Thursday, February 26, 2015

Waiting for the PM's word on GM / Surinder Sud

Agricultural scientists are being driven to frustration, thanks to the government's lingering indecision on the genetically-modified (GM) crops technology. They now intend to apprise Prime Minister of the scientifically validated facts about the and its potential benefits to let him take a call on the issue. But the requests to this effect conveyed to him through a series of letters sent by groups of scientists from India and abroad, as well as by the prestigious science academies and the Indian Science Congress, have gone unheeded so far.

The latest communication to the PM is signed by the country's 50 topmost farm scientists, most of whom are recipients of coveted national and international awards. Among them are four former and current director-generals of the (ICAR), M S Swaminathan, R S Paroda, and S Ayyappan, and winners of the World Food Prize (equivalent to the Nobel Prize in agriculture) -Gurdev Khush, S Rajaram and S K Vasal. There are also some 12 Padma Vibhushan, Padma Bhushan and Padma Shri awardees.

They have argued that the country has already lost considerable time in bringing this useful technology to the farmers' fields and further delay would be detrimental to agriculture. Apart from private biotechnology companies, public sector research bodies, too, have made significant advances in the development of GM products that can improve farm production and productivity. Unless these are field-tested and put to gainful use, the creative work of the scientists would remain confined to laboratories. They have also emphasised that the state governments' prior approval for conducting confined field trials of GM seeds is unwarranted and should be dispensed with. Such permission is needed, under the national seeds Act, only for allowing commercial cultivation of new seeds, not for their field testing.

This letter, dated February 12, 2015, was preceded by a communication on January 5 from the organisers of a symposium on at the held in Mumbai last month. It had endorsed the advantages of the GM technology. Written by Asis Datta, a well-known biotechnologist and former vice-chancellor of Jawaharlal Nehru University, and Paroda, chairman of the Trust for Advancement of Agricultural Sciences, this communication also outlined the other recommendations of the symposium regarding the GM technology.

Prior to that, as many as 750 scientists from different countries had sent a joint message to the PM in August 2014 in which they vouched for the biosafety and utility of GM crops. This initiative was led by C S Prakash, professor of crop biotechnology at the Tuskegee University in the US.

To follow it up, Manju Sharma, head of the Allahabad-based National Academy of Sciences, India, and Ayyappan, chief of the National Academy of Agricultural Sciences, jointly wrote to the PM on this issue. They also sent him a detailed and thoroughly debated status paper on all aspects of the GM technology, brought out by the country's science academies.

The common refrain of these communications is that there is no evidence of any adverse impact of the GM products either on human health or on environment since their inception in the US 35 years ago. They have also pointed out that certain objectives of breeding superior crop strains can be achieved only through GM technology.

Regrettably, the sane and well-founded counsel of the scientific community is being largely disregarded. The government's policies, on the other hand, are being guided - or misguided - by the relatively more vociferous but unsubstantiated propaganda against the GM technology. The scientists are, therefore, hoping that at least the PM, who often talks about putting science, technology and innovation on the top of the national agenda, would one day respond positively to their prudent pleas. Otherwise, the future of the GM technology in India would be in peril.

Power that pollutes

In the midst of triumphalism from the government aboutof coal mines, an assessment of the performance of India's coal-based by the comes as a sobering reality check. The plants studied, which account for around half of the country's capacity in 2011-12, have scored an abysmal average of 23 per cent on a scale that rates plants following global best practices at 80 per cent. No Indian plant does so, the best scoring around 50 per cent in terms of their and environmental performance. As much as 40 per cent of the plants studied score a very low rating of less than 20 per cent. As the quality of Indian coal is poor, the need is to make up the deficit through better technology and performance. But the opposite is the case. The worst offenders appear to get away with their way of working as it is difficult for a power-starved country to close down a plant for polluting too much or being inefficient.

In the fallout of the coal auctions, many senior officials have insisted India plans to massively raise its coal-based power-generating capacity even as the poor quality of its coal, with low calorific and high ash content, is going to go down further with increasing exploitation of known reserves. Coal demand for power is set to nearly double in the 2012-22 period. Right now, a billion tonnes of fly ash already generated remain unutilised. It is difficult to imagine what will happen when there are plans to generate more, but none to reduce the backlog of what is already there on the ground. The increase in generation will also lead to greater water consumption, which, too, is set to double in the same period.

It is imperative to devise a range of integrated policies that will reduce the pressure created on natural resources and minimise the amount of pollution caused, as it results in considerable health costs. For example, the power regulator that sets tariffs and the environment regulator that sets permissible emission levels must work in concert - so that a power producer that spends more on doing a cleaner job not just gets these costs recognised in the tariffs allowed to it, but is also rewarded. The mandated use of large super-critical capacity must be raised, and coal-based power must be used more and more to meet the base load demand (excluding peak demand). The additional power demand for peak periods must increasingly be met by renewable sources like solar and wind power, or by gas-based units that can be started and shut down quickly and are less polluting than coal-based power plants. Most of the additional thermal power-generating capacity will come up in eastern and central India, which are not as economically secure. As the communities around projects do not typically benefit the most from the economic activity, it is at least necessary to reduce the environmental costs that they bear above all.

Social spend needs Budget boost

Allocation has remained same since 2007

Social sector spending has flatlined over the past few years, and massive spending expansions are required to keep Prime Minister Narendra Modi’s key promises, Budget data show.
Social sector spending — expenditure on health, education, water supply, sanitation and housing among others — has doubled over the past 10 years as a proportion of the Union government’s total expenditure. But the big expansion came between 2004 and 2007, and more or less flattened at around 12 per cent of the total expenditure since then, show data from the Economic Census for various years.
In its first Budget in 2014, the National Democratic Alliance government held allocations for most flagship United Progressive Alliance schemes close to what the outgoing government made in its last Budget, an interim one prior to the Lok Sabha elections.
However, the release of funds has slowed down sharply for some schemes such as the Swachh Bharat Abhiyan (earlier known as Nirmal Bharat Abhiyan), while delays have grown on the ground for others such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, show data from Accountability Initiative, which monitors public finances. A senior official of the Rural Development Ministry, however, attributed this to “the usual friction during change in government,” which the official said would ease soon.
If the government is to follow through on its promises, the Union Budget to be presented on Saturday should be a break from the past.
Urban Development Minister M. Venkaiah Naidu pegged the cost of the Swachh Bharat Abhiyaan at Rs. 2 lakh crore over five years, a sum yet to be formally budgeted. Should the Budget reflect this expenditure, an allocation of Rs. 40,000 crore will be required, which is 10 times the allocation last year and two-and-a-half times the entire Budget for the Drinking Water and Sanitation Ministry for 2014-15.

A budget for women

The coming Union budget is significant for at least two reasons: first, this will be the new government’s maiden full year budget. Second, with the NITI Aayog replacing the Planning Commission, the government is likely to abolish the distinction between plan and non-plan budgets.
This year’s budget is also an opportunity for the government to demonstrate its commitment to gender equality. Gender issues have found consistent mention in official fora, including in the speeches of the Prime Minister. Ensuring adequate allocations for policies and programmes for women will help translate those commitments into action.
Development challenge
Gender inequality poses a significant development challenge in India. The Global Gender Gap Index 2014 ranked India at 114 out of 142 countries. The ranking is based on a country’s ability to reduce gender disparities in four areas: economic participation and opportunity, education, political empowerment, and health and survival. Violence against women and girls persists, both in private and in public spaces.
As a response to these challenges, India adopted ‘gender-responsive budgeting’ (GRB) in 2005. Put simply, GRB is a method of planning, programming and budgeting that helps advance gender equality and women’s rights. It also serves as an indicator of governments’ commitment to meeting those objectives. So far, 57 government Ministries/departments in India have set up Gender Budgeting Cells — a major step that could potentially impact the lives of crores of women. An analysis of GRB in India, 10 years after it was adopted, will be a crucial pointer to the way forward.
The quantum of allocations for schemes relating to women — out of a budget of nearly Rs.18 lakh crore (2014-15 budget estimate) — can be assessed by examining the Gender Budget Statement (GBS) which was first introduced in the 2005-06 budget. The analysis shows that over the last eight years the allocations for women as a proportion of the total budget have remained constant at approximately 5.5 per cent. Further, only about 30 per cent of the demands for grants, or estimates of expenditure, presented by Ministries/departments to the Union government are reported in the GBS.
Further, allocations to the Ministry of Women and Child Development (MWCD), the nodal agency for women in the country, show a marginal increase over the last three years — from Rs. 18,584 crore in 2012-13 to Rs. 21,193 crore in 2014-15. With respect to ‘Women Welfare,’ the allocations actually show a downward trend — from approximately Rs. 930 crore in 2011-12 to around Rs. 920 crore in 2014-15. And almost 87 per cent of the 2014-15 budget of the MWCD was allocated for the Integrated Child Development Services Scheme, leaving only five per cent for schemes exclusively meant for women.
The UN Committee on Elimination of Discrimination against Women has emphasised the need for increased investments for the MWCD and for gender budgets across Ministries. In 2014, following its review of the fourth and fifth periodic reports submitted by the Government of India, the Committee — which monitors States’ implementation of the UN Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) — also reiterated the need to strengthen institutions such as the National Commission for Women and the State commissions.
Schemes focussed exclusively on women either received reduced allocations or were not implemented, as seen from the revised estimates for 2013-14 vis-à-vis the budget estimates of the same year. Revised estimate figures are presented for the ongoing fiscal year based on the performance in the first six months of that year. The Domestic Violence Act is a case in point. The legislation, enacted a decade ago, received an allocation of Rs. 20 crore in 2012-13. Revised estimate figures for 2013-14 show zero allocation, which indicates that the scheme launched to operationalise the Act did not take off that year. Renamed SAAHAS, the scheme was allocated Rs. 50 crore last year. The coming budget will reveal how much of this was actually spent.
Other schemes such as restorative justice for rape victims have also seen a decline in allocations. The recent launch of the ‘Beti Bachao Beti Padhao’ scheme by the new government is commendable. Equal attention must now be paid to better implementation of laws and special measures for the most marginalised women, as highlighted in the election manifesto of the Bharatiya Janata Party.
It will also be important to ensure increased spending on all social sectors such as health, education and sanitation, given their impact on women. Women bear the greatest burden of unpaid care work — which includes looking after children and elderly or sick family members, cooking and cleaning. The call to recognise, redistribute and reduce women’s unpaid care work has gained momentum globally. This is therefore an opportune time to increase the quantum of allocations to the social sector.
Positive trend
A positive trend over the past couple of years has been the pre-budget consultations organised by the Ministry of Finance, aimed at ensuring that the voices of women are also heard in the budget making process. This year, in addition to meeting women’s rights organisations, the Ministry also held a dialogue with UN Women along with the MWCD to discuss key issues pertaining to GRB.
In conclusion, the coming budget can serve as a timely course correction. The emphasis must be on the strengthening of key institutions, adequate investments for schemes that address gender concerns and the effective implementation of those schemes.
The coming months will see a greater focus on development issues in general, and gender issues in particular, with the adoption of the post-2015 global development agenda and reviews of countries’ performance vis-à-vis the Beijing Declaration and Platform for Action (Beijing+20). The stand-alone goal on gender equality and women’s empowerment in the Sustainable Development Goals is an achievement for women’s rights advocates across the globe. It will, however, remain elusive if not backed by adequate investments. The government’s first full year budget is an excellent chance to recognise missed opportunities and take corrective action.

(Yamini Mishra is Gender Responsive Budget Specialist for Asia Pacific, UN Women, and Dr. Rebecca Reichmann Tavares is the Representative of UN Women’s Multicountry Office (MCO) for India, Bhutan, the Maldives and Sri Lanka.)

DTTI | Carter Initiative

For approximately three years, I have been involved in the India-U.S. Defence Technology and Trade Initiative (DTTI). Originally called “the Carter Initiative,” when Secretary Ashton Carter was the U.S. Deputy Secretary of Defence, DTTI aims to strengthen defence cooperation between India and the United States by elevating defence cooperation to the most senior levels of our governments.
I can proudly state that today the U.S. commitment to this initiative has never been stronger. We are delighted that DTTI is moving forward with strong support from Prime Minister Narendra Modi and his team. DTTI is real, it is important to the U.S., it is important to India, and it promises enhanced prosperity and security for both our nations.
DTTI is one facet of U.S. policy to build a deeper, closer, and broader relationship with India, one of the most important countries on earth. We see India as a country which shares our values and aspirations and a hunger for growth that will directly serve its people. We see India as a partner for peace and stability in a crucial part of the world and see a convergence of interests between our two countries, especially when we look at security challenges in East and South Asia. In the words of President Barack Obama, “India and the United States are not just natural partners…America can be India’s best partner.”
DTTI is one of the several flexible mechanisms intended to ensure that senior leaders from our nations are focussed on real opportunities and challenges associated with strengthening our defence partnership. DTTI is not a treaty or law. Rather, it elevates and accelerates our shared commitment to defence trade, helps eliminate bureaucratic obstacles, promotes collaborative technology exchange, and enables co-production and co-development of select defence systems to our countries’ mutual benefit. DTTI is not a concept — it is an instrument of real progress for U.S.- India ties, now and far into the future.
DTTI aims to strengthen U.S.-India cooperative research, co-production, and co-development of capabilities that are needed for the sustainment and modernisation of our military forces and the growth of our economies. Currently four pathfinder projects, plus a working group on aircraft carrier cooperation, and the investigation of jet engine technology cooperation are all in discussion as part of DTTI. These topics represent the modest beginning, not the conclusion of DTTI.
Our hope is that these efforts will begin a process of continued growth over time, until India and the U.S. achieve a strong and enduring partnership in military modernisation, technology, and manufacturing — because a strong Indian military serving as a security provider both regionally and throughout the globe is in the mutual interest of both our countries.
Together, our governments and industries can work to strengthen India’s industrial base to not only ‘Make in India,’ but to make the region and the world a safer place. DTTI is firmly grounded in our nations’ mutual interests. Our shared efforts aspire to be larger than the sum of their parts. We have gained momentum, but our good intentions must lead to tangible results, or the momentum we built will fade. We are primed to unlock the full potential of the India-U.S. relationship. For the U.S., this is more than an intention — it is a commitment.
Forward together we go – chalein saath saath.

(Frank Kendall is U.S. Under Secretary of Defence.)

A watershed 14th Finance Commission

The report of the (FFC) was tabled in Parliament yesterday. The government has accepted its far-reaching, indeed radical, recommendations that have the potential to redefine Indian federalism in a long overdue and desirable manner. This piece describes the key recommendations and highlights some of their major implications. It is based on updating assumptions in the report, which is the only source of data used in the numbers presented below. The discussion below, especially the estimates, should be seen as illustrative at best.

Vertical and horizontal devolution
The FFC has increased the amount that the Centre has to transfer to the states from the divisible pool of taxes by 10 percentage points, from 32 per cent to 42 per cent. Its radical nature is indicated by the comparison with the previous two Finance Commissions (FCs) that increased the share going to the states by 1 and 1.5 percentage points, respectively. So, the FFC recommendations represent a ten and six-and-a-half fold increase, respectively relative to the previous two FCs. Had the new share been implemented in 2014-15 (Budget estimates), the Centre’s fiscal resources would have shrunk by about 1.20 lakh crore (0.9 per cent of gross domestic product or GDP). If the comparison were to be in terms of overall (tax plus non-plan grants) devolution, the increase would be roughly comparable to that in tax devolution.

In addition, the FFC has significantly changed the sharing of resources between the states — what is called horizontal devolution. The FFC has proposed a new formula for the distribution of the divisible tax pool among the states. There are changes both in the variables included/excluded as well as the weights assigned to them. Relative to the Thirteenth Finance Commission, the FFC has incorporated two new variables: 2011 population and forest cover; and excluded the fiscal discipline variable.
Several other types of transfers have been proposed, including grants to rural and urban local bodies, a performance grant, and grants for disaster relief and reducing the revenue deficit of eleven states. These transfers total approximately 5.3 lakh crore for the period 2015-20.

Uniformly large addition to states’ resources
The impact of FFC transfers to the states needs to be assessed in two ways: gross and “net” FFC transfers will clearly add to the resources of all the states in absolute terms and substantially. They will also increase resources when scaled by states’ population, net state domestic product, or own tax revenues, with the latter connoting the addition to fiscal spending power.

Implementing the FFC recommendations alone would undermine the centre’s fiscal position substantially. The philosophy of the FFC report is that there should be some corresponding reduction in the (CAS, the so-called plan transfers). Thus, greater fiscal autonomy to the states would be achieved both on the revenue side (on account of states now having more resources and more untied resources) and on the expenditure side because of reduced transfers. The exact mechanism for implementation will be discussed in the months ahead but the legally backed schemes as well as flagship schemes that meet core objectives, such as rural livelihoods and poverty alleviation, will be, and need to be, preserved.

The net impact on the states will depend not just on the transfers effected via the FFC, but also the consequential alteration of CAS. Under some simple assumptions about how the latter will be distributed, we find that all states will end up better off than before, although there will be some variation amongst the states.

Increase in progressivity of overall transfers
The FFC transfers have a more favourable impact on the states that are relatively less developed, which is an indication that they are progressive, that is, states with lower per capita (NSDP) are likely to receive on average much larger transfers per capita . The correlation between per capita and FFC transfers per capita is -0.72 based on some broad assumptions about FFC transfers. This indicates that the FFC recommendations do go in the direction of equalising the income and fiscal disparities between the major states.

In contrast, CAS transfers are only mildly progressive: the correlation coefficient with state per capita GDP (over the last three years) is -0.29. This is a consequence of plan transfers moving away from being formula-based (Gadgil-Mukherjee formula) to being more discretionary in the last few years. Greater central discretion evidently reduced progressivity.

A corollary is that implementing the FFC recommendations would help address inter-state resource inequality: progressive tax transfers would increase, while discretionary and less progressive plan transfers would decline.

Weakening fiscal discipline?
Will FFC transfers lead to less fiscal discipline? There are two reasons to be optimistic. First, in the last few years the overall deficit of the states has been about half of that of the Centre: in 2014-15 (Budget estimates) for example, the combined fiscal deficit of the states was estimated at 2.4 per cent of GDP compared to 4.1 per cent for the Centre. So, on average, states, if anything, are more disciplined than the Centre.

Based on analysing recent state finances, we find that additional transfers toward the states as a result of the FFC will improve the overall fiscal deficit of the combined central and state governments by about 0.3-0.4 per cent of GDP. Moreover, nearly all the state governments have enacted (FRLs), which requires them to observe high standards of fiscal discipline such as keeping the deficit low.

Further, as part of the new Centre-state fiscal relations, for example, under the NITI Aayog, mechanisms for peer assessments and mutual accountability could be created, and incentives could be provided for maintaining fiscal discipline. This is becoming routine practice in many federal structures where sovereignty is shared between the members. The FFC recommendations and the consequences they entail offer an opportune time for instituting such mechanisms.

With the caveats noted earlier, the main conclusions are that the FFC has made far-reaching changes in that will move the country toward greater fiscal federalism, conferring more fiscal autonomy on the states. This will be enhanced by the FFC-induced imperative of having to reduce the scale of other central transfers to the states. In other words, states will now have greater autonomy both on the revenue and expenditure fronts.

This, of course, is in addition to the benefits that will accrue from addressing all the governance and incentive problems that have arisen from programmes being dictated and managed by the distant central government rather than by the proximate state governments.

To be sure, there will be transitional challenges, notably how the Centre will meet its multiple objectives given the shrunken fiscal envelope. But there will be offsetting benefits: moving from CAS to FFC transfers will increase the overall progressivity of resource transfers to the states. Another is that overall public finances might actually improve by more than suggested by looking at the central government finances alone.

In sum, it is clear that the far-reaching recommendations of the FFC, along with the creation of the NITI Aayog, will radically alter Centre-state fiscal relations, and further the government’s vision of cooperative and competitive federalism.

The necessary, indeed vital, encompassing of cities and other local bodies within the embrace of this new federalism is the next policy challenge, a change that we would like to see.

Syed Zubair Naqvi, Kapil Patidar & Arvind Subramanian

The authors are assistant directors and chief economic advisor respectively, in the Ministry of Finance