Eastern Region, and any shortfall in the generating station in NTPC has an direct impact on power cuts in Assam. The projected energy demand of power for the year 2008-09 for India is stated to be 799,578 MU, showing a deficit of 8.8 per cent and peak demand of 120,109 MW — a deficit of 18.1 per cent during the current year. The story of the current energy shortage is a story of blame and counter-blame between the Ministry of Power and the Ministry of Coal. But the sad truth is that out of 77 monitored stations of an installed capacity of 68,950 MW, 38 stations have had coal stock ranging from four to seven days in the month of July 2008, and it has increased to 43 stations of monitored 70,094.5 MW installed capacity as on August 31, 2008. The receipt of coal has been varying in the range of 23-77 per cent of the linkage assured during these days. It includes pit head stations too, where distance of coal transportation is not much. Normally coal firing thermal stations are expected to hold stock in 15-30 days depending on distance. Shortage of coal receipt at site forces the generating stations to regulate generation and even to close down the units in certain cases. As on today, the total installed capacity of the country, including all the captive power plants, is roughly 160,000 MW, and to sustain a growth of more than eight per cent over the next 25 years, the generating capacity has to be increased to 800,000 MW by 2031-32. India’s coal requirement may surge as high as 2.5 billion tons by the year 2031-32. The country’s coal reserve now stands at 250 billion tons, while its proven reserve is about 100 billion tons. To cope with the demand, India may be importing 181 MT of coal by 2025 to fill the gap of mismatch. Altogether it is a big challenge then. source: sentinel assam

Let the Rupee Fall Bharat Jhunjhunwala The unexpected decline of the rupee continues unabated. One reason is the world economy slipping into a recession. Collapse of Lehman Brothers indicates that things are likely to get worse. American citizens are unable to repay the loans taken by them. Reduced demand from Americans is telling on the balance sheet of American companies and the sub-prime crisis is spreading to good quality debt. The European economy has remained stagnant in the last quarter after constricting in the previous quarter. Japan is showing signs of recession. The China story appears intact at the moment but, given the all pervasive State control, it is difficult to fathom if the fundamentals are worsening. The demand for our goods in the world markets is declining as a result. Reduced exports means less foreign exchange is coming into our markets. The worsening global economy is making Foreign Institutional Investors to sell in India. They have become risk averse. They are keen to bring back their capital home before unforeseen developments take over the Indian economy. The decline in the exchange rate of rupee from Rs 39 to Rs 45 a dollar has shaken the confidence of FIIs. They have incurred huge losses by not selling earlier. More generally, FIIs are withdrawing from all emerging markets, including that of India. Just as the turtle clams up in the face of a storm, similarly FIIs seek the safety of their home turf in face of an imploding world economy. On the other hand, the demand for dollars remains buoyant in our forex markets. FIIs are buying dollars for repatriation of their monies. There is also a huge demand from oil companies for imports of oil. This demand is stable despite a small decline in our growth rate from 11 percent to eight per cent. This high demand along with reduced supply of dollars is leading to increase in price of the dollar and a parallel decline in the exchange rate of the rupee. The policies of our government have not helped. Some impact of the global slowdown is to be expected. But why are we declining speedily against all major currencies of the world? I had expected that India would gain from a declining global economy. As the dollar, euro and yen sink, I had expected the rupee to rise. Indian banks have not extended sub-prime loans of doubtful quality. Therefore, we stand to lose less than the American economy. Relatively speaking, the decline of the rupee should be less than the dollar; or the rupee should rise against the dollar. After all, why should Indian rupee decline due to the mistakes made by American banks in extending sub-prime loans? One does not go bankrupt because one’s neighbour has done so. Instead, we find that the rupee declining more than the dollar. The cause, in my opinion, is the policy of the government to buy oil expensive in the world markets and sell it cheap in the domestic economy. The low domestic price is leading to high demand for oil. The demand for oil would have been much less if the increase in international price had been wholly passed on to the consumer. People would certainly consume less petrol at Rs 100-a-litre. Oil companies have to import oil in large quantities to meet this demand. In the result, the burden of oil subsidy increases on our government. In the near future, the government will have to impose higher taxes on the domestic economy in order to raise the money to redeem the oil bonds issued to finance this consumption of oil. Foreign investors have factored this information in their decision to exit from India. They anticipate that Indian companies will face heavy taxes and make less profits in times to come. They also seem to understand that the government will not be able to raise the price of oil before the elections that are still a good eight-ten months away. The heavy consumption of oil till then will lead to a huge demand for dollars and a corresponding decline in the rupee. A declining rupee is disastrous for FIIs. They have to make profits not only to obtain a fair return on their investment but also to compensate for the declining value of the rupee. Say, a FII invests $100 in India today at the exchange rate of Rs 45-a-dollar. In one year, the value of rupee declines, say, to Rs 50. In this situation, 11 per cent of the profits made will be absorbed in compensating for the decline in the rupee. That is a tall order when the tax burden on Indian companies is likely to increase. The two causes of decline of the rupee, then, are slowdown in the world economy and oil subsidy provided by the government to domestic consumers. Of the two, the slowdown in the world economy is likely to be of a longer duration. In any case, the Government of India has no control over the same. However, it has the option of dismantling the oil subsidy. The Reserve Bank of India is trying to arrest the decline by selling forex reserves accumulated in the past. The RBI has to choose between this policy and letting the rupee decline. I think the present policy of selling reserves to stem the decline of the rupee will be counterproductive. The Indian economy is today like a company running in loss due to profligacy. Such losses cannot be managed by taking new loans. There is limit to the creditworthiness of a loss-making company. Similarly, India’s credit rating is not likely to improve till the burden of oil subsidy continues to rise. Thus selling forex reserves to contain decline will not deliver except for a short moment. Instead, the RBI should allow the rupee to decline and generate pressure on the government to dismantle oil subsidies

source: sentinel assam