The Tribune, Chandigarh, India

Cash and crisis
Treasury depleted prior to elections

THE UPA government’s expenditure this fiscal has gone out of control. Finance Minister P. Chidambaram, while admitting his failure to meet the Budget’s deficit target, has blamed the global financial crisis for the liquidity crunch. On the one hand, the government assures the citizens that all is well with the banks. On the other, it has sought and got a massive amount from the Consolidated Fund of India to improve the financial health of seven public sector banks. If the government is compensating the banks for the farm loan waiver, it has nothing to do with the global financial crisis. If there is more to it, the government must come out with facts before rumours spread.

The sharp rise in the global oil prices has unsettled the government finances, but after the recent softening of the oil prices it can recoup the losses. Instead, the UPA leadership, with an eye on the coming elections, plans to cut the domestic oil prices. The Petroleum Minister announced in Parliament on Thursday that the oil prices would be slashed next week. Since inflation is already declining, touching 11.07 on Thursday, an oil price cut is avoidable. But governments usually throw caution to the wind and get profligate in the run-up to elections, handing over giveaways to woo the voters. It makes political sense, not economic.

Another major drain on the exchequer is the liberal salary increase for the Central staff. The government must have taken into account the impact of the Sixth Pay Commission report in the Budget. The global meltdown has nothing to do either with the salary hike, the outgo on the extended Rural Employment Guarantee Scheme or food and fertiliser subsidies. Despite protests and persistent pleas by opposition members, the Finance Minister has not given any convincing explanation for drawing a huge amount of Rs 2.40 lakh crore from the central kitty as mid-term assistance. In the process, it is leaving a highly debilitated treasury for the next government, which is not a healthy practice.

Thinking green
HP environment fund is welcome

THE Himachal Pradesh government has mooted a voluntary environment fund, the first initiative of its kind in the country. Simultaneously, the government, in its drive to protect the state’s ecology has also proposed a voluntary cess on vehicle users. The voluntary nature of the fund is debatable as it is unlikely the state will earn enough money through this mode of raising resources. Nevertheless, in the age of global warming, few can dispute the growing concern for the environment. More so because Himachal Pradesh is blessed with a diverse and sensitive ecosystem that faces serious environmental problems, making a preventive approach rather urgent.

Despite the state spending crores of rupees and the existence of several foreign-aided projects, the environment in Himachal Pradesh continues to fall prey to human greed. The illegal felling of trees, indiscriminate mining and quarrying, intrusion into the protected forest area and mindless construction activity have led to a severe ecological imbalance. Disturbances in the rainfall pattern, a decline in crop productivity and climatic changes are worrying signals that could spell disaster for not only the state but also the rest of India. If the state government has now woken up to the enormity of environmental damage, it is a welcome development. Its ambitious stake at becoming Asia’s first “carbon neutral” state by minimising the emission of greenhouse gases aims to strike a balance between the environment and development. An environment master plan to study how vulnerable is its environment is also in the offing — a step in the right direction. Much will, however, depend on its implementation.

Himachal Pradesh, which has decided not to further exploit its estimated forest wealth of Rs 1, 50, 000, crore, cannot afford to be lax. Time-bound projects involving urban sewage treatment and scientific disposal of hazardous waste have become urgent. An extra vigil over the green cover, raising new forests, booking “errant” polluting industries and rewarding those who conform to pollution norms are needed. The idea of Total Eco-Effective Management (TEEM), calling for changes in lifestyles, should be spread among the people who are the biggest stakeholders in the environment they live in. The environment fund can help provided the money is utilised for the purposes it is meant for.

Thought for the Day

For what’s a play without a woman in it? — Thomas Kyd

ARTICLE

New Delhi and Beijing
It’s better they have strategic ties
by Gurmeet Kanwal

BOTH China and India are Asian giants and have begun to exercise immense influence in international affairs. Political and economic relations between the two are much better now than ever before since the 1962 border war. Mutual economic dependence is growing rapidly, and bilateral trade is expected to cross $40 billion this year.

However, growth in the strategic and security relationship has failed to keep pace. Despite prolonged negotiations at the political level to resolve the outstanding territorial and boundary disputes between the two countries, there has been little progress on this sensitive issue.

On April 11, 2005, China and India announced a new “strategic partnership” after a summit-level meeting between Prime Minister Manmohan Singh and Premier Wen Jiabao. International analysts were quick to note that the prospects of a more cooperative relationship between these two growing economies had significant global implications. A meaningful strategic partnership will lead to mutually beneficial synergies between the Chinese and Indian economies.

India is rapidly emerging as a leader in computer software. Its knowledge-based industries are attracting the interest of major international information technology (IT) enterprises from all over the world. China is now a leading base for the manufacture of IT hardware. Synergising India’s software capability and China’s hardware strength is likely to produce an unbeatable combination.

The rapidly growing appetite of both countries for energy and their high dependence on oil and gas imports is forcing them to secure oil equity abroad. Chinese and Indian oil and gas companies have often been in competition with each other to invest in overseas fields. A strategy based on cooperation rather than competition will help the two countries to secure better terms and enable them to share their risks.

China’s and India’s coordinated approach in international negotiations is proving to be mutually beneficial. When the two countries that represent more than a third of the global population speak in unison, as has been seen in their coordinated approach during the WTO negotiations and on environmental issues, the world has no option but to sit up and take note. China and India have played a calming role in the ongoing global financial meltdown. They must together seek the long-pending reform of the international financial architecture. As both countries hold substantial foreign exchange reserves, they can and should play a greater role in decision-making in the Bretton Woods organisations.

Reform of the UN Security Council (UNSC) is yet another area for cooperation. Just as India had played a very positive role in China’s membership of the UN and its subsequent inclusion in the UNSC, China should support India’s aspiration for a seat in an expanded UNSC. This will quite naturally increase Asia’s clout in world affairs. In Asia, China and India should work together for peace and stability and broader regional economic integration to make the 21st century truly Asia’s century.

Counter-terrorism is another area in which China and India can cooperate for mutual benefit as both are victims of pan-Islamic fundamentalist terrorism emanating from across their borders. Both also need to work together to counter the menace of narcotics trafficking from the Golden Crescent on the one side and the Golden Triangle on the other.

In the Indian perception, there are several areas of lingering concern. The foremost among these is the “all-weather” friendship between China and Pakistan that is said to be “higher than the mountains and deeper than the oceans”. The Indian government and analysts are convinced that China has given nuclear warhead designs and missile technology as well as fully assembled, crated M-9 and M-11 missiles to Pakistan.

The other contentious issues include China’s continuing opposition to India’s nuclear weapons programme; its deep inroads into Myanmar and support to its military regime; its covert assistance to the LTTE (Liberation Tigers of Tamil Eelam) in Sri Lanka and increasing activities in the Bay of Bengal and its attempts to isolate India in the ASEAN Regional Forum (ARF).

As both China and India are nuclear-armed states, it is in the interest of both to ensure that their strategic stability is maintained and that the risk of accidental or unauthorised nuclear exchanges is minimised. This is possible only if negotiators from both sides sit down together and discuss nuclear confidence- building measures (CBMs) and nuclear risk-reduction measures (NRRMs). However, China’s insistence that it cannot discuss nuclear CBMs and NRRMs with India as India is not a nuclear weapons state recognised by the NPT is proving to be a stumbling block. China’s official position is that India should roll-back and eliminate its nuclear weapons in terms of UNSC Resolution No 1172.

That is unlikely to happen, especially when India has now been given a backdoor entry into the NPT through the NSG waiver and the IAEA safeguards agreement as it has been recognised as a responsible state with advanced nuclear technology. India has also signed civilian nuclear cooperation agreements with France and the US and is likely sign one with Russia in December 2008. It would be in the interest of both countries to discuss nuclear CBMs and NRRMs so as to enhance strategic stability in South Asia. It is also in China’s interest to enter into a nuclear trade agreement with India as India is rapidly emerging as a large market for nuclear fuel and nuclear technology.

India is conscious of the fact that its growing external relations with its new trading and strategic partners are causing some concern in China. Beijing has viewed with suspicion India’s willingness to join Australia, Japan and the US in a “quadrilateral” engagement to promote shared common interests. China also wishes to reduce what it perceives as the steadily increasing influence of Washington over New Delhi.

China knows that the US is several years ahead of Beijing in recognising India’s potential as a military and economic power and has greatly increased its cooperation with India in both spheres. However, India has always pursued an independent foreign policy and cherishes its strategic autonomy. It will be recalled that India has steadfastly supported the Non-Aligned Movement (NAM) for several decades during the Cold War and has never entered into a military alliance with any country.

Therefore, India’s newfound strategic relationship with the US need not come in the way of China-India relations, which have their own strategic significance for New Delhi. Of all the areas of concern between the two countries, it is the long-standing territorial and boundary disputes that are the most disconcerting ones. The poor security relationship has the potential to act as a spoiler in the larger relationship and will ultimately determine whether the two Asian giants will clash or cooperate for mutual gains.n

The writer is Director, Centre for Land Warfare Studies, New Delhi.

MIDDLE

HM’s dressing d(g)own!
by Chander Koumdi

FIRST thing first. If you confuse H.M. with Home Minister, it’s your choice but I am referring to “His Majesty” (no less in stature in a parliamentary democracy than a King himself). In our own Indian context, Maharaja Bhupinder Singh of Patiala claimed himself to be a “potent”ially handsome man who always dressed to kill (whom?). Even Wajid Ali Shah, the redoubtable Nawab of Awadh was a connoisseur par excellence in terms of music, poetry, Katthak, Thumri and sartorial knackhood.

Wikipedia describes Wajid Ali’s dress style as, “… the Nawab would dress up as a Yogi with saffron robes, ash of pearls smeared on his face and body, necklaces of pearls around his neck, and a rosary in his hand, and walk pompously into the court with two of his “paris” dressed up as Jogans. Gradually he made it into a spectacular pageant or Mela known as Jogia Jashan, in which all citizens of Lucknow could participate. But yes mind you it was when no bombs had exploded in his fiefdom and the occasion used to be the tenth and the last Royal’s birthday.

The modern-day tele-watcher and cine-goer Indians are accustomed to witnessing even the nattily dressed and fairly youngish mothers-in-law in Reema Lagoo, Supriya Karmik et al. Contrast these with hard pressed ones in Leela Chitnis, Nirupa Roy, Sulochna and Achla Sachdev of an era gone by. And you will kindly believe India is progressing with bangs and b(d)ooms!

Winston Churchill was a man with a style statement of his own. His button down shirt with a double breasted blazer was one symbol perhaps of his ability to break rules. The polka dot bow ties, three piece suites, watch chains, hats and cigars made him what he was — a man worth emulating — minus his roly-poly constitution. And mind you he fought many a war at home and elsewhere in the world. At least our own Home Minister (yes, now I am ad’dressing’ him) wore “Bandgalas” symoblising his not giving in to breaking rules (maybe for some in the country).

Television and cinema undoubtedly lay down grammar rules of dressing at least in our own desi context and one can watch umpteen scenes of grieving death and destruction in the projected presentations. On all these somber occasions one finds the mourners dressed in all white.

One wonders as to how and when did everyone playing any part get time to switch over to such sober and colourless hues! Even after realising all this, if you or our dear LPY still “train” guns to bring “home” the point, then we can safely call it politics. Boy! Did you ask “who is LPY?” Now don’t moo moo! Just shut up and ruminate.

OPED

Fighting Taliban
Pakistan to arm tribal militias
by Karen DeYoung

Pakistan plans to arm tens of thousands of anti-Taliban tribal forces in its western border region in hopes — shared by the U.S. military — that the nascent militias can replicate the tribal “Awakening” movement that proved decisive in the fight against al-Qaida in Iraq.

The militias, called lashkars, will receive Chinese-made AK-47 assault rifles and other small arms, a purchase arranged during a visit to Beijing this month by Pakistani President Asif Ali Zardari, Pakistani officials said.

Since early August, the Pakistani army has launched several offensives in Bajaur, one of seven regions in the Federally Administered Tribal Areas (FATA), and in the nearby Swat Valley. According to Pakistani military assessments, more than 800 insurgents were killed in Bajaur operations during August and September, along with nearly 195 government soldiers and 344 civilians.

Last week, after months of Pakistani delays, about 30 U.S. military trainers were permitted to set up operations north of the region, a U.S. official said. The trainers will provide counterinsurgency instruction to Pakistani army soldiers, who in turn will train members of the Frontier Corps, the government's paramilitary force in the FATA.

Pakistani officials insisted that arming the lashkars was their own idea and that they are paying for it, although the United States has provided more than $10 billion in relatively unrestrained counterterrorism funds to Pakistan's military over the past seven years. “The Americans are not giving us a bloody cent” for the program, one Pakistani official said. “This is us, doing it ourselves.”

Zardari and the government of Prime Minister Yousaf Raza Gillani have been at pains to balance their support of U.S. objectives with a recognition of widespread Pakistani distrust of the United States — among the population as well as the political class.

In the wake of Gillani's visit to Washington in July and a meeting in New York last month between Zardari and President Bush, the Pakistani Parliament Wednesday passed a resolution calling for the immediate development of an “independent foreign policy” and a new attempt at dialogue with Islamic militants.

Much distrust also remains on the U.S. side, particularly within intelligence agencies that have long been suspicious of ties between the Pakistani intelligence service and the Taliban. The CIA has increased its operations against resurgent extremist forces in the FATA, with at least 11 missile attacks launched by Predator unmanned aircraft against al-Qaida and Taliban targets in August and September, compared with six in the previous eight months, according to knowledgeable officials who spoke on the condition of anonymity to discuss intelligence issues.

In its talks with the Bush administration, Gillani's government maintains that its counterterrorism cooperation surpasses that of retired Gen. Pervez Musharraf, who was ousted from the presidency in August.

Last month, Gillani and army chief of staff Gen. Ashfaq Kiyani replaced the head of the Interservices Intelligence (ISI) agency with an army general considered more responsive to civilian leaders and more palatable to the Americans.

A number of U.S. officials cautioned that Pakistan has made little progress in other aspects of a wider counterinsurgency strategy needed to make long-term gains against the extremists. “There is a significant, but not a comprehensive, bump up in the security element,” one official said.

While there are more soldiers on the ground, he said, the military strategy is not sustainable because Pakistan “is still doing virtually nothing about extending the government's political authority into the tribal areas, and virtually nothing about economic development” in the region.

Unlike Pakistan's four provinces, the FATA are only nominally controlled by the central government and are largely ruled by tribal elders.

U.S. military officials warn, however, that expanding the movement will be more difficult than it proved in Iraq, where the Awakening began in 2006 among Sunni tribes in Anbar province. Unlike the Iraqi tribes, the FATA Pakistanis are poorly armed with aging rifles and little else — although the provision of new, Chinese-made AK-47s and other small arms will increase their firepower.

Early this month, U.S. Ambassador Anne Patterson and Adm. Michael LeFever, the senior U.S. military officer in Pakistan, sent a joint cable to Washington criticizing the overall U.S. effort in Pakistan as disjointed and uncoordinated.

It recommended a comprehensive new strategy that would better meld the same three counterinsurgency “legs” — military, political and economic — that the United States has pushed the Pakistani government to adopt.

The proposal, one U.S. official said, offered examples of current U.S. aid programs that have little relationship to political aims, and political objectives that dismiss military concerns. “It said things like, `If you really want to understand Pakistan, you've got to understand food security as something a lot of people are worried about,’ ” especially in the tribal areas, the official said. “Where is the initiative on agriculture?”

The emergence in Pakistan of the lashkars, headed by tribal elders who are said to resent the intrusion of the Taliban and al-Qaida, began in earnest over the summer. So far, three lashkar militias, totaling as many as 14,000 men, have been established in Bajaur, according to Pakistani military estimates. In the FATA region of Orakzai, tribal leaders have amassed an estimated 4,000 indigenous fighters; an additional 7,000 are said to have enlisted in Dir, a tribal region just outside the FATA boundary.

— By arrangement with LA Times-Washington Post

Credit raters had expected meltdown
by Amit R. Paley

Executives at the leading US credit-rating companies, whose optimistic assessments of risky investments helped fuel the financial meltdown, have privately acknowledged for more than a year that conflicts of interest contributed to the industry's failures, according to internal company documents released on Wednesday.

The disclosures emerged at a heated congressional hearing where lawmakers grilled the heads of the three major rating companies, accusing them of betraying the public by letting corporate greed trump their responsibility to provide unbiased appraisals for investors.

“The story of the credit-rating agencies is the story of a colossal failure,” said Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee. “Millions of investors rely on them for independent, objective assessments. The ratings agencies broke this bond of trust, and federal regulators ignored the warning signs.”

In one of the confidential documents obtained by the committee, Raymond McDaniel, chief executive of ratings firm Moody's, said analysts and executives are “continually `pitched' by bankers, issuers, investors ... whose views can color credit judgment.”

“We ‘drink the kool-aid,’ ” he wrote in a Oct. 21, 2007, memo to the board of directors. “Unchecked, competition on this basis can place the entire financial system at risk.”

The three major credit-rating companies — Standard & Poor's, Moody's and Fitch — assigned some of their highest ratings to mortgage-backed securities whose risks were grossly underestimated. As homeowners began defaulting on subprime mortgages, it became clear that many of those securities were overvalued. The agencies finally downgraded thousands of those securities over the past year, contributing to the collapse of major firms and heightening the economic crisis.

Lawmakers are looking at whether the business model of these companies was a key factor in their failure to accurately predict the risk of the securities. The big credit-raters are paid by the issuers of the securities they evaluate, creating what executives acknowledge is an inherent conflict of interest. Some industry critics advocated banning the practice and replacing it with a model in which companies are paid by investors.

“When the referee is being paid by the players, no one should be surprised when the game spins out of control,” said Rep. Christopher Shays, R-Conn., reflecting the committee's unanimous bipartisan criticism of the industry. “You have so screwed up the ratings as to not be believable.”

All three executives acknowledged their firms had badly erred in assessing the mortgage-backed securities and said those mistakes had contributed to the financial meltdown. But they said the errors were not intentional or malicious, adding that they had made their procedures more transparent and implemented safeguards to prevent additional mistakes.

“We have to earn our credibility back,” said Deven Sharma, president of Standard & Poor's.

Before the firm chiefs testified, the committee heard from two former high-ranking credit-rating executives who described their frustrations in dealing with conflicts of interest and pressure on analysts to gloss over problems.

Frank Raiter, who had been head of residential mortgage-backed securities ratings at Standard & Poor's for 10 years, said that he developed a new model for better assessing loan performance in 2001 but that it was not implemented because of budgetary constraints.

Raiter also clashed with colleagues at Standard & Poor's when he was asked to rate a security by Richard Gugliada, an S&P managing director. After Raiter asked for detailed loan information to assess the creditworthiness of the security, Gugliada refused.

“Any request for loan level tapes is TOTALLY UNREASONABLE!!!” Gugliada wrote in 2001. “It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.”

Gugliada said in an interview that he was following company policy and that Raiter's department was the only one that refused to provide ratings without the detailed data.

Other internal documents suggested that analysts knew they were overrating the securities. In an April 2007 instant message exchange between two S&P analysts, one wrote, “that deal is ridiculous.”

Standard & Poor's said the deal discussed by the employees was later restructured and then rated by the firm. The company said the rating has held up and that the exchange did not reflect the firm's professional standards.

One high-ranking executive at Moody's expressed concern about the morality of its policies in September 2007. “We had blinders on and never questioned the information we were given,” the unnamed managing director said. “These errors make us look either incompetent at credit analysis, or like we sold our soul to the devil for revenue, or a little bit of both.”

— By arrangement with LA Times-Washington Post

Delhi Durbar
‘Chaudvin ka chaand’

ONE of the finest compliments to Indian scientists who successfully launched Chandrayaan-I on Wednesday came from CPI(M) politburo member Sitaram Yechury.

Taking out time from an important discussion going on in the Rajya Sabha, Yechury said: “It gives us immense pleasure to see how our scientists have successfully launched India’s first unmanned mission to the moon. We are tempted to term this feat as ‘chaudvin ka chaand’ since it comes in the 14th Parliament session.”

The Leader of the CPI(M) in the Rajya Sabha did not, however, forget to make a political point in the process.

“This vindicates the Left stand. We have always said Indians scientists are capable enough and there is no real need for the country to buckle under US pressure. The nuclear deal was really not necessary,” Yechury said.

Team for sale

Just weeks after one of the start-up telecom companies raked in big money by selling its stake to a foreign telecom firm trying to enter India, a similar deal may be on the cards in the BCCI-run Indian Premier League (IPL).

There is speculation that the Deccan Chronicle group, the owner of the Hyderabad-based IPL team Deccan Chargers, has put the team on the block and may end up selling it on a high premium.

The group is reportedly looking to sell its 80 per cent stake in the team for between $175 million (Rs 840 crore) and $200 million (Rs 960 crore), a 65 to 85 per cent premium on the original price of $107 million (Rs 502 crore).

Incidentally, Deccan Chargers was the most expensive IPL team after Mumbai and Bangalore. The team has stars like VVS Laxman, Adam Gilchrist and Andrew Symonds and had spent over $5.88 million (Rs 28 crore) on acquiring 11 players, both domestic and international.

However, it has been in the news even after the IPL is over for various reasons, including the sacking of Laxman as the captain and being replaced by Gilchrist.

Sensex struck

The fall of the BSE Sensex has affected some key politicians in India, the reason being that foreign institution investors (FIIs) who are not registered in India have borrowed stocks from Indian institutional investors and “shorted” the stock market.

“Shorting” means selling stocks which are not owned and buying them when the price falls, the difference being the profit.

Sources say that some politicians went on a buying spree in the market, hoping stock markets would improve and the prices would go up from here. Unfortunately, they have been taken by surprise.

Sources say most FIIs were very upset with the overnight political decision of banning the participatory notes in last October, which had led to heavy losses for them as the stock markets had plunged by nearly 1000-2000 points then. ‘’This is how FIIs take their revenge and politicos just can’t do much about it,’’ quipped the sources.

Contributed by Aditi Tandon, Girja Shankar Kaura, Bhagyashree Pande