The Tribune, Chandigarh, India

EDITORIALS

Spend and grow
Chidambaram shuns populism

Presenting the UPA government’s last budget ahead of a general election in 2014, Finance Minister P. Chidambaram has taxed the rich and large companies, largely spared the middle class and attempted to benefit women, youth and the poor. He has resisted pressures for pre-election populist giveaways and tried to make a sensible use of the taxpayer’s money, spending on areas which may spur growth. He could have easily pleased the large salaried class by raising the income tax exemption limit, but he has restrained himself to giving a token tax credit of Rs 2,000 to the taxpayers with an annual income of up to Rs 5 lakh. This is because the Finance Minister was also faced with a pressure to maintain fiscal discipline. With a credit rating downgrade looming, he has been trying to woo foreign investors, allaying their tax fears. The 2013-14 budget should be seen in the context of impending elections, imperatives to attract foreign investment and push growth.

To his credit, Chidambaram has kept his promise by limiting fiscal deficit to 5.2 per cent of the GDP and is confident of getting it further down to 4.8 per cent in the next financial year. This was not an easy task, given the decline in revenue and political pressure against raising petroleum prices. After taking over as Finance Minister in August last year he has been pushing for steps towards fiscal consolidation and boosting foreign investment. With an image of being a tough administrator he drastically cut government spending to achieve the fiscal target. “We took a dose of bitter medicine (policy decisions) that seems to be working”.

In his budget speech on Thursday Chidambram observed: “Fiscal consolidation cannot be effective only by cutting expenditure”. In the coming year he is on a big spending spree. The government expenditure will shoot up by an unusually high 16 per cent. He has raised allocations for social welfare schemes, rural development, education, health, agriculture, defence, wind energy and what not. This has raised a vital question: Where is the money? The taxes imposed are moderate and rational. The Obama administration’s talk of taxing the rich has had its impact in India. Chidambaram imposed a 10 per cent surcharge on the super rich, numbering 42,800, having a taxable annual income of more than Rs 1 crore. The duty on imported cars, motor cycles and yachts as well as SUVs has been raised. There is an added surcharge on companies having an income of more than Rs 100 million. The education cess of 3 per cent will continue. The sale of non-agricultural immoveable property will attract a TDS (tax deduction at source) of 1 per cent. Though the securities transaction tax on equity futures has been reduced a bit, a commodities transaction tax has been slapped on non-agricultural future contracts. These steps drove the BSE Sensex down by 290 points.

But still these tax measures will not yield enough to fund the lavish spending. It seems for more revenue the Finance Minister is betting on higher growth. The estimated growth rate of 5 per cent this year, Chidambaram hopes, will jump to above 6 per cent in the coming year as the Economic Survey has predicted. Given the uninspiring external environment and the current state of the Indian economy, it is a tall order. Bottlenecks to growth are many and the Finance Ministry can play a limited role. There are Central ministries delaying clearances for projects. Inadequate coal supplies are holding up power plants. Land acquisitions are caught in wrangles. Construction of highways has slowed down. The whole government functioning has to acelerate. On his part, Chidambaram has taken steps to bolster growth: boost to housing with tax incentives for first-time house buyers, roads, ports, power plants and renewable energy. A Chennai-Bengaluru industrial corridor has been proposed with Japanese funding. Though high government spending and borrowings may push up inflation, the risk is worth taking.

Usually seen as a darling of the corporate sector and stock markets, Chidambaram seems to have shifted his affections to three sections of society, also major vote-banks: women, youth and the poor. He has promised to set up a government bank to be run for and by women and a “Nirbhaya fund” with Rs 2,000 crore. For youth he has promised training in skills in demand. The poor will benefit from the countrywide rollout of the direct benefit transfer scheme in the coming year. Chidambaram’s dilemma can be best summed up in his own words: “On the one side is the economic policy, on the other side is economic welfare. We are a developing country. The link between policy and welfare can be expressed in a few words: Opportunities, education, skills, jobs and incomes”. He has done a fine balancing act by raising government spending, hiking taxes and maintaining fiscal discipline, while quoting Joseph Stiglitz to stress on inclusive growth.

ARTICLE

Maldives mess hasn’t ended
Delhi’s diplomacy remains on test
by Inder Malhotra

ON February 20, when the former president of the Maldives, Mohammed Nasheed, left on his own volition the Indian High Commission in Male, where he had sought shelter a week earlier, there was an audible sigh of relief in New Delhi. This was understandable — if only because this country had extricated itself from a very tight spot it had landed itself in — it is not at all enough. For the basic disharmony and deep distrust between the pre-eminent power of the South Asian region and the present regime in its tiniest country persist. It is impossible to overstate this country's stakes in the combination of a huge number of islands, scattered over a vast area of the Arabian Sea. Indeed, for India's maritime security right up to the Straits of Malacca via the Indian offshore chain of Andaman Islands the Maldives is vital. The gravity of the challenge to Indian diplomacy is, therefore, obvious.

Based on news reports, there is widespread belief that the crisis over Mr Nasheed's presence in the Indian compound was ended through a "deal" arrived at behind the scene. But can this be taken for sure? For, the strident spokesman of President Waheed has emphatically denied a deal of any kind. More significantly, Mr Waheed himself refused to see the leader of the Indian special delegation sent there to resolve the impasse.

As it happened, the day before the problem was resolved the United States Ambassador to Sri Lanka, who is concurrently accredited to the Maldives, Ms Michele J. Sison, was in Male. Mr Waheed received her cordially, of course, and reportedly assured her that his main objective was "stability and calm" in his country. Some observers are arguing, therefore, that strong American advice eventually persuaded the regime in Male to reassure India that Mr Nasheed would be allowed to participate in the elections due in September. India's insistence that the coming poll in September should be fair as well as inclusive is entirely unexceptionable. If, as claimed, the Waheed government has agreed that Mr Nasheed would not be debarred from the elections by being arrested and convicted by a kangroo court, this must be welcomed.

On the other hand, almost all Indian correspondents who were rushed to Male for the occasion have reported that because of the impression that Mr Nasheed is "India's man", he has lost a lot of public support except among the ardent followers of his party. In any case, where is the guarantee that this assurance would be adhered to? A week is said to be a long time in politics. The six-week interval between now and the Maldives election is, therefore, something akin to eternity. And hasn't the Waheed regime gone back on its promises in the recent past?

Four factors governing the sad deterioration in India-Maldives relations merit attention. The first is that the plummeting of the relationship has taken place in just one year since February 2012. Until then relations between two countries had been flourishing constructively and smoothly. In fact, the Maldivians became grateful to India when, in 1988, the Indian military saved the regime of the then dictator, Abdul Ghayoom, from a foreign-encouraged mercenary coup. Mr Ghayoom's rule continued for three decades thereafter. In 2008, in the Maldives' first democratic election, Mr Nasheed, a young human rights activist, came to power. He endeared himself to India, and other countries, because of his dedication to the democratic cause.

Then, in February last year, he resigned and his Deputy Prime Minister, Mr Waheed, took over. Later, the former president alleged that he was "ousted" through a coup. But the Commonwealth Secretariat, of which a veteran Indian diplomat, Kamlesh Sharma, is the head, held that the changeover was legitimate.

Secondly, at the time of the changeover, New Delhi made its big mistake, indeed a blunder. It recognised the Waheed regime much too hastily — a lead followed by the US and other nations. By then it was known that growing Islamic extremism, merrily promoted by Pakistan, was behind Mr Waheed, who is known to be the front man of Mr Ghayoom, busy looking for an opportunity for a comeback. Shockingly, no Indian policy maker thought it necessary to ascertain that Mr Waheed and his cohorts would respect India's core interests. The result was that Islamists entrenched themselves in the new power structure, one of them holding the crucial post of Home Minister. We woke up too late.

Thirdly, Mr Waheed cleverly chose the issue of GMR, an Indian company that was given a lucrative contract to renovate and run for 25 years Male's only international airport, to take on India. It was Mr Nasheed who had given the contract to GMR shortly before his ouster. His successor did not wait long to cancel the contract. The Indian government took the company's side and got embroiled in a dispute and strife with the Maldivians. Worse, at the end of the day it lost because the Singapore high court, adjudicating the dispute, held the cancellation of the contract valid. Mighty India should have chosen a more appropriate issue to put an uppity small neighbour in its place. That unfortunately was not done.

At the same time, Mr Nasheed's confrontational style and his all too frequent proclivity to rush to Delhi and eventually to walk into the Indian High Commission in Male to escape arrest had branded him without doing India any good. As a matter of fact, this country has needlessly given the impression of meddling with the Maldives's internal politics, and thus alienated a large section of the Maldives' small population.

Fourthly and finally, the Waheed regime backed by wily Mr Ghayoom, has acted so churlishly and defiantly because of powerful support it has got from China that has eaten into Indian influence in other neighbouring countries and now wants to displace India as the main regional power in the waters of the Maldives. It wasn't accidental that almost immediately after taking over, Mr Waheed travelled to Urumchi to meet Chinese Prime Minister Wen Jiabao. The eviction of GMR was followed by the Chinese Defence Minister's visit to Male with a promise of more than ample military and economic aid. To nobody's surprise, the Maldives' example is affecting other neighbours, of which Sri Lanka is in the lead at present.

Will New Delhi be a mute spectator to this because it is mired in its domestic woes or will it act adroitly to rectify the ugly situation it is now confronted with?

MIDDLE

Master, not slave, of technology
by Sai R. Vaidyanathan

THE family function had turned into a showdown — with me, the poor (est-looking) cousin on the one side and the entire clan on the other.

"We haven't seen an 'immobile' person like you. You neither have a car nor a mobile phone — in these times…," a senior member of the extended family lambasted me.

As it appeared to be an argument that I wouldn't win and one that I would hate my invited guests to lose, I left the scene with a punch, "I am an M.Tech — master of technology. I will use these gadgets only when and where I need without the media or you telling me what all I need to possess to be worthy of your company."

But swimming against the tide is never easy. A neighbour was getting married at faraway Zirakpur the other night. To attend, my family and I had to take a lift from one of our other neighbours.

Their collective indecision — about the time and the occupancy in their respective cars — ensured that I had no confirmation about my means to reach the venue.

So I — from my landline phone — called up the tuk-tuk autorickshaw service. "What's your mobile number?" the operator asked.

"I don't have one," I replied.

"Then, you can't get a tuk-tuk…," he flatly refused. "…as we send the confirmation of your booking and the driver's name by SMS."

I persisted, "Your service can be booked through any phone. Nowhere has it yet been specified that non-mobile phone users cannot avail of your tuk-tuk. Patch me up to an authority. If he categorically says so, then your denial would make for a good story in the media."

Without wasting my breath further, I got a tuk-tuk.

At the wedding, most neighbours apologised for not coming to our aid and offered a lift back home.

Recently, a family friend prevailed upon us to accept a kirtan invitation at her place in Panchkula. "Don't worry. I will get you picked and dropped."

When the auspicious hour arrived, our 'lift' was nowhere to be seen. The car had trouble starting as our friend's cousin had not recharged the battery. Finally, after a lot of delay and a push-start, the car was on the road.

But another hiccup was waiting for us at the busy Manimajra Housing Board traffic-lights. In the middle of a sea of vehicles, our four-wheeler went dead. The suited-booted me was forced to push-start it the second time.

After hearing my travails, a colleague asked, "Why are you hell-bent on being a 'green' martyr? Think what can happen if you have a flat tyre on your way back home after your night shift."

"I'll alight from my cycle and roll it along," I assured him.

OPED — DEFENCE

HYDRO HEGEMONY IS CHINA’S NEW GAMEPLAN
Chinese dams in Tibet have serious strategic and socio-economic implications for India. The issue needs to be addressed holistically and India should insist on transparency and raise its concerns forcefully
Major-Gen GG Dwivedi (retd)

THE Chinese intention to build a series of dams over the Brahmaputra (Yarlung Tsangpo) in Tibet is a matter of concern for India, and has rightly drawn reactions from various quarters. At Zangmu, a 510 MW dam is already under construction and due for completion by 2014. According to recent reports, three more dams have been approved for construction. Two of these dams, Dagu (640 MW) and Jiexu (capacity unconfirmed) are 18 km and 11 km upstream of Zangmu, respectively. The third one at Jiacha (320 MW), is downstream. These projects are likely to be completed by 2015.

Earlier, the Chinese had persistently denied undertaking any dam construction activity on the Brahmaputra. It was only in April 2010 that Yang Jiechi, Chinese Foreign Minister, officially acknowledged the construction of Zangmu dam. Beijing gave an assurance that being a “run of the river” project, it will not adversely impact the flow downstream. In 2005, there was the Pareechu episode, which had resulted in flash floods in the Sutlej, causing extensive damage. The Chinese had refused an Indian proposal for a joint inspection. In view of Beijing's system of closed-door functioning, lack of transparency and the prevailing state of trust deficit between the two neighbours, the issue merits a pragmatic review. Possible implications for India need detailed examination both from the scientific and strategic dimensions, should the Chinese go ahead with their ambitious plans.

Three Gorges Dam in China. China is the world's biggest consumer of energy and plans to double its installed capacity of 213,000 MW to 430,000 MW in a decade

The genesis

The Tibetan plateau has enormous strategic importance given its vast natural unexploited reserves. Due to its rich water resources, it has come to be known as the water tank of Asia. Ten to 20 per cent of the area is covered by glacial ice and 30-40 per cent of the region gets seasonal snow fall. This translates into 100,000 sq km of area covered by glaciers and 12,000 cubic km of fresh water. Its glaciers feed a number of river systems in South and South East Asia. The perennial run of rivers results in stable flow of water to different regions, which is augmented by the monsoon.

Major Chinese rivers which originate from Tibet are Yangtze, the longest river which carries half of the total national water and Huang He (Yellow River). Indus, Brahmaputra and Sutlej are the Indian rivers with Tibet plateau as the origin. Tibet is also home to Salween and Mekong Rivers which traverse through Indo-China peninsula.

The Chinese water resources are distributed unevenly. The upper parts of China, north of the Yangtze, are water deficient. Comparatively better developed northern region with 42 per cent population, it has only 14 per cent of the available fresh water. On the other hand, the agrarian south, lesser industrialized with 58 per cent population, has 86 per cent share. Over the years, the Chinese water consumption pattern has undergone a significant change. Whereas agricultural consumption has shown a downward trend, industrial and domestic usage has gone up substantially.

China's threat perception

In the Chinese threat perception calculus, stability tops the list, implying continued hold of the Communist Party. To ensure this, the country has to sustain a fast pace of economic progress. Water, food and energy security are non-negotiable in the Chinese security matrix.

In 2010, China emerged as the biggest consumer of energy, with an installed capacity of 213,000 MW. It aims to double its current capacity to 430,000 MW in a decade. This implies adding one project of the size of the Three Gorges Dam every year. At the same time, it also plans to lift the proportion of non-fossil fuel usage in the energy sector to 15 per cent by 2020. Officials of the Chinese Society of Hydropower state that in view of the rising demand for energy and pressure to reduce carbon emissions, China has to tap all available sources. A study concluded by the Chinese Academy of Sciences reveals that hydroelectric power generation capacity of the Tsang Po River basin is 114,000 MW; 79,000 MW from the main stem alone.

The Chinese have adopted a multi-pronged approach to meet the challenge of water and energy shortage. The Three Gorges project, the biggest of its kind on the Yangtze River, became operational in 2008. Besides generating 18,000 MW of electricity, the project has enabled transferring water to the northern region, contributed towards flood control and improved the inland water transport system.

Yet another ambitious project on the anvil is the South-North Water Transfer Project (SNWTP). It entails augmenting the capacity of the Huang He and transfer of water to the deficit northern region. The project envisages diverting the waters of the Yangtze along three axial routes. The Eastern route diversion is aligned with the existing Grand Canal. It is designed to draw 14.8 bcm (billion cubic meters) annually from the Yangtze to the eastern plains. The central route project envisages diversion of 13 bcm from Nanjing River to Beijing-Tianjin region. In the western route diversion, three tributaries of the Yangtze, namely Jinsha, Yalong and Dadu will be tapped to divert 17 bcm of water through an elaborate tunnel network. These projects being confined to the Chinese mainland do not have external ramifications as such.

One project that will be of serious concern to India is the Great Western Route Water Transfer Project (GWRWTP). The proposed project is extension of the western route diversion scheme. It entails construction of a mega dam at Namcha Barwa. Here, the Tsang Po River makes a steep loop to form a U-bend before entering India. Initially the project is only for power generation with a proposed capacity of 38,000 MW. Subsequently, plans are to divert water to the tune of 200 bcm annually to irrigate the deserts of Xinjiang, Gansu and Inner Mongolia. This mammoth project could take decades to become operational. It will entail major tunneling effort to the tune of 56 km, with longest tunnel envisaged to be 26 km. The Chinese possess proven expertise in creating engineering marvels. In case this project is implemented, it will significantly impact the water flow in the Brahmaputra River.

The Chinese are in the process of constructing 13 dams on the Salween River (Nu) in Tibet and Yunnan. Six mega dam projects on Mekong, including the 4,200 MW at Xiaowan and 5,850 MW at Nuozhadu, also stand approved. These two rivers are the lifelines of lower riparian states.

Implications

India needs to address the issue holistically, in the long-term perspective. Given Beijing's shrouded system of functioning and unilateralism, coupled with a hegemonic approach, our options should be based on the realistic assessment. Factoring China's strategic imperatives and grand designs, the major implications for India could be:

Dams on the Tsang Po, even if they are run of the river, gives China a handle on the tap — capability to control the flow of water of the Brahmaputra. As evident from the past incidences, even an accidental or emergent outflow from these dams could prove disastrous for India.

In case China goes ahead with the option of diverting waters of the Tsang Po, as brought out above, the resultant reduced flow in the Brahmaputra will have multiple impact. This could be strategic, economic, commercial and ecological, in varying degrees or combinations.

The 891-km stretch of Brahmaputra from Sadiya to Dhubri near the Indo-Bangladesh border, National Waterway-2, has vast potential to augment the current inadequate transportation infrastructural in the region. The Inland Waterway Authority of India is responsible for development of the waterway for navigation. A minimal depth of 1.5m needs to be maintained for Sadia-Dibrugarh stretch and 2m beyond. There are 11 floating terminals for handling cargo and passengers. Any interference with the water flow will adversely affect the operational status of this vital line of communication.

India's future plans to tap the hydro power potential of the Brahmaputra and the proposed river linking project will get stalled. This will impede the overall development, both at the regional and national level.

China's capability to exercise control over the water of the Brahmaputra can result in psycho-social influence over the local population fueling discontentment. Besides, it will hurt India's strategic engagement process with the south east Asian region.

As China does not believe in the concept of water sharing, there is no treaty between the two countries on the subject. Hence, India has to take recourse to crafty diplomacy, including building up international pressure to dissuade China from going ahead with the planned projects. India must insist on transparency on the issue and raise its concerns forcefully. Instead of following the policy of appeasement, we must insist on having constitutional mechanisms in place. There is an urgent need to constitute a body of experts from different fields to understand and address this vital issue in totality.

While China being an upper riparian state it enjoys “restricted territorial sovereignty” as per the international law, it also has the onus to protect the interest of the other nations. Our approach should be to build consensus amongst the affected nations. Support of Bangladesh, besides Myanmar, Thailand, Vietnam and Laos should be garnered to confront China on the issue.

Conclusion

Damming the Tsang Po in Tibet is one more addition to the list of contentious issues between India and China. While it may not be prudent to raise an alarm and press the panic button yet, its ramifications cannot be brushed aside. The issue merits a holistic review in the realm of emerging geo-political realities.

Initial vehement denials and later justifications are typical of the Chinese unilateralism. The issue of water and energy must be seen in the larger context of China's global aspirations. While keeping a close watch, it is time to evolve a long term strategy to effectively respond to the new challenges.

India's approach should be both bilateral and multilateral to persuade China to give up the precarious approach of hydro hegemony. Persistent efforts should be made to evolve a legal framework to address the water sharing mechanism. Political will along with astute diplomacy are needed to checkmate China's grand designs.

The writer has commanded a Division in the East and served as the Defence Attaché in China