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COVER STORY

30-07-2004

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Briefing

An exercise in evasion

In an effort to make the appropriate signals to various sections, the Union Budget takes a risky path that could lead the United Progressive Alliance to politically difficult situations.

BETWEEN the festive season last year, which saw the first glimmers of the "India Shining" campaign, and the elections this year, it became the political common sense that the agrarian sector in the country was facing a crisis of desperate proportions. Former Deputy Prime Minister L.K. Advani grudgingly conceded the case that the Indian farmer perhaps had no part in the shine that his regime had imparted to the economy. And the Congress party built its campaign on the perceived state of despair and devastation in the countryside, promising a new deal for the farmer if voted to power.

This continued to be the refrain through the days of ministry formation and the drafting of the "National Common Minimum Programme" (NCMP) that will guide the new Congress-led coalition. It was the signature theme of Finance Minister P. Chidambaram's maiden Budget for the United Progressive Alliance Ministry. But as the budget speech wore on, a sense of puzzlement arose. Here was a Finance Minister who was promising to phase out the gaping revenue account deficit well before the mandated five-year period, handing out a vastly increased outlay for capital expenditure in the defence services, and promising that the long-neglected sectors of agriculture and social welfare will be given their due. How was he squaring the fiscal circle?

The mystery was largely dispelled with the figures coming in. Chidambaram has bargained for a massive increase in Central government revenues this year, well in excess of anything seen over the last decade and a half. He has severely held down committed outlays for agriculture, rural development and employment programmes. He has allocated a substantial Rs10,000 crores in Plan funding for the NCMP but not assigned it to any particular expenditure head. Instead, he has made the entire hike in allocation for these purposes contingent on a review to be undertaken in the next few months by the Planning Commission. Now headed by Montek Singh Ahluwalia, Finance Secretary during Chidambaram's earlier tenure in the Ministry, the Planning Commission is expected to propose measures to reduce the plethora of Centrally sponsored schemes implemented by the States into some manageable order.

In remarks to the media after the budget speech was concluded, Prime Minister Manmohan Singh repeatedly underlined the issues of implementation and delivery. Implicitly, he was seeking to shift the focus of public scrutiny from the rather paltry allocations for agriculture and social welfare. The new mantra evidently is not to increase levels of public spending in these sectors, but to ensure that the limited expenditures that are committed deliver maximum results. It is a process that would involve enforcing a greater degree of transparency in the administration of these funds and ensuring that the bureaucracy that channels the top-down flow of funds remains accountable to the intended beneficiaries.

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The politics involved in this is complex. It involves the meshing of the process of allocating funds with the bottom-up articulation of demands by the poorest in the country. It could conceivably unsettle local relations of power on which regional and national politics is constructed. Whether the Congress party is prepared to face the full consequences of this process is yet unclear.

It may seem a little far-fetched to say that the UPA government will compensate for a 15 per cent cut in the Plan outlay for rural development, a token, almost derisory hike in the provision for the public distribution of food, and an insubstantial increase in the outlay in agriculture, by reforming the administration and rearranging the contours of politics at the local level. But that is the promise inherent in the Budget for 2004-05. And the time available for the UPA to deliver is limited. The previous government deluded itself into the belief that a modest rebound from the disastrous drought year of 2002-03 was indeed evidence that the Indian economy had moved onto a dynamic new growth trajectory. The current administration cannot afford for very long to proceed on the belief that illusions of a recovery from a very bad year would suffice, rather than the restitution of all the damage that has been suffered over a decade of neo-liberal economic policies.

Another platform that the Budget uses to address the crisis in the agrarian sector is the credit system. The Finance Minister has directed regional rural banks (RRB) to increase the credit availability for agriculture and held out the assurance that the lead bank for each RRB would be held accountable for any failure on this account. But among the expenditure heads that the Budget economises on is the capitalisation of banks. Coupled with the debt buyback scheme of the government, which involves the swapping of older debts which are liable for a higher interest for newer, lower cost debts, this represents a zone of some uncertainty for the banking system. The effort at curbing the growth of non-performing assets has been misdirected for long at the agricultural and small-scale industry sector rather than the medium and large-scale industry sectors, where its dimensions are truly mammoth. Given this mix of circumstances, the banks' ability to extend the required quantum of credit to agriculture cannot be deemed to be quite adequate.

On the revenue mobilisation side, Chidambaram's effort does not afford very much novelty. A turnover tax on stock market transactions has been introduced, partly to mitigate the losses on account of the moderation of the capital gains tax. But the turnover tax remains contentious, with a powerful mobilisation of stock traders seeking to make it an issue on which they would paralyse the markets. And its yield cannot be computed with great accuracy, since the discipline of a tax would drive underground many of the speculative transactions that were rife in the stock market.

The extension of the service tax and its integration into the centralised value added tax (CENVAT) chain potentially taps new sources of revenue and offers the merit of simplicity in accounting. But its yield again remains uncertain. Past experience with the service tax does not indicate that it is a buoyant source of revenue.

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This leaves the 2 per cent cess on all taxes as the single most important revenue initiative taken by the Minister this year. With an expected annual yield of over Rs. 4,000 crores, the cess would be reserved entirely for extending the reach of basic education and upgrading its capacities.

This long-overdue recognition of the value of education has, naturally enough, been welcomed. But it is an index of the course of tax reform over the last decade and a half, that the government has finally had to seek recourse to the blunt instrument of a cess to meet a vital social need. The measure is reminiscent of the "surcharges" that were introduced on corporate and personal income taxes in the late 1990s, ostensibly as temporary expedients, only to show a remarkable persistence over the years.

The initial premise of the neo-liberal reforms introduced in the early-1990s was that it would promote private initiative in the productive sectors, while leaving the government with sufficient wherewithal to attend to its tasks in the sectors that really mattered. With government revenues plunging, the outcome has been a crisis of livelihoods in the agrarian sector and a serious investment famine in vital infrastructure areas. The surcharges and cesses are admissions, even if inadvertent, that this basic premise has been exposed as hollow.

With all the provisions - even if they are in large part illusory - made for the rural and welfare sectors, the Finance Minister had to make the appropriate signals to private corporate interests that they had not entirely been forgotten. The signal he chose was to raise the foreign direct investment ceiling in the three areas of insurance, civil aviation and telecom. Yet, most expert opinion is unconvinced that the ceiling has been a constraint in any way on investments in these sectors. If anything, the demand constraints have been the decisive factor. And to circumvent this problem, investments need to flow into areas, and target constituencies, that the corporate sector is not normally very mindful of. Early political turbulence is foretold over these proposals, with the Left parties making it clear that they will vote against the proposal on insurance in particular.

Inevitably, media comment after the UPA's first Budget sought to evoke the image and spirit of the 1997-98 exercise, partly because the principal author was the same. But the discussion tended to miss the central point about the "dream budget" of the 1990s. It was then hailed as a decisive break with the notion of "zero sum economics". By boldly reducing tax rates and bargaining for a massive increase in revenues as a consequence, Chidambaram had ostensibly in 1997 laid to rest the old belief that to bring benefits to the disadvantaged, you had to impose a certain burden on those more fortunate.

The actual revenue accruals showed how disastrously miscued these calculations were. In relation to the budget forecasts, actual tax receipts in 1997-98 fell short by 17 per cent in nominal terms. This was by far the most serious fiscal miscalculation since the neo-liberal economic reforms began in 1991.

Tax buoyancy expectations this year are premised not so much upon the old "supply side assumption" - that lower rates yield higher revenues - but on the more mundane calculation that long-overdue arrears will finally be paid up. The path that the Finance Minister has chosen is a risky one. And if revenue accruals fall short, there is little question that the first expenditure commitments to suffer would be the ones that the budget speech sets greatest store by. That could be the surest path to a political crisis of enormous dimensions for the UPA.

The missing `human face'

PRABHAT PATNAIK cover-story

The Budget has missed the opportunity to reconcile liberalisation with the welfare of the masses, as UPA leaders appeared to promise. Instead, it signals the continuation of the policies of liberalisation.

BUDGETS in India tend to get hailed for precisely what they are not. The current year's Budget, for instance, has been hailed as being "pro-poor, pro-farmer", having "the fragrance of the village" and "having a vision for agriculture, irrigation and rural development". Nothing could be further from the truth. The outlay for the Department of Agriculture and Cooperation remains at the same level as in the National Democratic Alliance government's (NDA) interim Budget - Rs.3,014 crores. There is no additional outlay over what the interim Budget had provided for the food-for-work programme. And the extension of coverage from 1.5 crore to 2 crore families under the Antyodaya Anna Yojana had also figured already in the interim Budget.

In fact, paradoxically, for a government committed to Rural Employment Guarantee, there is a marked decline in Central Plan outlay on rural employment compared to 2003-04 (RE), from Rs.9,640 crores to Rs.4,590 crores. True, the outlay for 2003-04 was inflated because several rural areas were declared "calamity-affected" and the Finance Minister promised financial assistance upon request this year too. But even if we remove this special component from both years' figures, the outlay actually decreases from Rs.4,751.25 crores to Rs.4,310 crores. If we take the outlay for the Department of Rural Development as a whole, again excluding the "calamity relief" component, the increase is meagre, from Rs.10,612 crores to Rs.11,437 crores. No doubt there are off-Budget measures promised, such as the Rural Infrastructure Development Fund, and the doubling of credit to agriculture over three years, but the Budget itself is extraordinarily niggardly towards agriculture and rural development, contrary to the promise of the Common Minimum Programme (CMP).

The Budget does bow in the direction of the CMP by raising the amount of budgetary support for the Plan by Rs.10,000 crores over the provisions of the interim Budget. Of this, however, a significant amount of Rs.4,910 crores, according to the Receipts Budget, which is financed by the 2 per cent cess levied on five taxes, should go for education. The remainder is too small to make much difference. By contrast, defence expenditure has gone up by Rs.11,000 crores over and above the sum provided by even the interim Budget of the NDA government. Questioning the need for such an enormous jump in defence expenditure may not be de rigeur, but the contrast between the attitudes to defence and rural development is quite striking, more characteristic of the NDA than of the United Progressive Alliance (UPA). It comes as no surprise that former Finance Minister Yashwant Sinha has expressed "satisfaction" over the increase in defence outlay while calling the education cess, perhaps the most positive feature of the Budget, a "mindless act".

WHAT is dubious about the Budget is not just its commitment to the CMP, but also its macroeconomics. The relentless pursuit of neo-liberalism, especially during the NDA years, had imposed a drastic deflation on the economy, compressing aggregate demand and giving rise to a combination of unutilised industrial capacity, unsold foodstock, and increased unemployment. Boosting domestic demand through increased government expenditure, and doing so via increased outlays in rural India, was the obvious need of the hour. The Budget not only does not raise outlays in rural India significantly, but it does not even give much boost, as it stands, to aggregate demand in the economy. This is so for two reasons: first, the fiscal deficit is supposed to come down from 4.8 per cent of gross domestic product (GDP) in 2003-04 (RE) to 4.4 per cent in 2004-05, which is contractionary per se; and second, since a large chunk of defence expenditure would go for equipment imports, representing a demand leakage from the economy, the 27.7 per cent increase in defence expenditure, which significantly alters the composition of public expenditure, would have a further contractionary effect. In short, the Budget as it stands does not free the economy from the scourge of deflation.

But, as almost everyone recognises, the revenue estimates of the Budget are grossly unrealistic. Income tax revenue is budgeted to rise by 26.5 per cent over the revised estimates of 2003-04, despite the fact that as many as 14 million tax payers, out of a total number of 27 million tax assessees, are being taken out of the tax net. (This measure, incidentally, has to be rectified since in its present form it introduces anomalies such that people with higher pre-tax incomes end up having lower post-tax incomes in absolute terms compared to those with lower pre-tax incomes.) Corporation tax revenue is expected to grow at an even more phenomenal rate, 40.4 per cent. The Budget has, of course, increased the rate of service tax from 8 to 10 per cent and extended its coverage. It has also introduced an extremely innovative tax on stock market transactions, though it has removed the tax on long-term capital gains, entirely without any justification. (Interestingly, the introduction of a stock market transactions tax, in addition of course to capital gains taxation and larger service sector taxation, was advocated by a convention of economists, organised by Social Scientist and Sahmat, in New Delhi on July 5.) But a major assumption behind the revenue estimates is that a "tidy sum" would be fetched from all tax arrears, which is rather sanguine.

If, in the likely event of tax revenues falling short of Budget estimates, the government cuts back on expenditures in order to meet the fiscal deficit target, then the deflationary scourge on the economy would persist and the CMP would remain even more of a chimera. But if the revenue shortfall gets covered by a larger fiscal deficit, then aggregate demand would receive a boost and the CMP targets would appear less remote. True, even in such a case, we would not have used the best means of boosting aggregate demand, viz. through rural development expenditure; we would have essentially boosted demand through tax-cuts on middle income groups and some increase in Plan outlays (apart from the limited stimulus of defence expenditure). But at least there would have been some escape from the scourge of deflation.

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Hence it is important that the Finance Minister stick to his expenditure targets even in the event of a revenue shortfall. Such a course would no doubt be contrary to the Fiscal Responsibility and Budget Management Act, but that is a piece of legislation with which the government must not tie itself down. Inspired by Right-wing American ideologues like Buchanan and meant to appease finance capital which is always opposed to state activism in matters of expenditure, the Act constitutes an insult to intelligence. "Thou shalt not have a fiscal deficit exceeding a certain proportion of GDP from now to eternity" cannot possibly be accepted as an immutable value-judgment. In the European Union (E.U.), where there is a limit on fiscal deficits under the Maastricht Treaty, as part of the currency unification process, France and Germany have recently been violating the limit. In the U.S., from where the preaching on fiscal orthodoxy originates, the recent boom has been stimulated by a substantial expansion of the fiscal deficit under George W. Bush. And yet in India the NDA has tied everybody's hands by enacting this law, which is theoretically absurd. In a demand-constrained system, harping on keeping down the fiscal deficit is bad economics, apart from being socially retrograde. And this is all the more so when the expenditure financed by the fiscal deficit creates demand within the public sector itself and hence gives rise to larger public sector profits. (These theoretical arguments are discussed in my paper "The Humbug of Finance", Frontline, February 4, 2000.)

But quite apart from general theoretical considerations, there is a further specific reason why this Act is absurd at the present juncture. We have had huge foreign exchange inflows through foreign institutional investors (FIIs). The Reserve Bank of India (RBI), quite rightly, has prevented the rupee from appreciating too much (and thereby precipitating a domestic de-industrialisation) by holding on to reserves which currently exceed $120 billion. The high-powered money created as a consequence has boosted bank reserves though the demand for bank credit from quarters that the banks consider creditworthy (which unfortunately excludes the peasantry and petty producers) has been limited. To support banks' profitability, the RBI has been putting government securities into their portfolios (in what are misleadingly called "sterilisation" operations). In the process, however, the RBI's own holding of government securities has gone down dramatically and with it the RBI's own profitability.

This decline in RBI's profitability is significant not only in itself but also for an additional reason, namely that much of the finance for rural credit through the National Bank for Agriculture and Rural Development (NABARD) comes from the RBI's profits. With the drying up of the RBI's profits there has been a drying up of such funds for rural credit as well. It is extremely urgent that additional government securities be put into the RBI's portfolio. For the government to refuse to do so because its hands are tied by the Fiscal Responsibility Act is folly beyond belief. In short, to have a Fiscal Responsibility Act that limits the size of the fiscal deficit, when there are no controls over the inflow of finance from abroad, is plain illogical. This bit of absurdity inherited from the NDA government must be done away with. At any rate, the Finance Minister, if he is serious about his commitment to the CMP, should pay little heed to it.

Such commitment also requires a degree of control over capital flows into and out of the country, a pre-condition, as everybody must recognise after the Asian currency crisis, for overcoming thraldom to the caprices of globalised finance. Unfortunately, the Budget not only shows no recognition of this, but has even taken a few limited steps towards increasing the role of globalised finance in our economy, such as raising the investment ceiling for FIIs in debt-funds from $1 billion to $1.75 billion, and allowing banks, including foreign banks, greater latitude in the capital market. In fact, while the RBI Governor spoke recently with legitimate concern about "India becoming a parking place for dollars", the Finance Minister, in contrast, wanted to make the Indian capital market "attractive" for globalised finance.

LIKEWISE, the Finance Minister's decision to raise the foreign direct investment (FDI) cap in telecommunications, civil aviation and insurance is a thoroughly unwarranted step. His claim that the insurance sector meets the CMP criteria for FDI defies logic. The government-owned insurance companies in India have far greater experience, far larger reach, far greater social commitment, far greater expertise and a far better record of honouring claims than foreign companies. To induct the latter into the economy serves no other purpose than gratuitously handing over a chunk of the lucrative Indian market to them. Raising the FDI cap in telecommunications hands over a strategic area to foreign investors and in the process goes beyond what even the NDA had dared to do. And raising the cap in civil aviation amounts to giving foreign companies, again quite gratuitously, a share of the profitable Indian market at a time when the global industry continues to be in crisis.

The Budget does, of course, put forward proposals to strengthen the healthy public sector enterprises with equity support of Rs.14,194 crores and to set up a Board for Reconstruction of Public Sector Enterprises to advise the government on the measures to restructure ailing public sector enterprises. But, this healthy concern for the public sector is belied by the plan to disinvest in the National Thermal Power Corporation (NTPC).

An intellectual Gresham's Law is operating in economics these days, whereby bad economics drives out good economics. A completely erroneous proposition, namely that a fiscal deficit can be "closed" through disinvestment proceeds, has become "acceptable" and underlies the NTPC disinvestment. But since those buying such equity do so not by skimping on their flow expenditures on consumption or even investment (surely even the government itself does not want private investment going down for financing the purchase of equity), covering a fiscal deficit through disinvestment proceeds is different from covering it through taxes, which do curtail flow expenditures. In fact, since the whole rationale for covering a fiscal deficit at all arises from the presumed need to ensure that the economy does not face excess demand pressures, "covering" a fiscal deficit through disinvestment is no "covering" at all. It merely constitutes an unnecessary and unwarranted transfer of public assets to the private sector.

The implementation of the CMP requires a strengthening of State government finances, which are in a crisis for no fault of theirs. The two main reasons for this crisis are the implementation of the Fifth Pay Commission recommendations in line with the Centre, which the States could not possibly avoid doing; and the exorbitant interest rates charged on Central loans to the States. While the Budget does reduce interest rates on fresh Central loans to 9 per cent, it is silent on the issue of debt write-off, which even the NDA government's Planning Commission had proposed for non-small savings debt. And the eagerness to introduce value-added tax (VAT) when there has been no study whatsoever of its consequences and when the Centre's promise of full compensation to States extends only to one year is completely unjustified. (The case of Haryana which has made a revenue gain from the introduction of VAT cannot be cited to justify its introduction in other States since Haryana is a virtually metropolitan State). The introduction of VAT has the potential to inflict great damage on State government finances and hence should be eschewed until its consequences are better understood.

THE first Budget of the UPA government was eagerly anticipated by all for the signals it would provide about the ways of the new dispensation. While many believe that "liberalisation with a human face" is an impossibility, that the immanent logic of "liberalisation" pushes governments, no matter what their political complexion, into bowing to the caprices of globalised finance, and hence necessarily having to sacrifice welfare objectives (whose achievement therefore requires abandoning the neo-liberal path), the outlook of the UPA leaders is presumably different. They believe that a reconciliation of "liberalisation" with the welfare of the masses is possible.

The 2004-05 Budget would have been the means for them to show how such reconciliation is possible. What we have instead, in substantive terms, is little of "the human face", but a continuation, no doubt in a less aggressive manner than the NDA, of "liberalisation". The identity of the fly trapped in the fly-bottle may have changed, but it still remains trapped in the fly-bottle.

A disappointing blend

C.P. CHANDRASEKHAR cover-story

The first Budget of the United Progressive Alliance persists with the liberalisation agenda of the previous government. It is high on pro-poor rhetoric but unclear on the ways and means of financing its stated priorities.

DESPITE periodic statements to the contrary, the annual Budget of the Government of India is a major instrument of its economic policy. It reveals the fiscal stance - expansionary, neutral or deflationary - of the government at each point in time; it reflects its economic policy priorities; and discloses the way in which the burden of financing the pursuit of those priorities is sought to be distributed. To these features characteristic of all budgets must be added the special nature of Budget 2004-05. Coming as it did in the wake of what to many was a surprise election verdict against the National Democratic Alliance (NDA) and its economic policies, the budget was expected to mark a departure from the neo-liberal economic regime of the 1990s that had resulted in agrarian distress, near-stagnant employment, inadequate progress in poverty alleviation and a sharp increase in urban inequality.

The first impression is that Finance Minister P. Chidambaram has responded to the election mandate for a redirection of economic policy. Part A of his budget speech is peppered with copious references to agriculture, education, health and employment, even if the financial allocation for many programmes under these heads amounts to mere tokenism. In addition, he has made a special allocation of Rs.10,000 crores for the Planning Commission to implement the National Common Minimum Programme (NCMP) of the United Progressive Alliance (UPA).

To finance these commitments he appears to have made some efforts at resource mobilisation as well. He has stuck by the promise made in the NCMP to impose a 2 per cent cess to mobilise about Rs.4,000 crores for education. He has imposed a tax, even if only a marginal 0.15 per cent, on stock market transactions. He has increased the service tax from 8 to 10 per cent and extended its reach by adding a number of sectors to the 58 already being taxed.

While all these can be seen as positive steps forward in redeeming election promises and fulfilling the election mandate, a close look at the Budget results in disappointment. To start with, the new government has chosen not to depart from the macroeconomic framework typical of the pre-existing neo-liberal regime. As the Economic Survey had noted, India's food stocks are still at relatively comfortable levels; it has access to an embarrassingly high reserve of foreign exchange; and industry is characterised by substantial excess capacity. This offers an opportunity to launch on an expansionary fiscal programme, which, if focussed on investments in irrigation and the infrastructural areas, can result in output and employment growth and help raise savings and government revenues that can partly finance the expenditure undertaken to realise that expansion. However, accepting the irrational constraints on fiscal policy set by the Fiscal Responsibility and Budget Management Act, the Finance Minister has chosen to limit the fiscal deficit at 4.4 per cent of gross domestic product (GDP).

The result of this fiscal conservatism parading as fiscal prudence is that the aggregate expenditure budgeted for 2004-05 is, at Rs.4,77,829 crores, more or less the same as Rs.4,74, 255 crores spent in 2003-04. Since, plan expenditure is budgeted to rise by Rs.24,000 crores, from Rs.1,21,507 crores to Rs.1,45,590 crores, the Finance Minister has had to budget for an almost equivalent reduction in non-plan expenditure from Rs.3,52,748 crores to Rs.3,32,239 crores. This has been ensured through a huge reduction of budgeted capital expenditures on the non-plan account from Rs.67,946 crores to Rs.38,589 crores, which has not been matched by the increase in plan capital expenditures from Rs.43,421 crores to Rs.53,747 crores. In sum, the immediate casualty of fiscal conservatism is much needed capital expenditure, which would have helped relax crucial supply constraints in the infrastructural area, even while stimulating demand and ensuring growth.

This limit on aggregate spending has been accompanied by a huge increase in the defence budget. In a surprise move, the government has chosen to allocate an additional Rs.16,700 crores for defence, by increasing the defence budget from Rs.60,300 crores to Rs.77,000 crores over the financial year. The increase is surprising since even the Interim Budget had provided for only Rs.66,000 crores for defence. Even granting that national security is an important concern, this huge increase in allocation seems unwarranted at a time when the security situation can hardly be described as critical and when problems such as an agrarian crisis, rising unemployment and persisting hunger and malnutrition are serious. In practice, the additional allocation for defence exceeds the special allocation for the NCMP, which sends out wrong signals about the priorities of the government. And given the government's obsession with the fiscal deficit, it is inevitable that this increased allocation would have limited its expenditures in other crucial areas.

The fall-out of this combination of fiscal conservatism and largesse for defence is visible, for example, in the reduced allocations for rural development and employment. The total expenditure incurred by the Ministry of Rural Development is estimated at Rs.15,061 crores in 2002-03 and Rs.15,519 crores as per the revised estimates for 2003-04. As compared with these figures, the budgeted expenditure for 2004-05 is placed at just Rs.11, 456 crores. What is more, the Rs.4,000-crore reduction in expenditure relative to the revised estimates for 2003-04 is largely on account of a sharp fall in the allocation for rural employment programmes, from Rs.9,640 crores in 2003-04 (RE) to Rs.4,590 crores in 2004-05 (BE). It could be argued that the expenditure in 2003-04 was unusual as it included a Special Component of the Sampoorna Gramin Rozgar Yojana (SGRY), aimed at augmenting food security through food-for-work schemes in calamity affected areas. But given the state of agrarian distress in most parts of the country and the new government's stated commitment to augmenting employment, the sharp fall in allocation can hardly be justified.

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In fact, with the government having committed itself through the CMP to guarantee 100 days of employment at the minimum wage to one member of every needy family in the country, a substantial additional allocation for employment generation was expected. The government could argue that employment being created with existing expenditures in various sectors could be used for the purpose of implementing the guarantee. But if existing allocations were enough to realise this objective, then there would have been no need for a special guarantee.

The view that the special allocation of Rs.10,000 crores to the Planning Commission can be used to realise this goal is also not defensible. The wage and capital expenditures together for providing 100 days of employment for a single individual in a year would total Rs.9,000. Assuming that on average about one-third to two-fifths of households in the country would opt for such employment, the expenditure required to implement the employment guarantee works out to around Rs.45,000 crores. Hence the additional allocation of Rs.10,000 crores would be inadequate, especially since a significant part of that allocation would have to go to meet the expenditures on education to be financed by the special cess that is expected to yield Rs.4,000 crores for the purpose. The budgetary allocation for all levels of education is, at Rs.11,062 crores, only around Rs.800 crores higher than the expenditure in 2003-04, indicating that the allocation aimed at raising over time the expenditure on education from 3.1 to 6 per cent of GDP has yet to be made. Funding for that purpose would have to come out of the sum earmarked for the implementing the CMP.

Overall, therefore, the Budget does not seem to have provided the finance to meet the various commitments made in the CMP and referred to in Part A of the Finance Minister's speech.

The sense of disappointment generated by the Budget does not end here. Another area of concern is the fiscal relationship between the Centre and the States. It has been clear for some time now that urgent measures are needed to help the States recover from the fiscal crisis they have been in, especially since the implementation of the Fifth Pay Commission's recommendations. While an increase in resource transfers to the States through an increase in their share in taxes would have to wait for the Finance Commission's recommendations, immediate steps in the form of enhanced Plan and non-Plan grants and a restructuring of their debt by swapping low-interest debt for high interest debt was called for. In particular, the practice of the Centre charging the States an interest rate on their borrowing from the Centre, which was much higher than the interest rate paid by the Centre on its own borrowings, had to be reversed. However, even while recognising the need to strengthen the hands of the State governments, which must necessarily play an important role in implementing the CMP, the Budget makes no major effort to correct the fiscal squeeze being faced by the States. Much is made of the reduction of interest rates paid by the States on borrowing from the Centre from 10 to 9 per cent. What was not mentioned was that the Centre today borrows, in many cases at interest rates that vary between 4 and 6 per cent, and on-lends to the States at 10 per cent.

Despite these measures to curtail its expenditures, even if at the expense of the realisation of its stated objectives and commitments, the government would have had to mobilise additional resources to finance its activities and meet its self-imposed fiscal deficit targets. Some effort in this direction is indeed visible in the Budget: primarily, the imposition of a transactions tax on financial transactions in equity and debt markets, and an expansion of the coverage in taxation in services. While such moves have to be welcomed, their impact has been marginal because of the extremely low rates at which the taxes have been levied, the marginal increase in coverage and the concessions in other areas that have accompanied these measures in the name of rationalisation of taxes. In the event, the additional resources mobilised through the Budget is meagre, forcing the Finance Minister to fall back on an unusual source of additional revenue, viz. recovery of tax arrears due from cases where the tax claims have not been legally disputed.

Arguing that there is a kitty of close to Rs.18,000 crores under this head and assuming that he would be successful in mobilising a significant share of that kitty, the Finance Minister has made extremely optimistic projections of tax revenue collections under different heads. Corporation taxes are estimated to rise by 41 per cent, income taxes by 27 per cent and excise duties by 18 per cent. If these targets are realised the gross tax revenue to GDP ratio would rise by one percentage point from 9.3 per cent in 2003-04 to 10.3 per cent in 2004-05.

There are no reasons whatsoever to believe that such large additional revenues from taxes would actually materialise. Hence, the final collections are likely to be much lower than projected, forcing the government either to reduce its expenditures even more than provided for in the Budget or to accept a much higher fiscal deficit. Rather than lay himself open to that possibility in the very first Budget of the new government, Chidambaram could have done better by making adequate expenditure provisions, ensuring a higher level of additional resource mobilisation and allowing for a substantially higher fiscal deficit, in the context of a demand constrained economy which makes that deficit benign from the point of view of inflation.

The reason why the Finance Minister and his colleagues did not choose that route seems to be their neo-liberal mindset. In the event, inadequate moves on the development front have been accompanied by policies that seem to suggest persistence with the liberalisation agenda of the previous government. Foreign Direct Investment caps have been raised substantially in telecom, civil aviation and insurance. Foreign Institutional Investors have been provided a range of concessions in the form of lower capital gains taxes, greater access to the debt market and higher ceilings for their shareholding in different sectors. Banks are to be encouraged to increase their speculative exposure to the stock market. And privatisation is to be persisted with in the name of "piggy-backing" on new share issues by profit-making companies like the National Thermal Power Corporation (NTPC).

Given the mindset these policies reflect, an adherence to fiscal conservatism and the adoption of a market-friendly taxation framework was inevitable. Unfortunately, however, the nature of the mandate obtained by the new government required it to depart from neo-liberalism and redirect economic policy in favour of the poor. Faced with this dilemma the Congress-led government has made some moves that are suggestive of a new agenda. But overall it seems to have adopted the soft option: it has dressed the budget in pro-poor rhetoric but chosen not to implement what it claims it has set out to do.

`FDI in core sector not acceptable'

cover-story

Interview with M.K. Pandhe, CITU president.

The Left unions have expressed strong reservations about the scaling up of the cap on Foreign Direct Investment (FDI) in core infrastructure areas such as telecommunications and civil aviation. There is also an opinion that several budgetary provisions fail to reflect the United Progressive Alliance's Common Minimum Programme. The unions feel that more concrete measures could have been spelt out and that the link between rural sector reforms and land reforms was missing in the Budget. M.K. Pandhe, president of the Centre of Indian Trade Unions, points out, in an interview to T.K. Rajalakshmi, the areas the Union Budget could have focussed on. Excerpts:

The Finance Minister said the key to growth was investment and that he wished to enhance investment in all sectors of the economy. But industry circles say investment will suffer owing to certain tax burdens imposed on them. Has the Finance Minister been guided more by the principles of fiscal prudence than by the need for enhanced investment in public sector enterprises? How adequately have these concerns been addressed in the Budget?

First, giving concessions to industry does not automatically enhance investment. This is the experience of the past five years. Therefore, to say that investment grows with more concessions is not correct. Industrialists have been bargaining for more concessions in the name of investment. Why is the rate of growth of production in the United States tardy? It is not even 2 per cent per annum despite the availability of technology and surplus money. A Reserve Bank of India study shows that concessions do not lead to investment. There has been no real burden imposed on industry in Budget 2004. Some turnover tax has been imposed but the incidence is not very high. It works out to Rs.150 per lakh rupees turnover. As soon as any burden comes the industry complains that investment will be affected. Investment has to be socially justified. In many industries, there is large unutilised capacity. A proper investment policy should see to the full utilisation of the production capacity. Investment should lead to employment generation. It is not so now. Today the government is discouraging bank investment and encouraging investment in the share market. That is why bank and provident fund interest rates have been reduced. There should be a proper investment policy, which is not there at the moment. The opposition of industry to the education cess and the turnover tax shows that they have no welfare or social objectives in mind.

A commitment has been made to the restructuring of small-scale industries in terms of raising the ceiling on loans. Do you not think this is a step in the right direction from the point of view of higher employment generation?

On the contrary, this hits the interests of the small-scale sector. The Finance Minister has announced the dereservation of some 85 commodities from the list of small-scale sector. This will kill investment.

There is a proposal to set up a board for the reconstruction of sick PSEs. Surely you welcome this move. But would this address the problem of sick units in its entirety?

It is a positive step but is not adequate. The Finance Minister has allocated Rs.14,000 crores for this purpose. But since industrial sickness is very high, more funds should have been provided. Moreover, employees should also be represented apart from the government and the employer [on the board]. Public sector profits go to the government.

The Left parties have expressed their reservations to the scaling up of FDI in insurance, telecom and civil aviation sectors. But the Finance Minister mentioned that the CMP had declared that FDI would continue to be encouraged and sought particularly in areas such as infrastructure. So basically what has been announced in the Budget is a reiteration of the CMP.

We do not agree with every aspect of the CMP. That is why we have not signed it. We do not accept the encouragement of FDI. If FDI is allowed to increase production capacity, we do not have any problem. We do not object to the entry of new technology. But FDI in the share market and in the manipulation of the market is not a correct thing. Secondly, to invite FDI in the core sector is not acceptable. From the national security point of view, it is a sensitive issue to invite FDI in the telecom sector. Again, why invite FDI in the insurance sector? Foreign companies are not going to make any capital investment. They will use the premium paid. The privatisation of the Airports Authority of India is also unwarranted. The Authority has Rs.2,000 crores of reserve funds and its profit is Rs.500 crores. For the modernisation of the Airports Authority, Rs.4,000 crores is needed. So why privatise it? In four years, they will be able to harness the amount needed for modernisation. The movement of India's air force is through the airports. So it is not prudent, from the point of view of national security, to privatise the sector. In every airport, the government has allowed 49 per cent foreign equity participation, 25 per cent for the Indian private sector and 26 per cent participation for the government sector. This is actually a violation of the CMP, which says that no profit-making unit will be privatised.

The question of providing 100 mandays of employment is also not clear. Only stating intent is not sufficient. Two crore families are to be given employment. One family gets 100 days of work, which means one worker's wage will be 60x100. For two crore families this works out to Rs12,000 crores. How does the government plan to generate this amount? It has to have a programme of building infrastructure - construction of dams, village roads, overbridges and schools, among other things. In the CMP, the government agreed to strengthen the public distribution system but not much money has been provided for this in the Budget. The Budget is silent on land reforms. Land reforms are important for the creation of jobs in rural areas.

Workers are also agitated over the current rate of interest for PF. The previous government brought down the rate of interest from 12 per cent to 9 per cent. Workers expected the UPA to restore the old rates. This is a social security measure. The government should not link this with bank rates. A worker joins work at the age of 18 and retires at 58. So, for 40 years the money lies with the government.

Does the UPA Budget mark a significant departure from the policies of the previous government? The Bharatiya Janata Party has been claiming that there has been no major policy shift. For example, the Budget has recommended an increase in the number of Special Economic Zones to boost production, exports and employment. A Bill to regulate such zones has also been proposed. It is well known that no labour law applies in this sector. The previous government too was keen to promote such zones. How do you view this?

This Budget is different from the previous one. The BJP-led government never paid attention to the needs of the rural sector. This Budget has an orientation towards the needs of the village economy. But it needs to be properly implemented. It has to be ensured that the beneficiary is not only capital but also the worker. The BJP government never thought of reviving sick industries, neither was there any intention to strengthen the PDS. So there is a departure, but we have to see how this is brought about. As for the SEZs, these are areas where labour laws are absent. It is a lucrative industry for employers, as they do not have to give any benefits like bonus. The previous Commerce Minister made a public statement that labour laws would not be applicable to SEZs. We are not in favour of such zones if labour laws do not apply. We are not against the development of these zones but why exempt them from the laws that are applicable everywhere? There are 500 such zones all over the world, and there is a move to increase this to 1,000 within three years. One of the main reasons is cheap labour. Today 100 per cent production is being shifted to these zones owing to the availability of cheap labour. Employers abroad get away with paying lower wages by using the threat to shift production where labour is cheap.

How do you rate the UPA Budget from the point of view of the industrial working class? While a lot of stress has been laid, ostensibly, on the rural sector and rural employment, what are the benefits to industrial workers? In a televised panel discussion, the Finance Minister referred to the Left as being his conscience. Does this indicate that the government has good intentions?

There may be good intentions but what is done finally is what is important. Apart from the industrial working class, the traditional industries should be given a major fillip. I agree that there is some reference to them but no substantial allocation has been made. This sector should be revived, for this will generate jobs. The government should seriously think of reviving the handloom and powerloom industry, for this sector has the potential to generate employment. We welcome the positive aspects of the Budget - the negative ones, we oppose.

Withering lives

The moratorium announced by the Andhra Pradesh government, despite shortcomings, has the potential to give respite to farmers in distress. But there is no sign of a long-term strategy to revive agriculture and thus put an end to the rural tragedy.

THE wave of suicides by peasants in Andhra Pradesh continues unabated. The toll since mid-May headed past 400 by early July even though the State government had announced a series of relief measures. Although the new Congress (I) government headed by Y.S. Rajasekhara Reddy is generally regarded as being more farmer-friendly than the N. Chandrababu Naidu dispensation, it is increasingly evident that the alarming situation needs much more than good intentions. In particular, the passage of a law on June 21 to enforce a six-month moratorium on loans taken by peasants in the State appears to be utterly inadequate. The plight of the poor and marginal farmers who remain mired in debt, taken mostly from private moneylenders, is likely to worsen if concomitant steps are not taken on an urgent basis. Nothing highlights this urgency more than the fact that in just four days after the passage of the Andhra Pradesh Farmers Agricultural Debts (Moratorium) Act, 34 peasants committed suicide.

Moving the Bill in the State Assembly, the Minister for Revenue, Relief and Rehabilitation Dharmana Prasada Rao stated that peasants in the State had suffered heavy losses because of drought for a number of years. Moreover they had suffered "molestation and harassment" by rural moneylenders, "eventually forcing them to resort to the extreme step of committing suicide". He said the six-month moratorium on farm-related debts would provide relief to farmers.

Ironically, the Telugu Desam Party, which had consistently refused to provide the peasants any relief package during its nine-year rule claiming that it would only encourage them to commit suicide, sang a different tune when the Bill came up for discussion in the Assembly. TDP legislators said a six-month moratorium was inadequate. They demanded a two-year moratorium for not only farmers but also artisans, agricultural workers and weavers. They also called for extending the scope of the legislation, which is applicable only to loans advanced by private moneylenders. Claiming that more than 500 farmers had committee suicide since the Congress government assumed power on May 14, the TDP said the Act should cover loans advanced by institutional credit sources such as banks and credit cooperatives also. Rajya Sabha member Ramamohana Rao of the TDP demanded that the State government declare a three-year moratorium on all agricultural debts of farmers.

THE issue of a moratorium on repayment of debt is a crucial step because it is the swiftest way of lifting the sword of death that hangs over the peasant's head. But it is also obvious that this can only be the first in a series of steps that the government has to take. The continuing spiral of death clearly shows that a six-month moratorium can, at best, be a part of a larger package that addresses the factors that have driven peasants to debt and eventually to their death. If the understanding is that the debt burden that the peasant carries is a result of policies that have made agriculture an unviable endeavour, then the moratorium needs to be backed up by medium to long-term measures.

It is also becoming clear that the effectiveness of the moratorium package is severely constrained by several factors. Since credit from institutional sources hardly accounts for 15-20 per cent of the credit requirements of farmers, they depend heavily on private sources of credit. This has important implications. Evidence from the field indicates that these creditors also have an extensive network and reach in the agricultural economy, particularly in the markets for inputs, produce and even the land that is leased to peasants. Political commentators have argued that this cross-play of powerful interests represents a powerful bloc, which strives to block any attempt at offering a moratorium on debts issued by private creditors.

While this is only to be expected, the failure of institutional lenders to step up credit at a time of dire need is the other side of the problem. The Union Finance Minister's announcement on June 19 that credit for agriculture will expand two fold in the next three years has to be seen in the light of the actual situation on the ground. In Andhra Pradesh, for instance, institutional credit has consistently failed to meet targets. The notion of a credit card for farmers has always been the butt of jokes but it takes on a particularly ironical twist in the case of Andhra Pradesh. According to official sources, a total of 56.63 lakh Kisan Credit Cards have been issued in the State until March-end this year. The total amount outstanding on these cards is Rs.9,826 crores, implying that each card has an outstanding amount of Rs.17,350. It is obvious that the distribution of credit from schemes such as these is extremely skewed in favour of richer farmers. Not a single family of suicide victims that this correspondent met - mostly small and marginal peasants, or tenant cultivators - mentioned that they ever saw anything resembling the Kisan Credit Card. Andhra Pradesh is one of the leading States in the matter of issuing Kisan Credit Cards, accounting for about 15 per cent of the cards issued in the country.

Moreover, the dynamics of a liberal financial regime have a crucial bearing on the way rural credit is distributed. For instance, it is well known that public sector banks and cooperative institutions have their own tricks to pad their books to inflate the volume of credit that they advance to borrowers. Making "book adjustments" is one such trick. This is done to recycle existing debts and show them as "fresh" issues of debt. More important, the "reorientation" of banking activity has led to the closure of rural branches. In effect, the infrastructure for rural lending has been significantly weakened on the ground.

The fact that suicides have been reported from every single district of the State, barring Hyderabad, clearly shows that blaming "drought" for the crisis will no longer do. But politicians and bureaucrats continue to do just that. This is having adverse consequences for desperate peasants. For instance, a circular dated June 16 issued by the Andhra Pradesh State Cooperative Bank (APCOB), the State-level apex institution governing credit cooperatives, asked district-level and primary cooperatives to "go ahead with recovery of loans in mandals not declared as drought affected during the year 2003-2004". This is a clear indication that in mandals not declared as "drought affected", the cooperatives continue to pressure the peasants for recoveries even as they are supposedly protected from private moneylenders by the recent legislation.

APART from its narrow focus on private moneylenders, the moratorium suffers from other serious limitations. Malla Reddy, general secretary of the Andhra Pradesh Rythu Sangham, said that a six-month moratorium would provide little relief because most cash crops have a much longer cropping cycle. Crops such as turmeric, sugarcane and banana have a cycle of about ten months, which means that peasants growing these crops would be exposed to the caprices of moneylenders well before they actually are able to tide over their immediate and pressing debt problems. "A moratorium of six months makes no sense. It has to last at least one year for it to provide protection to farmers," he said.

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The failure of the cooperatives is illustrated by the fact that although 1.39 crore farmers in the State are members of credit cooperatives, only 38 lakh farmers have obtained loans from the sector. Moreover, peasants who are unable to repay their existing loans find it difficult to obtain fresh loans to meet their immediate needs in the ongoing sowing season. Referring to a recent survey conducted by the Rythu Sangham, Malla Reddy said that farmers, who are increasingly dependent on borewells, have undertaken enormous risks. He said that the risks were compounded by the government's failure to provide technical and financial assistance to farmers. He demanded that geologists be posted in each mandal in order to provide expert guidance and advice to farmers.

B.V. Raghavalu, secretary of the Andhra Pradesh State Committee of the Communist Party of India (Marxist), said that the Act only allows a moratorium on loans drawn by farmers for "agricultural purposes". He points out that the "format" for promissory notes issued by borrowers when they draw loans from private moneylenders generally mentions "family or personal expenses" as the reason for taking the advance from lenders. Raghavalu said that this is "a loophole in the Act, which the government did not rectify even when it was pointed out to it".

Malla Reddy observed that in parts of the State, moneylenders are refusing to lend to peasants because of the fear that loan recoveries would be jeopardised by the moratorium. For instance, in Cherial mandal of Warangal district moneylenders and suppliers of inputs such as pesticides are refusing to lend to the peasants. "The small and marginal farmers in the State require a complete moratorium for one year so that they have the breathing space." Malla Reddy pointed out that the failure of institutional credit sources to increase disbursals would worsen the plight of the peasantry.

Although Raghavalu said that despite its serious shortcomings, the Act was "useful" for the peasantry. "The Act can be an instrument that can provide respite to the peasantry now and enable it to resist the moneylenders. If the peasantry is able to organise itself now, it can draw long-term benefits from this piece of legislation."

Recent reports indicate that the despondency among the peasantry is giving way to anger. Farmers have demanded that bank officials give them a better deal. The Chief General Manager of the State Bank of India was gheraoed by peasant activists on July 5 in Anantapur. They demanded that the bank reschedule crop loans, issue fresh loans and not insist that farmers repay dues in order to get fresh loans. They also alleged that SBI had not rescheduled crop loans despite a Reserve Bank of India directive to banks. This, despite the fact that all 63 mandals in Anantapur district had been officially declared drought-hit in the last four years.

The Prime Minister has come and gone but death continues its march on the countryside.

Marching orders

The Opposition's criticism of the Centre's dismissal of four Governors lacks credibility in the light of past experiences and its own track record.

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THE United Progressive Alliance (UPA) government at the Centre dismissed the Governors of Haryana, Goa, Gujarat and Uttar Pradesh on July 2 after failing to secure their resignations through informal advice. President A.P.J. Abdul Kalam, following the advice of the Union Council of Ministers, directed that the four Governors would cease to hold office. The President's action was based on Article 156(1) of the Constitution, which specifies that the Governor shall hold office during the pleasure of the President. On July 5, the government announced the appointment of new Governors - A.R. Kidwai in Haryana, Nawal Kishore Sharma in Gujarat, T.V. Rajeshwar in Uttar Pradesh and S.C. Jamir in Goa.

The removal of the Governors, Babu Parmanand (Haryana), Kidar Nath Sahani (Goa), Kailashpati Mishra (Gujarat) and Vishnu Kant Shastri (Uttar Pradesh), before the expiry of their five-year tenure in office has created a controversy, with the Opposition Bharatiya Janata Party questioning the motives of the government's decision. The BJP criticised the move as "unconstitutional" and as one aimed "against the federal structure".

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However, Union Home Minister Shivraj Patil denied any ill will towards the four Governors. He attributed their removal to their ideology, past actions, and an assessment of a situation the government anticipated. He added that the government removed them particularly because it thought it could not get along with them. "We took precautionary measures when we felt there could be a problem," Shivraj Patil said. Earlier, Union Minister of State for Home Prakash Jaiswal said that the UPA government did not have problems with all the Governors appointed by the previous regime, but only with those who had a Rashtriya Swayamsewak Sangh (RSS) background.

Importantly, the government did not dismiss Rajasthan Governor Madan Lal Khurana, who had been in the thick of Delhi politics before his appointment to the post and who does not conceal his association with the RSS. Similarly, the government did not remove Bihar Governor Rama Jois, who had once been counsel for the Vishwa Hindu Parishad (VHP) in the Ayodhya case before the Supreme Court. Both Khurana and Jois have been informed that if there is a conflict of interest between their ideological and political backgrounds and the discharge of their gubernatorial responsibilities as seen by the Centre, they could face the same fate as the four others. The government, apparently, did not find any problem in the continuance of Karnataka Governor T.N. Chaturvedi, a former Rajya Sabha member of the BJP and civil servant.

Although the government did not give cogent reasons for the removal of each of the four Governors, they were indeed obvious. The government also probably thought that stating the reasons in public would have meant betraying any ill will towards them. Jaiswal might perhaps be correct in saying that the RSS background of some Governors was a problem for the government, but it was not an important factor in their dismissal.

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For instance, former Haryana Governor Babu Parmanand did not belong to the RSS. He was a former Speaker of the Jammu and Kashmir Assembly and was with the National Conference before shifting to the BJP. Yet he was dismissed because the government was not satisfied with his conduct during the prelude to the 2004 Lok Sabha elections, when at a public meeting at Rewari, he reportedly appealed to the people to support Atal Bihari Vajpayee's bid for another term. President Kalam had sought an explanation from him then but deferred action, pending the formation of the new government.

Similarly though former Goa Governor Kidar Nath Sahani belonged to the RSS, he had to go because there was an allegation that he misused his office to detain and harass a person on the basis of trumped-up charges (see box). The Centre is now probing this allegation.

Both Kailashpati Mishra and Vishnu Kant Shastri had to leave their offices because their conduct in the Raj Bhavans did not inspire the confidence that they would be able to keep the Centre sufficiently informed about the Sangh Parivar's controversial actions in their respective States. Both States are considered sensitive in view of past incidents - Gujarat because of the 2002 anti-Muslim pogrom and Uttar Pradesh because of the Ayodhya dispute. Both Mishra and Shashtri owe their political tutelage to the RSS.

In this regard, the role played by former Gujarat Governor and RSS activist Sunder Singh Bhandari during the 2002 pogrom was illustrative of the risks involved in appointing those with an RSS background as Governors, who under the Constitution play a significant role in such critical situations. Bhandari defended the Narendra Modi government and did not feel the need to apprise the Centre of the seriousness of the situation, which, according to many, qualified for the imposition of President's Rule.

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The role of the Governor in situations where secularism is under threat was well explained by former President K.R. Narayanan during the Governors' Conference in 2000. Narayanan called upon the Governors to become a source of "moral influence" and act as agents of harmony and tolerance in the troubled times of religious intolerance and sectarian violence. Deploring the "lowering of the tolerance level in society and the emerging cult of violence", Narayanan reminded the Governors that they had an obligation to uphold "India's traditional heritage of a tolerant society".

THE Centre's move could have become a federal issue if there is evidence to suggest that it used uncertainty of tenure, including transfer to another State, to influence a Governor's decisions. On the contrary, the government followed a transparent procedure. It first sought the Governors' resignations through informal channels. It requested former Deputy Prime Minister L.K. Advani's help to secure their resignations in order to avoid taking recourse to a punitive step against the constitutional appointees. However, it was only after the BJP made it clear that the Governors would not quit that their dismissal became inevitable.

The 1988 Sarkaria Commission Report on Centre-State Relations noted about the Governor's tenure issue: "The ever-present possibility of the tenure being terminated before the full term of five years can create considerable insecurity in the mind of the Governor and impair his capacity to withstand pressures, resist extraneous influences and act impartially in the discharge of his discretionary functions." The case of the four Governors proves, on the contrary, that insecurity of tenure is perhaps the best instrument to secure their accountability as the Constitution does not lay down any procedure for their removal in case of dereliction of duty.

If the BJP's complaint against the UPA government is that Governors should not be changed merely because they belong to parties or subscribe to ideologies opposed to those in power at the Centre, it ought to look back at its own record in office. In 1998, the BJP-led coalition government at the Centre sought the removal of Gujarat Governor Krishna Pal Singh, who was appointed by the Congress government, for his questionable role in what it believed to be the "undemocratic" dismissal of its State government led by Suresh Mehta after it lost majority in the Assembly.

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In July 2001, Tamil Nadu Governor M. Fathima Beevi was removed by the National Democratic Alliance (NDA) government for "failure" to discharge her "duty" to inform the Centre at short notice about the developments following the arrest of Dravida Munnetra Kazhagam (DMK) leader and former Chief Minister M. Karunanidhi. The real reason was, of course, that the Centre perceived a collusion of interests between her and Chief Minister Jayalalithaa in the latter's vindictive actions against the DMK, a constituent of the NDA at that time (see box).

Although the Governor, as the head of the State, holds a high constitutional office, which carries with it important functions and duties, the Constitution has given the Governor a clear responsibility as the Centre's representative in and its link with the State and its government. One of the Governor's functions has been to keep the President informed of local conditions and developments through "fortnightly letters to the President", a practice that dates back to 1948, as recorded by Granville Austin in his Working a Democratic Constitution: The Indian Experience. The President, in turn, shares the communication with the Central government, as it is a useful input when taking decisions concerning the States. If the Centre feels that only a Governor who could get along with it ideologically and politically would be able to perform this role well, the argument cannot be disputed.

President Kalam highlighted the Governor's role in his speech to the Governors' Conference in 2003. He said: "For genuine development of any State, the Centre and the State have to work together. Governors have a key role to ensure this. It is essential that the Governors and the governments in the States work harmoniously to achieve the ultimate aim of integrated development. Any nation in development mode may have difference of opinions - be it political, or managerial or Centre-State relationship. The Governors have to give a leadership to move the development process with fast interface between the Centre and the State. The Governors have a positive role to play to bring about unity of minds. Governors being statesmen, having vast experience are best suited to provide sage advice beyond any political considerations to the people and the government. A Governor is indeed a noble healer."

An agonising wait

Students aspiring to join professional courses in Tamil Nadu await decisions by the Madras High Court on a host of issues ranging from the nature of the common entrance test to the admission procedure to be followed by private colleges.

in Chennai

FOR the more than 65,000 students aspiring to join professional courses in Tamil Nadu and their anxious parents, this year's has been a long, hot summer. Nearly three months after having got through a gruelling admission test, the students find themselves caught in a quagmire of litigation. The counselling for admission to over 250 engineering colleges, both government-run and privately owned, which was to have normally started in the third week of June, was to have begun on July 8 this year, but was "indefinitely" postponed pending decisions by the Madras High Court on a host of writ petitions filed by different interest groups, including students, parents and the managements of self-financing institutions. The cases related to issues ranging from questions asked for the entrance test to the admission process stipulated for private colleges. In the case of medical colleges, counselling has almost been completed, but the follow-up has been held up as court orders are awaited.

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All through, the State government has maintained a stoic silence. And, perhaps understandably so. It had to wait until March-end to get its position on the eligibility marks required for admission to professional courses endorsed by the Supreme Court because of prolonged litigation involving the government, Anna University, the All India Council of Technical Education and a number of self-financing engineering colleges, over the issue.

Thanks to the policy of successive governments in the State to withdraw gradually from the field of higher education, over the past 10 years Tamil Nadu has seen a phenomenal increase in the number of self-financing engineering and medical institutions, many of which charge huge fees but hand out education of low quality. Nevertheless, the State can boast of a time-tested admission process, perfected over the years with the help of the prestigious Anna University and numerous academics and experts associated with it. Notwithstanding controversies and litigation over the working of the process every now and then, the system has received acclaim from large sections of students and parents. Admissions to engineering and medical colleges are effected on the basis of a common entrance test (the Tamil Nadu Professional Colleges Entrance Examination) conducted by Anna University, the nodal agency, in April. The test is followed by counselling to fill the seats in State-run and government-aided private colleges - the "free seats" (50 per cent of the total) or "government quota seats" on the basis of merit, and the seats reserved for students belonging to the backward and most backward classes and the Scheduled Castes and the Scheduled Tribes. The managements of self-financing colleges fill the rest of the seats in their colleges. Although capitation fee is not collected, the seat-seekers reportedly have to part with sums of money ranging from Rs.80,000 to Rs.8 lakhs for undergraduate studies in the self-financing engineering, medical and paramedical institutions.

In 2001, ten self-financing engineering colleges were raised to the status of deemed universities, and they announced that they would conduct examinations on their own. All other self-financing colleges got themselves affiliated to Anna University, which will conduct examinations for their students and issue certificates.

Last year admissions took place in the backdrop of the Supreme Court judgment in October 2002 in the T.M.A. Pai Foundation case (Frontline, March 26, 2003), which granted privately run unaided professional colleges the right to conduct their own entrance examinations for admission and ruled that the government would have no control over the right to fix the fee for the courses offered by these institutions. Although some of the self-financing colleges were assertive about their rights and adopted a confrontationist attitude towards the State government, almost all colleges fell in line and admissions went on as usual, although there was some hitch over the way the "payment seats" were sought to be filled. A protracted legal battle ensued.

UNLIKE last year, the admission process promised to be less problematic this year, given the guidelines provided by the five-member Constitution Bench of the Supreme Court in its judgment on August 14, 2003 in the Islamic Academy of Education case (Frontline, July 16, 2004), while clarifying certain doubts over the interpretation of the judgment in the T.M.A. Pai case. The 2002 judgment held as "unconstitutional" a practical scheme evolved by the Supreme Court in the Unnikrishnan case (1993) on the grounds that it forced students coming under the "payments seats" category to bear the additional burden of paying for the studies of those admitted under the merit quota. However, the judgment failed to provide an alternative and so last year only minor changes could be made in the admission process. This year, however, the State government initiated efforts to streamline the admission process on the lines of the judgment in the Islamic Academy of Education case. Two committees were constituted in March, one headed by Justice S.S. Subramani to oversee the entrance tests and the other headed by Justice A. Raman to fix the fees self-financing colleges can charge.

On June 8, the Permanent Committee for the Fixation of Fee for Private Professional Educational Institutions directed unaided engineering colleges in the State not to charge more than Rs.32,500 as annual fee for undergraduate engineering courses that have not been accredited by the National Board for Accreditation, and Rs.40,000 for accredited courses. The fee includes admission fee, tuition fee, special fee, laboratory/computer/Internet fee, development fee, maintenance and amenities fee, extra-curricular activities fee and so on. It does not include accommodation, transport and mess charges. The colleges have also been permitted to collect a refundable one-time caution deposit not exceeding Rs.5,000. The committee recommended a fee waiver or concession of Rs.5,000 to deserving meritorious students. The fee structure will be in force for three years. (The fee fixed by the State government for last year was Rs.30,000 for "management" quota seats and Rs.25,000 for seats allotted under the "single window" admission scheme.)

The Subramani Committee (the Permanent Committee for Common Entrance Test for Private Educational Institutions in Tamil Nadu) ordered on June 14 that admissions to engineering colleges under the management quota should be done under the Single Window System and that the Consortium of Self-Financing Professional, Arts and Science Colleges in Tamil Nadu should conduct the common entrance test for admission to all self-financing engineering colleges in the State. Referring to the specific conditions laid down by the Supreme Court, the committee said: "Merit has to be assessed only on the basis of one test." The managements of several self-financing engineering colleges have challenged the orders of the Subramani Committee. (Two renowned self-financing colleges have, however, opted to leave 40 per cent of their "management quota" seats to be filled by the government.)

When the admission process was set in motion with the conduct of the Tamil Nadu Professional Courses Entrance Eaminations - 2004 on April 24 and 25, things seemed normal. Over 1.5 lakh candidates, roughly one-third of them girls, appeared for the examinations in the first stage of the admission process, to fill about 70,000 seats in engineering colleges and about 8,000 seats in medical and para-medical colleges. (The MBBS course accounts for only 1,429 seats in 14 colleges, 10 of which are government-run.)

However, the first signs of crack in the system came up when the candidates, parents and teachers complained of wrong or ambiguous questions, numbering 22 in all, in the biology and physical sciences papers. Responding to the charges, E. Balagurusamy, Vice-Chancellor of Anna University, which conducted the examination, said an expert-committee would look into the complaints. "In case any complaint raised by the students over a specific question is found genuine, that question will not be valued," he said.

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About 200 writ petitions challenging the ambiguity in the questions were filed in the Madras High Court. Partly allowing the petitions, Justice P.K. Mishra directed that the answers to seven questions in biology and physical sciences be revalued in view of the "avoidable errors". The Judge also directed that a particular question be deleted. The papers were revalued and fresh results were announced. Writ appeals, preferred by the petitioners against this judgment, are pending before a Bench headed by the Chief Justice. The appellants contend that the 22 questions concerned accounted for eight marks and their deletion would cost the candidates dearly.

This was followed by a batch of petitions before the High Court, which challenged the practice of treating "improvement candidates" (candidates who had improved their performance in the subsequent year's Plus-2 examination, the prescribed minimum qualifying examination held by the Board of Higher Secondary Education as provided by the rules) on a par with regular candidates, who had appeared for the Plus-2 examination in the current year. The aggrieved petitioners, numbering over 12, are among the candidates who aspire for medical seats. Justice R. Balasubramanian restrained the medical education selection committee from allotting seats to the "improvement candidates" pending orders. This has brought to a standstill the medical admission process. Any changes made will dislocate the engineering admissions also because of the drastic changes that are possible in the rank list. Further hearing of the petitions on "improvement candidates" saw some dramatic scenes. When the lawyers failed to turn up in view of a strike, many young petitioners and their guardians represented their own cases.

Interestingly, of the 945 seats available in the government colleges this year, only 493 have gone to regular candidates. The remaining have been earmarked for "improvement candidates'', whose allotment is subject to the court's decision. Speaking to Frontline, M.D. Raju Kumar, a former top official of Bharatiyar University in Coimbatore said the provision regarding admission of "improvement candidates" had created an anomalous situation. The candidates naturally had an advantage over those who had passed out in the current year because the former had improved their marks after one more year of study. "The two sets of students are not comparable and cannot be treated on a par," he said. A significant point to be noted was that a large number of the successful "improvement candidates" had undergone special coaching in three particular schools in the western region of Tamil Nadu, which are said to be collecting hefty fees from students, he said. Raju Kumar argued before the Court the case of his son, who is one of the petitioners.

YET another batch of petitions pending before the High Court challenges eight key clauses in a set of 25 directions laid down by the Subramani Committee while authorising the Consortium of Self-financing Professional, Arts and Science Colleges to conduct the entrance test for the management seats in its engineering colleges. The Subramani Committee has insisted on ensuring "merit-based admission" through the test, followed by counselling under a Single Window System, as envisaged by the Supreme Court. It has warned against admissions based on any other test or made in any other form. Apart from the Consortium, two other organisations representing self-financing engineering and medical institutions have sought intervention by the court. In its counter-affidavit, the Subramani Committee has accused the consortium of having approached the court "with unclean hands". It said that the consortium had agreed to the conditions attached to the conduct of the entrance test but was now going back on it.

If the Single Window System is not followed, experts say, the whole process of rank-based admissions will collapse. With money being the only criterion, self-financing colleges, it is feared, will have a free hand to admit students, throwing all norms to the winds. The purpose of putting an end to profiteering will be defeated. It will also help them regularise the admissions that have already been made, albeit temporarily. Already, many such attempts at regularising admissions that have been made by flouting rules and manipulating procedures have been successful. This is not surprising because political bigwigs, including former Ministers, parliamentarians and legislators, run many of these institutions.

Expressing concern over the agony of the students and parents, G. Ramakrishnan, member, State Secretariat of the Communist Party of India (Marxist), suggested that the State government initiate steps with a long-term perspective in order to evolve a more efficient and less complicated system that could ensure admission to professional colleges on the basis of merit, affordability and social justice. The fees fixed by the Committee for engineering colleges was very high and it should be brought down, he said.

Pattali Makkal Katchi founder Dr. S. Ramadoss has faulted the State government for allowing self-financing colleges to keep 50 per cent of their seats as "management quota" seats and pointed out that the Karnataka government had yielded only 25 per cent to the "management quota".

Students Federation of India (SFI) State president G. Selva said the State government should exercise greater control over self-financing educational institutions and take steps to enable meritorious candidates from the less-privileged sections to have greater access to higher education. He said the SFI had presented a memorandum to the Union Human Resource Development Minister pleading for Central legislation to correct the situation created by the Supreme Court judgment in the T.M.A. Pai case, which gave enormous scope for self-financing institutions to indulge in unfettered profiteering.

The first `mass dismissal'

V. VENKATESAN the-nation

THE recent dismissal of four Governors is the fourth instance when a government at the Centre decided to curtail the tenure of Governors by withdrawing the President's pleasure. However, it is the first time when a "mass dismissal" of Governors has taken place.

The first dismissal of a Governor was in October 1980, when Tamil Nadu Governor Prabhudas Patwari, an appointee of the Janata Party government, was shown the door by the Indira Gandhi government. Prime Minister Indira Gandhi did not give Patwari, known as a Gandhian in the Raj Bhavan, the option to resign. The dismissal of Patwari without any valid reason was an instance of political abuse of Article 156(1) of the Constitution, which states that a Governor "shall hold office during the pleasure of the President".

In August 1981, Rajasthan Governor Raghukul Tilak was removed from office under similar circumstances by the Indira Gandhi government. Tilak challenged his dismissal in the Rajasthan High Court. The High Court rejected his petition, saying the pleasure of the President in this matter was not justiciable.

These dismissals are different from `forced resignations' of Governors, of which there are several examples. According to the Sarkaria Commission, of the 66 gubernatorial tenures between 1947 and March 31, 1967, 32 lasted the full term. Of the 88 tenures from April 1, 1967 to October 31, 1986, only 18 lasted for five years. Although allowances must be made for illnesses, deaths in office, transfers and voluntary resignations, the Commission noted that during the latter period, in contrast to the former period, premature exits from office occurred at a much faster rate and fewer Governors completed their normal terms of office.

In 1989, when V.P. Singh came to power, his government, through the President's office, secured the resignations of all Governors, so that it could accept only those it wanted to. The then Home Minister, Mufti Mohammad Sayeed, urged for a convention that when a new government took over at the Centre, the Governors should resign on their own to enable the government to appoint those who enjoyed its confidence. However, this created a piquant situation with the government taking its own time to decide which resignations it should accept and who should be sent to which State as a replacement. As a result, many Governors did not relish the idea of continuing in office as `lame duck' Governors and some insisted on quitting the office immediately after sending their letters of resignation. However, the idea of mass resignations of Governors after every change of government at the Centre was not endorsed by the political class.

In 1998, the BJP-led coalition government came to power at the Centre and secured the resignations of Gujarat Governor Krishna Pal Singh, Goa Governor T.R. Satish Chandra, Uttar Pradesh Governor Romesh Bhandari, Mizoram Governor A.P. Mukherjee and the Lieutenant Governors of the Union Territories of Delhi, Andoman and Nicobar, and Pondicherry. In July 2001, the National Democratic Alliance (NDA) government dismissed Tamil Nadu Governor M. Fathima Beevi. In fact, she was a scapegoat in the tug-of-war between Tamil Nadu Chief Minister Jayalalithaa and Dravida Munnetra Kazhagam president M. Karunanidhi. (The DMK was then a constituent of the NDA.)

A welcome relief

The Prime Minister doles out a generous package upon his visit to Andhra Pradesh to meet the families of farmers who committed suicide.

DASU KESAVA RAO in Hyderabad D. SRINIVASULU in Kurnool

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HE came, he saw and was deeply touched. In the process, he also conquered the hearts of the drought-stricken and deeply distressed farmers of Andhra Pradesh.

Essentially that was what Prime Minister Manmohan Singh's brief visit to Andhra Pradesh on July 1 was all about. The articulate advocate of India's economic reforms revealed the `real human face' of the reform exercise during his interaction with the families of debt-ridden farmers who had committed suicide.

Anguished by the continuing suicide by farmers, Dr. Manmohan Singh decided to make a first-hand assessment of the crisis plaguing the farm sector in the southern State, besides providing succour and moral support to the bereaved families. He visited Somayajulapalli in Kurnool district in the drought-prone Rayalaseema region and Dharmapur in the neighbouring Mahbubnagar district in backward Telangana. Manmohan Singh said afterwards: "I belong to a farmer's family and am well versed with the problems of farmers. But it is for the first time that I am witnessing such shocking realities."

After a wrap-up session in Hyderabad with State government officials, the Prime Minister announced a slew of relief measures which included a Rs.60-crore assistance from the Calamity Relief Fund, an additional 1.82 lakh tonnes of foodgrains, a new Seed Act to standardise quality seed, time-bound help from banks to ensure a steady income for the affected families, and the supply of entitlement cards to the families to meet their basic needs. Chief Minister Y.S. Rajasekhara Reddy, in a memorandum on behalf of the State government, had sought Central assistance to the tune of Rs.660 crores to ensure steady credit flow to the farm sector.

Earlier, at Somayajulapalli and Dharmapur, he announced a grant of Rs.50,000 from the Government of India. He sanctioned an additional Rs.50,000 in some special cases. The State government had announced a package of Rs.1.50 lakhs to each family.

The Prime Minister was accompanied by the Chief Minister and Union Ministers from the State S. Jaipal Reddy, K. Chandrasekhar Rao and P. Lakshmi. Manmohan Singh, a self-effacing person, revealed another facet of his persona - that of a good listener and a ready empathiser of rural people in distress.

The suicide spree continues unabated, but he succeeded in instilling some hope in the demoralised villagers. He said he would not be able to bring back the sole breadwinner of the family but would see how best he could help it. Manmohan Singh said at Dharmapur that the fact that he chose to make his first visit outside Delhi to Andhra Pradesh demonstrated how concerned New Delhi was about the plight of the State's farmers.

Very few among the largely unlettered rural folk of the arid region had ever heard about their eminent visitor. Despite this and the language barrier, he managed to establish a good rapport with them. Rajasekhara Reddy translated the Prime Minister's speech and acted as an interpreter during the interactions.

At Somayajulapalli, he spent more than half an hour with the local people listening to their ordeals and asked families that had lost their breadwinners what kind of support they required. He was moved by the plight of young widows, small children and aged parents who were left behind by the farmers who killed themselves unable to escape the debt trap. He described the tragedy as a "shocking reality". Bayamma, a widow, told the VIP visitor that her husband A. Pullareddy died in 1998 leaving behind a debt of Rs.7 lakhs and a handicapped son. Since then, both of them were surviving on the meagre income they got from a public telephone booth sanctioned to her son under the quota for disabled persons.

The pathetic story of two teenagers, Nagamani, a degree student, and her physically challenged brother, Madhusudan Reddy, touched the Prime Minister. After the death of their parents, they were staying with a maternal aunt. Nagamani had little money for her own education and for her brother's treatment.

The State government approved a list of 51 farmers in Kurnool district for the relief disbursement. The list included those who had committed suicide since 1998. The farmers' families will get, apart from the special package of Rs.1.5 lakhs, a house under the existing scheme.

Even after the Prime Minister's visit, there is no end to the wave of suicides. By July 5, four farmers had taken their lives in four days in Kurnool district. The deaths have a social pattern too, with the incidents occurring largely among the backward class communities which traditionally depend on agriculture. Most of the farmers committed suicide by consuming pesticide, which is easily available in every rural household. A few farmers resorted to hanging themselves.

At Somayajulapalli, Manmohan Singh held a meeting with senior officials, to discuss long-term measures such as completing pending irrigation projects, simplifying banks' lending procedure in the case of farmers, modifications in the crop insurance scheme, recognition of tenant farmers for institutional finance, and insurance for borewells that fail to yield water.

Somayajulapalli is representative of the current agriculture crisis witnessed in the semi-arid zones of the State. The crisis has claimed the lives of hundreds of farmers here. At Somayajulapalli, a backward caste farmer, K. Beesapati Pedda Rangaiah, 40, killed himself by consuming pesticide on May 22. Rangaiah was ruined financially by the failure of his borewell and cotton crops. He had borrowed Rs.40,000 from a bank and Rs.50,000 from private lenders. Deviating from his father's method of comprehensive agriculture, which involved the raising of 100 sheep and the cultivation of rain-fed crops, Rangaiah had dug an open well a decade ago by investing Rs.15,000 . Since it failed, he sank a borewell and succeeded in tapping water. But after a few years, the well went dry . By then, his debts had become unmanageable.

Many farmers in the village took to commercial crops in the recent past, encouraged by a few initial success stories. Out of the village's total cropped area of 744 hectares, cotton is cultivated on 265 ha and tomato on 175 ha. The area under food crops thereby declined - paddy to 6 ha, "korra" (fox-tail millet) to 4 ha, red gram to 24 ha and orchards to 20 ha.

Farmers here sank 89 borewells and 20 open wells to irrigate 135 ha of cultivated land. Thirty of the borewells and all the 20 open wells went dry because of drought in the last three years.

Analysing the agriculture crisis, Dr. G. Narasimha Rao, Principal Scientist at the District Agricultural Advisory and Technology Transfer (DAATT) centre in Kurnool, says that the increasing cost of inputs, non-remunerative prices for various commodities, and the drought situation have crippled the system. While the prices of agricultural commodities have witnessed a declining trend year after year, the prices of inputs have kept rising.

When farmers are short of money, traders tighten their hold and make the prices tumble. According to a study, for many commodities the difference between the prices paid by the consumer and the price paid to the grower is more than 100 per cent. Prices reached rock bottom during the harvest season and peaked when the stocks with the farmers exhausted. In the absence of an effective government mechanism to shield farmers from price fluctuations, middlemen claimed huge margins.

The unchecked sale of spurious seeds and pesticides has been hitting the farmers below the belt. Farmers who buy inputs on credit have to compromise on their quality. In the absence of easy access to experts in the field, farmers buy pesticides on the advice of dealers whose sole motive is to increase the volume of sales.

Of late, many farmers who have dug borewells have been digging their own graves in the process. Many of the farmers who ended their lives had dug several wells, all of which failed. One successful borewell provokes the digging of many more, but a cluster of borewells becomes a serious strain on the water table.

After the arrival of cash crops, farmers abandoned the practice of comprehensive agriculture which included domestic dairy and poultry units in addition to agriculture. Besides ensuring a year-long steady income to farmers, the allied units provided low-cost fertilizers thus limiting the use of chemicals and pesticides.

Spring far behind

The leadership crisis in the All Parties Hurriyat Conference and the mainstream parties' failure to respond to the political challenges in the valley threaten to push the State into anarchy.

in Srinagar

"SPRING will return to the beautiful valley soon," Prime Minister Atal Bihari Vajpayee promised in Srinagar last April, quoting a somewhat trite passage from the poet Ghulam Ahmed Mehjoor, "the flowers will bloom again and the nightingales will return, chirping." Like any headless nightingale, the peace process in Jammu and Kashmir is headed earthwards. Initiated by the National Democratic Alliance (NDA) in 2002, the peace process was predicated on widening political dialogue within Jammu and Kashmir, most significantly between the secessionist All Parties Hurriyat Conference (APHC) and the Union government. Now, however, the contradictions in the process have become evident. Unable to control events on the ground, and battered by terrorist threat, the Hurriyat's Centrist faction is without a leader, and mainstream political parties are fast losing control over their constituencies. Events in Jammu and Kashmir are spiralling out of control, and it will take at least a minor miracle to get them back on track.

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On July 6, Hurriyat chairman Maulvi Abbas Ansari announced that he was resigning his post in an effort to bring about the reunification of the coalition's factions. The organisation's founder-chairman, Srinagar cleric Mirwaiz Umar Farooq, was asked to work towards restoring the Hurriyat's original executive council, which until last year's split included Islamist hardliner Syed Ali Shah Geelani. Although the Hurriyat reiterated its willingness to continue dialogue with India and Pakistan, Farooq said this process would commence only after a new chairman was elected by the pre-split executive council. No clear idea, however, has emerged on just how the Hurriyat intends to bring Geelani back on board. The Ittehadi Force, a forum of secondary political parties including Sheikh Abdul Aziz's faction of the People's League, has said that it is waiting for an invitation from the Hurriyat to begin talks, but neither the Islamists nor the centrists have responded.

What sense might one make of Ansari's resignation? At one level, the effective termination of dialogue with the Government of India could be read as the outcome of intense terrorist pressure on the Hurriyat's centrists. On May 29, terrorists had shot the Mirwaiz's uncle, Maulvi Mushtaq Ahmad, and he died nine days later. Farooq's house was subsequently attacked. Speaking in New Delhi on June 28, Farooq admitted that "somebody within our rank and file is targeting me and my family". The reason for this hostility among terrorist ranks, he said, was "our stand on the resolution of the Kashmir issue on the dialogue process between India and Pakistan".

After a meeting with Pakistan Foreign Secretary Riaz Khokhar, Farooq asked for permission to travel to Pakistan as part of a Hurriyat delegation to investigate just who was responsible for the spate of attacks. A meeting scheduled to decide on the members of the delegation, however, never took place, and the Hurriyat never formally made a request for passports to travel to Pakistan.

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Discretion, it would then seem, triumphed over valour in the week between Farooq's visit to Delhi and Ansari's decision to step down. One key event may have been the burning down of the historic school run by Farooq's family in downtown Srinagar on June 7, the act of arson intended to signal that both his life and his ideological inheritance were under threat. Yet, the problems surfaced much earlier. It had become clear that the United Progressive Alliance (UPA) government was unwilling to deliver a dramatic face-saving gesture to the centrists, like significant troop withdrawals or direct one-on-one negotiations with Prime Minister Manmohan Singh. Another key factor was efforts by the Union government to draw the Islamists into the dialogue process, thus undermining the Hurriyat's centrist majority's claims to represent all the people of Jammu and Kashmir.

On June 9, lawyer-politician Ram Jethmalani held an unscheduled 30-minute meeting with Geelani, pushing ideas for wider internal autonomy for Jammu and Kashmir. Jethmalani made his visit on behalf of the non-official Kashmir Committee, set up with quiet government assent at the start of the NDA's engagement of the Hurriyat. Most observers had believed that the Kashmir Committee to be defunct after the resignation of two of its three members, senior journalists M.J. Akbar and Dilip Padgaonkar.

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The mission, sources told Frontline, was pushed by elements in the Union Ministry of Home Affairs who believed that the centrists needed to be prodded into action, and the dialogue `broad-based'. The services of the recently removed Intelligence Bureau (IB) Director, K.P. Singh, were used to set up the meeting, and Geelani was contacted through a New Delhi lawyer of ethnic-Kashmiri origin. Although the Islamist leader was non-committal, Jethmalani flew to Srinagar, only to be kept waiting for several hours before he was granted a token audience. At a later rally, Geelani claimed he rejected Jethmalani's autonomy proposals out of hand. "Jethmalani wanted me to give credit to the Indian democracy," Geelani said. "I explained to him how the Indian forces had committed massacre after massacre of Kashmiri people in the last 15 years. He had nothing to say when he withdrew." Geelani also charged that the "the entire Indian leadership was biased against the Kashmiri Muslims", and that while the Bharatiya Janata Party (BJP) was "explicitly communal", the Congress "was instinctively communal but it was pretending to be secular".

JETHMALANI'S mission, then, failed to win over the Islamists - and also served to alienate the centrists. For now, Geelani has shown no signs of biting the bait offered by the centrists, and has expressly rejected dialogue with India. Speaking after Friday prayers at a Srinagar mosque on July 9, for example, he accused India of "massacring Kashmiris under the camouflage of a peace process". In several earlier speeches, Geelani rejected any forward movement other than those founded on United Nations resolutions mandating a plebiscite in the pre-1947 state of Jammu and Kashmir. This rejectionist stance has long had the support of Pakistan-based terrorist groups, who have little to gain from a negotiated settlement that does not include them. Pakistan, in turn, has softened its position on the Hurriyat centrists in recent months, but for obvious reasons would not like a dialogue kite to fly unless it has at least one hand on the string. Thus, reason suggests Geelani would enter the Hurriyat only if he had a decisive say in shaping its strategy: something the mere removal of Ansari would not give him.

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Geelani's best hope is to regain influence within the Jamaat-e-Islami, the organisation to which he gave much of his life before being marginalised last year. His supporters now hope to use his majority among the 1,250-plus delegates in the Jamaat-e-Islami's general council to secure changes in the organisation's leadership, and amend its constitution to allow for support of the jehad against India. He does not, however, have a majority among the Jamaat-e-Islami's Rukuns - its rank and file cadre - or its senior leadership.

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From December 2003 onwards, moderates in the Jamaat had run a successful campaign to remove pro-Geelani figures from positions of power, tacitly backing the Hurriyat moderates. Syed Nazir Ahmad Kashani, the Amir of the Jamaat-e-Islami, fought off Hizbul Mujahideen efforts to garner support for the hardliners. On January 1 this year, the Jamaat's Markazi Majlis-e-Shoora, went public with a commitment to "democratic and constitutional struggle", an indication of willingness to operate within the Indian political system. Article 5 of the Jamaat-e-Islami's constitution obliges it to use such means, and to desist from those, which "may contribute to the strife on earth".

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One key factor in shaping the power struggle will be how much influence terrorist groups are able to exercise. The signs, on the face of it, are not good. Although violence has been in steady decline since 2001 - the year India threatened to go to war unless Pakistan de-escalated its covert war in Jammu and Kashmir - official figures for this summer do not make for happy reading. Killings of civilians from April to June this year were higher than in 2003, particularly in the Kashmir division (see chart). So, too, were the numbers of Indian security force personnel killed, although the numbers of terrorists killed in retaliation declined. Infiltration, as Chief of Army Staff Nirmal Vij recently made public, has resumed, reaching high levels in the first two weeks of June. What Vij did not make public was the fact that the almost-complete border fencing is not as effective as some had hoped. Three terrorists shot dead near the Line of Control (LoC) in the Mandi-Loran area on June 9, for example, were carrying plastic pipes, designed to penetrate the fencing. Indian infantry troops who have carried out tests on the fencing have taken just 10 to 15 minutes to clear the barrier - suggesting that while it is indeed a deterrent, the fence is hardly the kind of impregnable barrier enthusiasts had claimed.

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Worst of all, the political ground on which the peace process is premised threatens to turn into quicksand. With terrorist groups increasingly dominating southern Kashmir, particularly at night, large crowds of villagers have started appearing at the last rites of slain terrorists, a phenomenon not seen since the early 1990s. Gatherings of up to 2,000 villagers have been recorded during the burials of terrorists of Pakistani origin, something unheard of until early this year. In one recent incident in Kulgam, villagers were shipped in by bus to protest an Army siege of a local mosque, in an effort to rescue two terrorists still trapped inside. Major political parties have been unable to respond. The People's Democratic Party (PDP), which until recently had a none-too-covert alliance with elements of the south Kashmir Hizbul Mujahideein, has been haemorrhaging cadre - the wages of the terrorist group's ire at the PDP's inability to deliver on pre-poll promises to scale back military operations. At least five PDP workers have been killed and eight injured since June. In a gruesome incident on June 15, four PDP activists who had campaigned for Mehbooba Mufti, who contested and the won the parliamentary election from Anantnag, were taken to a jungle hideout near Aishmuqam, beaten and then shot through the legs.

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Crippled by a bitter feud with its alliance partner, the Congress, the PDP seems unable to respond to the political challenge. Last month, Congress politicians, their eyes firmly focussed on the Hindu vote in Jammu, launched a protracted offensive against the State government's efforts to restrict the ongoing Amarnath Yatra to just one month. The move was motivated by calls from the Indian Army, which said it did not want to squander troops on protecting pilgrims for an extended period. Congress leaders in Jammu responded by charging Chief Minister Mufti Mohammad Sayeed of interfering in Hindu religious affairs. One MLA, Yogesh Sawhney, even alleged that Sayeed had attempted to murder him, after a helicopter scheduled to pick up the politician from the Amarnath cave failed to do so. Others in the Congress have bucked the party's official line, and charged the PDP with backing corrupt officials and administrative inefficiency. The State Cabinet, as a consequence of the crisis, has not met for four months, the last scheduled meeting having been called off on June 9. Both mainstream parties and centrist secessionist factions seem bereft of leadership: an unhappy pointer to what could lie ahead in the months to come.

'An industry-friendly Budget'

cover-story

Interview with Y.K. Modi, president, FICCI.

Y.K. Modi, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), thinks that industry does not need funds from the government, and that all it needs is a "congenial atmosphere". He says that the hype surrounding the Budget is unnecessary as "it was only along expected lines". He, however, thinks it is a "good Budget in the right direction". Excerpts from an interview Modi gave Purnima S. Tripathi:

How would you describe the Budget? Was it along expected lines?

The Budget can be described as industry-friendly, in the sense that it has imposed no restrictions on us. The best thing about the Budget is that it has removed any apprehensions about a setback to the reforms process. There were doubts in some quarters, because of the role of the Left parties in the government, that there could be a setback to the reforms process, but such apprehensions have now been set to rest.

Was it like the "dream Budget", which Chidambaram presented in the past?

Actually, we have started expecting too much from the Budget, as if it is the be all and end all of what a government can do. We forget that the Budget is just one tool in the hands of the government for fiscal management. The real issues bothering us all such as delivery of government services to the needy, health, education, infrastructure, pragmatic labour laws all these fall outside the purview of the Budget. As for this being a dream Budget, I would say the policies were already there, it is a continuation of those policies.

What did industry expect from the Finance Minister?

We would have liked more rationalisation of direct taxes, simplification, re-adjustment of slabs. Besides, the 2 per cent cess on all taxes for education could have been avoided. Not that one does not want to pay for a worthy cause like this, but a cess has to have a direct linkage, in the sense that a cess on petrol funds the building of roads and so on. Here there is no linkage and there is no guarantee the money will actually go into education. More than the money, the real problem here is non-delivery of already existing services. Look at government schools, there are no teachers, no buildings, no other facilities. He could have done without this cess. The money could have come from elsewhere, such as from tobacco or whisky or some such luxury items. We are going to demand that this be withdrawn.

What, in your opinion, would have been the compulsion for him to impose the cess?

Actually, it is for the first time any government is really serious about the manifesto and the Common Minimum Programme. It is a part of that, plus compulsions of coalition politics. But we need to wait because the real Chidambaram Budget will be in March next. We will wait for that.

What would be your expectation from such a Budget?

A complete overhaul of direct taxes: increase the tax base, bring it to Rs.15 crores from the present Rs.3 crores, tax the rural rich, simplify the tax structure, redefine slabs, make compliance more effective, have policies that attract new investment, emphasise infrastructure. He has made a good beginning in the right direction.

But the Left parties have expressed their displeasure over increasing the foreign direct investment (FDI) limit in the telecommunications, civil aviation and insurance sectors. Is the industry worried that the government could succumb to pressure from the Left and retract?

The Left is crying wolf. If they are so opposed to foreign investment then why are they seeking it in West Bengal? In fact, they are making noises only for public consumption. They too realise that the process that has been set in motion cannot be reversed.

Does industry have any specific complaints about the Budget?

Yes, the 2 per cent cess. It must be withdrawn. And the rate of turnover tax is too high for comfort. The Finance Minister should revisit these two areas.

On the popular track

Laloo Prasad Yadav presents a Railway Budget that reflects his core concerns as a politician who has not lost touch with his roots.

LALOO PRASAD YADAV is an extraordinarily engaging political figure who came to the Ministry of Railways seemingly determined to transform its basic ethos. That he would oppose any proposal to raise freight rates and fares was evident. And as his Railway Budget proposals were rolled out on July 5, it became clear that he had been entirely successful in sticking to this resolve. But did he really achieve anything beyond this? The decades-old organisational behemoth of the Indian Railways is not easily amenable to radical change. Ardent votaries of tranformative politics have been known to scale back their ambitions once ensconced in the most privileged recesses of Delhi's Rail Bhavan.

Yet Laloo Prasad is not one to forget easily his basic instincts. In the course of one of the longest Railway Budget speeches in recent times, he made two specific announcements of benefit to the community of railway porters. Railway stations will be granted funds to build shelters for licensed porters to spend their few hours of leisure. And spouses will now be entitled to a biennial privilege earlier reserved for registered porters in the Indian Railways: a free return ticket to any destination in India.

Benefits were not confined to the symbolic or the cosmetic. Laloo Prasad evidently has in mind an entire scheme of social security for the unorganised sector. In emulation of a programme that has been introduced on a pilot basis in about 50 districts, the Minister has announced that all workers in the unorganised sector who come in contact with the Railways, would be covered under the scheme. Where licensed porters are concerned, the initial financial contributions for the scheme would be provided through the Railway Budget. The vast majority of the unorganised workers who come in contact with the Railways however, are in turn employed by contractors engaged by the Railways. In these cases, the Minister proposes to initiate a dialogue with the Law and Labour Ministries to enact the kind of legislation that would put the onus for the schemes on the contractors concerned.

It has of course been many years since a Minister presenting a Railway Budget made any mention of the men who eke out a living hauling loads. That was a characteristic touch of Laloo Prasad the politician still very much in touch with his roots. These were, expectedly, received with a sense of resigned despair by votaries of reforms. And Laloo Prasad did not disappoint, giving them ample reason to gripe with several of his other proposals as well.

Among the issues the Minister dealt with on a priority basis was security. Since July 1, amendments to the Railways Act have come into effect, vesting police powers in the Railway Protection Force and the Government Railway Police, for the investigation and prosecution of certain varieties of crimes committed in railway premises. This shifts the emphasis decisively from their earlier mission of only standing vigil over railway property.

The task calls for a larger manpower complement, and Laloo Prasad announced that he proposed to begin recruiting security personnel directly through force headquarters rather than the established board. No precise figure of the number of recruitments envisaged was provided, but unofficially, it has been put in the range of 15,000 to 20,000.

Expectedly, this has stirred up apprehensions that the Railways are being burdened with populist commitments that they are ill-equipped to fulfil. But the recruitments proposed are only a tiny fraction of the Railways' total employment today, which is in the region of 1.5 million. And the additional wage burden is not expected to be significantly higher than the existing bill of around Rs.15,000 crores. That the additional manpower will be deployed in the security mission, which has been almost universally recognised to be a priority area, makes the charge of populism less than convincing. But that has not prevented the partisans of the reforms process from trying.

In the absence of any increase in freight rates and fares, the question of finding the resources for all Laloo Prasad's schemes is, however, a well-founded one. Apart from the special attention that the Minister has bestowed upon the unorganised workers, he has also announced free travel concessions for widows of armed forces personnel killed in the line of duty, and unemployed youth travelling to attend Central government interviews. And the fine print of Laloo Prasad's Budget shows that he is banking upon a certain degree of buoyancy in revenue accruals to the Railways. The year gone by has been a relatively good one for the Railways and this has undoubtedly fuelled the mood of optimism. But to bet on a second successive year of over-fulfilled targets is not an enterprise free of risks.

The Railways had made an initial freight plan involving the carriage of 540 million tonnes in 2003-04. As the economy rebounded briskly from the drought-induced downturn of 2002-03, the actual volume of freight carried went up to 550 million tonnes. This has undoubtedly induced the Railway management to budget for a further increase to 580 million tonnes in 2004-05. This projected increase of 5.5 per cent may not seem ambitious in comparison to the 6 per cent registered in the recovery year 2003-04. But it would otherwise be, by a substantial margin, the highest growth rate in freight traffic registered in the last decade.

Railway officials emphasise that there are factors working in favour of this ambitious target. The 1990s were a bad period for freight movements on account of a host of factors. Ministers averse to raising passenger fares sought to put the entire burden of supporting the Railways' investment plans on freight rates, inducing a substantial migration of goods traffic towards the roadways. At the same time, the Railways' ambitious unigauge programme, to convert the entire national network to the standard broad gauge, meant that existing metre gauge networks were temporarily disrupted, providing another powerful inducement for traffic to migrate to the roadways.

Both these factors have become inoperative in recent times in the Railways' strategic calculations. First, the unigauge project has restored continuity of movement along most major axes of freight movement in the country. And second, a number of years of restraint in raising freight rates has established a more favourable parity in relation to competing modes of transport.

Indeed, with the unigauge programme having run its course along the main traffic corridors, the Railways' concern, as outlined by Laloo Prasad, is now to develop alternative routes so as to reduce congestion in the network. The gauge conversion programme for 2004-05 hence targets relatively narrow stretches of track that could provide big benefits in terms of easing the load on the most congested routes.

The Railways have also set under way a programme for enhancing connectivity between the major hubs of economic activity in the country. In this respect, the project has taken a cue from the "Golden Quadrilateral and Diagonals" project, launched in 1999 by the Vajpayee government, with the aim of providing for heavier and faster road transit between the country's main metropolitan centres. Coupled with this, the Railways also have a plan to provide quicker and higher volume connectivity to the country's main ports.

This plan was launched in August 2002, but given its first infusions of funds only in the 2003-04 Railway Budget. Initial forecasts put down the total cost involved in the programme - called the National Rail Vikas Yojana - at Rs.15,000 crores. But the first infusion of capital into the Rail Vikas Nigam - a special purpose vehicle created for the purpose of implementing the plan - was a mere Rs.500 crores. Laloo Prasad now proposes further financing to the tune of Rs.717 crores. Together with these inflows,the Nigam would also be empowered to raise funds from the market for its investment programmes. But with its equity being rather limited, its ability to raise debt financing would be likewise constrained. And it would be a long time before the projected investment quantum of Rs.15,000 crores is met. The Railways' effort to recapture aggressively freight traffic along the "Golden Quadrilateral and Diagonals" would obviously be limited by these factors.

THE Railways portfolio has been held for over eight years now, by politicians from the eastern region. The Ministry has seen four incumbents in this period, of which three have been from Bihar. With the exception of Nitish Kumar, who grudgingly conceded the case for a substantial fare revision in 2002, all recent incumbents in the Ministry have been notably resistant to the notion of increasing the burden on the passengers.

Nitish Kumar, however, made it amply clear when he introduced his interim budget for the Railways for 2004-05 in February, that his years of painful self-discipline when he conceded the case for rate increases, were only meant to set the stage for election-eve political giveaways. Laloo Prasad has maintained the huge roster of new train services that Nitish Kumar proposed and added a few of his own to it. The relative priorities among the Railways' various investment heads - new lines, gauge conversion, rolling stock acquisition, signalling and telecommunications, electrification works, road safety, and others - have not changed in any significant manner. But perhaps the greatest assurance that Laloo Prasad's proposals are on safe ground comes from the generous accruals that he has budgeted for to the Railways' reserve funds. All these funds - the Depreciation Reserve, Safety Fund, and others - closed substantially above budgeted figures on March 31, 2004. With the figures budgeted in the 2004-05 proposals, they should close still higher on March 31, 2005. Even with a substantial shortfall in freight traffic, the Railways evidently have enough in reserve to meet essential investment needs. What could happen in the years to follow is, of course, quite another matter.

Crackdown on a beach

The Goa government's demolition of houses and shacks in Baina in a bid to shut down the State's only red light area, which plays havoc with the lives of thousands of people, especially commercial sex victims, invites strong protests.

recently in Baina

THE Bharatiya Janata Party government in Goa led by Manohar Parrikar recently achieved what several previous governments had tried and failed - to shut down the State's only recognised, albeit unofficially, red light district. On June 14, at the height of the monsoon, a demolition squad with 10 bulldozers razed 800 to 1,200 tiled or tin-roofed cubicles and shacks varying between 2.5 and 80 square metres, about 400 of which were involved in the burgeoning sex trade, in the red light district of the Baina beach, 2 km from the port town of Vasco-da-Gama. But the demolition could well turn out to be a pyrrhic victory for the government.

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Officially the area has been cleared of all structures and closed for sex work, and the around 450 (down from a high of 2,500) commercial sex victims (CSVs), mainly from coastal Andhra Pradesh and northern Karnataka's Devadasi belt, and 100-odd touts and gharwalis (brothel keepers) have been sent out. Besides the brothels, the demolition has also put out of business 20 bars (some in existence since 1967), 83 eateries and a number of telephone booths and small shops selling anything from cigarettes to provisions. The question is, where have all the CSVs gone?

The Parrikar government prefers to believe that the demolition has driven the CSVs out of the State and back to where they came from. However, with multiple dependents including children and debts to pay off, most of them are likely to be doing sex work elsewhere in Goa. Investigations by Frontline show that while a handful of them may have gone back to their `home' States, or shifted base to Mumbai, the majority are in Goa. Most of them have settled in areas near Baina such as Mangoor Hill and Zuarinagar, or moved to Margao city, Porvorim or beaches such as Baga. Some, who failed to find accommodation outside Baina (many have been turned away by house owners since the police have warned them not to rent houses to people from Baina), have stayed back in what remains of their shacks at Baina, or at the nearby Katembaina slum. Several CSVs told this correspondent that the police were hounding them and threatening to lock them up if they did not move out of Goa at the earliest and return to their respective States. However, they could not do so since it was deplorable situations at home that forced them to come to Goa in the first place. Many also got themselves pregnant so as to force their local partners to support them.

Pushpa, a 30-year-old Telugu-speaking CSV who has lived at Baina for the last 14 years, said: "A man promised me a job at Bellary, but sold me to a gharwali at Baina. Later, a local policeman befriended me and by him I have an eight-year-old son. I have put him in a boarding school paying Rs.800 a month. After the demolition, the policeman is afraid to come and meet me. I have to fend for myself. I am afraid that the police will detain me, but whenever a customer comes I don't send him away. In the nights, goons come and beat us, demand money, liquor and sex."

WHAT happened to the few thousand people (figures vary between 4,000 and 6,000) who were not connected with the sex trade, but were migrants chiefly from Karnataka, Andhra Pradesh, Bihar and Uttar Pradesh and had settled at Baina decades ago, eking out a living as labourers, hawkers and domestic helps? Most have now become homeless. Having lost their meagre belongings and with no meaningful rehabilitation programme in sight, women from such families are more likely to join what the government would like to drive out of Goa - the "sex industry". For them too, the question of going back to their native States does not arise: they have stayed so long at Baina that it is the only home they know.

Ramnaresh Gupta said: "I ran a small hotel here for nearly 20 years. My father brought me to Baina 40 years ago. I have raised even my grandchildren here. We were given water and electricity connections. We have voter identification and ration cards. I was paying taxes to the municipality to run the hotel. The police fully knew what was going on."

Revappa Saravur, who was born in a village close to Bijapur in Karnataka but has lived in Baina for three decades, said: "My children were all born here. They don't even know how to work in the fields. And with no rain in north Karnataka, what will we go back and do?"

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Added Maguve Sheikh, who has lived with his family in the demolished Fakir Gully ever since he left Bagalkot in Karnataka over four decades ago: "We had nothing to do with the sex business. Still our house was demolished. The Goa government has promised to build tenements by November for the displaced people. And we have been asked to register with the Mormugao Mamlatdar (Revenue Officer)." Several people told this correspondent that when they went to register, either the official was not there or they were humiliated and told that nothing would come out of registering. Officially, about 300 families registered at the Mamlatdar's office and, after scrutiny of their claims, only 77 were "found to be reasonable in all aspects".

So far government relief has been meagre, and the task of feeding many of the homeless has been left to voluntary organisations. The Goa government provided housing for about 200 non-CSV families - mainly Muslims from Fakir Gully because it feared a communal problem - in the nearby Buthe Bhat Sports Complex. But they were sent out on July 2, some with a grant of Rs.10,000, on the eve of the visit by a delegation of the National Commission for Women (NCW). They were the less unfortunate ones, the rest have so far got nothing. Parrikar said: "As far as we know only around 300 families have come to register. Let the NGOs bring the rest if there are any."

According to observers, the demolitions have not only made thousands homeless, but driven the sex trade underground. Goa's newly appointed Director-General of Police (DGP), Amod Kanth, hit the nail on the head when he said: "No administration or police force can completely wipe out the sex trade." And this is what frightens non-governmental organisations (NGOs). Dr. Maryam Shahmanesh, chief investigator of the NGO Positive People, Goa, said: "If there was no market for sex in Baina the sex workers wouldn't have existed at Baina. We knew there was a market. The demolition has not tackled this problem. Neither has it tackled the network of goons and pimps, nor the network that is trafficking women from other States to Goa. And it will not, as the government thinks, bring down the incidence of HIV/AIDS [human immunodeficiency virus/acquired immune deficiency syndrome]. If anything, it will make the situation worse since they [CSVs] have now been forced to go underground, making themselves more vulnerable to exploitation by goons and traffickers. This means it will drastically bring down their ability to insist on the use of condoms. So HIV prevalence will increase. And neither can there be intervention by NGOs [in 2002 over 7.5 lakh condoms were distributed and socially marketed by NGOs to women in Baina] since we now don't know where the women have gone."

Given that a substantial number of the affected people were from Karnataka, the demolitions had repercussions in that State. The Karnataka government sent a delegation to Baina to take stock of the situation. Although Parrikar met the delegation and promised relief, he was piqued by Karnataka's concern. "Who is Karnataka to ask me? They should first take care of the four lakh people who live on the roads in Bangalore. Why should they worry about Goans?" The demolition also caused some people in Karnataka to take to the streets and condemn Parrikar and his government. The Vasco Express, which runs between Goa and Bangalore, was detained briefly, and a couple of buses were stoned. Moreover, there is a growing feeling, especially in Goa and among migrants belonging to the lower income groups, that the Goa government is pursuing an anti-migrant policy and trying to deport non-Goans. Although Parrikar disagrees, he is candid that he is not for a "large number of migrants, especially from the lower socio-economic groups, making Goa their home".

SO what good has the demolition done? J.B. Singh, Collector, South Goa, said: "It will clear up an area that had become a haven for the sex trade. Forty-four per cent of the sex workers had AIDS. Pimps, brothel keepers, bars, motorcycle pilots and sex workers had all become a part of an interdependent chain. Baina had become a hideout for criminals and provided space for anti-social activities. But the police and other law-enforcing agencies could not even enter Baina. While we have to take a humanitarian attitude, we also have a duty to the law-abiding citizen of Goa."

However, surveys conducted by the National AIDS Control Project dispute the Collector's claims about the prevalence of AIDS among the CSVs in Baina. While 53.20 per cent of the CSVs had AIDS in 2000, the figure stood at 50.79 in 2001, 24 in 2002 and 30.15 in 2003. It was also revealed that 97 per cent had heard about HIV/AIDS and 95 per cent were aware that AIDS could be prevented through the consistent use of condoms.

J.B. Singh also rejected the criticism that the government was wrong in demolishing all the structures at Baina, including those that were not being used for the sex trade. On the other hand, NGOs pointed out that in July 2003 the Panaji Bench of the Bombay High Court had directed that the District Collector concerned should close down the 250 cubicles that were being used for the sex trade. The cubicles were identified in September 1998 by the Justice G.D. Kamat Inquiry Committee, which was constituted by the NCW, after receiving complaints of police atrocities and human rights violations, to study the problems of CSVs in Baina and to make recommendations for their rehabilitation.

Explained J.B. Singh: "We were acting only as per the July 2003 orders. The 8,752 square metres of land where the demolished structures stood belonged to the government. The people there had no legal justification to stay on the land. If basic amenities such as water and power were provided, it was only to meet their minimum needs. And there may have been compulsions. But no trade licence can legalise their occupation. And the court order does not prevent us from recovering what is government land. And, tell me, how could we practically separate and identify which cubicle was being used for the sex trade and which was not? It was not even possible for the law enforcement agencies to go to Baina. About 346 notices were issued in 1998 itself. If anyone now has a problem, let him file a petition in the court. And commercial establishments were issued notices on June 7. [Ironically, the first court hearing pertaining to the closure of these establishments was posted for the afternoon of June 14, the day the structures were demolished.] In fact, in the neighbouring Katembaina slum, the court has only asked us to give people living there a notice, and not a show-cause notice, 10 days prior to demolition. NGOs are today crying foul because in the eyes of the people of Baina they have been shown as liars. They kept telling the people that nothing would happen to their houses."

IN December 2003, the government, through the Goa State Women's Commission and the Department of Women and Child Development, warned the CSVs in Baina about the impending action. In April, the government, following the recommendations of the Kamat Committee and the directions of the High Court, commissioned the compilation of a socio-economic profile of the CSVs. A Pune-based Rashtriya Swayamsewak Sangh (RSS) affiliate, the Rambhau Mhalgi Prabodhini-Centre for Development Planning and Research, was entrusted with the task. NGOs are critical that the government invited, at considerable cost, the Pune-based group when a local organisation itself could have been asked to conduct the survey. The CSVs, on the other hand, criticised the members of the Prabodhini for asking irrelevant questions.

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In January, the area was cordoned off and prospective customers were prevented from going in. The NGOs pointed out that this was a mistake since the women, in the absence of any other source of income, were then forced to go out of Baina to seek clients. According to the NGOs, CSVs reported an increase in physical violence against them, harassment by the police, use of force by clients to consume alcohol (alcohol is strongly associated with increased HIV risk), multiple partners and forced sex and rape without condoms. (A 2001 study by the National AIDS Control Project indicated that the CSVs in Baina used condoms in 72 per cent of the instances with paying partners and 46 per cent of the instances with non-paying partners.) There was also an increase in self-harm in terms of attempted suicide and in mental health problems. According to Positive People, condom distribution came down from a monthly average of around 14,000 to 6,000.

A day prior to the demolition, the Mamlatdar announced that the cubicles used for the sex trade would be demolished. Four buses were brought and the CSVs were asked to choose from going to the government's rehabilitation centre at Ribandar (formerly a mental asylum), returning to their respective States, and being locked up at the Fort Aguada prison. None of the women opted for Ribandar. Power and water supply to Baina was cut off. The NGOs claimed that Ribandar was unsuitable since there would be sentries and restrictions. J.B. Singh told Frontline that there was only to be a nominal restriction, preventing the women from going out between 8 a.m. and 8 p.m. "for their own safety". He also stressed that the NGOs had poisoned the minds of the women and prevented them from taking up the government's offer. Parrikar said: "These NGOs want the problem to persist. If the commercial sex worker issue is settled many of these NGOs will be without a job, which is why they are preventing a solution."

The NGOs do not agree. They accuse the government of offering a flawed rehabilitation package. Sonali Wayal of Positive People said: "The intention of the government is to send these women out of Goa. We, as part of the `Forum for Justice in Baina', have filed a petition in the High Court against the demolition. The government is taking full advantage of the High Court order which had directed that `since the commercial sex workers are being brought from outside the State the government is not bound to rehabilitate them except to the extent provided by specific directions of the apex court' and that `the rescued commercial sex workers be deported to the State from where they come'." Arun Pandey of the NGO Anyay Rahit Zindagi (ARZ), said: "I think we were complacent. After the High Court order of July 2003 the government had to file a compilation report within nine months. It approached the court in April 2004 and citing the elections and the approaching monsoon sought a further 10 months to comply. It also commissioned the socio-economic survey. We NGOs thought that the government was sincere. And we never thought that they would demolish all the structures."

Added Shahmanesh: "At best we thought the government would banish the sex workers and seal the cubicles." During her visit to Baina, even NCW Chairperson Poornima Advani said the Commission was unaware that the Goa government was going to demolish the shacks.

Parrikar told Frontline that within the next six months all the shacks and illegal construction on the Baina beach, including the sprawling Katembaina slum, would be demolished, but only after rehabilitating the people living there. After the June 14 demolition not many NGOs are taking the Chief Minister's promise of rehabilitation too seriously.

`This is first aid, the need is hospitalisation'

cover-story

In keeping with the United Progressive Alliance's promises in the Common Minimum Programme (CMP), Finance Minister P. Chidambaram made agriculture a major focus of the Budget. Siddharth Narrain spoke to K. Varadharajan, general secretary of the All India Kisan Sabha, on his perception of the Budget. Excerpts from the interview:

Are the provisions of the Budget in consonance with the spirit of the CMP, especially with the parts that relate to the agricultural sector? Does this Budget indicate a major shift in agricultural policy from that of the previous government?

This Budget amounts to first aid when the need is hospitalisation. In Chidambaram's proposal, there is definitely a turn to the villages compared to the earlier Budgets. The Budget has allocated an additional amount of over Rs.900 crores for agriculture and he has a specific plan for irrigation, especially tanks and other forms of conserving water. These are definitely steps in the right direction. The 2 per cent cess to be utilised in providing compulsory education for children up to eight years of age will also help the rural poor. The Finance Minister has also suggested more allotments for the Scheduled Castes and the Scheduled Tribes, which is good because they constitute most of the rural poor. But there are basic issues such as poverty that have not been addressed. For example, the Employment Guarantee Scheme was meant to generate 100 days of work a year for at least one person in a family. This Budget could have begun addressing this issue.

What is your reaction to the Finance Minister's decision to entrust the implementation of the government's policy to double the flow of agricultural credit in three years to the public sector and private banks?

The existing problem is that more than 72 per cent of credit is from the private sector, that is, moneylenders and traders connected with agricultural inputs. This involves a high interest rate and is one of the main causes of farmers' suicides. This is why the All India Kisan Sabha and other organisations have been demanding that the availability of government institutional and non-institutional loans should be increased manifold. Although doubling the amount of credit in three years is a positive step, our experience is that private banks are not interested in the rural sector. We feel that credit facilities should be increased through cooperatives and nationalised banks by strengthening NABARD [National Bank for Agriculture and Rural Development].

Has the Budget done enough to address the reasons for farmers' suicides?

The main reasons for farmers' suicides are the supply of the wrong quality of seeds by multinational seed companies, the high cost of inputs, price fluctuation, and the non-availability of government credit. The Finance Minister has addressed the issue of government credit, but none of the other main aspects. The issues of quantitative restrictions, import policy and the entry of MNCs [multinational corporations] into the seed and other agriculture-related industries have not been addressed.

The actual outlay for the Department of Agriculture and Cooperatives remains at the same level as the interim Budget of the previous government. Do you see this as a problem?

We need to take into account that the Budget is meant for six months. Also, some of the extra allotment for Rs.10,000 crores to develop infrastructure may reach rural India. Even after taking these into account, the fund allotted is far below expectations.

Does the Budget adequately address the demands of oilseed farmers?

Oilseed farmers have been affected by the import of crude and refined palm oil. Raising the import duty on refined palm oil from 70 to 75 per cent shows the good intention of the government, but the crucial question is whether it is enough to prevent imports

Will the proposed insurance schemes, including the one against adverse weather, successfully cover farm income and livestock?

The prevailing insurance scheme is of no use to the farmer. The basic issue is whether you consider a region, a village or the individual as the unit for insurance. At a recent meeting that the Prime Minister held with farmers' associations, we said that unless you consider the individual as a unit the farmer will not benefit. The farmer is affected by weather, pests and the supply of wrong seeds. But if the region is taken as a unit while insuring farmers, many of those affected do not benefit and so most farmers will not take insurance. The insurance schemes suggested in this Budget are welcome proposals. The Finance Minister, before restructuring the present schemes, should consult the kisan sabhas.

According to the Finance Minister, India is self-sufficient in the production of wheat and paddy and deficient in other areas such as horticulture, oilseeds and floriculture. He has also said that a distinct bias in the agricultural price support policies in favour of rice and wheat has distorted cropping patterns. Do you agree with this assessment?

Although diversification of crops is needed, to say that we have attained self-sufficiency in wheat and rice is not true. Dr. M.S. Swaminathan [renowned agricultural scientist] and others have warned that if the rate of growth of foodgrain production continues to be lower than the rate of growth of population, we will become a net importer of foodgrains by 2010. The Finance Minister has assumed that the market will decide the price and alternative crops. So he has suggested a market-dominated arrangement instead of the minimum support price system for deciding crop patterns and the price structure. If this is implemented, it will be an attack on farmers, especially small and marginal farmers who are the worst affected in today's market arrangements.

Have the issues in the Agricultural Worker's Bill been addressed in the Budget?

The basic necessity for agricultural workers is comprehensive legislation that will cover wages and assure employment. Many States have lakhs of acres of government wasteland. The CMP says that some of this land will be redistributed among the landless. This issue has not been addressed by the Budget. Land reforms, which have not been implemented seriously in many States, has not been touched in this Budget.

Baina's traumatic history

RAVI SHARMA social-issues

AT the height of its notoriety, the Baina beach was home to 2,500 commercial sex victims (CSVs), around 60 per cent of them from Andhra Pradesh and the rest mainly from Karnataka. However, the number had come down to around 450 by the June 14 demolition.

Baina's association with the sex trade goes back to the Portuguese colonial times when seamen visiting the nearby port of Mormugao spent time at Baina. The post-colonial era saw a rapid expansion of the port and with it a large floating population of seamen and labour. Added to this was the influx of domestic tourists. Baina's notoriety grew rapidly and by the early 1970s the flesh trade had struck root, with clients being drawn from the floating population, the migrants and the local people.

The post-Independence era also brought about a sea change in the profile of the sex workers at Baina. With better educational and employment opportunities available to the local population, Goans disassociated themselves from the flesh trade. Goan CSVs were soon replaced, initially by women from Karnataka's northern districts such as Bagalkot, Bijapur, Gadag and Dharawad, and later by women from Andhra Pradesh's coastal belt areas such as Rajamundry, Vijayawada, Mandapeta and Kakinada. In the past 20 years women from Andhra Pradesh outnumbered those from Karnataka.

The Devadasi system that prevailed in Karnataka played a major role in sending many young girls to Baina. Girls, mainly from poverty-stricken families, were brought to Goa promising jobs as domestic helps or labourers and then forced into the flesh trade. In other instances, agents provided loans to families that had migrated to Baina looking for construction work and, when they failed to pay back, forced their women into the trade. In many cases the girl became the family's only breadwinner.

It was poverty, the trauma of a failed love affair or, in the majority of cases, landlords who exploited their families, that drove the girls from Andhra Pradesh to Baina. Tara, who is from a village close to Vijayawada, said: "The practice of vetti chakiri [bonded labour] helped the landlord harass my family. Not only had I and the rest of my family to toil in the fields the whole day, but I had to visit the landlord, his son and his son-in-law at night. I ran away to Vijayawada and then a man brought me to Baina and sold me to a gharwali. This is better than staying in my village. At least here I earn money and spend it as I like."

According to the CSVs, the trafficking of girls from Andhra Pradesh to Baina is part of a well-organised racket. Prospective victims are identified and contracted by agents who in many cases pay the girl's parents or guardians an advance of about Rs.15,000. The girl is then sold to a gharwali. The girl is expected to earn at least Rs.500 every day if she is to secure an income. This continues for three to four months, during which time, depending on her age and appearance, she could earn between Rs.5,000 and Rs.15,000 a month. Later she is dispatched to other destinations in India. Simultaneously, girls from other places are sent to Baina, thereby ensuring a regular supply of new CSVs at each location.

'Shining India' replayed

JAYATI GHOSH cover-story

The Economic Survey 2003-2004 reads like a paean to the supposed material and policy successes of the National Democratic Alliance government.

SONIA GANDHI, the chairperson of the United Progressive Alliance (UPA), and the government that she helped to create, appear to inhabit two very different countries. The India she lives in and travelled through widely during the election campaign is a country in the throes of an economic crisis, especially in the countryside. It was the people of this country that she recognised and addressed, in all the speeches she gave about the problems faced by farmers, the lack of jobs for the people, the inadequacy and poor quality of the most basic public services, the hunger and despair that affect backward regions, the growing inequality.

It was the voters of this country who, in response to such recognition, unseated dramatically and decisively the previous government, and by implication, rejected the policies and processes that it had set in motion. And it was to the people of this country that promises were made by the new UPA government, in the form of a Common Minimum Programme (CMP) that pledged to rectify all these unfortunate consequences.

But the new government - or at least some influential elements in it - seems to exist in a completely different country, where apparently none of the problems mentioned above is significant or even particularly evident. Instead, this section apparently is in a country that is shining in much the same way that the previous government had tried to claim, in which the problems highlighted by the Congress and its allies before the elections simply do not exist.

The Economic Survey, released by the Finance Ministry just before the presentation of the delayed Annual Budget, is supposed to be an accurate portrayal of the state of the economy in the previous year. Instead, it reads like a paean to the supposed material and policy successes of the National Democratic Alliance (NDA) government, even when these claims of success are (and have been shown to be) demonstrably false.

Consider the economic review of developments in the very first chapter. Much is made of the high rate of GDP growth (in excess of 8 per cent per annum) which has been achieved only three times earlier in independent India. While it is briefly mentioned that this represents a recovery from the slump of the previous year, the point that even then, total agricultural production did not reach the level it was at two years ago is not mentioned. Similarly, the fact that most of the growth occurred nonetheless in agriculture (from a very depressed base) and in hard-to-measure services, not in manufacturing, is glossed over.

But the real dishonesty lies in the assessment of government policies over this period and their impact. The Survey accepts in toto the (largely false or exaggerated) claims made by the NDA government. For example, the Survey says that "the Budget for 2003-04 undertook to provide a major thrust to infrastructure, principally to roads, railways, airports and seaports, through innovative funding mechanisms. The total cost of these projects was estimated at about Rs.60,000 crores". It also claims that "implementation of these schemes has made substantial progress". What it does not mention is that hardly any of the tall claims made were realised, that barely Rs.2,000 crores was spent from the public exchequer, that most of this went to high-publicity road projects along the Golden Quadrilateral which have been associated with massive corruption and the killing of whistle-blowers, and that the actual implementation was nowhere near the promises made.

Similarly, the Survey claims that "the softening of interest rates... has provided a climate conducive to investment growth" but does not mention that such investment growth did not occur. Instead, it chooses to focus on "the improvement in stock market valuation and the flurry of activity in primary markets" as justifying optimism about investment, even though the evidence points to continued slack in the economy. The Survey also lists various programmes and legislation passed by the government as major achievements, although there was no visible positive economic impact over the period concerned.

One of the most mendacious claims relates to the decline in the extent of poverty. The Survey claims that "it is well known that there was a significant decline in poverty from 36 per cent in 1993-94 to 26.1 per cent in 1999-2000". It does not mention the less publicised fact that even the Planning Commission has admitted that the estimates for these points in time are not comparable. Actually, the consensus among independent scholars now is that the rate of decline of poverty slowed down appreciably over this period. Instead of providing the information on average calorie consumption, which shows a disturbing decline, the Survey only cites improbable estimates of subjective hunger to claim that just 0.5 per cent of rural households and 0.1 per cent of urban households are chronically hungry.

ON the other crucial issue of jobs, the Survey barely touches upon the decline in aggregate employment generation and the collapse in formal sector employment. Instead, it uses the thin samples of National Sample Survey (which are notoriously unreliable) to repeat the claim made in the BJP's election propaganda, that 84 lakh new jobs were created every year during 2000-02.

Even in terms of issues and priorities, the Survey appears to belong to the previous government rather than the current one. There is no mention of the six major goals of the UPA as stated in its CMP. (Incidentally, two of these are: to ensure that the economy grows in a sustained manner over a decade and more and in a manner that generates employment so that each family is assured of a safe and viable livelihood; and to enhance the welfare and well-being of farmers, farm labour and workers, particularly those in the unorganised sector, and assure a secure future for their families in every respect.)

Instead, the Survey mentions the following challenges: achieving an annual growth rate of 7-8 per cent in the next five years; containing annual inflation to single-digit levels; boosting agricultural growth through diversification and agro-processing; expanding industry by at least 10 per cent per year; effecting fiscal consolidation and eliminating the revenue deficit. This is very much the standard hackneyed stuff, which focuses on variables that would please the markets rather than address the needs of the people, and completely ignores the most pressing problems of employment and insecurity of livelihoods that are currently facing the populace.

The most charitable explanation of how this extraordinary - and misleading - document has come to be released by the UPA government, is that it was already written as a pre-election advertisement by the policy hacks of the previous government, and those in charge were simply too lazy or too callous to bother to change much. A harsher explanation would suggest that there are deeper, and perhaps less forgivable, motivations on the part of those who have produced this document.

Essentially, the economic policies of the past decade, while they have produced greater insecurity for most of the people, have been enormously beneficial to a small minority. It was this minority for whom India was shining, and it is this minority that still retains substantial control over the levers of economic policymaking.

The temptation to brush aside or ignore the mandate of the people must be very great, especially if that mandate requires some changes in or reversals of policies that have so clearly delivered disproportionate benefits to the rich. But how can there be "business as usual" if it is admitted that these policies did harm most of the people? So it is much simpler just to pretend that actually everything has been wonderful for everyone all along, and that all those who feel that their economic conditions have worsened are simply imagining things. This will allow the old policies to continue, and maybe if people are told often enough that they are actually much better off, the lie will become true through sheer repetition.

Or could it be that even deeper processes are at work? It does not take much insight to realise that one of the greatest failings of the previous government was that it believed its own lies, and thereby became completely disconnected from the people. Perhaps there are some inside the present government who want to encourage it to go the same way, not for its own good or the good of the people, but for a more insidious reason. The Congress and its allies would do well to examine more carefully the people they are allowing to run loose in government, and see whose interests they really serve. Callousness to issues that the elections raised and pandering to illusions of "shining" may be necessary to continue with "reforms as usual", but this is also a prescription for expulsion from power.

A trimming exercise

State governments comply with the constitutional requirement of limiting the size of their Ministries, but what should have provided an opportunity for Chief Ministers to cleanse their governments of tainted and incompetent Ministers turns out to be an exercise in political manipulation.

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THE downsizing of Ministries in compliance with the Constitution (97th) Amendment, which limits the size of the Ministry to 15 per cent of the total strength of legislators in the Lower House (or 12 as in the case of smaller States), has turned out to be an exercise in deception, political one-upmanship and manipulation. It has been used either to settle political scores or to put down rivals. Besides, the basic idea behind the pruning - that is, reducing wasteful government expenditure and ending the practice of offering berths in the Ministry to lure Members of the Legislative Assembly has been largely defeated because most of the Ministers who were dropped in various States have been given or are in the process of getting equally lucrative positions as Chairmen of various corporations\councils or, as in the case of Punjab and Himachal Pradesh, as parliamentary secretaries.

While the exercise, which became effective on July 7, has been completed without damage to the party in power in the majority of the States, the process claimed its first victim in the politically volatile northeastern region: the Arunachal Pradesh government. Interestingly, the northeastern Ministries were the flabbiest of all. Of the 250-odd Ministers to be dropped across the country, more than half belonged to this region. No wonder the scale of resentment there has been of an equally large proportion.

Significantly, in Uttar Pradesh, where Chief Minister Mulayam Singh Yadav was required to drop 31 Ministers from his 88-member Council, the exercise went off smoothly. This was possible because Mulayam Singh did not antagonise anyone. Among those dropped, two Cabinet Ministers (Reoti Raman Singh and Bhagwati Singh) have since been elected to Parliament. The rest were Ministers of State, whom Mulayam Singh rehabilitated immediately as Chairmen of various corporations. Besides, he did not disturb the Ministers belonging to his alliance partner, the Rashtriya Lok Dal.

Bihar too managed to achieve the feat with equal ease, thanks to Rashtriya Janata Dal (RJD) chief Laloo Prasad Yadav's new-found clout at the Centre and rapport with Congress president Sonia Gandhi. Laloo Prasad's firm hold over the situation was evident from the fact that the influential Excise Minister, Sivanand Tiwari, who was once considered his right-hand man, could do nothing but raise a cry when he was dropped along with 16 others.

In the 243-member Bihar Assembly, the strength of the Ministry was to be 53. Out of the 17 members dropped, nine belong to the RJD, six to the Congress and two are independents. Laloo Prasad tactically quelled any rebellion with promises of lucrative posts in corporations or the ticket in the Assembly elections, due early next year.

In Jharkhand, the BJP-led Arjun Munda government had to contend with resentment from its alliance partner, the Janata Dal (United). This could cost the party dearly in the Assembly elections in neighbouring Bihar. But Munda's task was made easier for the time being because he had the full support of the JD(U)'s central leadership, enabling him to drop all the five JD(U) Ministers. The Jharkhand Assembly has a total strength of 82, and the Ministry, as per law, had to be downsized from 25 to 12.

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In Punjab and Himachal Pradesh, both ruled by the Congress, problems have cropped up and are likely to continue, causing damage to the party's prospects in the next elections. While in Himachal Pradesh the problem is of regional imbalance, in Punjab it is political dissidence. Punjab Chief Minister Captain Amarinder Singh had to grapple with the kind of dissidence he has been facing for sometime from his deputy, Rajinder Kaur Bhattal, who is likely to lose the post and remain content with a Cabinet rank. Amarinder Singh, largely in control of the situation, managed to drop eight Ministers without much problem, with the promise of the posts of parliamentary secretaries to the suitable ones.

In Punjab, the basic criterion for allotting the ticket in the Lok Sabha elections was performance and on this basis Amarinder Singh managed to get rid of those who were aligned with the Bhattal camp. Bhattal herself may not have much choice now, but given her political ambitions she is not likely to lie low for long.

In Himachal Pradesh, where Congress Chief Minister Virbhadra Singh was given a free hand to carry out the exercise of downsizing the Ministry from 16 to 12, the problem is not so much political as regional. While crucial areas such as Kangra and Hamirpur remain under-represented, Shimla, as before, is over-represented. This fact could provide the BJP a handle to discredit the government. Of the four Ministers who were dropped, Transport Minister Chander Kumar won from Kangra defeating former Chief Minister Shanta Kumar. Of the rest, Chandresh Kumari and Brij Bihari Lal Butel belong to the Virbhadra faction and Vijay Singh Mankotia, is reportedly close to Pradesh Congress Committee chief Vidya Stokes, They are likely to be compensated with other positions.

Maharashtra was the State with a high potential for trouble but the fact that Assembly elections are due in a few months made Chief Minister Sushil Kumar Shinde's task that much easier. First, the Ministers do not have such a big stake now and secondly, they have all been promised suitable compensation. Shinde dropped four Cabinet Ministers and 18 Ministers of State from his 65-member Council - eight independents and seven each from the two main coalition partners, Shinde's Congress and the Nationalist Congress Party (NCP). Among the surprises of the day was the elevation of five Ministers of State (three from the NCP and two from the Congress) to Cabinet rank. The independent Ministers who were dropped are said to have brokered a deal. The arrangement is that neither the Congress nor the NCP will put up candidates in the constituencies they contest, they will be reinstated if the combine returns to power, and if they choose not to contest as independents and opt to join either party, they will be guaranteed the party ticket.

Interestingly, the Dalit factor, so far ignored by the combine, played a key role in the downsizing exercise. There is a conscious attempt to project a pro-Dalit image. Vimal Mundada of the NCP, a Dalit, was rewarded with Cabinet rank for her contribution to the NCP victory in the Beed seat in the Lok Sabha elections. In Maharashtra, where the Cabinet size was brought down to 43 from 65, the key criterion was apparently performance during the Lok Sabha elections, although the Congress preferred to downplay it.

IN the vexed northeastern region, the exercise fuelled rebellion across parties. The 60-member Arunachal Pradesh Assembly was dissolved on July 6 after the size of the Ministry was reduced from 41 to the stipulated 12. Twenty-one Ministers resigned from the Bharatiya Janata Party-led United Democratic Front government. The 29 Ministers who were dropped immediately shifted their loyalty to the Congress, prompting Chief Minister Gegong Apang to recommend hastily the dissolution of the Assembly to Governor V.C. Pande. The Governor accepted the recommendation and dissolved the House and asked Apang to ontinue in office until the new Assembly was formed. But following a demonstration by members of the Opposition Congress and the breakaway faction of the UDF in front of the Raj Bhavan demanding imposition of Article 356 to ensure a "free and fair election", he recommended imposition of President's Rule. The Assembly elections are scheduled for October.

The Apang-led government, the first of the BJP in the northeastern region, had come into being on August 3, 2003, after the Mukut Mithi-led Congress Ministry was reduced to a minority when 31 of the 58 Congress MLAs, including 17 Ministers, announced their resignation. The breakaway MLAs formed a separate legislative group, the Congress(D) led by Kameng Dolo. They then formed the UDF and elected Gegong Apang as their leader. Later the group joined the BJP.

V. Satish, the BJP leader in charge of the region, does not consider the dissolution of the Assembly a big loss for the party as it is " firmly entrenched in the State now". He said that with a 29 per cent vote share in the State, the BJP had arrived in the region. "The political outcome needs to be assessed," he said.

In Assam, the government of Tarun Gogoi is rocked by dharnas and bandhs by resentful supporters of the dropped Ministers. Announcing the pruning of his 35-member Ministry to 19, Gogoi maintained that he was dropping the Ministers under "the compulsion of the Congress high command" and that it was not his decision.

Supporters of Agriculture Minister Ardhendu Kumar Dey and Public Works Minister Sarat Barkatoki staged rail and road blockades at various places, disrupting normal life. Gogoi's warning of strict action staved off a crisis.

In view of the volatile situation, the Chief Minister has written to Prime Minister Manmohan Singh underlining the need for necessary amendments to the Constitution to allow States like Assam to have 20 per cent of the total number of legislators in the Ministry in order to ensure representation to all the regions of the State.

The 33-member Okram Ibobi Singh Ministry in Manipur was downsized to 12. The Congress, which heads the Secular Progressive Front, retained 10 Ministers and two of its coalition partner, the Communist Party of India (CPI). Another ally, the Manipur State Congress Party, has not been accommodated.

In the Communist Party of India (Marxist)-ruled Tripura, six Ministers were required to be dropped. The CPI(M) dropped five of its Ministers and asked its front partner, the CPI, to withdraw its lone Minister, Manindra Reang. The latter part of the exercise created a rift between the two allies. The CPI accused the CPI(M) of using pressure tactics and initially refused to withdraw Reang, saying that the decision was against the spirit of coalition politics. Reang later tendered his resignation.

In Meghalaya, where the Ministry's size had to be reduced to 12 from 40, Chief Minister D.D. Lapang managed to keep the Congress' alliance with the regional parties intact by retaining one Minister from each of the three regional parties, the United Democratic Party (UDP), the Meghalaya Democratic Party (MDP) and the Khun Hyentrip National Awakening Movement (KHNAM).

However, former Chief Minister and the lone representative of the Hill State People's Democratic Party (HSPDP), F.A. Khonglam, had to go. He has been assured the post of Chairman of the Meghalaya State Planning Board. Meghalaya, incidentally, was the only State in the region to have formed a core group of the political affairs committee (PAC) of the Congress for wider consultations with the constituents of the ruling Meghalaya Democratic Alliance (MDA) before finalising the list of 11 Ministers to be retained. Lapang had earlier insisted that Assemblies with a strength of 60 seats should have at least 20 Ministers.

Similarly, Nagaland too, where the size of the Ministry was slashed to 12 from 43, had sought exemption from the Centre on the grounds of regional and tribal representation.

The request, which had been rejected by the previous National Democratic Alliance government, was turned down by the present United Progressive Alliance government. Nagaland Chief Minister Neiphu Rio had insisted that the mandatory downsizing would do immense harm to the multiplicity of tribes in a State like Nagaland.

Apart from the problem of ensuring the representation of various tribes in the Ministry, Rio had cited the compulsion of coalition politics. The 43-member Democratic Alliance of Nagaland (DAN) government consisted of 30 members of the Nagaland People's Front (NPF), seven of the BJP, one JD(U) member, and one Samata Party member and four independents. The downsized Ministry has nine NPF and two BJP members and one independent.

In Mizoram, where three Ministers were dropped, the only surprise was the exclusion of Excise Minister P.P. Thawlla of the Mara Democratic Front (MDF), whose support had ensured the formation of the Zoramthanga government. The Chief Minister's task was made easy by the resignation of three Ministers: Prisons Minister K. Vanlalauva and Cooperation Minister C. Lalrinsanga belonging to Zoramthanga's Mizo National Front (MNF) and Thawlla. In the 40-member House, Zoramthanga had only 19 MLAs after the Assembly elections in November last year. It was Thawlla's support that enabled government formation. But the MNF won the byelection to Kolasib, making Thawlla redundant.

In Chhattisgarh, where five Ministers were dropped, the exercise was effortless. The surprise element, however, was the sacking of the lone Sikh representative, Rajinder Pal Singh Bhatia. But as one BJP leader put it, Bhatia could be sacrificed because "Sikhs do not form a major vote bank" as they are scattered across the State.

Unfortunately, what should have provided an opportunity for Chief Ministers to cleanse their governments by getting rid of tainted and incompetent Ministers was turned into an occasion of political manipulation.

With inputs from Sushanta Talukdar in Guwahati, Lyla Bavadam in Mumbai, Suhrid Sankar Chattopadhyay in Kolkata and T.K. Rajalakshmi.

Public funds for terrorism

PRAVEEN SWAMI the-nation

AS ironies go, this one is hard to top: for the past several months, Indian taxpayers may have been subsidising the activities of the Hizbul Mujahideen and Lashkar-e-Toiba. Ongoing police investigations into last month's murder of Indian Railways Construction Company (IRCON) engineer Sudhir Kumar Pundir and his brother Sanjay Pundir have blown the lid off a shadowy protection racket run by terrorist groups in southern Kashmir. IRCON's subcontractors are believed to have been inflating costs to meet extortion demands, with a wink and a nod from the top bosses of the Rs.6,000-crore Jammu-Srinagar railway line project.

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It is still unclear who murdered the Pundir brothers, but investigators now believe that they knew their kidnappers, and did not fear harm. The brothers were kidnapped on June 23, along with an IRCON subcontractor, Farooq Ahmad Kucchai, and the driver of a leased vehicle, Shabbir Ahmad. Kucchai and Ahmad were let off some hours after the kidnappers called IRCON's offices with an Rs.50,00,000 ransom demand. On the morning of June 24, it now transpires, both brothers had a good chance to escape, after a two-wheeler on which they were travelling along with a terrorist was flagged down by a patrol of the 1 Sector Rashtriya Rifles near the village of Litter. Neither brother made his plight known and the two-wheeler, according to troops present there, was waved on.

Until early in the evening, IRCON officials were still confident of stitching together a ransom deal. Cash, sources told Frontline, had been mobilised in anticipation of a final figure of around Rs.5,00,000. Then, for reasons which are still unclear, the kidnappers changed their mind. That night, the Pundir brothers were killed in the most gruesome manner possible, by having their throats slit in ritual halal fashion. The bodies were found the next afternoon, buried in a shallow trench. One possible explanation is that the two terrorists believed to be responsible for the kidnapping panicked, since the operation was not authorised by their commanders. Another is that they never intended to let the hostages live, hoping to derail a project which will make the Indian Army's logistical lines into Jammu and Kashmir more secure than they have been this past half century.

What is becoming clear, though, is that IRCON's subcontractors - who handle the enormous amount of earth-and-stone work that precedes the actual laying of track - have been buying peace for some time. On July 7, a highly placed source told Frontline, intelligence personnel monitoring telephone communications in Awantipora intercepted a call, in which the caller asked a subcontractor to pay Rs.5,00,000. When the subcontractor protested that the sum was too high, his attention was drawn in a none-too-subtle fashion to the Pundir murder. The Superintendent of Police of Awantipora, Sheikh Mehmood, refused to discuss the call, but admitted that investigations had confirmed dozens of such payments having been made over the last six months, with the cash handed over ranging from Rs.50,000 to Rs.5,00,000. In essence, IRCON permitted subcontractors to overstate the number of labourers working on their sites, and funnel the extra cash to terrorists in order to ensure the work went on as scheduled.

If such payments were common, it would help explain why the Pundir brothers thought they had no reason to fear for their lives: they would have thought a simple deal would soon be clinched. Earlier this year, Rajinder Kumar, an IRCON heavy machine operator, was kidnapped near Bijbehara. His release, police officials now believe, involved a ransom payment. Interestingly, Jammu and Kashmir Police officials have identified at least a dozen subcontractors who are close family members of important terrorists, almost all from the Hizbul Mujahideen, or had links with the organisation in the past. Kucchai, who has now been detained for further questioning on his possible links with the terrorists who murdered the Pundir brothers, himself served two years in jail on terrorism-related charges. "We think IRCON knew about these linkages", says a senior Jammu and Kashmir government official, "but thought it a useful asset to avoid trouble. Of course, when you leave a pot of honey out in a garden, sooner or later the bees will sting someone."

SUPPORTING evidence of the massive funds flow from IRCON to terrorists in recent months is also available in official data on terrorist activity - not a single instance of looting from banks, government institutions or individuals since the end of March this year. The three-month break in cash-seeking crime is the longest such gap in the history of violence in Jammu and Kashmir. By contrast, Rs.1,35,408 was looted from April to end-June last year, out of a total of Rs.26,57,440 for all of 2003. In 2002, Rs.3,55,965 was looted in the April-June period, out of a total of Rs.53,73,865. Experts believe that the declining trend in looting is the outcome of large-scale diversions from the welter of large-scale public works projects that have been coming on-line in rural Jammu and Kashmir in recent years, notably in the irrigation and power sectors. Tourism operators in several areas are also believed to be making protection money payments, as apple-orchard owners have done for at least the last decade.

Work has now resumed on the Baramulla-Qazigund railway line after a brief crisis provoked by the murders. But local staff as well as thousands of migrant workers, who have been shipped in from Bihar, Madhya Pradesh and Jharkhand, remain apprehensive. Recent articles in the local press, charging migrant workers with selling bootleg alcohol, have been seen as part of a campaign to legitimise further killings, and thus end work on the railway line. One key sector of the track that has already been constructed, from Jammu to Udhampur, is yet to be used for regular operations because of security concerns. Police investigators are optimistic of an early breakthrough in the case, and have identified two key Lashkar-affiliated suspects - a Pakistani national code-named Abu Sufiyan, and his ethnic-Kashmiri associate, Altaf Husain Mir. Vigilance authorities are separately investigating IRCON's dealing with a state-owned contractor, again for possible payoffs. Many officials are sympathetic to IRCON's very real concerns in the affair, but the tragic killings point to the peril posed by buying peace: that it only ends up subsidising war.

Full of promise

Wimbledon 2004 sees the second crowning of the brilliant Roger Federer and the rise of a new star in the 17-year-old Russian Maria Sharapova.

WIMBLEDON 2004 was a windy, wet fortnight with frequent stoppages due to rain forcing the authorities to have play on the middle Sunday, July 4, for only the third time in 127 years. At the moment of truth when Roger Federer of Switzerland served the final ace against Andy Roddick of the United States, the Centre Court was bathed in sunlight a fitting tribute to his genius. Federer lorded it over the field, winning his second consecutive Wimbledon and completing a run of 25 victories on grass courts. He lost only two sets reflecting an accurate measure of his superiority. The greats of the past such as McEnroe, Becker and a host of others, in a flurry of accolades, hailed him as the greatest of all time!

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But Federer has a long way to go before he can pull alongside Pete Sampras who has 14 Grand Slam victories, seven of which were at Wimbledon. Time alone will show if Federer has the staying power, physique and mental strength for such a long haul. Federer has the entire range of shots. His top-spin backhand specially the deadly down-the-line shot was something Sampras did not have. Unlike many other players who have a single winning shot, Federer can hit winners from both flanks. In the end the ultimate measure is the number of titles one wins, and Federer has five more Wimbledons to win before he draws level with Sampras. It is a long way.

The final provided in patches the highest quality of tennis in the championships. Roddick was literally exploding with energy. Moving between points and changeovers like a video on fast forward, he blasted his serve and ground shots like missiles. I have never seen so much power on a tennis court. After the match, Roddick said: "I threw the kitchen sink at him, but he went to the bathroom and got the tub." Federer admitted that he was surprised at Roddick's power but he stood his ground and weathered the storm. The 40-minute break for the rain was the turning point of the match. The score was one set all with Roddick leading by 4 games to 2 in the third set. It seemed that Roddick had given too much in the earlier part of the match. This was when Federer stepped up a gear, by attacking and following his service to the net. Roddick visibly wilted and soon Federer was calling the tune bringing off some spectacular volleys. Earlier McEnroe had said: "Nothing negates skill quite like power, it's the ultimate equaliser". In this final, power was subdued by skill.

Roddick has a great future. There is much scope for improvement in his game. A gentler unhurried approach, proper distribution of energy and a sound net attack could make him almost invincible. He has an attractive and friendly personality, which accounts for his great popularity amongst teenagers. His rivalry with Federer will give a much-needed shot-in-the arm to the stagnant men's game.

OF the other players, Grosjean of France and Ancic of Croatia, the losing semifinalists, deserve mention. Ancic, 6'5" (195.58 cm) tall and 20 years of age, has the potential to be in the top ten. Roddick subdued him after four hotly contested sets in an exciting encounter. Grosjean, 26, is considered to be the third best grass court player in the world. He reached the semifinals without dropping a set. A mere 5'9" (175.26 cm) in height, he is a tactically shrewd all-court player with no weakness. A little extra power could well have hoisted him to a Grand Slam title.

The despair over the poor quality of women's matches vanished when 17-year-old Maria Sharapova of Russia, seeded 13, trounced Serena Williams, the title holder and world No.1, in straight sets 6-1, 6-4 in the final. Sharapova, 6' (182.88 cm) of sleek leggy femininity, is a spectacular figure. Wearing a low-cut, tight-fitting dress and long blond hair flying in the wind, her fresh innocence is captivating. There is much scope in her power-packed game. With her long reach, she would be even more formidable if she could develop a net attack. On slow surfaces she will need a higher level of consistency, and, I believe, could be vulnerable at present to the new young group of very tenacious Russian girls, seven of whom were seeded in the top 20. With Sharapova's victory at Wimbledon, Russian woman have won the Grand Slams in a row. In the French Open, Myskina defeated another Russian, Dementieva, in the final. Russian women will be a force to reckon with in the future.

Sharapova's success is no fairy tale. It is a story of blood and guts and sacrifice. Ten years of hard labour, away from home, with the crushing burden of high expectancy from sponsors and parents. While watching the final it struck me that both the girls were of humble origins. A factor that ignites the passion to succeed.

Serena Williams, the fifth woman in history to hold all four Grand Slams at the same time, seemed to be on track to win her third consecutive Wimbledon title. Her victory in the semifinals against Amelie Mauresmo of France in a very close match should have helped Serena sharpen her game and overcome her lack of matchplay. But it was not enough.

Sharapova attacked Serena's suspect forehand, which collapsed. It was sad to see Serena, winner of six Grand Slams, at times walking between points with her shoulders limp and dragging her feet. A year ago, it seemed that no woman would be able to beat her for quite some time. An eight-month layoff due to injury, and a loss of tunnel vision, what with acting in movies, designing clothes and other frivolous ventures, brought about her downfall.

None of the great champions of the past, like Navratilova and Graf, ever lost their focus they were totally dedicated. Serena was not allowed to wear the "Wonder Woman" outfit she designed for Wimbledon; now it could become a symbol of her dreams. The graceful pirouettes accompanied by a regal wave of the hand with which the Williams sisters acknowledged the cheers of the audience after their matches, were listless and without sparkle. Their invincibility has been shattered. If their father puts them back on track they could be back at the top.

Not much has been said or written of how gracious the Williams sisters were in defeat. They must have been deeply hurt. But they took their humiliation like true champions and deserve a gilded accolade. It was touching to see Richard Williams embracing and congratulating Sharapova's father just after the women's final. For Richard it must have brought back memories of 2000 when Venus triumphed at Wimbledon.

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The absence of Henin-Hardenne and Kim Clijsters due to injury and the lack of depth in the women's game produced mostly dull and one-sided matches. Karolina Sprem, a very promising 18-year-old from Croatia, caused a stir when she defeated Venus Williams in the third round. Much was expected from Sprem and she was being hailed as a new star in women's tennis. Four tough matches took a heavy toll of Sprem's physical reserves and she was trounced by the former Champion Lindsay Davenport 6-2, 6-2 in the quarter-finals.

The top Russian seeds, Myskina (2) and Dementieva (6), were unable to adjust to the grass courts. The skills and attitude required for grass courts are very different. This was also very apparent in the men's singles as Guillermo Coria of Argentina, the world's best clay court player, seeded three, narrowly survived a first-round defeat in five sets against South African Wesley Moodie and then went on to lose to Florian Mayer of Germany in four sets in the second round.

IT would be sacrilege to write about Wimbledon and not mention the great British hope Henman. After his great performance in the French Open, where he reached the semifinals the media boosted him to an all-time high. Slow clay is not Henman's surface and it was reasoned that with his new-found consistency, and with ex-Sampras coach Paul Anacone by his side, he could at least get to the final if not win the title.

The talented Ancic trounced Henman in straight sets in the quarter-finals, much to the dismay of British fans. A newspaper columnist compared the match to a beheading at the Tower of London. There is no doubt that Henman is one of the best grass court players in the world, but I think he is a little short of being a Grand Slam winner.

Summing up, I would say it was a trying fortnight, a victim of the fickle British summer, which came to life with the birth of an exciting new star, the "Siberian Siren" Sharapova, and the brilliance of Roger Federer, who looks like becoming one of the greatest players ever.

Naresh Kumar is a former Davis Cup player.

An exercise in evasion

In an effort to make the appropriate signals to various sections, the Union Budget takes a risky path that could lead the United Progressive Alliance to politically difficult situations.

BETWEEN the festive season last year, which saw the first glimmers of the "India Shining" campaign, and the elections this year, it became the political common sense that the agrarian sector in the country was facing a crisis of desperate proportions. Former Deputy Prime Minister L.K. Advani grudgingly conceded the case that the Indian farmer perhaps had no part in the shine that his regime had imparted to the economy. And the Congress party built its campaign on the perceived state of despair and devastation in the countryside, promising a new deal for the farmer if voted to power.

This continued to be the refrain through the days of ministry formation and the drafting of the "National Common Minimum Programme" (NCMP) that will guide the new Congress-led coalition. It was the signature theme of Finance Minister P. Chidambaram's maiden Budget for the United Progressive Alliance Ministry. But as the budget speech wore on, a sense of puzzlement arose. Here was a Finance Minister who was promising to phase out the gaping revenue account deficit well before the mandated five-year period, handing out a vastly increased outlay for capital expenditure in the defence services, and promising that the long-neglected sectors of agriculture and social welfare will be given their due. How was he squaring the fiscal circle?

The mystery was largely dispelled with the figures coming in. Chidambaram has bargained for a massive increase in Central government revenues this year, well in excess of anything seen over the last decade and a half. He has severely held down committed outlays for agriculture, rural development and employment programmes. He has allocated a substantial Rs10,000 crores in Plan funding for the NCMP but not assigned it to any particular expenditure head. Instead, he has made the entire hike in allocation for these purposes contingent on a review to be undertaken in the next few months by the Planning Commission. Now headed by Montek Singh Ahluwalia, Finance Secretary during Chidambaram's earlier tenure in the Ministry, the Planning Commission is expected to propose measures to reduce the plethora of Centrally sponsored schemes implemented by the States into some manageable order.

In remarks to the media after the budget speech was concluded, Prime Minister Manmohan Singh repeatedly underlined the issues of implementation and delivery. Implicitly, he was seeking to shift the focus of public scrutiny from the rather paltry allocations for agriculture and social welfare. The new mantra evidently is not to increase levels of public spending in these sectors, but to ensure that the limited expenditures that are committed deliver maximum results. It is a process that would involve enforcing a greater degree of transparency in the administration of these funds and ensuring that the bureaucracy that channels the top-down flow of funds remains accountable to the intended beneficiaries.

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The politics involved in this is complex. It involves the meshing of the process of allocating funds with the bottom-up articulation of demands by the poorest in the country. It could conceivably unsettle local relations of power on which regional and national politics is constructed. Whether the Congress party is prepared to face the full consequences of this process is yet unclear.

It may seem a little far-fetched to say that the UPA government will compensate for a 15 per cent cut in the Plan outlay for rural development, a token, almost derisory hike in the provision for the public distribution of food, and an insubstantial increase in the outlay in agriculture, by reforming the administration and rearranging the contours of politics at the local level. But that is the promise inherent in the Budget for 2004-05. And the time available for the UPA to deliver is limited. The previous government deluded itself into the belief that a modest rebound from the disastrous drought year of 2002-03 was indeed evidence that the Indian economy had moved onto a dynamic new growth trajectory. The current administration cannot afford for very long to proceed on the belief that illusions of a recovery from a very bad year would suffice, rather than the restitution of all the damage that has been suffered over a decade of neo-liberal economic policies.

Another platform that the Budget uses to address the crisis in the agrarian sector is the credit system. The Finance Minister has directed regional rural banks (RRB) to increase the credit availability for agriculture and held out the assurance that the lead bank for each RRB would be held accountable for any failure on this account. But among the expenditure heads that the Budget economises on is the capitalisation of banks. Coupled with the debt buyback scheme of the government, which involves the swapping of older debts which are liable for a higher interest for newer, lower cost debts, this represents a zone of some uncertainty for the banking system. The effort at curbing the growth of non-performing assets has been misdirected for long at the agricultural and small-scale industry sector rather than the medium and large-scale industry sectors, where its dimensions are truly mammoth. Given this mix of circumstances, the banks' ability to extend the required quantum of credit to agriculture cannot be deemed to be quite adequate.

On the revenue mobilisation side, Chidambaram's effort does not afford very much novelty. A turnover tax on stock market transactions has been introduced, partly to mitigate the losses on account of the moderation of the capital gains tax. But the turnover tax remains contentious, with a powerful mobilisation of stock traders seeking to make it an issue on which they would paralyse the markets. And its yield cannot be computed with great accuracy, since the discipline of a tax would drive underground many of the speculative transactions that were rife in the stock market.

The extension of the service tax and its integration into the centralised value added tax (CENVAT) chain potentially taps new sources of revenue and offers the merit of simplicity in accounting. But its yield again remains uncertain. Past experience with the service tax does not indicate that it is a buoyant source of revenue.

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This leaves the 2 per cent cess on all taxes as the single most important revenue initiative taken by the Minister this year. With an expected annual yield of over Rs. 4,000 crores, the cess would be reserved entirely for extending the reach of basic education and upgrading its capacities.

This long-overdue recognition of the value of education has, naturally enough, been welcomed. But it is an index of the course of tax reform over the last decade and a half, that the government has finally had to seek recourse to the blunt instrument of a cess to meet a vital social need. The measure is reminiscent of the "surcharges" that were introduced on corporate and personal income taxes in the late 1990s, ostensibly as temporary expedients, only to show a remarkable persistence over the years.

The initial premise of the neo-liberal reforms introduced in the early-1990s was that it would promote private initiative in the productive sectors, while leaving the government with sufficient wherewithal to attend to its tasks in the sectors that really mattered. With government revenues plunging, the outcome has been a crisis of livelihoods in the agrarian sector and a serious investment famine in vital infrastructure areas. The surcharges and cesses are admissions, even if inadvertent, that this basic premise has been exposed as hollow.

With all the provisions - even if they are in large part illusory - made for the rural and welfare sectors, the Finance Minister had to make the appropriate signals to private corporate interests that they had not entirely been forgotten. The signal he chose was to raise the foreign direct investment ceiling in the three areas of insurance, civil aviation and telecom. Yet, most expert opinion is unconvinced that the ceiling has been a constraint in any way on investments in these sectors. If anything, the demand constraints have been the decisive factor. And to circumvent this problem, investments need to flow into areas, and target constituencies, that the corporate sector is not normally very mindful of. Early political turbulence is foretold over these proposals, with the Left parties making it clear that they will vote against the proposal on insurance in particular.

Inevitably, media comment after the UPA's first Budget sought to evoke the image and spirit of the 1997-98 exercise, partly because the principal author was the same. But the discussion tended to miss the central point about the "dream budget" of the 1990s. It was then hailed as a decisive break with the notion of "zero sum economics". By boldly reducing tax rates and bargaining for a massive increase in revenues as a consequence, Chidambaram had ostensibly in 1997 laid to rest the old belief that to bring benefits to the disadvantaged, you had to impose a certain burden on those more fortunate.

The actual revenue accruals showed how disastrously miscued these calculations were. In relation to the budget forecasts, actual tax receipts in 1997-98 fell short by 17 per cent in nominal terms. This was by far the most serious fiscal miscalculation since the neo-liberal economic reforms began in 1991.

Tax buoyancy expectations this year are premised not so much upon the old "supply side assumption" - that lower rates yield higher revenues - but on the more mundane calculation that long-overdue arrears will finally be paid up. The path that the Finance Minister has chosen is a risky one. And if revenue accruals fall short, there is little question that the first expenditure commitments to suffer would be the ones that the budget speech sets greatest store by. That could be the surest path to a political crisis of enormous dimensions for the UPA.

'An industry-friendly Budget'

cover-story

Interview with Y.K. Modi, president, FICCI.

Y.K. Modi, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), thinks that industry does not need funds from the government, and that all it needs is a "congenial atmosphere". He says that the hype surrounding the Budget is unnecessary as "it was only along expected lines". He, however, thinks it is a "good Budget in the right direction". Excerpts from an interview Modi gave Purnima S. Tripathi:

How would you describe the Budget? Was it along expected lines?

The Budget can be described as industry-friendly, in the sense that it has imposed no restrictions on us. The best thing about the Budget is that it has removed any apprehensions about a setback to the reforms process. There were doubts in some quarters, because of the role of the Left parties in the government, that there could be a setback to the reforms process, but such apprehensions have now been set to rest.

Was it like the "dream Budget", which Chidambaram presented in the past?

Actually, we have started expecting too much from the Budget, as if it is the be all and end all of what a government can do. We forget that the Budget is just one tool in the hands of the government for fiscal management. The real issues bothering us all such as delivery of government services to the needy, health, education, infrastructure, pragmatic labour laws all these fall outside the purview of the Budget. As for this being a dream Budget, I would say the policies were already there, it is a continuation of those policies.

What did industry expect from the Finance Minister?

We would have liked more rationalisation of direct taxes, simplification, re-adjustment of slabs. Besides, the 2 per cent cess on all taxes for education could have been avoided. Not that one does not want to pay for a worthy cause like this, but a cess has to have a direct linkage, in the sense that a cess on petrol funds the building of roads and so on. Here there is no linkage and there is no guarantee the money will actually go into education. More than the money, the real problem here is non-delivery of already existing services. Look at government schools, there are no teachers, no buildings, no other facilities. He could have done without this cess. The money could have come from elsewhere, such as from tobacco or whisky or some such luxury items. We are going to demand that this be withdrawn.

What, in your opinion, would have been the compulsion for him to impose the cess?

Actually, it is for the first time any government is really serious about the manifesto and the Common Minimum Programme. It is a part of that, plus compulsions of coalition politics. But we need to wait because the real Chidambaram Budget will be in March next. We will wait for that.

What would be your expectation from such a Budget?

A complete overhaul of direct taxes: increase the tax base, bring it to Rs.15 crores from the present Rs.3 crores, tax the rural rich, simplify the tax structure, redefine slabs, make compliance more effective, have policies that attract new investment, emphasise infrastructure. He has made a good beginning in the right direction.

But the Left parties have expressed their displeasure over increasing the foreign direct investment (FDI) limit in the telecommunications, civil aviation and insurance sectors. Is the industry worried that the government could succumb to pressure from the Left and retract?

The Left is crying wolf. If they are so opposed to foreign investment then why are they seeking it in West Bengal? In fact, they are making noises only for public consumption. They too realise that the process that has been set in motion cannot be reversed.

Does industry have any specific complaints about the Budget?

Yes, the 2 per cent cess. It must be withdrawn. And the rate of turnover tax is too high for comfort. The Finance Minister should revisit these two areas.

On the popular track

Laloo Prasad Yadav presents a Railway Budget that reflects his core concerns as a politician who has not lost touch with his roots.

LALOO PRASAD YADAV is an extraordinarily engaging political figure who came to the Ministry of Railways seemingly determined to transform its basic ethos. That he would oppose any proposal to raise freight rates and fares was evident. And as his Railway Budget proposals were rolled out on July 5, it became clear that he had been entirely successful in sticking to this resolve. But did he really achieve anything beyond this? The decades-old organisational behemoth of the Indian Railways is not easily amenable to radical change. Ardent votaries of tranformative politics have been known to scale back their ambitions once ensconced in the most privileged recesses of Delhi's Rail Bhavan.

Yet Laloo Prasad is not one to forget easily his basic instincts. In the course of one of the longest Railway Budget speeches in recent times, he made two specific announcements of benefit to the community of railway porters. Railway stations will be granted funds to build shelters for licensed porters to spend their few hours of leisure. And spouses will now be entitled to a biennial privilege earlier reserved for registered porters in the Indian Railways: a free return ticket to any destination in India.

Benefits were not confined to the symbolic or the cosmetic. Laloo Prasad evidently has in mind an entire scheme of social security for the unorganised sector. In emulation of a programme that has been introduced on a pilot basis in about 50 districts, the Minister has announced that all workers in the unorganised sector who come in contact with the Railways, would be covered under the scheme. Where licensed porters are concerned, the initial financial contributions for the scheme would be provided through the Railway Budget. The vast majority of the unorganised workers who come in contact with the Railways however, are in turn employed by contractors engaged by the Railways. In these cases, the Minister proposes to initiate a dialogue with the Law and Labour Ministries to enact the kind of legislation that would put the onus for the schemes on the contractors concerned.

It has of course been many years since a Minister presenting a Railway Budget made any mention of the men who eke out a living hauling loads. That was a characteristic touch of Laloo Prasad the politician still very much in touch with his roots. These were, expectedly, received with a sense of resigned despair by votaries of reforms. And Laloo Prasad did not disappoint, giving them ample reason to gripe with several of his other proposals as well.

Among the issues the Minister dealt with on a priority basis was security. Since July 1, amendments to the Railways Act have come into effect, vesting police powers in the Railway Protection Force and the Government Railway Police, for the investigation and prosecution of certain varieties of crimes committed in railway premises. This shifts the emphasis decisively from their earlier mission of only standing vigil over railway property.

The task calls for a larger manpower complement, and Laloo Prasad announced that he proposed to begin recruiting security personnel directly through force headquarters rather than the established board. No precise figure of the number of recruitments envisaged was provided, but unofficially, it has been put in the range of 15,000 to 20,000.

Expectedly, this has stirred up apprehensions that the Railways are being burdened with populist commitments that they are ill-equipped to fulfil. But the recruitments proposed are only a tiny fraction of the Railways' total employment today, which is in the region of 1.5 million. And the additional wage burden is not expected to be significantly higher than the existing bill of around Rs.15,000 crores. That the additional manpower will be deployed in the security mission, which has been almost universally recognised to be a priority area, makes the charge of populism less than convincing. But that has not prevented the partisans of the reforms process from trying.

In the absence of any increase in freight rates and fares, the question of finding the resources for all Laloo Prasad's schemes is, however, a well-founded one. Apart from the special attention that the Minister has bestowed upon the unorganised workers, he has also announced free travel concessions for widows of armed forces personnel killed in the line of duty, and unemployed youth travelling to attend Central government interviews. And the fine print of Laloo Prasad's Budget shows that he is banking upon a certain degree of buoyancy in revenue accruals to the Railways. The year gone by has been a relatively good one for the Railways and this has undoubtedly fuelled the mood of optimism. But to bet on a second successive year of over-fulfilled targets is not an enterprise free of risks.

The Railways had made an initial freight plan involving the carriage of 540 million tonnes in 2003-04. As the economy rebounded briskly from the drought-induced downturn of 2002-03, the actual volume of freight carried went up to 550 million tonnes. This has undoubtedly induced the Railway management to budget for a further increase to 580 million tonnes in 2004-05. This projected increase of 5.5 per cent may not seem ambitious in comparison to the 6 per cent registered in the recovery year 2003-04. But it would otherwise be, by a substantial margin, the highest growth rate in freight traffic registered in the last decade.

Railway officials emphasise that there are factors working in favour of this ambitious target. The 1990s were a bad period for freight movements on account of a host of factors. Ministers averse to raising passenger fares sought to put the entire burden of supporting the Railways' investment plans on freight rates, inducing a substantial migration of goods traffic towards the roadways. At the same time, the Railways' ambitious unigauge programme, to convert the entire national network to the standard broad gauge, meant that existing metre gauge networks were temporarily disrupted, providing another powerful inducement for traffic to migrate to the roadways.

Both these factors have become inoperative in recent times in the Railways' strategic calculations. First, the unigauge project has restored continuity of movement along most major axes of freight movement in the country. And second, a number of years of restraint in raising freight rates has established a more favourable parity in relation to competing modes of transport.

Indeed, with the unigauge programme having run its course along the main traffic corridors, the Railways' concern, as outlined by Laloo Prasad, is now to develop alternative routes so as to reduce congestion in the network. The gauge conversion programme for 2004-05 hence targets relatively narrow stretches of track that could provide big benefits in terms of easing the load on the most congested routes.

The Railways have also set under way a programme for enhancing connectivity between the major hubs of economic activity in the country. In this respect, the project has taken a cue from the "Golden Quadrilateral and Diagonals" project, launched in 1999 by the Vajpayee government, with the aim of providing for heavier and faster road transit between the country's main metropolitan centres. Coupled with this, the Railways also have a plan to provide quicker and higher volume connectivity to the country's main ports.

This plan was launched in August 2002, but given its first infusions of funds only in the 2003-04 Railway Budget. Initial forecasts put down the total cost involved in the programme - called the National Rail Vikas Yojana - at Rs.15,000 crores. But the first infusion of capital into the Rail Vikas Nigam - a special purpose vehicle created for the purpose of implementing the plan - was a mere Rs.500 crores. Laloo Prasad now proposes further financing to the tune of Rs.717 crores. Together with these inflows,the Nigam would also be empowered to raise funds from the market for its investment programmes. But with its equity being rather limited, its ability to raise debt financing would be likewise constrained. And it would be a long time before the projected investment quantum of Rs.15,000 crores is met. The Railways' effort to recapture aggressively freight traffic along the "Golden Quadrilateral and Diagonals" would obviously be limited by these factors.

THE Railways portfolio has been held for over eight years now, by politicians from the eastern region. The Ministry has seen four incumbents in this period, of which three have been from Bihar. With the exception of Nitish Kumar, who grudgingly conceded the case for a substantial fare revision in 2002, all recent incumbents in the Ministry have been notably resistant to the notion of increasing the burden on the passengers.

Nitish Kumar, however, made it amply clear when he introduced his interim budget for the Railways for 2004-05 in February, that his years of painful self-discipline when he conceded the case for rate increases, were only meant to set the stage for election-eve political giveaways. Laloo Prasad has maintained the huge roster of new train services that Nitish Kumar proposed and added a few of his own to it. The relative priorities among the Railways' various investment heads - new lines, gauge conversion, rolling stock acquisition, signalling and telecommunications, electrification works, road safety, and others - have not changed in any significant manner. But perhaps the greatest assurance that Laloo Prasad's proposals are on safe ground comes from the generous accruals that he has budgeted for to the Railways' reserve funds. All these funds - the Depreciation Reserve, Safety Fund, and others - closed substantially above budgeted figures on March 31, 2004. With the figures budgeted in the 2004-05 proposals, they should close still higher on March 31, 2005. Even with a substantial shortfall in freight traffic, the Railways evidently have enough in reserve to meet essential investment needs. What could happen in the years to follow is, of course, quite another matter.

`This is first aid, the need is hospitalisation'

cover-story

In keeping with the United Progressive Alliance's promises in the Common Minimum Programme (CMP), Finance Minister P. Chidambaram made agriculture a major focus of the Budget. Siddharth Narrain spoke to K. Varadharajan, general secretary of the All India Kisan Sabha, on his perception of the Budget. Excerpts from the interview:

Are the provisions of the Budget in consonance with the spirit of the CMP, especially with the parts that relate to the agricultural sector? Does this Budget indicate a major shift in agricultural policy from that of the previous government?

This Budget amounts to first aid when the need is hospitalisation. In Chidambaram's proposal, there is definitely a turn to the villages compared to the earlier Budgets. The Budget has allocated an additional amount of over Rs.900 crores for agriculture and he has a specific plan for irrigation, especially tanks and other forms of conserving water. These are definitely steps in the right direction. The 2 per cent cess to be utilised in providing compulsory education for children up to eight years of age will also help the rural poor. The Finance Minister has also suggested more allotments for the Scheduled Castes and the Scheduled Tribes, which is good because they constitute most of the rural poor. But there are basic issues such as poverty that have not been addressed. For example, the Employment Guarantee Scheme was meant to generate 100 days of work a year for at least one person in a family. This Budget could have begun addressing this issue.

What is your reaction to the Finance Minister's decision to entrust the implementation of the government's policy to double the flow of agricultural credit in three years to the public sector and private banks?

The existing problem is that more than 72 per cent of credit is from the private sector, that is, moneylenders and traders connected with agricultural inputs. This involves a high interest rate and is one of the main causes of farmers' suicides. This is why the All India Kisan Sabha and other organisations have been demanding that the availability of government institutional and non-institutional loans should be increased manifold. Although doubling the amount of credit in three years is a positive step, our experience is that private banks are not interested in the rural sector. We feel that credit facilities should be increased through cooperatives and nationalised banks by strengthening NABARD [National Bank for Agriculture and Rural Development].

Has the Budget done enough to address the reasons for farmers' suicides?

The main reasons for farmers' suicides are the supply of the wrong quality of seeds by multinational seed companies, the high cost of inputs, price fluctuation, and the non-availability of government credit. The Finance Minister has addressed the issue of government credit, but none of the other main aspects. The issues of quantitative restrictions, import policy and the entry of MNCs [multinational corporations] into the seed and other agriculture-related industries have not been addressed.

The actual outlay for the Department of Agriculture and Cooperatives remains at the same level as the interim Budget of the previous government. Do you see this as a problem?

We need to take into account that the Budget is meant for six months. Also, some of the extra allotment for Rs.10,000 crores to develop infrastructure may reach rural India. Even after taking these into account, the fund allotted is far below expectations.

Does the Budget adequately address the demands of oilseed farmers?

Oilseed farmers have been affected by the import of crude and refined palm oil. Raising the import duty on refined palm oil from 70 to 75 per cent shows the good intention of the government, but the crucial question is whether it is enough to prevent imports

Will the proposed insurance schemes, including the one against adverse weather, successfully cover farm income and livestock?

The prevailing insurance scheme is of no use to the farmer. The basic issue is whether you consider a region, a village or the individual as the unit for insurance. At a recent meeting that the Prime Minister held with farmers' associations, we said that unless you consider the individual as a unit the farmer will not benefit. The farmer is affected by weather, pests and the supply of wrong seeds. But if the region is taken as a unit while insuring farmers, many of those affected do not benefit and so most farmers will not take insurance. The insurance schemes suggested in this Budget are welcome proposals. The Finance Minister, before restructuring the present schemes, should consult the kisan sabhas.

According to the Finance Minister, India is self-sufficient in the production of wheat and paddy and deficient in other areas such as horticulture, oilseeds and floriculture. He has also said that a distinct bias in the agricultural price support policies in favour of rice and wheat has distorted cropping patterns. Do you agree with this assessment?

Although diversification of crops is needed, to say that we have attained self-sufficiency in wheat and rice is not true. Dr. M.S. Swaminathan [renowned agricultural scientist] and others have warned that if the rate of growth of foodgrain production continues to be lower than the rate of growth of population, we will become a net importer of foodgrains by 2010. The Finance Minister has assumed that the market will decide the price and alternative crops. So he has suggested a market-dominated arrangement instead of the minimum support price system for deciding crop patterns and the price structure. If this is implemented, it will be an attack on farmers, especially small and marginal farmers who are the worst affected in today's market arrangements.

Have the issues in the Agricultural Worker's Bill been addressed in the Budget?

The basic necessity for agricultural workers is comprehensive legislation that will cover wages and assure employment. Many States have lakhs of acres of government wasteland. The CMP says that some of this land will be redistributed among the landless. This issue has not been addressed by the Budget. Land reforms, which have not been implemented seriously in many States, has not been touched in this Budget.

'Shining India' replayed

JAYATI GHOSH cover-story

The Economic Survey 2003-2004 reads like a paean to the supposed material and policy successes of the National Democratic Alliance government.

SONIA GANDHI, the chairperson of the United Progressive Alliance (UPA), and the government that she helped to create, appear to inhabit two very different countries. The India she lives in and travelled through widely during the election campaign is a country in the throes of an economic crisis, especially in the countryside. It was the people of this country that she recognised and addressed, in all the speeches she gave about the problems faced by farmers, the lack of jobs for the people, the inadequacy and poor quality of the most basic public services, the hunger and despair that affect backward regions, the growing inequality.

It was the voters of this country who, in response to such recognition, unseated dramatically and decisively the previous government, and by implication, rejected the policies and processes that it had set in motion. And it was to the people of this country that promises were made by the new UPA government, in the form of a Common Minimum Programme (CMP) that pledged to rectify all these unfortunate consequences.

But the new government - or at least some influential elements in it - seems to exist in a completely different country, where apparently none of the problems mentioned above is significant or even particularly evident. Instead, this section apparently is in a country that is shining in much the same way that the previous government had tried to claim, in which the problems highlighted by the Congress and its allies before the elections simply do not exist.

The Economic Survey, released by the Finance Ministry just before the presentation of the delayed Annual Budget, is supposed to be an accurate portrayal of the state of the economy in the previous year. Instead, it reads like a paean to the supposed material and policy successes of the National Democratic Alliance (NDA) government, even when these claims of success are (and have been shown to be) demonstrably false.

Consider the economic review of developments in the very first chapter. Much is made of the high rate of GDP growth (in excess of 8 per cent per annum) which has been achieved only three times earlier in independent India. While it is briefly mentioned that this represents a recovery from the slump of the previous year, the point that even then, total agricultural production did not reach the level it was at two years ago is not mentioned. Similarly, the fact that most of the growth occurred nonetheless in agriculture (from a very depressed base) and in hard-to-measure services, not in manufacturing, is glossed over.

But the real dishonesty lies in the assessment of government policies over this period and their impact. The Survey accepts in toto the (largely false or exaggerated) claims made by the NDA government. For example, the Survey says that "the Budget for 2003-04 undertook to provide a major thrust to infrastructure, principally to roads, railways, airports and seaports, through innovative funding mechanisms. The total cost of these projects was estimated at about Rs.60,000 crores". It also claims that "implementation of these schemes has made substantial progress". What it does not mention is that hardly any of the tall claims made were realised, that barely Rs.2,000 crores was spent from the public exchequer, that most of this went to high-publicity road projects along the Golden Quadrilateral which have been associated with massive corruption and the killing of whistle-blowers, and that the actual implementation was nowhere near the promises made.

Similarly, the Survey claims that "the softening of interest rates... has provided a climate conducive to investment growth" but does not mention that such investment growth did not occur. Instead, it chooses to focus on "the improvement in stock market valuation and the flurry of activity in primary markets" as justifying optimism about investment, even though the evidence points to continued slack in the economy. The Survey also lists various programmes and legislation passed by the government as major achievements, although there was no visible positive economic impact over the period concerned.

One of the most mendacious claims relates to the decline in the extent of poverty. The Survey claims that "it is well known that there was a significant decline in poverty from 36 per cent in 1993-94 to 26.1 per cent in 1999-2000". It does not mention the less publicised fact that even the Planning Commission has admitted that the estimates for these points in time are not comparable. Actually, the consensus among independent scholars now is that the rate of decline of poverty slowed down appreciably over this period. Instead of providing the information on average calorie consumption, which shows a disturbing decline, the Survey only cites improbable estimates of subjective hunger to claim that just 0.5 per cent of rural households and 0.1 per cent of urban households are chronically hungry.

ON the other crucial issue of jobs, the Survey barely touches upon the decline in aggregate employment generation and the collapse in formal sector employment. Instead, it uses the thin samples of National Sample Survey (which are notoriously unreliable) to repeat the claim made in the BJP's election propaganda, that 84 lakh new jobs were created every year during 2000-02.

Even in terms of issues and priorities, the Survey appears to belong to the previous government rather than the current one. There is no mention of the six major goals of the UPA as stated in its CMP. (Incidentally, two of these are: to ensure that the economy grows in a sustained manner over a decade and more and in a manner that generates employment so that each family is assured of a safe and viable livelihood; and to enhance the welfare and well-being of farmers, farm labour and workers, particularly those in the unorganised sector, and assure a secure future for their families in every respect.)

Instead, the Survey mentions the following challenges: achieving an annual growth rate of 7-8 per cent in the next five years; containing annual inflation to single-digit levels; boosting agricultural growth through diversification and agro-processing; expanding industry by at least 10 per cent per year; effecting fiscal consolidation and eliminating the revenue deficit. This is very much the standard hackneyed stuff, which focuses on variables that would please the markets rather than address the needs of the people, and completely ignores the most pressing problems of employment and insecurity of livelihoods that are currently facing the populace.

The most charitable explanation of how this extraordinary - and misleading - document has come to be released by the UPA government, is that it was already written as a pre-election advertisement by the policy hacks of the previous government, and those in charge were simply too lazy or too callous to bother to change much. A harsher explanation would suggest that there are deeper, and perhaps less forgivable, motivations on the part of those who have produced this document.

Essentially, the economic policies of the past decade, while they have produced greater insecurity for most of the people, have been enormously beneficial to a small minority. It was this minority for whom India was shining, and it is this minority that still retains substantial control over the levers of economic policymaking.

The temptation to brush aside or ignore the mandate of the people must be very great, especially if that mandate requires some changes in or reversals of policies that have so clearly delivered disproportionate benefits to the rich. But how can there be "business as usual" if it is admitted that these policies did harm most of the people? So it is much simpler just to pretend that actually everything has been wonderful for everyone all along, and that all those who feel that their economic conditions have worsened are simply imagining things. This will allow the old policies to continue, and maybe if people are told often enough that they are actually much better off, the lie will become true through sheer repetition.

Or could it be that even deeper processes are at work? It does not take much insight to realise that one of the greatest failings of the previous government was that it believed its own lies, and thereby became completely disconnected from the people. Perhaps there are some inside the present government who want to encourage it to go the same way, not for its own good or the good of the people, but for a more insidious reason. The Congress and its allies would do well to examine more carefully the people they are allowing to run loose in government, and see whose interests they really serve. Callousness to issues that the elections raised and pandering to illusions of "shining" may be necessary to continue with "reforms as usual", but this is also a prescription for expulsion from power.

An agonising wait

Students aspiring to join professional courses in Tamil Nadu await decisions by the Madras High Court on a host of issues ranging from the nature of the common entrance test to the admission procedure to be followed by private colleges.

in Chennai

FOR the more than 65,000 students aspiring to join professional courses in Tamil Nadu and their anxious parents, this year's has been a long, hot summer. Nearly three months after having got through a gruelling admission test, the students find themselves caught in a quagmire of litigation. The counselling for admission to over 250 engineering colleges, both government-run and privately owned, which was to have normally started in the third week of June, was to have begun on July 8 this year, but was "indefinitely" postponed pending decisions by the Madras High Court on a host of writ petitions filed by different interest groups, including students, parents and the managements of self-financing institutions. The cases related to issues ranging from questions asked for the entrance test to the admission process stipulated for private colleges. In the case of medical colleges, counselling has almost been completed, but the follow-up has been held up as court orders are awaited.

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All through, the State government has maintained a stoic silence. And, perhaps understandably so. It had to wait until March-end to get its position on the eligibility marks required for admission to professional courses endorsed by the Supreme Court because of prolonged litigation involving the government, Anna University, the All India Council of Technical Education and a number of self-financing engineering colleges, over the issue.

Thanks to the policy of successive governments in the State to withdraw gradually from the field of higher education, over the past 10 years Tamil Nadu has seen a phenomenal increase in the number of self-financing engineering and medical institutions, many of which charge huge fees but hand out education of low quality. Nevertheless, the State can boast of a time-tested admission process, perfected over the years with the help of the prestigious Anna University and numerous academics and experts associated with it. Notwithstanding controversies and litigation over the working of the process every now and then, the system has received acclaim from large sections of students and parents. Admissions to engineering and medical colleges are effected on the basis of a common entrance test (the Tamil Nadu Professional Colleges Entrance Examination) conducted by Anna University, the nodal agency, in April. The test is followed by counselling to fill the seats in State-run and government-aided private colleges - the "free seats" (50 per cent of the total) or "government quota seats" on the basis of merit, and the seats reserved for students belonging to the backward and most backward classes and the Scheduled Castes and the Scheduled Tribes. The managements of self-financing colleges fill the rest of the seats in their colleges. Although capitation fee is not collected, the seat-seekers reportedly have to part with sums of money ranging from Rs.80,000 to Rs.8 lakhs for undergraduate studies in the self-financing engineering, medical and paramedical institutions.

In 2001, ten self-financing engineering colleges were raised to the status of deemed universities, and they announced that they would conduct examinations on their own. All other self-financing colleges got themselves affiliated to Anna University, which will conduct examinations for their students and issue certificates.

Last year admissions took place in the backdrop of the Supreme Court judgment in October 2002 in the T.M.A. Pai Foundation case (Frontline, March 26, 2003), which granted privately run unaided professional colleges the right to conduct their own entrance examinations for admission and ruled that the government would have no control over the right to fix the fee for the courses offered by these institutions. Although some of the self-financing colleges were assertive about their rights and adopted a confrontationist attitude towards the State government, almost all colleges fell in line and admissions went on as usual, although there was some hitch over the way the "payment seats" were sought to be filled. A protracted legal battle ensued.

UNLIKE last year, the admission process promised to be less problematic this year, given the guidelines provided by the five-member Constitution Bench of the Supreme Court in its judgment on August 14, 2003 in the Islamic Academy of Education case (Frontline, July 16, 2004), while clarifying certain doubts over the interpretation of the judgment in the T.M.A. Pai case. The 2002 judgment held as "unconstitutional" a practical scheme evolved by the Supreme Court in the Unnikrishnan case (1993) on the grounds that it forced students coming under the "payments seats" category to bear the additional burden of paying for the studies of those admitted under the merit quota. However, the judgment failed to provide an alternative and so last year only minor changes could be made in the admission process. This year, however, the State government initiated efforts to streamline the admission process on the lines of the judgment in the Islamic Academy of Education case. Two committees were constituted in March, one headed by Justice S.S. Subramani to oversee the entrance tests and the other headed by Justice A. Raman to fix the fees self-financing colleges can charge.

On June 8, the Permanent Committee for the Fixation of Fee for Private Professional Educational Institutions directed unaided engineering colleges in the State not to charge more than Rs.32,500 as annual fee for undergraduate engineering courses that have not been accredited by the National Board for Accreditation, and Rs.40,000 for accredited courses. The fee includes admission fee, tuition fee, special fee, laboratory/computer/Internet fee, development fee, maintenance and amenities fee, extra-curricular activities fee and so on. It does not include accommodation, transport and mess charges. The colleges have also been permitted to collect a refundable one-time caution deposit not exceeding Rs.5,000. The committee recommended a fee waiver or concession of Rs.5,000 to deserving meritorious students. The fee structure will be in force for three years. (The fee fixed by the State government for last year was Rs.30,000 for "management" quota seats and Rs.25,000 for seats allotted under the "single window" admission scheme.)

The Subramani Committee (the Permanent Committee for Common Entrance Test for Private Educational Institutions in Tamil Nadu) ordered on June 14 that admissions to engineering colleges under the management quota should be done under the Single Window System and that the Consortium of Self-Financing Professional, Arts and Science Colleges in Tamil Nadu should conduct the common entrance test for admission to all self-financing engineering colleges in the State. Referring to the specific conditions laid down by the Supreme Court, the committee said: "Merit has to be assessed only on the basis of one test." The managements of several self-financing engineering colleges have challenged the orders of the Subramani Committee. (Two renowned self-financing colleges have, however, opted to leave 40 per cent of their "management quota" seats to be filled by the government.)

When the admission process was set in motion with the conduct of the Tamil Nadu Professional Courses Entrance Eaminations - 2004 on April 24 and 25, things seemed normal. Over 1.5 lakh candidates, roughly one-third of them girls, appeared for the examinations in the first stage of the admission process, to fill about 70,000 seats in engineering colleges and about 8,000 seats in medical and para-medical colleges. (The MBBS course accounts for only 1,429 seats in 14 colleges, 10 of which are government-run.)

However, the first signs of crack in the system came up when the candidates, parents and teachers complained of wrong or ambiguous questions, numbering 22 in all, in the biology and physical sciences papers. Responding to the charges, E. Balagurusamy, Vice-Chancellor of Anna University, which conducted the examination, said an expert-committee would look into the complaints. "In case any complaint raised by the students over a specific question is found genuine, that question will not be valued," he said.

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About 200 writ petitions challenging the ambiguity in the questions were filed in the Madras High Court. Partly allowing the petitions, Justice P.K. Mishra directed that the answers to seven questions in biology and physical sciences be revalued in view of the "avoidable errors". The Judge also directed that a particular question be deleted. The papers were revalued and fresh results were announced. Writ appeals, preferred by the petitioners against this judgment, are pending before a Bench headed by the Chief Justice. The appellants contend that the 22 questions concerned accounted for eight marks and their deletion would cost the candidates dearly.

This was followed by a batch of petitions before the High Court, which challenged the practice of treating "improvement candidates" (candidates who had improved their performance in the subsequent year's Plus-2 examination, the prescribed minimum qualifying examination held by the Board of Higher Secondary Education as provided by the rules) on a par with regular candidates, who had appeared for the Plus-2 examination in the current year. The aggrieved petitioners, numbering over 12, are among the candidates who aspire for medical seats. Justice R. Balasubramanian restrained the medical education selection committee from allotting seats to the "improvement candidates" pending orders. This has brought to a standstill the medical admission process. Any changes made will dislocate the engineering admissions also because of the drastic changes that are possible in the rank list. Further hearing of the petitions on "improvement candidates" saw some dramatic scenes. When the lawyers failed to turn up in view of a strike, many young petitioners and their guardians represented their own cases.

Interestingly, of the 945 seats available in the government colleges this year, only 493 have gone to regular candidates. The remaining have been earmarked for "improvement candidates'', whose allotment is subject to the court's decision. Speaking to Frontline, M.D. Raju Kumar, a former top official of Bharatiyar University in Coimbatore said the provision regarding admission of "improvement candidates" had created an anomalous situation. The candidates naturally had an advantage over those who had passed out in the current year because the former had improved their marks after one more year of study. "The two sets of students are not comparable and cannot be treated on a par," he said. A significant point to be noted was that a large number of the successful "improvement candidates" had undergone special coaching in three particular schools in the western region of Tamil Nadu, which are said to be collecting hefty fees from students, he said. Raju Kumar argued before the Court the case of his son, who is one of the petitioners.

YET another batch of petitions pending before the High Court challenges eight key clauses in a set of 25 directions laid down by the Subramani Committee while authorising the Consortium of Self-financing Professional, Arts and Science Colleges to conduct the entrance test for the management seats in its engineering colleges. The Subramani Committee has insisted on ensuring "merit-based admission" through the test, followed by counselling under a Single Window System, as envisaged by the Supreme Court. It has warned against admissions based on any other test or made in any other form. Apart from the Consortium, two other organisations representing self-financing engineering and medical institutions have sought intervention by the court. In its counter-affidavit, the Subramani Committee has accused the consortium of having approached the court "with unclean hands". It said that the consortium had agreed to the conditions attached to the conduct of the entrance test but was now going back on it.

If the Single Window System is not followed, experts say, the whole process of rank-based admissions will collapse. With money being the only criterion, self-financing colleges, it is feared, will have a free hand to admit students, throwing all norms to the winds. The purpose of putting an end to profiteering will be defeated. It will also help them regularise the admissions that have already been made, albeit temporarily. Already, many such attempts at regularising admissions that have been made by flouting rules and manipulating procedures have been successful. This is not surprising because political bigwigs, including former Ministers, parliamentarians and legislators, run many of these institutions.

Expressing concern over the agony of the students and parents, G. Ramakrishnan, member, State Secretariat of the Communist Party of India (Marxist), suggested that the State government initiate steps with a long-term perspective in order to evolve a more efficient and less complicated system that could ensure admission to professional colleges on the basis of merit, affordability and social justice. The fees fixed by the Committee for engineering colleges was very high and it should be brought down, he said.

Pattali Makkal Katchi founder Dr. S. Ramadoss has faulted the State government for allowing self-financing colleges to keep 50 per cent of their seats as "management quota" seats and pointed out that the Karnataka government had yielded only 25 per cent to the "management quota".

Students Federation of India (SFI) State president G. Selva said the State government should exercise greater control over self-financing educational institutions and take steps to enable meritorious candidates from the less-privileged sections to have greater access to higher education. He said the SFI had presented a memorandum to the Union Human Resource Development Minister pleading for Central legislation to correct the situation created by the Supreme Court judgment in the T.M.A. Pai case, which gave enormous scope for self-financing institutions to indulge in unfettered profiteering.

The first `mass dismissal'

V. VENKATESAN the-nation

THE recent dismissal of four Governors is the fourth instance when a government at the Centre decided to curtail the tenure of Governors by withdrawing the President's pleasure. However, it is the first time when a "mass dismissal" of Governors has taken place.

The first dismissal of a Governor was in October 1980, when Tamil Nadu Governor Prabhudas Patwari, an appointee of the Janata Party government, was shown the door by the Indira Gandhi government. Prime Minister Indira Gandhi did not give Patwari, known as a Gandhian in the Raj Bhavan, the option to resign. The dismissal of Patwari without any valid reason was an instance of political abuse of Article 156(1) of the Constitution, which states that a Governor "shall hold office during the pleasure of the President".

In August 1981, Rajasthan Governor Raghukul Tilak was removed from office under similar circumstances by the Indira Gandhi government. Tilak challenged his dismissal in the Rajasthan High Court. The High Court rejected his petition, saying the pleasure of the President in this matter was not justiciable.

These dismissals are different from `forced resignations' of Governors, of which there are several examples. According to the Sarkaria Commission, of the 66 gubernatorial tenures between 1947 and March 31, 1967, 32 lasted the full term. Of the 88 tenures from April 1, 1967 to October 31, 1986, only 18 lasted for five years. Although allowances must be made for illnesses, deaths in office, transfers and voluntary resignations, the Commission noted that during the latter period, in contrast to the former period, premature exits from office occurred at a much faster rate and fewer Governors completed their normal terms of office.

In 1989, when V.P. Singh came to power, his government, through the President's office, secured the resignations of all Governors, so that it could accept only those it wanted to. The then Home Minister, Mufti Mohammad Sayeed, urged for a convention that when a new government took over at the Centre, the Governors should resign on their own to enable the government to appoint those who enjoyed its confidence. However, this created a piquant situation with the government taking its own time to decide which resignations it should accept and who should be sent to which State as a replacement. As a result, many Governors did not relish the idea of continuing in office as `lame duck' Governors and some insisted on quitting the office immediately after sending their letters of resignation. However, the idea of mass resignations of Governors after every change of government at the Centre was not endorsed by the political class.

In 1998, the BJP-led coalition government came to power at the Centre and secured the resignations of Gujarat Governor Krishna Pal Singh, Goa Governor T.R. Satish Chandra, Uttar Pradesh Governor Romesh Bhandari, Mizoram Governor A.P. Mukherjee and the Lieutenant Governors of the Union Territories of Delhi, Andoman and Nicobar, and Pondicherry. In July 2001, the National Democratic Alliance (NDA) government dismissed Tamil Nadu Governor M. Fathima Beevi. In fact, she was a scapegoat in the tug-of-war between Tamil Nadu Chief Minister Jayalalithaa and Dravida Munnetra Kazhagam president M. Karunanidhi. (The DMK was then a constituent of the NDA.)

Spring far behind

The leadership crisis in the All Parties Hurriyat Conference and the mainstream parties' failure to respond to the political challenges in the valley threaten to push the State into anarchy.

in Srinagar

"SPRING will return to the beautiful valley soon," Prime Minister Atal Bihari Vajpayee promised in Srinagar last April, quoting a somewhat trite passage from the poet Ghulam Ahmed Mehjoor, "the flowers will bloom again and the nightingales will return, chirping." Like any headless nightingale, the peace process in Jammu and Kashmir is headed earthwards. Initiated by the National Democratic Alliance (NDA) in 2002, the peace process was predicated on widening political dialogue within Jammu and Kashmir, most significantly between the secessionist All Parties Hurriyat Conference (APHC) and the Union government. Now, however, the contradictions in the process have become evident. Unable to control events on the ground, and battered by terrorist threat, the Hurriyat's Centrist faction is without a leader, and mainstream political parties are fast losing control over their constituencies. Events in Jammu and Kashmir are spiralling out of control, and it will take at least a minor miracle to get them back on track.

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On July 6, Hurriyat chairman Maulvi Abbas Ansari announced that he was resigning his post in an effort to bring about the reunification of the coalition's factions. The organisation's founder-chairman, Srinagar cleric Mirwaiz Umar Farooq, was asked to work towards restoring the Hurriyat's original executive council, which until last year's split included Islamist hardliner Syed Ali Shah Geelani. Although the Hurriyat reiterated its willingness to continue dialogue with India and Pakistan, Farooq said this process would commence only after a new chairman was elected by the pre-split executive council. No clear idea, however, has emerged on just how the Hurriyat intends to bring Geelani back on board. The Ittehadi Force, a forum of secondary political parties including Sheikh Abdul Aziz's faction of the People's League, has said that it is waiting for an invitation from the Hurriyat to begin talks, but neither the Islamists nor the centrists have responded.

What sense might one make of Ansari's resignation? At one level, the effective termination of dialogue with the Government of India could be read as the outcome of intense terrorist pressure on the Hurriyat's centrists. On May 29, terrorists had shot the Mirwaiz's uncle, Maulvi Mushtaq Ahmad, and he died nine days later. Farooq's house was subsequently attacked. Speaking in New Delhi on June 28, Farooq admitted that "somebody within our rank and file is targeting me and my family". The reason for this hostility among terrorist ranks, he said, was "our stand on the resolution of the Kashmir issue on the dialogue process between India and Pakistan".

After a meeting with Pakistan Foreign Secretary Riaz Khokhar, Farooq asked for permission to travel to Pakistan as part of a Hurriyat delegation to investigate just who was responsible for the spate of attacks. A meeting scheduled to decide on the members of the delegation, however, never took place, and the Hurriyat never formally made a request for passports to travel to Pakistan.

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Discretion, it would then seem, triumphed over valour in the week between Farooq's visit to Delhi and Ansari's decision to step down. One key event may have been the burning down of the historic school run by Farooq's family in downtown Srinagar on June 7, the act of arson intended to signal that both his life and his ideological inheritance were under threat. Yet, the problems surfaced much earlier. It had become clear that the United Progressive Alliance (UPA) government was unwilling to deliver a dramatic face-saving gesture to the centrists, like significant troop withdrawals or direct one-on-one negotiations with Prime Minister Manmohan Singh. Another key factor was efforts by the Union government to draw the Islamists into the dialogue process, thus undermining the Hurriyat's centrist majority's claims to represent all the people of Jammu and Kashmir.

On June 9, lawyer-politician Ram Jethmalani held an unscheduled 30-minute meeting with Geelani, pushing ideas for wider internal autonomy for Jammu and Kashmir. Jethmalani made his visit on behalf of the non-official Kashmir Committee, set up with quiet government assent at the start of the NDA's engagement of the Hurriyat. Most observers had believed that the Kashmir Committee to be defunct after the resignation of two of its three members, senior journalists M.J. Akbar and Dilip Padgaonkar.

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The mission, sources told Frontline, was pushed by elements in the Union Ministry of Home Affairs who believed that the centrists needed to be prodded into action, and the dialogue `broad-based'. The services of the recently removed Intelligence Bureau (IB) Director, K.P. Singh, were used to set up the meeting, and Geelani was contacted through a New Delhi lawyer of ethnic-Kashmiri origin. Although the Islamist leader was non-committal, Jethmalani flew to Srinagar, only to be kept waiting for several hours before he was granted a token audience. At a later rally, Geelani claimed he rejected Jethmalani's autonomy proposals out of hand. "Jethmalani wanted me to give credit to the Indian democracy," Geelani said. "I explained to him how the Indian forces had committed massacre after massacre of Kashmiri people in the last 15 years. He had nothing to say when he withdrew." Geelani also charged that the "the entire Indian leadership was biased against the Kashmiri Muslims", and that while the Bharatiya Janata Party (BJP) was "explicitly communal", the Congress "was instinctively communal but it was pretending to be secular".

JETHMALANI'S mission, then, failed to win over the Islamists - and also served to alienate the centrists. For now, Geelani has shown no signs of biting the bait offered by the centrists, and has expressly rejected dialogue with India. Speaking after Friday prayers at a Srinagar mosque on July 9, for example, he accused India of "massacring Kashmiris under the camouflage of a peace process". In several earlier speeches, Geelani rejected any forward movement other than those founded on United Nations resolutions mandating a plebiscite in the pre-1947 state of Jammu and Kashmir. This rejectionist stance has long had the support of Pakistan-based terrorist groups, who have little to gain from a negotiated settlement that does not include them. Pakistan, in turn, has softened its position on the Hurriyat centrists in recent months, but for obvious reasons would not like a dialogue kite to fly unless it has at least one hand on the string. Thus, reason suggests Geelani would enter the Hurriyat only if he had a decisive say in shaping its strategy: something the mere removal of Ansari would not give him.

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Geelani's best hope is to regain influence within the Jamaat-e-Islami, the organisation to which he gave much of his life before being marginalised last year. His supporters now hope to use his majority among the 1,250-plus delegates in the Jamaat-e-Islami's general council to secure changes in the organisation's leadership, and amend its constitution to allow for support of the jehad against India. He does not, however, have a majority among the Jamaat-e-Islami's Rukuns - its rank and file cadre - or its senior leadership.

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From December 2003 onwards, moderates in the Jamaat had run a successful campaign to remove pro-Geelani figures from positions of power, tacitly backing the Hurriyat moderates. Syed Nazir Ahmad Kashani, the Amir of the Jamaat-e-Islami, fought off Hizbul Mujahideen efforts to garner support for the hardliners. On January 1 this year, the Jamaat's Markazi Majlis-e-Shoora, went public with a commitment to "democratic and constitutional struggle", an indication of willingness to operate within the Indian political system. Article 5 of the Jamaat-e-Islami's constitution obliges it to use such means, and to desist from those, which "may contribute to the strife on earth".

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One key factor in shaping the power struggle will be how much influence terrorist groups are able to exercise. The signs, on the face of it, are not good. Although violence has been in steady decline since 2001 - the year India threatened to go to war unless Pakistan de-escalated its covert war in Jammu and Kashmir - official figures for this summer do not make for happy reading. Killings of civilians from April to June this year were higher than in 2003, particularly in the Kashmir division (see chart). So, too, were the numbers of Indian security force personnel killed, although the numbers of terrorists killed in retaliation declined. Infiltration, as Chief of Army Staff Nirmal Vij recently made public, has resumed, reaching high levels in the first two weeks of June. What Vij did not make public was the fact that the almost-complete border fencing is not as effective as some had hoped. Three terrorists shot dead near the Line of Control (LoC) in the Mandi-Loran area on June 9, for example, were carrying plastic pipes, designed to penetrate the fencing. Indian infantry troops who have carried out tests on the fencing have taken just 10 to 15 minutes to clear the barrier - suggesting that while it is indeed a deterrent, the fence is hardly the kind of impregnable barrier enthusiasts had claimed.

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Worst of all, the political ground on which the peace process is premised threatens to turn into quicksand. With terrorist groups increasingly dominating southern Kashmir, particularly at night, large crowds of villagers have started appearing at the last rites of slain terrorists, a phenomenon not seen since the early 1990s. Gatherings of up to 2,000 villagers have been recorded during the burials of terrorists of Pakistani origin, something unheard of until early this year. In one recent incident in Kulgam, villagers were shipped in by bus to protest an Army siege of a local mosque, in an effort to rescue two terrorists still trapped inside. Major political parties have been unable to respond. The People's Democratic Party (PDP), which until recently had a none-too-covert alliance with elements of the south Kashmir Hizbul Mujahideein, has been haemorrhaging cadre - the wages of the terrorist group's ire at the PDP's inability to deliver on pre-poll promises to scale back military operations. At least five PDP workers have been killed and eight injured since June. In a gruesome incident on June 15, four PDP activists who had campaigned for Mehbooba Mufti, who contested and the won the parliamentary election from Anantnag, were taken to a jungle hideout near Aishmuqam, beaten and then shot through the legs.

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Crippled by a bitter feud with its alliance partner, the Congress, the PDP seems unable to respond to the political challenge. Last month, Congress politicians, their eyes firmly focussed on the Hindu vote in Jammu, launched a protracted offensive against the State government's efforts to restrict the ongoing Amarnath Yatra to just one month. The move was motivated by calls from the Indian Army, which said it did not want to squander troops on protecting pilgrims for an extended period. Congress leaders in Jammu responded by charging Chief Minister Mufti Mohammad Sayeed of interfering in Hindu religious affairs. One MLA, Yogesh Sawhney, even alleged that Sayeed had attempted to murder him, after a helicopter scheduled to pick up the politician from the Amarnath cave failed to do so. Others in the Congress have bucked the party's official line, and charged the PDP with backing corrupt officials and administrative inefficiency. The State Cabinet, as a consequence of the crisis, has not met for four months, the last scheduled meeting having been called off on June 9. Both mainstream parties and centrist secessionist factions seem bereft of leadership: an unhappy pointer to what could lie ahead in the months to come.

A trimming exercise

State governments comply with the constitutional requirement of limiting the size of their Ministries, but what should have provided an opportunity for Chief Ministers to cleanse their governments of tainted and incompetent Ministers turns out to be an exercise in political manipulation.

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THE downsizing of Ministries in compliance with the Constitution (97th) Amendment, which limits the size of the Ministry to 15 per cent of the total strength of legislators in the Lower House (or 12 as in the case of smaller States), has turned out to be an exercise in deception, political one-upmanship and manipulation. It has been used either to settle political scores or to put down rivals. Besides, the basic idea behind the pruning - that is, reducing wasteful government expenditure and ending the practice of offering berths in the Ministry to lure Members of the Legislative Assembly has been largely defeated because most of the Ministers who were dropped in various States have been given or are in the process of getting equally lucrative positions as Chairmen of various corporations\councils or, as in the case of Punjab and Himachal Pradesh, as parliamentary secretaries.

While the exercise, which became effective on July 7, has been completed without damage to the party in power in the majority of the States, the process claimed its first victim in the politically volatile northeastern region: the Arunachal Pradesh government. Interestingly, the northeastern Ministries were the flabbiest of all. Of the 250-odd Ministers to be dropped across the country, more than half belonged to this region. No wonder the scale of resentment there has been of an equally large proportion.

Significantly, in Uttar Pradesh, where Chief Minister Mulayam Singh Yadav was required to drop 31 Ministers from his 88-member Council, the exercise went off smoothly. This was possible because Mulayam Singh did not antagonise anyone. Among those dropped, two Cabinet Ministers (Reoti Raman Singh and Bhagwati Singh) have since been elected to Parliament. The rest were Ministers of State, whom Mulayam Singh rehabilitated immediately as Chairmen of various corporations. Besides, he did not disturb the Ministers belonging to his alliance partner, the Rashtriya Lok Dal.

Bihar too managed to achieve the feat with equal ease, thanks to Rashtriya Janata Dal (RJD) chief Laloo Prasad Yadav's new-found clout at the Centre and rapport with Congress president Sonia Gandhi. Laloo Prasad's firm hold over the situation was evident from the fact that the influential Excise Minister, Sivanand Tiwari, who was once considered his right-hand man, could do nothing but raise a cry when he was dropped along with 16 others.

In the 243-member Bihar Assembly, the strength of the Ministry was to be 53. Out of the 17 members dropped, nine belong to the RJD, six to the Congress and two are independents. Laloo Prasad tactically quelled any rebellion with promises of lucrative posts in corporations or the ticket in the Assembly elections, due early next year.

In Jharkhand, the BJP-led Arjun Munda government had to contend with resentment from its alliance partner, the Janata Dal (United). This could cost the party dearly in the Assembly elections in neighbouring Bihar. But Munda's task was made easier for the time being because he had the full support of the JD(U)'s central leadership, enabling him to drop all the five JD(U) Ministers. The Jharkhand Assembly has a total strength of 82, and the Ministry, as per law, had to be downsized from 25 to 12.

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In Punjab and Himachal Pradesh, both ruled by the Congress, problems have cropped up and are likely to continue, causing damage to the party's prospects in the next elections. While in Himachal Pradesh the problem is of regional imbalance, in Punjab it is political dissidence. Punjab Chief Minister Captain Amarinder Singh had to grapple with the kind of dissidence he has been facing for sometime from his deputy, Rajinder Kaur Bhattal, who is likely to lose the post and remain content with a Cabinet rank. Amarinder Singh, largely in control of the situation, managed to drop eight Ministers without much problem, with the promise of the posts of parliamentary secretaries to the suitable ones.

In Punjab, the basic criterion for allotting the ticket in the Lok Sabha elections was performance and on this basis Amarinder Singh managed to get rid of those who were aligned with the Bhattal camp. Bhattal herself may not have much choice now, but given her political ambitions she is not likely to lie low for long.

In Himachal Pradesh, where Congress Chief Minister Virbhadra Singh was given a free hand to carry out the exercise of downsizing the Ministry from 16 to 12, the problem is not so much political as regional. While crucial areas such as Kangra and Hamirpur remain under-represented, Shimla, as before, is over-represented. This fact could provide the BJP a handle to discredit the government. Of the four Ministers who were dropped, Transport Minister Chander Kumar won from Kangra defeating former Chief Minister Shanta Kumar. Of the rest, Chandresh Kumari and Brij Bihari Lal Butel belong to the Virbhadra faction and Vijay Singh Mankotia, is reportedly close to Pradesh Congress Committee chief Vidya Stokes, They are likely to be compensated with other positions.

Maharashtra was the State with a high potential for trouble but the fact that Assembly elections are due in a few months made Chief Minister Sushil Kumar Shinde's task that much easier. First, the Ministers do not have such a big stake now and secondly, they have all been promised suitable compensation. Shinde dropped four Cabinet Ministers and 18 Ministers of State from his 65-member Council - eight independents and seven each from the two main coalition partners, Shinde's Congress and the Nationalist Congress Party (NCP). Among the surprises of the day was the elevation of five Ministers of State (three from the NCP and two from the Congress) to Cabinet rank. The independent Ministers who were dropped are said to have brokered a deal. The arrangement is that neither the Congress nor the NCP will put up candidates in the constituencies they contest, they will be reinstated if the combine returns to power, and if they choose not to contest as independents and opt to join either party, they will be guaranteed the party ticket.

Interestingly, the Dalit factor, so far ignored by the combine, played a key role in the downsizing exercise. There is a conscious attempt to project a pro-Dalit image. Vimal Mundada of the NCP, a Dalit, was rewarded with Cabinet rank for her contribution to the NCP victory in the Beed seat in the Lok Sabha elections. In Maharashtra, where the Cabinet size was brought down to 43 from 65, the key criterion was apparently performance during the Lok Sabha elections, although the Congress preferred to downplay it.

IN the vexed northeastern region, the exercise fuelled rebellion across parties. The 60-member Arunachal Pradesh Assembly was dissolved on July 6 after the size of the Ministry was reduced from 41 to the stipulated 12. Twenty-one Ministers resigned from the Bharatiya Janata Party-led United Democratic Front government. The 29 Ministers who were dropped immediately shifted their loyalty to the Congress, prompting Chief Minister Gegong Apang to recommend hastily the dissolution of the Assembly to Governor V.C. Pande. The Governor accepted the recommendation and dissolved the House and asked Apang to ontinue in office until the new Assembly was formed. But following a demonstration by members of the Opposition Congress and the breakaway faction of the UDF in front of the Raj Bhavan demanding imposition of Article 356 to ensure a "free and fair election", he recommended imposition of President's Rule. The Assembly elections are scheduled for October.

The Apang-led government, the first of the BJP in the northeastern region, had come into being on August 3, 2003, after the Mukut Mithi-led Congress Ministry was reduced to a minority when 31 of the 58 Congress MLAs, including 17 Ministers, announced their resignation. The breakaway MLAs formed a separate legislative group, the Congress(D) led by Kameng Dolo. They then formed the UDF and elected Gegong Apang as their leader. Later the group joined the BJP.

V. Satish, the BJP leader in charge of the region, does not consider the dissolution of the Assembly a big loss for the party as it is " firmly entrenched in the State now". He said that with a 29 per cent vote share in the State, the BJP had arrived in the region. "The political outcome needs to be assessed," he said.

In Assam, the government of Tarun Gogoi is rocked by dharnas and bandhs by resentful supporters of the dropped Ministers. Announcing the pruning of his 35-member Ministry to 19, Gogoi maintained that he was dropping the Ministers under "the compulsion of the Congress high command" and that it was not his decision.

Supporters of Agriculture Minister Ardhendu Kumar Dey and Public Works Minister Sarat Barkatoki staged rail and road blockades at various places, disrupting normal life. Gogoi's warning of strict action staved off a crisis.

In view of the volatile situation, the Chief Minister has written to Prime Minister Manmohan Singh underlining the need for necessary amendments to the Constitution to allow States like Assam to have 20 per cent of the total number of legislators in the Ministry in order to ensure representation to all the regions of the State.

The 33-member Okram Ibobi Singh Ministry in Manipur was downsized to 12. The Congress, which heads the Secular Progressive Front, retained 10 Ministers and two of its coalition partner, the Communist Party of India (CPI). Another ally, the Manipur State Congress Party, has not been accommodated.

In the Communist Party of India (Marxist)-ruled Tripura, six Ministers were required to be dropped. The CPI(M) dropped five of its Ministers and asked its front partner, the CPI, to withdraw its lone Minister, Manindra Reang. The latter part of the exercise created a rift between the two allies. The CPI accused the CPI(M) of using pressure tactics and initially refused to withdraw Reang, saying that the decision was against the spirit of coalition politics. Reang later tendered his resignation.

In Meghalaya, where the Ministry's size had to be reduced to 12 from 40, Chief Minister D.D. Lapang managed to keep the Congress' alliance with the regional parties intact by retaining one Minister from each of the three regional parties, the United Democratic Party (UDP), the Meghalaya Democratic Party (MDP) and the Khun Hyentrip National Awakening Movement (KHNAM).

However, former Chief Minister and the lone representative of the Hill State People's Democratic Party (HSPDP), F.A. Khonglam, had to go. He has been assured the post of Chairman of the Meghalaya State Planning Board. Meghalaya, incidentally, was the only State in the region to have formed a core group of the political affairs committee (PAC) of the Congress for wider consultations with the constituents of the ruling Meghalaya Democratic Alliance (MDA) before finalising the list of 11 Ministers to be retained. Lapang had earlier insisted that Assemblies with a strength of 60 seats should have at least 20 Ministers.

Similarly, Nagaland too, where the size of the Ministry was slashed to 12 from 43, had sought exemption from the Centre on the grounds of regional and tribal representation.

The request, which had been rejected by the previous National Democratic Alliance government, was turned down by the present United Progressive Alliance government. Nagaland Chief Minister Neiphu Rio had insisted that the mandatory downsizing would do immense harm to the multiplicity of tribes in a State like Nagaland.

Apart from the problem of ensuring the representation of various tribes in the Ministry, Rio had cited the compulsion of coalition politics. The 43-member Democratic Alliance of Nagaland (DAN) government consisted of 30 members of the Nagaland People's Front (NPF), seven of the BJP, one JD(U) member, and one Samata Party member and four independents. The downsized Ministry has nine NPF and two BJP members and one independent.

In Mizoram, where three Ministers were dropped, the only surprise was the exclusion of Excise Minister P.P. Thawlla of the Mara Democratic Front (MDF), whose support had ensured the formation of the Zoramthanga government. The Chief Minister's task was made easy by the resignation of three Ministers: Prisons Minister K. Vanlalauva and Cooperation Minister C. Lalrinsanga belonging to Zoramthanga's Mizo National Front (MNF) and Thawlla. In the 40-member House, Zoramthanga had only 19 MLAs after the Assembly elections in November last year. It was Thawlla's support that enabled government formation. But the MNF won the byelection to Kolasib, making Thawlla redundant.

In Chhattisgarh, where five Ministers were dropped, the exercise was effortless. The surprise element, however, was the sacking of the lone Sikh representative, Rajinder Pal Singh Bhatia. But as one BJP leader put it, Bhatia could be sacrificed because "Sikhs do not form a major vote bank" as they are scattered across the State.

Unfortunately, what should have provided an opportunity for Chief Ministers to cleanse their governments by getting rid of tainted and incompetent Ministers was turned into an occasion of political manipulation.

With inputs from Sushanta Talukdar in Guwahati, Lyla Bavadam in Mumbai, Suhrid Sankar Chattopadhyay in Kolkata and T.K. Rajalakshmi.

Public funds for terrorism

PRAVEEN SWAMI the-nation

AS ironies go, this one is hard to top: for the past several months, Indian taxpayers may have been subsidising the activities of the Hizbul Mujahideen and Lashkar-e-Toiba. Ongoing police investigations into last month's murder of Indian Railways Construction Company (IRCON) engineer Sudhir Kumar Pundir and his brother Sanjay Pundir have blown the lid off a shadowy protection racket run by terrorist groups in southern Kashmir. IRCON's subcontractors are believed to have been inflating costs to meet extortion demands, with a wink and a nod from the top bosses of the Rs.6,000-crore Jammu-Srinagar railway line project.

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It is still unclear who murdered the Pundir brothers, but investigators now believe that they knew their kidnappers, and did not fear harm. The brothers were kidnapped on June 23, along with an IRCON subcontractor, Farooq Ahmad Kucchai, and the driver of a leased vehicle, Shabbir Ahmad. Kucchai and Ahmad were let off some hours after the kidnappers called IRCON's offices with an Rs.50,00,000 ransom demand. On the morning of June 24, it now transpires, both brothers had a good chance to escape, after a two-wheeler on which they were travelling along with a terrorist was flagged down by a patrol of the 1 Sector Rashtriya Rifles near the village of Litter. Neither brother made his plight known and the two-wheeler, according to troops present there, was waved on.

Until early in the evening, IRCON officials were still confident of stitching together a ransom deal. Cash, sources told Frontline, had been mobilised in anticipation of a final figure of around Rs.5,00,000. Then, for reasons which are still unclear, the kidnappers changed their mind. That night, the Pundir brothers were killed in the most gruesome manner possible, by having their throats slit in ritual halal fashion. The bodies were found the next afternoon, buried in a shallow trench. One possible explanation is that the two terrorists believed to be responsible for the kidnapping panicked, since the operation was not authorised by their commanders. Another is that they never intended to let the hostages live, hoping to derail a project which will make the Indian Army's logistical lines into Jammu and Kashmir more secure than they have been this past half century.

What is becoming clear, though, is that IRCON's subcontractors - who handle the enormous amount of earth-and-stone work that precedes the actual laying of track - have been buying peace for some time. On July 7, a highly placed source told Frontline, intelligence personnel monitoring telephone communications in Awantipora intercepted a call, in which the caller asked a subcontractor to pay Rs.5,00,000. When the subcontractor protested that the sum was too high, his attention was drawn in a none-too-subtle fashion to the Pundir murder. The Superintendent of Police of Awantipora, Sheikh Mehmood, refused to discuss the call, but admitted that investigations had confirmed dozens of such payments having been made over the last six months, with the cash handed over ranging from Rs.50,000 to Rs.5,00,000. In essence, IRCON permitted subcontractors to overstate the number of labourers working on their sites, and funnel the extra cash to terrorists in order to ensure the work went on as scheduled.

If such payments were common, it would help explain why the Pundir brothers thought they had no reason to fear for their lives: they would have thought a simple deal would soon be clinched. Earlier this year, Rajinder Kumar, an IRCON heavy machine operator, was kidnapped near Bijbehara. His release, police officials now believe, involved a ransom payment. Interestingly, Jammu and Kashmir Police officials have identified at least a dozen subcontractors who are close family members of important terrorists, almost all from the Hizbul Mujahideen, or had links with the organisation in the past. Kucchai, who has now been detained for further questioning on his possible links with the terrorists who murdered the Pundir brothers, himself served two years in jail on terrorism-related charges. "We think IRCON knew about these linkages", says a senior Jammu and Kashmir government official, "but thought it a useful asset to avoid trouble. Of course, when you leave a pot of honey out in a garden, sooner or later the bees will sting someone."

SUPPORTING evidence of the massive funds flow from IRCON to terrorists in recent months is also available in official data on terrorist activity - not a single instance of looting from banks, government institutions or individuals since the end of March this year. The three-month break in cash-seeking crime is the longest such gap in the history of violence in Jammu and Kashmir. By contrast, Rs.1,35,408 was looted from April to end-June last year, out of a total of Rs.26,57,440 for all of 2003. In 2002, Rs.3,55,965 was looted in the April-June period, out of a total of Rs.53,73,865. Experts believe that the declining trend in looting is the outcome of large-scale diversions from the welter of large-scale public works projects that have been coming on-line in rural Jammu and Kashmir in recent years, notably in the irrigation and power sectors. Tourism operators in several areas are also believed to be making protection money payments, as apple-orchard owners have done for at least the last decade.

Work has now resumed on the Baramulla-Qazigund railway line after a brief crisis provoked by the murders. But local staff as well as thousands of migrant workers, who have been shipped in from Bihar, Madhya Pradesh and Jharkhand, remain apprehensive. Recent articles in the local press, charging migrant workers with selling bootleg alcohol, have been seen as part of a campaign to legitimise further killings, and thus end work on the railway line. One key sector of the track that has already been constructed, from Jammu to Udhampur, is yet to be used for regular operations because of security concerns. Police investigators are optimistic of an early breakthrough in the case, and have identified two key Lashkar-affiliated suspects - a Pakistani national code-named Abu Sufiyan, and his ethnic-Kashmiri associate, Altaf Husain Mir. Vigilance authorities are separately investigating IRCON's dealing with a state-owned contractor, again for possible payoffs. Many officials are sympathetic to IRCON's very real concerns in the affair, but the tragic killings point to the peril posed by buying peace: that it only ends up subsidising war.

A Balancing Act

the-nation

THE Union Budget for the financial year 2004-05, presented by Finance Minister P. Chidambaram, is a careful exercise that seeks to translate the concerns of the National Common Minimum Programme (NCMP) adopted by the United Progressive Alliance government into Budget proposals for what remains of the current financial year. It has remained broadly, though not entirely, within the parameters of the NCMP. In terms of policy pronouncements, which have in recent years become an increasingly prominent part of Budget speeches, even pushing expenditure and revenue proposals to the background, the Finance Minister has emphasised agriculture and rural development in a big way. This is not immediately reflected in the expenditure figures, but one must bear in mind that the sectoral allocations will get firmed up only after the Planning Commission completes the exercise of expenditure revision, based on the priorities of the NCMP, for the year, following the process outlined by the Finance Minister in his Budget speech. The Budget has also made a reference to the National Employment Guarantee Act promised in the NCMP and indicated that it will soon be brought before Parliament. In the interim period, the Budget has provided for food-for-work programmes in 150 backward districts where the programme is seen as being very urgently needed. Measures in support of agriculture announced in the Budget include enhanced credit to be made available through the banking system including regional rural banks and cooperative banks, insurance schemes for crops and agricultural incomes, removal of excise duties on farm and dairy machinery including tractors, budgetary assistance for irrigation, and tax breaks for agroprocessing units. Perhaps the most important measure flowing directly from the NCMP is the imposition of an education cess of 2 per cent on all taxes, estimated to fetch a revenue of Rs. 4,000 -5,000 crores in a full year and wholly earmarked for education. This is expected to help ensure primary education for all, including the provision of a nutritious cooked midday meal for the school-going child. The focus on irrigation and water harvesting in the Finance Minister's speech is also in line with the thrust on rural development in the NCMP document. The increased budgetary support for the plan as well as the nearly 25 per cent increase in plan outlay for 2004-05 as compared to the revised estimates for 2003-04 reflects the Budget's commitment to the NCMP mandate.

The Finance Minister's provision of Rs.14,194 crores of equity support and Rs.2,132 crores of loans to Central public sector enterprises and his commitment that "major investments will be made in PSEs falling in the sectors of power, telecommunications, railways, roads, petroleum, coal and civil aviation" will be welcomed by all except hardcore neo-liberal market fundamentalists. These measures, as well as the decision to constitute a Board for Reconstruction of Public Sector Enterprises (BRPSE), are consistent with the NCMP's stress on strengthening the public sector. The exemption from CENVAT granted to handloom and powerloom units will help address an important livelihood issue affecting millions of weavers, who have been badly hurt by the neo-liberal reforms of the last decade and need relief.

It is interesting to note that the corporate sector has generally hailed the Budget. While the financial media's fond hopes of a repeat of the so-called "dream budget" of 1997 (which was in fact a disaster in terms of its huge tax give-aways to the corporates, its reward of the dishonest tax evader through the Voluntary Disclosure of Income Scheme, and the collapse of the budget numbers before the financial year was over) mercifully did not materialise, this Budget has also been very kind to large capital, both foreign and domestic. Except for the educational cess of 2 per cent levied on all taxes across the board, there has been no attempt in this Budget to raise resources from the well-to-do through higher rates of direct taxation. The Finance Minister evidently subscribes to the empirically unsubstantiated view that low tax rates result automatically in a high degree of compliance. His own remarks towards the end of his Budget speech on large amounts of extant tax arrears should bring home the point that low tax rates do not guarantee compliance and that there is a strong case for enforcing the tax regime rigorously. Additionally, if the NCMP is to be seriously implemented, there is an urgent need to mobilise additional resources, and higher rates of marginal taxation of corporate and personal incomes should receive due consideration. It needs to be emphasised that fiscal rectitude should not be taken to imply only (and mindless) expenditure reduction. One must also recall that tax-GDP ratios in India are among the lowest in the world and have been declining further during the period of neo-liberal reforms. A lack of political will to enforce tax laws cannot become a justification for lowering tax rates.

A positive feature of the Budget is its focus on the reduction of the revenue deficit rather than of that neo-liberal holy cow, the fiscal deficit. It is not often understood that the concept of the fiscal deficit and an obsession with its reduction serve to delegitimise borrowing by elected governments for purposes of productive investment even while the private sector, both domestic and foreign, is allowed a free run on the funds of public sector financial institutions. However, the Finance Minister's assumptions regarding the growth of tax revenues seem overly optimistic.

Perhaps the most disturbing feature of the Union Budget is its continuation of uncritical external and financial liberalisation. The unilateral commitment to reduce import duties to levels prevailing in the Association for South East Asian Nations (ASEAN) region is unwarranted. The decision to enhance the cap on Foreign Direct Investment (FDI) in the insurance, telecommunications and civil aviation sectors is not only unwarranted but fraught with security implications. Besides, this proposal prevents the possible use of levels of FDI limits in these sectors as a bargaining tool in World Trade Organisation (WTO) negotiations. The concessions to foreign institutional investors, the abolition of tax on long-term capital gains in securities transactions, the reduction in the tax rate on short-term gains, and the decision to let banks play more freely in the stock market reflect the continuing hold of financial liberalism over policymakers.

Overall, both the Budget and the reactions to it reflect the fact that while the juggernaut of neo-liberalism has been checked by the electoral verdict of 2004, it still holds ideological sway in both the ruling and the Opposition coalitions as well as in the media.

Cautious optimism

Pakistan's approach to the bilateral talks seems to be defined more by a concern to sustain the momentum of the peace process than any expectations of a major breakthrough.

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IT is perhaps a unique characteristic of India-Pakistan relations that the two countries tend to travel backwards in time on their differences. The just concluded Foreign Secretary-level talks in New Delhi between the two sides once again demonstrated this.

The much-talked-about January 6 joint press statement, after the dialogue between Pakistan President Pervez Musharraf and the then Prime Minister Atal Bihari Vajpayee on the sidelines of the South Asian Association for Regional Cooperation (SAARC) Summit in Islamabad, was all about the resumption of the 1998 composite dialogue process interrupted in the aftermath of the Kargil War. Of course, it contained some significant references to the commitment of Pakistan to create an atmosphere free from terrorism.

The June 28 joint statement, issued at the end of the Foreign Secretary-level talks in New Delhi, has almost taken the two sides to the time when it all began - 1948. The reference to the United Nations Charter and their commitment to them might mean nothing in the real sense but does provide the scope for Pakistan to return to the rhetoric centring around the 1948 U.N. resolution on Kashmir.

India too has extracted its pound of flesh by incorporating a categorical assertion in the statement on the importance of the 1972 Simla Agreement and the determination of both sides to implement it in letter and spirit.

Of course, there is a quid pro quo in the formulation. But do they mean anything from the point of view of Pakistan? Not really.

This was evident a week later in the remarks made by President Pervez Musharraf to visiting Senators of the Republican Party from the United States. "The peace process with India could suffer a setback if there was no progress on Kashmir," he told them. In other words, Musharraf does not see the dialogue process as being on a firm course.

From Pakistan's point of view, the June 27-28 talks were essentially about ensuring the sustenance of the peace process initiated by Atal Bihari Vajpayee, after the change of government in New Delhi. Some of the statements attributed to External Affairs Minister K. Natwar Singh on the peace initiative had caused anxiety in the Pakistani establishment.

It was not a coincidence that the first face-to-face encounter between Natwar Singh and his Pakistani counterpart Khurshid Mehmood Kasuri in Qingdao, China, on the sidelines of a regional conference, was dominated by this theme. There was a sigh of relief when Natwar Singh reassured Kasuri that India remained committed to the path of dialogue to solve all bilateral issues.

There is no euphoria in Pakistan over the latest joint statement. Within hours after the conclusion of the talks, Pakistan Foreign Secretary Riaz Khokhar cautioned against any hype and high expectations. "I saw and found them serious, committed and determined to move forward on a composite dialogue" was all that he was willing to tell journalists.

Part of the reason for the guarded optimism of the Pakistani establishment and civil society could be attributed to prejudices against the Congress and the successive governments led by it. Popular perception in Pakistan, reinforced by the establishment, is that the Congress is at the root of all the problems between India and Pakistan. So it could not be expected to be radical in its approach towards the resolution of differences.

At the same time, for a variety of reasons Pakistan does not want the process to be derailed. Faced with serious domestic problems and trouble on the porous border with Afghanistan, Islamabad can ill afford bad relations with India. Forces opposed to cooperation with the U.S.-led coalition on the so-called war against terrorism have mounted a challenge to the authority of the Pakistani establishment, perhaps the most serious witnessed since the dismemberment of the country in 1971.

Changed ground realities in the aftermath of September 11, growing pressure from the international community and the desire of increasingly large sections of society to integrate with the rest of the world have made jehad an unviable foreign policy instrument for Pakistan. So Islamabad not only wants to be seen as engaging, but actually engaging India.

This was the primary motive behind the conciliatory gestures of Pakistan in the just concluded round of talks. Pakistan, like most of the world, did not expect the Bharatiya Janata Party to lose power in the general elections. But once the return of the Congress to power, albeit as the leader of a coalition, was a reality, there was the need to introduce new nuances into the process of engagement.

Perhaps Congress leaders succeeded in convincing the military establishment that it would like to put its own signature on the peace process. Hence the concession from Pakistan on the centrality of the Simla Agreement in defining the relations between the two countries. It must have been a bitter pill, particularly for the Pakistan Army, as the pact is a reminder of its follies that led to the birth of Bangladesh.

Musharraf agreed to the reference in order to keep the process going. Of course, in the process, Pakistan bargained for the inclusion of a reference to the U.N. Charter and purposes. There is little rationale for any reference to the U.N. in a bilateral statement, particularly when both sides are its members. Even in the context of Kashmir, it makes little sense after Musharraf's statement that Pakistan has for the time being set aside the U.N. resolution on plebiscite.

Curiously, Pakistan chose to respond indirectly to criticism made by former External Affairs Minister Yashwant Sinha that the reference to the U.N. Charter "weakens our approach that all issues between India and Pakistan should be resolved bilaterally and may give an opening to Pakistan to bring in the old U.N. resolutions on Jammu and Kashmir and involve third parties in the negotiations". Pakistan Foreign Office spokesman Masood Khan maintained that the reference to the U.N. Charter had no significance and it was a mere reiteration of commitment to the Charter by the two countries.

Pakistan has reasons to be happy with the outcome of the expert-level talks on confidence building measures (CBMs) on nuclear weapons. At the New Delhi meeting, the Foreign Secretaries approved the measures recommended by the expert-level meeting on the CBMs in New Delhi on June 19-20. They agreed to conclude an agreement on pre-notification of the flight-testing of missiles and authorised the experts to work towards finalising the draft agreement.

Significantly, both sides reaffirmed references in the joint statement to the need to promote a stable environment of peace and security, to recognise the nuclear capabilities of each other as constituting a factor for stability, to work towards strategic stability, and to call for regular meetings among all nuclear powers to discuss issues of mutual concern. It is a matter of great satisfaction for Pakistan to find such support in the neighbourhood, particularly in the light of the Dr. A.Q. Khan scandal and fears of its adverse fall out on the country's nuclear programme.

Besides the symbolism to carry forward the dialogue process, the two sides proposed a comprehensive framework for conventional CBMs aimed at initiating and enhancing communication, coordination and interaction. These would be discussed further. Some of them are contentious for both sides and that is why they chose not to make them public. In response to concrete Kashmir-centric proposals, the Pakistan Foreign Secretary merely said that they would be referred to the "Ministries concerned" for examination before any further discussion.

Pakistan, on its part, did raise the issues of "re-location" of forces from Kashmir (a euphemism for reduction of troops inside the Valley), repeal of "draconian" laws, release of "political prisoners" and improvement of "human rights". Acknowledging the difficulties the Manmohan Singh government could face if these issues are discussed in public, the Pakistani delegation only raised them behind closed doors.

Islamabad also did not appear to be satisfied with the set of proposals made by India to enhance people-to-people contacts between the people of Kashmir on both sides of the divide. So proposals like the Muzaffarabad-Srinagar bus link, another road link along the Line of Control (LoC), and bus services between Jammu and Sialkot did not get priority attention. Pakistan wants "simultaneous" progress on CBMs and Kashmir.

Besides the pact on the restoration of staff strength at the missions in New Delhi and Islamabad to 110, as it existed before January 1, 2002, there was agreement in principle to re-establish the consulates in Karachi and Mumbai. Although Pakistan has agreed to give up its claim on Jinnah House in Mumbai to locate its consulate, it is doubtful if it would materialise early. After all, earlier in the year Pakistan refused permission to India to open a camp visa office in Karachi. Pakistan has also not been keen on quick progress with regard to the Munnabao-Khokrapar road linking Sindh and Rajasthan and the ferry service between Karachi and Mumbai.

The coming weeks will witness a flurry of activity on the diplomatic front. An important achievement of the New Delhi meeting is that the two Foreign Secretaries agreed that discussions on the remaining six subjects of the composite dialogue - Sir Creek, Siachen, Wullar Barrage/Tulbul Navigation Project, terrorism and drug trafficking, economic and commercial cooperation, and promotion of friendly exchanges in various fields - would take place between the third week of July and the first half of August.

Later in July, Natwar Singh is expected to visit Islamabad in connection with a meeting of the SAARC Council of Ministers. Kasuri has been invited to New Delhi in August, where the two Foreign Ministers are expected to review the progress achieved. No doubt, the calendar is full. However, it would be unrealistic to expect any major breakthrough.

A new round, with hope

JOHN CHERIAN the-nation

The desire to move ahead with efforts to resolve contentious issues characterises the latest round of bilateral talks between India and Pakistan.

INDIA and Pakistan have expressed satisfaction over the progress made in the latest round of bilateral talks, held in New Delhi in the last week of June. Both countries said that there was a "detailed exchange" of views on Jammu and Kashmir and agreed to continue with their "sustained and serious" dialogue to find a peaceful, negotiated and "final" settlement to the Kashmir issue. The Foreign Secretaries of India and Pakistan, Shashank and Riaz Khokhar, will be meeting again on the sidelines of the South Asian Association for Regional Cooperation (SAARC) Foreign Ministers' meeting scheduled to be held in the third week of July in Islamabad. Another meeting between the two officials is scheduled for August, before the Indian and Pakistani Foreign Ministers have formal talks in the same month in New Delhi.

"It was a good exchange of views," Pakistan's High Commissioner to India, Aziz Ahmad Khan, told Frontline. He said the statements made by senior officials of the new Central government, including Prime Minster Manmohan Singh, External Affairs Minister K. Natwar Singh and National Security Adviser J.N. Dixit, were very positive.

To the apparent discomfiture of Pakistan, details of the proposals made during the recent talks have been leaked to the media. Islamabad feels that when sensitive issues are discussed, the glare of the media has to be avoided.

INDIA proposed that the Line of Control (LoC) be converted into a line of peace and tranquillity and the ceasefire that has been in place for the last seven months be built upon. Pakistan, on the other hand, talked about the need for a plebiscite in the Kashmir Valley. Pakistani officials pointed out that there had been tranquillity along the LoC for quite some time and that infiltration into Jammu and Kashmir had come down drastically.

Although Islamabad considers the sophisticated fencing of large sections of the LoC by New Delhi as "illegal", Pakistani officials say that the Israel-made sensors and other high-tech equipment the Indian Army has installed are highly effective in spotting infiltrators. They also point out that the difficult terrain along the LoC is mined and there are 250,000 Indian soldiers guarding the 744-km-long LoC. The ceasefire along the LoC has been another disincentive for would-be infiltrators, argue Pakistani officials. The Indian Army had claimed that much of the infiltration across the LoC used to take place under the protective fire cover of the Pakistani Army.

Pakistani officials dismiss out of hand talk of the continued existence of training camps for "terrorists" on their territory. They say that their leadership itself is under grave threat from political extremists. Many of these extremists are involved in the insurgency in Jammu and Kashmir. The officials aver that the demand to close down the madrassas (religious schools) is "unacceptable". According to them, after President Pervez Musharraf assumed office the government has been monitoring the madrassas strictly and encouraging them to introduce science and mathematics into their curriculum. They point out that madrassas fulfil an essential function in an Islamic state as they provide education, board and lodging free of cost to needy children. However, Pakistani officials assert, it is ensured that non-Pakistanis do not get admitted to the schools.

India suggested a further expansion of military contacts between the two countries, including the setting up of military hotlines between the service chiefs and interaction between the institutions linked with the militaries. Pakistan preferred the setting up of expert groups similar to the ones set up as part of the confidence building measures (CBMs) on nuclear weapons.

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Another important suggestion made by India was the establishment of bus transport between Jammu and Sialkot, cutting across the border in the Jammu region. However, Pakistan seems to have a problem with readily accepting bus routes linking Pakistan Occupied Kashmir (POK) and Jammu and Kashmir. The demand for a bus route between Srinagar and Muzaffarabad is still on hold. Pakistani officials say that the service should be only for the residents of Jammu and Kashmir and that there is no question of accepting Indian passports as valid travel documents. They also said that they would rather prefer shorter "shuttle services" from points near the border. Such a move, they emphasise, would help more people to travel across the border. Pakistan had earlier suggested that the Delhi-Lahore bus route be substituted by a shorter Amritsar-Lahore route.

Both sides also discussed ways and means to develop further people-to-people contact, especially between the people of Jammu and Kashmir and POK. Meanwhile, in the first week of July a team of boy scouts from Pakistan visited the Kashmir Valley. That visit caused an uproar in the Pakistani media. Sections of the media alleged that Islamabad has already started bending under Indian pressure.

The two sides have agreed to restore immediately the full staff strength at their respective High Commissions and agreed in principle to reopen their Consulates in Mumbai and Karachi. All fishermen in each other's custody, detained for breaching each other's maritime borders, are to be released immediately.

PAKISTANI officials say that both sides are happy with the way the first round of talks went, but they warn that it would be a "long haul" before concrete results can be achieved. Both sides will have to be "flexible", they affirm. "Flexibility means both sides making concessions," said a senior official. The Pakistani view is that "Kashmiri opinion" has to be taken into consideration. The officials say that the entire spectrum of "Kashmiri opinion", including those in government, those who participated in elections, the various Hurriyat factions, and also the Kashmiri diaspora, should be included in the dialogue process. "There has to be a mechanism to find out Kashmiri public opinion," said a Pakistani diplomat. Islamabad believes that the dialogue between New Delhi and the Hurriyat is "fundamentally flawed". It feels that it would be better if India and Pakistan initiate the dialogue process and then allow the Kashmiris to join in. One of the suggestions is to hold a grand "Loya Jirga", patterned on the Afghanistan model in which Kashmiris of all political persuasions can attend and collectively determine their negotiating position.

The new Indian government has been criticised in some quarters for allegedly making unnecessary concessions to Pakistan. The critics, many of whom belonging to the Opposition Bharatiya Janata Party, are of the view that the reiteration of the commitment of the two countries "to the principles and purposes of the Charter of the U.N. [United Nations], and their determination to implement the Simla Agreement in letter and spirit", as mentioned in the statement issued after the talks between the Foreign Secretaries, constitutes a significant concession to Islamabad. Their argument is that this commitment would help to internationalise the Kashmir issue and involve third parties in the dispute. It has been pointed out that both India and Pakistan, being members of the U.N., have to subscribe to the U.N. Charter. Besides, the First Article of the Simla Agreement refers to the U.N. Charter.

Pakistani officials said that they subscribe to both the U.N. resolutions on Kashmir and the Simla agreement. They, however, pointed out that the joint statements issued in January, when the then Prime Minister Atal Bihari Vajpayee was in Islamabad, and in New Delhi in June talk about finding a bilateral settlement to the Kashmir issue. At the same time, Pakistani officials emphasise that Pakistan has "never forfeited its right to internationalise the issue of Kashmir".

Meetings with a message

in Singapore

THE recent political-level interactions between India and Pakistan on the sidelines of two regional conferences in East Asia cannot be dismissed as cameos of bonhomie. The meetings which External Affairs Minister K. Natwar Singh held with Pakistan Foreign Minister Khurshid Mahmood Kasuri at the Chinese city of Qingdao on June 21 and in the Indonesian capital of Jakarta on July 2 were much more than marginal events.

The possibility of yet another new beginning on the India-Pakistan diplomatic front in the context of the assumption of office by a Congress-led coalition government is no mirage, judged by the comments of both sides. However, it is an altogether different matter whether the latest dialogue process can really prove decisive in shaping a friendly relationship that can also be sustained.

After the Natwar Singh-Kasuri meeting in Qingdao, held on the sidelines of the Asian Cooperation Dialogue, India said the two leaders had agreed to "provide continuous political guidance" to those already engaged in the current process of bilateral parleys under the matrix of a composite dialogue. The "progress" already made in these official-level discussions on various subjects was also described by the two leaders as a "positive" trend. More important, the Qindao meeting, the first of its kind between India and Pakistan at the political level after the formation of the new Indian government, was described by the Indian Embassy in Beijing as a "warm and productive" exercise in diplomatic engagement.

"Productive" certainly was the Natwar Singh-Kasuri meeting in terms of weaving a web of new connections. However, it would be naive to look for any "productive" outcome in terms of progress in resolving the fundamental issues at stake, particularly the one relating to Jammu and Kashmir, in the specific context of the Qingdao or Jakarta meetings.

The most significant comment that Pakistan made after the Natwar Singh-Kasuri conversation in Jakarta was that the two leaders agreed that the current "momentum of [the bilateral] dialogue process [would] be kept up". The Indian `take' on the talks in Jakarta was that the two men agreed not only to "continue" the overall bilateral dialogue-process but even carry it "forward".

It is easy, of course, to strike a sceptical note by arguing that much should not be read into the substance of such unstructured meetings. However, a credible counter-point is that India-Pakistan diplomatic encounters of the political kind, wherever they might occur, cannot be regarded as non-events. In fact, each of these meetings was preceded by a substantive bilateral engagement at other levels. An expert-level agreement, reached in New Delhi on certain aspects of risk reductions (concerning nuclear weapons), provided the immediate context for the Natwar Singh-Kasuri talks at Qingdao. The Foreign Secretaries of India and Pakistan had met, also in New Delhi, shortly before the political-level talks in Jakarta.

In Jakarta, according to Pakistan, Natwar Singh was the first leader to greet Kasuri after it was formally admitted to the Association of South East Asian Nations' Regional Forum (ARF), Asia's only elite security-dialogue forum. Significantly, it was the Atal Bihari Vajpayee-led coalition which agreed to go along with the general "consensus" within the ARF to take Pakistan aboard. Hence Natwar Singh's gesture to Kasuri at the ARF platform was noteworthy.

In some ways, the Natwar Singh-Kasuri talks at Qingdao marked an exercise in positive thinking. The nuclear risk-related confidence building measures (CBMs), which the experts had agreed upon prior to this meeting, provided quite an unusual setting as Natwar Singh and Kasuri sought to establish a working relationship at the political echelons. Kasuri later told this correspondent over phone that it was Natwar Singh who showed him the text of the accord on the CBMs.

Noting that the CBMs could herald a process of detente on the `nuclearised' India-Pakistan front, Kasuri made a particularly India-friendly comment that was indicative of the potential for a meeting of minds on the highly sensitive nuclear issue.

Although Pakistan does not subscribe to the principle of no-first-use of nuclear weapons, a norm that the Vajpayee-led government had set forth after conducting nuclear tests at Pokhran in 1998, Kasuri said: "We are responsible countries. Nobody should talk down to Pakistan and India. We are interested in non-proliferation."

If, however, the India-Pakistan talks in Qingdao did not touch upon Natwar Singh's earlier proposal for a common nuclear security doctrine involving not only New Delhi and Islamabad but also Beijing, the reason was traced to the fact that the idea had been put in perspective through a "clarification" soon after it was articulated.

In any case, the Natwar Singh-Kasuri meeting, which also had elements of a get-acquainted exercise, was not of a long-enough duration for detailed explorations of new and emerging ideas. However, the international community will watch closely for any China angle in the India-Pakistan dialogue, given the projections by Western Beijing-watchers like Bates Gill that "the most intense competition in the near term between China and India will be in the strategic nuclear realm".

A bloodbath foretold

The battle for Tiger Hill was won with the lives of hundreds of soldiers and enormous resources. Was the entire exercise avoidable? A Frontline investigation answers in the affirmative.

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FIVE years ago, at 8-00 a.m. on July 8, 1999, troops of the 18th Battalion of the Grenadiers Regiment signalled that Tiger Hill was secure. For most of India, this was perhaps the most powerful emotional moment of the Kargil war. It had been a bitter battle, one that called for troops to push their way across near-vertical rock faces under sustained enemy fire. The battle for Tiger Hill won the troops of the Grenadiers Regiment 10 awards for gallantry and distinguished service, including a Param Vir Chakra and two Maha Vir Chakras. Now, a Frontline investigation has found that the battle could have been avoided if top commanders had paid attention to what their soldiers were telling them - that the Pakistani occupation of Tiger Hill was predicted and avoidable.

A 1998 war-game carried out in Kargil, the Frontline investigation has found, had specifically warned of the possibility of Pakistani troops holding key heights in the Kargil sector. The warning led to demands for reinforcements. Frontline has obtained access to a January 30, 1999 letter, calling the attention of the then Commander of 3 Infantry Division, Major-General V.S. Budhwar, to major weaknesses in Indian defences identified in the course of the war-game, code-named `Exercise Jaanch'. Written by Colonel Pushpinder Oberoi, the commanding officer of 16 Grenadiers, the letter is marked 0072/AC OPS. Colonel Oberoi was cashiered after the war for the unauthorised vacation of Bajrang, a key forward post in the Kargil sector, during the winter of 1998-1999.

According to Colonel Oberoi's classified letter, Exercise Jaanch suggested that "existing defs [defences] need a re-look in view of the en [enemy] capturing certain hts [heights] in the vicinity of own defs [defences], rendering some posts untenable". It proceeded to make the specific suggestion that section-strength or company-strength forces be permanently stationed on Point 5,165-metres, Pariyon ka Talab and Point 4,660-metres. Interestingly, the term Tiger Hill seems to have been used for Point 4660 for the first time during this exercise, perhaps because of the hump and tooth-shaped features that protect the approaches to its summit. General Budhwar, informed sources said, was dismissive of these warnings and told local commanders to make do with the forces they had.

Colonel Oberoi's letter was written after General Budhwar failed to respond to verbal pleas for troops, made during his visit to the sector on November 25, 1998. It would, ironically, have reached 3 Division Headquarters - and possibly the offices of the then Commander of 15 Corps Lieutenant-General Kishan Pal - at about the same time as the first reconnaissance groups of Pakistani intruders occupied these features. General Pal was dismissive of the prospect of a Pakistani offensive, an attitude founded on the fact that Prime Ministers Atal Bihari Vajpayee and Nawaz Sharif were shortly to meet in Lahore. He clung to the illusion well after the Kargil war began. At a meeting of the Unified Headquarters in Srinagar on May 24, 1999, called to prepare an assessment for the Cabinet Committee on Security which was to meet the next day, General Pal insisted that there "were no concentration of troops on the Pakistani side and no battle indicators of war or even limited skirmishes". Paragraph 4(v) of the minutes of the Unified Headquarters meeting record his claim that the "situation was local and would be defeated locally".

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General Budhwar, for his part, seemed to have men available for virtually every conceivable enterprise other than guarding India's frontiers. On May 16, 1998, 3 Division sent out instructions to all its field units informing them of their commanding officer's new pet project - building a zoo for Leh's few thousand residents. Lt.-Col. U.K. Singh sent out a second missive, marked 6361/9/ZOO/Q1, on June 8, 1998. "Please ensure", the Colonel's letter said, "that various types of wild animals/birds are procured and despatched to zoo at Leh at your earliest." "Cages required for transportation of animals/birds," it continued, "will be made under arrangements of respective b[riga]de[s]." "No representation," the Colonel concluded sternly, "will be entertained." The project had no legal sanction and was executed in express violation of a plethora of wildlife protection laws - a fascinating glimpse into the mindset prevailing in 3 Division.

WITH hindsight, alarm bells ought to have been going off by this time. Paragraph 8 of an August 1998 briefing note prepared by Brigadier Surinder Singh, Commanding Officer of 121 Brigade, for General Budhwar ahead of former Chief of the Army Staff General V.P. Malik's visit to Kargil, was explicitly marked "Enhanced Threat Perception" and laid out the reasons for 121 Brigade's apprehensions. Sections (a) (i) to (iii) of the paragraph recorded fresh Pakistani troop movements, including the deployment of 24 Sind Regiment, a reserve division from Gilgit, to forward positions at Olthingthang. Another battalion, the paragraph records, had moved "on priority" from Sialkot to Skardu. Fresh heavy and medium guns had been inducted into the sector, paragraph 6 (b) noted, along with M-198 155 millimetre mortar, and light flashes, possibly laser designators for smart weapons or missiles, had been seen over Drass and Kargil.

From paragraph 13 onwards, the briefing note detailed "Vulnerabilities (of) 121 (I) Inf[antry] B[riga]de". It noted that National Highway IA was vulnerable to fire from Pakistan positions on Twin Bumps, Bunker Ridge and Point 3249, and the next paragraph pointed out that Kargil and its rear areas were open to shelling. Paragraph 15 laid out a whole new order of vulnerability, pointing out that "infilt[ration] routes [were] available through Mashkoh [Mushkoh] Valley, from Doda side to Panikhar, Yaldor and through nalas [streams]". Small detachments could be targeted, paragraph 15(b) noted, while paragraph 17 noted the existence of posts vulnerable to "rogue action". While General Pal could not, in fairness, have been expected to anticipate a Kargil-style offensive by Pakistan, the fact remains that no action was taken to protect the sector from these admitted vulnerabilities. Requests for air reconnaissance were denied and specific intelligence reports on the training of Pakistani irregulars across the Line of Control consigned to the dustbin.

IT is hard to estimate precisely the number of casualties caused by the negligence of General Pal and General Budhwar and, possibly, others higher up the chain who knew of the warnings generated by Exercise Jaanch. Since the final victory required the capture of a succession of secondary positions, for which disaggregated data is not available, only battle losses in the actual fight for Tiger Hill can be studied. These, in themselves, were enormous. The 18 Grenadiers Regiment had nine personnel dead and 37 injured while fighting to occupy Tiger Hill, while another 25 of its men were killed and 41 injured while taking a key adjoining feature, Tololing. The 8 Sikh Regiment lost 35 men and had 83 injured while struggling to set up a base from which the Tiger Hill assault could be launched. Together, the fatalities in these battles alone account for well over one in ten of the 499 fatalities suffered by India in the entire war.

Occupation of the area around Pariyon ka Talab, which translates as `the Lake of the Fairies', could, in turn, have blocked the intrusion towards Tiger Hill. It was only on May 20, 1999, that Indian troops were moved to Pariyon ka Talab, in an effort to block the Pakistani supply route to Tiger Hill. General Pal, concerned with evolving events in the Kashmir Valley, had steadily bled the 121 Brigade sector of troops, thus widening the gaps available for infiltration through the Mushkoh Valley, the site of the lake. Between January 10, 1999 and March 30, 1999 the Army sent out no patrols into the Mushkoh sector, allowing Pakistan to take control of critical features dominating National Highway 1A from Mughalpura to Dras. Sixteen men of the 2 Naga Regiment were killed in fighting to recapture Point 4875, the most important feature in the Mushkoh Valley, while 24 were injured.

While the Army subsequently pinned responsibility on local commanders for the failure to patrol the area properly, no investigation was carried out on the systematic denuding of troops in the Kargil sector, and on whether 121 Brigade was in a position to carry out its task. Interestingly, the official Kargil Review Committee made no reference at all to Exercise Jaanch in its report on the 1999 war, one of a series of scandalous omissions by investigators who claimed to have access to all official documentation. Colonel Oberoi was removed from service for his negligence on the Bajrang Post issue. Brigadier Surinder Singh met a similar fate. His case, along with that of another sacked officer Major Manish Bhatnagar, is being heard in the Delhi High Court. The United Progressive Alliance government has a chance to set wrongs right, and help ensure Indian soldiers are not sent to their deaths again because of the failures of their commanders.

Conquering heights

PRAVEEN SWAMI the-nation

FOR years, the Indian official position on Point 5353, a key peak in the Dras sector, has sounded like something out of Brave New World: `it never happened', `we never had it', and even `it doesn't exist'.

Now, a Frontline investigation has unearthed new evidence that Indian soldiers had made an abortive attempt to capture Point 5353 in the first days of the Kargil war. The evidence blows apart contradictory claims by former Defence Minister George Fernandes and top military officials that the feature does not lie on the Indian side of the Line of Control (LoC), that it was not a war objective and even that it was under Indian control.

Point 5353 is the highest feature in the Dras sector and allows Pakistani troops to observe National Highway 1A as well as an alternate Dras-Kargil route that is now under construction. Since it provided Pakistani artillery observers an excellent view of the route used by Indian military convoys, it was a key objective during the early fighting in the Kargil war. Troops under Major Navneet Mehra's command were asked to evict Pakistani intruders on Point 5353 by 6-00 a.m. on May 18, 1999.

Major Mehra's plan was to set up three fire-bases along the base of the peak to support the infantry assault by two groups. Although backed by some artillery, both groups faced a difficult climb, coming under direct fire from the Pakistani positions on Point 5353 and Point 5165. However, Major Mehra's despatches note that his commanding officer, Colonel Pushpinder Oberoi, had given specific orders "to go for it at any cost". Colonel Oberoi's troops failed to execute his instructions. Ill-equipped for the extreme cold, and not properly acclimatised to the altitude, the troops withdrew after suffering 13 casualties. The attack was finally called off at 3-00 a.m. on May 19, 1999.

After news broke that Pakistani troops occupied Point 5353, the Indian Army denied the peak had ever been held by India, or that it was on its side of the LoC. A press release issued on August 11, 2000, asserted that the "point was never under our control either before or after Operation Vijay in Kargil". Fernandes seemed to disagree. Asked about the status of Point 5353 at a subsequent press conference, he insisted that "every inch of the land is under our control". Fernandes' subsequent statements added to the confusion. Speaking to an audience in Mumbai, he said: "Point 5353 is the point over which the LoC goes. Fact is, out troops had never occupied that."

Bureaucrats at the Union Government's Press Information Bureau (PIB) then proceeded to blow apart their own Minister's claims. On January 1, 2001, the PIB issued a photograph of Fernandes standing on what it claimed was Point 5353. A furore broke out, as what Fernandes had himself stated suggested Indian troops had no business to be there. Later, the PIB was forced to sack a junior staffer for what it called an administrative error. There was, however, no clear explanation of just how the error had taken place. Critics noted that the PIB officer could not have invented the slogan for the photograph on a whim and suggested that Fernandes was either misinformed about his location or that his staff were seeking to secure a quick propaganda coup.

War-time media reports, based on briefings by the Army, suggest that fresh efforts to take the peak were made from July 21, 1999, well after fighting had officially ended. Fighting was reported from the area by the Press Trust of India, and one senior military official reported that Point 5353 was among three areas that continued to be held by Pakistani intruders despite the official withdrawal. While Indian efforts to recapture Point 5353 were unsuccessful, available evidence suggests that the then Commander of 56 Brigade, Brigadier Amar Aul, responded by occupying two heights, Point 4875 and Point 4251, on the Pakistani side of the LoC. Subsequently, local commanders hammered out a deal, where both agreed to leave points 5353, 5240, 4251 and 4875 unoccupied.

Towards the end of October, and for reasons that are still unclear, 16 Grenadiers was ordered to take Point 5240 and 1-3 Gurkha Rifles was asked to occupy Point 5353. While 16 Grenadiers' attack proceeded as planned, despite bad weather, 1-3 Gurkha Rifles never made its way up to Point 5353, for reasons that remain unclear. When Pakistani troops detected the Indian presence on Point 5240, they promptly reoccupied Point 5353. No proper explanation has ever been offered for just why 1-3 Gurkha Rifles did not proceed as planned to Point 5353, but some officers within the Army believe Brigadier Aul was unwilling to sacrifice the large numbers of troops the murderous battle condition would most likely have claimed.

Interestingly, however, 16 Grenadiers' records on the Point 5353 assault refer to the height as "a minor objective". So do entries in Colonel Oberoi's confidential service records. The assessment was vindicated during artillery clashes in 2001-2002, when Pakistani observation posts on Point 5353 were unable to bring accurate fire to bear on either the highway or the nearby Indian positions. Indian troops were able to tie down the Pakistani position with accurate fire, rendering it near impossible for its superior altitude to be used to good effect. While Point 5353's loss may not constitute a major military loss, the continuing controversy over the issue does point to the institutional use of deceit and dishonesty to cover-up military failures before, during and after the Kargil war.

A life-saving order

SIDDARTH NARRAIN public-health

While pharmaceutical companies try to persuade the government to reduce the number of drugs under price control, a Supreme Court order directs the government to ensure that the prices of life-saving drugs are kept under strict control.

EVEN as pressure from pharmaceutical companies to reduce the number of drugs that are under price control in India increased, the Supreme Court, in an order issued during the proceedings of a petition, said clearly that the government should ensure that the prices of essential and life-saving drugs were kept under control. The petition was filed by the All India Drug Action Network (AIDAN), the Medico Friends Circle (MFC), the Low Cost Standard Therapeutics (LOCOST) and the Jan Swasthya Sahyog. Says Colin Gonsalves, the advocate representing these organisations in the Supreme Court: "Any move to reduce the number of drugs in the DPCO [Drug Price Control Order] will be in contravention of the Supreme Court order in the K.S. Gopinath case where the court made an order on March 10, 2003, directing the government to ensure that essential and life-saving drugs do not fall out of price control."

According to the World Health Organisation (WHO), essential medicines are those that satisfy the priority health care needs of the population. The medicines are selected keeping in mind their public health relevance, evidence of safety and efficacy, and cost-effectiveness. Essential medicines are intended to be available in the context of a functioning health system at all times in adequate quantities, in appropriate dosage forms with assured quality and reliable information, and at a cost that the community and individual can afford.

The history of price control in India dates back to the Essential Commodities Act of 1955, which kept a check on prices of essential commodities including drugs. In 1979, there was a list of 347 drugs in the DPCO that were under price control. Over a period of time, as a result of sustained lobbying by the Indian pharmaceutical industry, the number of drugs listed in the DPCO fell to 142 in 1987 and to 76 in 1995. The problem is the absence of a regulatory agency that is empowered to keep a check on the prices pharmaceutical companies decide on and the profit margins they think are acceptable. The National Pharmaceutical Pricing Authority (NPPA), set up in 1997, is supposed to monitor the prices of drugs to ensure that they do not flout the maximum price allowed if they are under price control.

In the European Union (E.U.) and Australia, governments have tried complementing pharmaceutical licensing procedures with the ability of a company to demonstrate the cost effectiveness of the drug. For example, the Pharmacy Benefits Scheme (PBS) in Australia and the National Institute of Clinical Excellence (NICE) in England require companies to submit evidence of the costs and effects of new products. In the United Kingdom, the U.K. Pharmaceutical Price Regulation Scheme (PPRS) regulates profits to a band of 17 to 21 per cent on historical capital or the initial capital used to begin the venture with a 25 per cent variation on either side. Companies are free to set prices, provided the rate of return is within the band. If the profits are higher, the companies have to reduce profits the next year and if the profits are lower, they can raise the prices. In France, Italy and Belgium, prices are set in relation to relative cost, prices elsewhere in the E.U., and the contribution made to the national economy.

In India, the authority in charge of drug pricing is not the Ministry of Health and Family Welfare but the Ministry of Chemicals and Fertilizers. The Government of India appointed the Committee on Drug Pricing in 1999; its members included representatives from the pharmaceutical industry, the Secretary of the NPPA, the Drug Controller of India and the Secretary to the Ministry of Chemicals and Fertilizers. In its summary recommendations, the Committee said: "...In most other countries the regulation of drug prices is considered necessary to contain public expenditure due to the government's role in funding social health and insurance schemes that cover hospital and out-patient drugs... . In these countries, a substantial portion of the population is covered through health insurance and public health schemes. As a result, consumers are not affected directly by the high prices of drugs or the high costs of medical services but are made to pay for the increased costs through a high insurance premium. As opposed to this, a substantial portion of the population in India is market-dependent and have to meet all their expenses on this account out of their own pocket, making price regulation of pharmaceutical products unavoidable."

According to Pharmaceutical Policy 2002, which is formulated by the Ministry of Chemicals and Fertilizers, the criteria for price control of bulk drugs are based on the sales figures of drugs, that is, the Moving Annual Total value or MAT value of the drugs concerned. These are calculated by adding up the MAT values of single ingredient formulations of bulk drugs from the retail store audit data published by the market research company ORG-MARG. The idea is to identify bulk drugs of mass consumption, which do not have enough competition for the market to bring down the prices. Bulk drugs are kept under price regulation if the total MAT value in respect of any particular bulk drug is more than Rs.25 crores and the percentage share of any of the formulators is 50 per cent or more or the total MAT value arrived at in respect of any particular bulk drug is less than Rs.25 crores but more than Rs.10 crores and the percentage share of any of the formulators is 90 or more. Since MAT figures decide which drugs will go out of price control, there are many instances of life-saving drugs that are not controlled by drug pricing. According to ORG-MARG, in March 2001, the life-saving diuretic and anti-hypertensive, frusemide, had a total MAT value of Rs.9.48 crores and though the leading brand Lasix manufactured by Avantis had a market share of over 97 per cent, it escaped price control.

A cursory look at the drugs that are on the DPCO shows that the criteria for price control are not working. While drugs such as quinine and primaquinine used to combat malaria do not come under price control, analgin, which is banned in many countries because it can cause serious blood disorders, is listed as essential. Says Amit Sen Gupta, co-convener of Jan Swasthya Abhiyan, a network of organisations that works in the area of health: "The criteria for drug pricing have little to do with the country's health policy, the availability of health care or the diseases that are prevalent. For example, tuberculosis often leads to complications when patients do not comply with the prescribed regimes for treatment because drugs are not available to the patient. When this happens, second and third line drugs are used, but none of these are under price control."

Says S. Srinivasan, from LOCOST, a Vadodara-based trust that manufactures low-cost drugs on a no-profit basis, "If one looks at drug prices in terms of wages, that is, if you look at the costs of drugs for a person earning a minimum wage of Rs.60 in a State like Chhattisgarh, she/he has to spend one month's salary to afford immunisation for hepatitis A and nearly one and a half month's salary to afford treatment for tuberculosis. The difference between the prices of the Tamil Nadu Medical Services Corporation (TNMSC), set up to ensure the availability of essential drugs to government medical institutions in the State, and those charged in the market is glaring. For instance, the daily cost of treatment of tuberculosis using the least expensive brands available in the market is Rs.7.70 while the TNMSC rate is only Rs.2.49."

Pharmaceutical companies have been arguing that the number of drugs on the DPCO should be reduced as adequate competition will ensure reasonable prices. But a close look at the prices of drugs shows that this is not true. Often, the top-selling brand of a particular category is also the higher priced one; in other words, the brand leader is often the price leader too. Says Anurag Bhargav, a founding member of the Jan Swasthya Abhiyan and a physician: "If true competition and free market characteristics were present, the brand leaders that would sell the most would be the lowest priced. In reality, the brand leader is often the highest priced. For example, cefuroxime, a broad-spectrum antibiotic, produced under the brand name ceftum, is priced the highest although the brand has a share of 38 per cent, the highest in the market."

Although Finance Minister P. Chidambaram has indicated that the government will reduce the rigours of price control where it has become counter-effective, reducing the number of essential drugs on the DPCO will not only be in contravention of the Supreme Court's orders but also be contrary to the United Progressive Alliance government's Common Minimum Programme, which has promised to "take all steps to ensure the availability of life-saving drugs at reasonable prices". The government also has to worry about the coming into force of trade-related aspects of intellectual property rights or TRIPS in January 2005, which will mean that the generic equivalents of all drugs patented from that date onwards can no longer be produced in the country.

A `brown revolution'

A `BROWN revolution' is happening in the tribal areas of Visakhapatnam district. The tribal people are being taught, and encouraged, to grow "socially responsible and environment friendly" coffee to cater to the demand from developed countries.

The Coffee Board has embarked upon the challenging campaign of promoting the coffee grown in these remote areas as niche coffee for markets in the West. Niche coffee, determined by consistent quality and the socio-economic well-being of the local people, is a $55-billion market world-wide.

Although the tribal people of Visakhapatnam district have been growing coffee since the 1970s, it is only recently, particularly after eyeing the organic market, that it is being given a thrust. Some 30,000 tribal people of Andhra Pradesh, who once practised slash-and-burn `Podu' (shifting) cultivation, are now growing coffee as a shade crop under the canopy of silver oak.

What the tribal people of Visakhapatnam are cultivating may be a minuscule part of India's annual coffee production of around three lakh tonnes. But, according to the Coffee Board, what is significant is that apart from regenerating the forest cover in those parts of the Eastern Ghats where it is cultivated, coffee has helped at the micro level by boosting the income of the tribal people. Their per hectare income from coffee is estimated at Rs.15,000 compared to Rs.10,000 for pineapple, Rs.1,500 for niger seeds and Rs.1,000 for maize.

The Coffee Board cites the instance of 50-year-old Linganna Padal who owns a demonstration coffee plot, which has generated enough income for him to own a house and educate his children. His success is now sought to be replicated throughout the Integrated Tribal Development Agency areas of the district.

However, it is not just a case of the good intentions of the Coffee Board and the ITDA of Paderu to help the tribal people. Some argue that there could even be a sound marketing base to all this. World over, there is a burgeoning demand for organic coffee. In those areas of Karnataka, Tamil Nadu and Kerala where over 90 per cent of India's coffee is grown, any shift to organic coffee cultivation would necessitate a break in cultivation as the soil has to be left fallow for a few years to wash out traces of chemicals. But the tribal areas of Visakhapatnam can cultivate organic coffee as no chemical fertilizers or pesticides are used, as much owing to financial constraints as the lack of exposure to modern methods of cultivation.

Trying to turn this into an advantage, the Coffee Board and the ITDA launched the programme to grow coffee in the Araku Valley. Coffee Board officials, however, say that it seems far-fetched for Araku Valley coffee to sell in London or New York. But the process is moving in that direction. The Coffee Board has even created a logo for the "Araku Valley Coffee" brand.

According to the Coffee Board, the quality of Araku Valley coffee will be improved through systematic development of on- and off-farm processing facilities. Self-help groups of tribal farmers are to be strengthened to facilitate pooling of coffee so as to offer consistent and larger quantities. A physical platform for auctioning is expected to give a fillip to marketing and the prospects of exporting coffee to Japanese, Australian and American markets through Visakhapatnam port are to be pursued.

Araku coffee is turning out to be a potent brew indeed.

Marketing tribal wealth

WITH the increasing worldwide demand for natural products, the Andhra Pradesh government-run Girijan Cooperative Corporation Ltd (GCC), which procures minor forest produce and agricultural produce from the hill tribal people and sells them after value-addition, is looking at markets abroad.

According to a senior GCC official, the Corporation is confident of making a significant headway abroad, with its range of products that includes French beans, cashew, amla, honey, herbs and cosmetics.

As a first step, the Visakhapatnam-headquartered GCC has launched its web site, where it lists its range of products. The idea is to generate demand and then procure the produce from the tribal areas, a practice that marks a break from the practice of procuring the produce and then scouting for a market. According to the GCC official, this can also fetch a better price for the tribal people's products.

The GCC expects a steady market for niger seeds and French beans in the United Kingdom and the United States. Another product it is focussing on is gum, which is said to be of high quality and has a `swelling ability' of 1,300-1,800 points (the gums available in the market usually have a swelling ability of 500 points only).

The institution is particularly confident of marketing a range of cosmetic products that includes sheekakai (soapnut), soaps and turmeric. The turmeric from the tribal area of Paderu, for example, gives high-quality oil.

The GCC also plans to market bio-flocculent products, which have the property of binding atomic minerals and hence can be used to extract uranium from ore. Stychnospotatorum, a seed with high bio-flocculent properties, is grown extensively in the tribal areas of Andhra Pradesh. The National Metallurgical Laboratory at Jamshedpur and the Uranium Corporation of India are engaged in research to extract from the seed the basic substance, which can bind uranium. The GCC has applied for a patent for this product.

Further, with the State Forest Department withdrawing the ban on the procurement of `naramamidi bark', a main raw material for the agarbathi industry, the GCC is looking at this product, which fetches a very high price.

The GCC is focussing on increasing minor forest produce procurement from the tribal people as part of its forest regeneration drive. Some 10 plant species, including gum karaya, mohwa, tamarind, sheekakai and amla, are being distributed in large numbers to the tribal people under this programme.

With the tribal areas of Andhra Pradesh having a wealth of minor forest and agricultural produce, the GCC has the potential to become a major player in the nature-based products market. Said another GCC official: "Our studies show that the tribal areas in the State have tamarind worth Rs.18 crores; French beans worth Rs.45 crores; adda leaves worth Rs.20 crores; and medicinal plants worth Rs.20 crores. We are tapping hardly 10 per cent of the forest wealth."

In the lap of nature

A HORTICULTURE technique, some 10,000 years old and forerunner to the systematic cultivation of food crops, is still practised by tribal societies living on hills and mountains the world over and the hill areas of Visakhapatnam are no exception. Known as slash-and-burn cultivation, or Podu in Visakhapatnam, it involves clearing the jungle on the hill slopes, burning the trees and growing crops on the ashes. This method does not require fertilizers, chemicals, pesticides or insecticides. Organically grown, the products are naturally flavoured.

The Samanthas or the Khonds of the Visakhapatnam tribal hill areas are one of the few traditional horticultural communities that have made the Eastern Ghats of Andhra Pradesh and Orissa their home. In the past, they cultivated a plot of land for six-seven years and then moved to a new slope, leaving the earlier plot fallow for some 10 years. But the restrictions on slash-and-burn cultivation and the growing pressure on land have reduced the fallow period to two-three years.

For the tribal people, slash-and-burn cultivation offers certain advantages over settled cultivation: the management is simple and farming requires no special inputs or implements. All that is needed is a hoe and human labour. Crop productivity is low but so is the cost of inputs - around Rs. 600 a year for three crops, less than one-tenth the amount needed to raise a single conventional crop. However, the tribal people do not set much store by either productivity or profits and are satisfied with what they get. The most remarkable feature of Podu cultivation is that almost all varieties of cereals and vegetables are grown in one plot.

THE tribals have a strong sense of community living. Whether it is festivals, farming or funerals, everyone in the village is involved. Slash-and-burn cultivation is in itself a ritual for them. Most festivals are connected with either farming or collection of minor forest produce. During festivals, every household contributes its share in accordance with the decisions arrived at by the village elders. Families celebrate festivals such as "Itika Pongal", the hunting festival in April, by performing the traditional Dimsa and Mayur dances.

In February, during "Biccha Parbu", the seed festival, the Samanthas worship the village goddess "Jakiri Penu" by sacrificing animals. Most tribes believe that sowing seeds mixed with sacrificial blood will propitiate nature. It is only after this ceremony that most tribal people begin sowing operations.

Besides Podu, some tribes also cultivate on flat land. After the monsoon, they plough the field two or three times and then broadcast the seeds, mainly of dry paddy, ragi, and minor millets.

Some tribal people also practise terrace cultivation to grow wet paddy. Though the monsoon is the main source of irrigation, at many places streams have been diverted by raising walls of stones. Seedbeds of wet paddy are raised in May. In early July, the plots are ploughed twice and the water is allowed to stagnate in the field for a week. Then, after ploughing again, the paddy seedlings are transplanted.

All families cultivate horticulture crops such as chillies, tobacco and vegetables on small patches. While some families have pattas for the land, others have "D-form pattas", which proclaim their temporary ownership of the land, and quite a few cultivate land "illegally". Women and children collect a variety of minor forest produce such as edible and herbal roots, tubers and creepers, leaves and fruits. They sell most of these products at the shandies to buy kerosene, oil, salt, tobacco and clothing. Every tribal household has stocks of cereals, pulses and minor millets and never goes hungry throughout the year.

The commercial sense of the market is alien to tribal people. Their economic activity is interwoven with their religious life. Their pantheon of gods and goddesses symbolises various forces of nature and they believe in the absolute surrender of the human spirit to these forces. The availability of food in the jungle, the fertility of the soil, the rain and the outbreak of epidemics signify the bounty or the wrath of the gods and goddesses. Whenever an epidemic breaks out in the village, the Samanthas propitiate "Ruga Penu", the goddess of disease. After worshipping the godess, they ceremonially send her out of the village. The oneness with nature is characteristic of the tribal lifestyle, which is as old as the mountains.

Trade and a tradition

Shandies, or weekly markets, play a key role in life in the tribal heartland of Visakhapatnam district in Andhra Pradesh.

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IT is a bright Sunday morning. Sunkaramettah village, 1,500 metres above sea level and surrounded by lush green grassy knolls, orchards and a thickly wooded forest, wears a festive look. There is hustle and bustle all around. And, as far as the eye can see, people are walking in, dressed in their best and weighed down by a variety of nature's bounty - cereals, pulses, fruits, vegetables, roots, shoots and leaves.

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One of the largest - and also the highest - shandies in the Paderu Agency area of Andhra Pradesh's Visakhapatnam district has just come alive. For the more than 40 lakh tribal people of the district, who constitute over 14 per cent of its population, economic, social and cultural life revolves around shandies or weekly local markets.

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On an average, tribal people from 200 villages in a 25-30 km radius flock to a shandy every week. The major ones attract people from up to 600 villages, between 1,000 and 1,500 people belonging to the Bagada, Konda Dora, Khond, Mali, Nooka Dora, Valmiki, Kotiya, Manne Dora, Porja, Gond, Reddi Dora, Gadaba, Konda Kammara and Kulia tribes.

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Many of the tribes are not native to the Paderu Agency area but have settled there after being displaced by power and industrial projects elsewhere in the State and in Orissa. Interestingly, all tribal people who come to a shandy do not speak the same language. While the language - Kui, Sarava, Jatapu, Gadaba, Adivasi Odiya and so on - varies across tribes, some have a high content of Telugu and others Oriya, depending on the village's proximity to the Orissa border and also the tribe's place of origin. Though traditionally the tribal people practise the animistic form of worship, there is evidence of the influence of Hinduism and Christianity. The Alekha tradition of Buddhism is also practised in some areas.

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Usually, entire families come to a shandy - to sell fruits, vegetables, spices, poultry, cattle, and such minor forest produce as adda leaves (which are sewn together to make plates) and bamboo. They buy mainly salt, kerosene and edible oils. If the shandy has a depot of the Girijan Cooperative Corporation's public distribution system, they also buy commodities such as rice and sugar. Girijan Corporation Cooperative Ltd, set up during the First Five-Year Plan to help tribal people, has monopoly rights over 30-odd varieties of minor forest produce. Things that come for sale in the shandies change every season.

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In most villages, a place is demarcated for a shandy. At some shandies the State government has provided some shelter. Tribal and non-tribal traders also put up tents. Only at the height of the monsoon may a shandy be suspended.

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Some shandies have `touring talkies', to which most of the tribal visitors gravitate after the day-long buying and selling, even if it means walking long distances to their villages after nightfall. It is also an occasion to socialise over a drink. It is common to find men and women drinking maddy kallu, a brew made of rice and herbs, or smoking tobacco.

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Coming alive at 6 a.m., a big shandy would go on until 4 p.m.; a small one would end at 11 a.m. Some of the major shandies in the Paderu Agency area come up at Chintapalli, G. Madugula, Paderu, Araku, Gutualput, Peddabailu, Munchingput, Jolaput, Hukumpeta, Kinchumanda, Damuku, Kasipatnam, Madugula, Dharakonda, Sileru, Mangampadu, Donkarai, Downuru and Sunkaramettah. (The Fifth Schedule of the Constitution guarantees tribal people living in Scheduled areas of nine States - Andhra Pradesh, Jharkhand, Gujarat, Himachal Pradesh, Maharashtra, Madhya Pradesh, Chhattisgarh, Orissa and Rajasthan - right over the land they live in. The government set up a Tribal Development Agency to protect this right along with various other provisions to enhance the welfare of tribal people. Thus, the areas where tribal people were concentrated began to be known as the "Agency areas" or "Scheduled areas".)

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Usually, a small shandy runs on the barter system, and mostly the traders are women. Only in medium and big shandies does money play a role, though barter is also practised.

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Although they are primarily meant for tribal people, shandies offer a huge opportunity for trading in various products. For instance, according to Ravi Rebbapragada, executive director of Samata, a non-governmental organisation (NGO) that has been working for the tribal people in the districts of Visakhapatnam, Vizianagaram, East Godavari and Srikakulam for nearly two decades, at least three shandies function on any given day throughout the year in the hilly tribal areas of Visakhapatnam district, each with an annual sale in the range of Rs.1 crore. This translates into an annual turnover of Rs.1,200 crores, a staggering sum considering the tribal people's social and economical backwardness and high illiteracy rate, 98 per cent in some areas. No amount of mining operations or agri-businesses, which are sought to be thrust on the tribal people can match this figure. For instance, in Sunkuramettah, which hosts a shandy every Sunday, middlemen and wholesalers come from the plains as far away as Escota (60 km away), Dharmavaram (65 km) and Vizianagaram (80 km).

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According to K. Jalluku of Baski village, some 30 km away, tribal families come to the shandy from Orissa villages some 60 km away. His wife Gunamma says the Sunkuramettah shandy has been there for over 50 years. Says Jalluku: "I have been coming here for the past 40 years, first with my grandparents, then with my parents and now with my wife and daughter Seethamma." Jalluku had left home at 3 a.m. to reach the shandy by 7 a.m., trekking 30 km. At 10 a.m., when this correspondent met Jalluku, he had 65 Rasallu mangoes from his land for sale. By mid-day he had sold all the mangoes, which fetched him Rs.100. "This is a good price," said Jalluku, who had to buy, apart from salt and kerosene, a sari for his wife and bangles for his daughter.

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But Rukmini from Pandurangini village, who had trekked 25 km to sell adda leaves, was not so lucky. She had brought to the shandy 3 kg of adda leaves and left the shandy at 5 p.m. with Rs.7. Sarasamma, who negotiated a deal with Gangamma on behalf of a mango wholesaler from the plains, got Rs.20 at the end of the day. Shivanna was disappointed that he could sell his two hens only for Rs.75. He expected to get Rs.130.

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Pollanna came to the shandy with some 50 kg of freshly plucked Neelalu mangoes grown on his land. A wholesaler from Vizianagaram, who had come with a van, bought all the mangoes for Rs.250 after a long bargain. Neelamma, who brokered the deal, got Rs.15 from the wholesaler and five mangoes from Pollanna.

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According to Jalluku, over time there has been a change in the items coming to the shandies as also in the operations of the market. Bamboo products such as mats and baskets and handloom saris have yielded place to plastic products (sold by retailers from the plains) and synthetic saris (also from the plains). Also, increasingly, money changes hands what with wholesalers from the plains flocking to the shandies in search of organically grown farm products at `cheap prices'.

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According to Polanna, the presence of people from the plains has robbed the shandies of their old-world charm. Their increasing commercialisation, he feels, is leading to the exploitation of the tribal people. They are cheated not only on price, but also in the weights and measures used (traders still use the unreliable spring balance). Traders exploit their innocence and illiteracy. According to Samata president P. Devullu, money-lending tradesmen manipulate them in various ways. Some of the tribal people are obliged to sell their products at a heavy loss to tradesmen to clear their debts.

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According to Ravi Rebbapragada, in some sense shandies represent the most decentralised and sustainable economic activity of the tribal people, who do not have anyone or anything to depend on except their land, water, forest and hard work. They do not depend on the public transport simply because there is hardly one.

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There is little interference from the government. In some shandies, Girijan Cooperative Corporation Ltd has inspectors collecting cess and tax from the traders who come from the plains.

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The Tribal Cooperative Marketing Development Federation (TRIFED) was set up in 1987 to provide the tribal people marketing assistance and remunerative prices for their minor forest produce and surplus agricultural produce and to protect them from exploitative private traders and middlemen. But the tribal people prefer the shandies.

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According to a survey by Homo Sapiens, another NGO, with the support of Marketing and Research Team (MART), a premier institution in micro-market promotion), the cost of products sold every year by 20 tribal villages in a shandy in Halia village in Nalgonda district is Rs.1.5 crores. Seeing an opportunity, multinational corporations are showing interest in this market.

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The Andhra Pradesh Rural Livelihoods Programme (APRLP) has gone a step ahead. It is not only looking to leverage these markets but also examining the scope for new shandies. The APRLP's aim, according to its mission statement, is to be a facilitator for sustainable rural development. With the support of MART, the APRLP has mapped the existing shandies and worked out plans for establishing new ones in five districts. It seeks to add 90 more shandies to the existing 178, in Anantapur, Mahboobnagar, Nalgonda, Kurnool and Prakasam districts. The plan, if successful, will be extended to other areas.

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According to APRLP project coordinator Satya Prakash Tucker, shandies are the most suitable marketplaces for the growing number of women self-help groups (SHGs) in the State. He wants to link the SHG movement with the shandies. According to Tucker, SHG members will have to look to shandies, market local products at remunerative prices, retain the cash flow within the local economy, support local production by expanding market channels, promote collective marketing, and make available extension and eco-friendly agricultural inputs.

As a pilot project, the APRLP has established a shandy in Nellikal village of Nalgonda district. On the opening day, it is reported that 2,500 buyers bought goods worth Rs.1.05 lakh. Collective marketing through the promotion of seller-buyer meets has also been launched. Bulk buyers are encouraged to buy from local producers.

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But most tribal people Frontline met in Nimalapadu, Jeerugadda, Vankachinta and Panasaputtu villages on the hills were not happy with the commercialisation of shandies. For one thing, they are not sure about handling non-tribal people, given their illiteracy.

For the tribal people, shandies go much beyond buying and selling. A major social gathering, the shandy transforms itself into an important place for the exchange of information and gossip. Many buy clothes and get them stitched within an hour by enterprising tailors. According to Samata's Devullu, locally made soaps, "Looks" and "Virma", are popular with them.

Match-making also happens in shandies. Little wonder that the youngsters are dressed in their best. One can see tribal women in bright-coloured saris, held together by a knot resting on the left shoulder. They appear striking, with big orange, bright red, yellow and purple flowers decorating their braids and their noses, which are pierced at the centre and on the sides, holding rings of various sizes.

For the tribal people, nothing can substitute a traditional shandy. For them, it is, after all, a way of life.

The President's man

B. MURALIDHAR REDDY world-affairs

SHAUKAT AZIZ, Pakistan's "Prime Minister-in-waiting", is a banker's pride and a politician's envy. After a three-decade-long career in corporate banking and less than two years of `active' politics, he has risen to the position that any politician could aspire for in the guided politics of military-dominated Pakistan.

He was chosen for the job by General Pervez Musharraf, the most powerful President Pakistan has ever had. It does not matter if he does not fulfil the basic qualification - he is not a member of the National Assembly. Chaudary Shujjat Hussain, the chief of the military-made Pakistan Muslim League (Quaid-e-Azam) who hails from the Punjab province, has been installed in the Prime Minister's seat pending Aziz' election. Aziz, currently a member of the Senate, is contesting from two constituencies in byelections scheduled for August 18.

Why did Musharraf select Aziz? In the words of the General, if neighbouring India can accept a renowned economist as its Prime Minister, why not Pakistan?

However, if the Opposition parties are to be believed, Musharraf could have been motivated by two factors - To please the all-powerful United States and the international financial institutions, and to show his disdain for the political class, even of the servile kind. Aziz has a strong U.S. connection, as he has served with Citibank for 30 years, 22 of these outside Pakistan. Aziz was vice-president of Citibank when he quit his job after Musharraf's coup in October 1999 and took charge as Finance Minister in his government.

In his first interview to the state-run Pakistan Television (PTV) after he was named "Prime Minister-in-waiting", Aziz said that the first time he saw Musharraf was on the CNN, a few hours after the bloodless coup on October 12, 1999 when the General first addressed the people of Pakistan. "In New York I had casually tuned in to the CNN and I heard Gen. Musharraf's address," he told the interviewer. As if to emphasise the point that he had no connections with the all-powerful military, Aziz made it known that never before had he visited the GHQ (headquarters of the Pakistan Army).

Aziz said that a few days later the General sent him a message asking him to travel to Pakistan and call on him. "When I met the General saheb, he asked me if I would like to serve as Finance Minister in his government. I was delighted as it was always my desire to serve the people of Pakistan," he told PTV.

To a query about his passport, he replied: "I never gave up [my] Pakistani passport. It was a matter of pride, well, my identity. Non-resident Pakistanis tend to be more patriotic and nationalistic." It need not necessarily mean that he does not have a U.S. passport. Three days later, as Opposition members in the Senate created a furore over the subject and wanted him to clarify if he had a U.S. passport, Aziz chose not to join issue with them.

Committed to the International Monetary Fund-World Bank duo's free market philosophy, Aziz is credited with injecting new life into the dying Pakistani economy. When he took over the reins of the economy five years ago, the country was on the verge of debt default and the forex reserves were not enough to take care of even a fortnight's requirements. There was massive flight of capital, and the dollar was gaining value vis-a-vis the Pakistani rupee at an alarming rate.

Undoubtedly, today the Pakistani economy has made a spectacular recovery on every front with a growth rate of over 6 per cent, the highest recorded in recent decades. However, critics wonder how much of the credit should go to Aziz and how much of it could be attributed to the massive cash flows from the U.S. and its allies after the designation of Pakistan as a frontline ally in the "war against terrorism".

Although Aziz has been the Finance Minister of Pakistan for nearly five years, he has not trusted Pakistani banks and financial institutions to invest his own assets. As his declaration before the Pakistan Election Commission shows, his foreign exchange account in the country had a balance of $761. In contrast, his Citibank account in New York accounted for $2.91 million and the one with Lloyds in London 0.31 million.

Born in Karachi in March 1949, Aziz obtained an MBA from the Institute of Business Administration, University of Karachi, in 1969. He started his career in 1969 when he joined Citibank in Karachi. Aziz moved overseas in 1975 and served in the Philippines, Jordan, Greece, the U.S., the United Kingdom, Malaysia, Singapore and Saudi Arabia. He occupied several important posts before assuming charge as executive vice-president of Citibank in 1992.

In November 1999, Aziz was appointed Pakistan's Minister of Finance with charge of the departments of Finance, Economic Affairs, Statistics, Planning and Development, and Revenue. It was only in 2002 that Aziz joined the military-backed Muslim League, also known as the `king's party'. He, however, chose not to contest elections. He opted to become a member of the Senate.

Sticking to their guns

The third round of the six-party negotiations on the North Korean nuclear weapons issue sees little progress as North Korea speaks of "freezing" the programme while the United States looks at this position with suspicion.

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PROGRESS, measurable as a diplomatic nuance rather than a clear breakthrough, marked the third round of six-party talks on the North Korean nuclear weapons programme. With the parties agreeing "in principle" to sustain the process through another round by the end of September, the focus now shifts to some of the many contentious specifics.

After the talks effort concluded in Beijing on June 26, Chinese Vice-Foreign Minister Wang Yi, who chaired the effort, made some candid comments at a press conference. A quick-glance summary of the positions of the parties - the Democratic People's Republic of Korea (DPRK or North Korea), the United States, South Korea, Japan, Russia and China - to the negotiations, his comments are worth quoting.

"The DPRK expressed its willingness to give up all projects related to nuclear weapons in a transparent manner. [Pyongyang] would like to accept inspections to this end," Wang said. In this specific context, the DPRK stressed that its willingness to accept "nuclear freezing" "is merely the first step of nuclear [weapons programme] abandonment". For the first time, the DPRK put forward a "concrete plan" for the implementation of "nuclear freezing".

For the first time, the U.S., too, "worked out a comprehensive plan for the complete resolution of the nuclear issue", Wang pointed out. Noting that the U.S. reaffirmed "it would not adopt any hostile policies [towards] the DPRK", he delivered the punch-line about the larger problems at stake in the following terms: "Meanwhile, we clearly understand that the nuclear issue is highly complicated and there is still a serious lack of mutual trust between [the] relevant parties."

The main relevant parties being Washington and Pyongyang, the meeting in Jakarta between U.S. Secretary of State Colin Powell and DPRK Foreign Minister Paek Nam-sun, on July 2, on the margins of the annual meeting of a regional security forum, acquired political importance.

It was certainly not the first high-level political contact between the two countries since President George W. Bush's infamous description of North Korea, Iran and Saddam Hussein's Iraq as forming an "axis of evil". Powell and Paek had earlier met on the sidelines of the same regional forum at Bandar Seri-Begawan (Brunei) on July 31, 2002. That meeting, over a cup of coffee, was meant to break the ice as tensions had heightened between the two countries following the Bush remark. The latest Powell-Paek meeting, in contrast, was meant to give a political thrust, however modest, to the current channels of communication between the two sides. In the event, this meeting too, yielded not even a positive sound bite (even without substance). Not that anyone expected a quick-fix political formulation. But the U.S.-DPRK hiatus came in for special mention by Wang. "The basis of the [six-party] talks is not solid enough, and there are still a number of differences and even opposing ideas on the scope and means of the [nuclear weapons programme] abandonment, freezing and corresponding measures," he underlined.

Responding to questions from the media, Wang made it clear that the issues of "abandonment" and "freezing" remained the "two major difficulties" at the latest round. Asked specifically why his summing-up statement did not include any reference to the DPRK's willingness to "freeze" its nuclear weapons programme, he said the statement was "a collection of all consensus reached" at the meeting. "Fully authorised by the governments of the six parties after serious and careful negotiations," the Chairman's statement mentioned a few times the "first steps" towards the goal of denuclearisation of the Korean peninsula. These "first steps" would include a "freeze" by the DPRK of its atomic weapons programme, he hinted. It is this diplomatic nuance that forms the pith and substance of the progress achieved during the third round.

Now, the idea of a "freeze" and the duration of any such phase, even if only as a prelude to the ultimate dismantling of the DPRK's nuclear weapons capabilities, are still not acceptable to the U.S. The reason is that Washington does not like the idea of a "freeze" to freeze the movement towards the total elimination of Pyongyang's nuclear weapons capabilities.

Wang put this issue thus: "The DPRK plan focusses on the first steps towards nuclear abandonment, while the U.S. plan focusses more on the specific means of comprehensive nuclear abandonment [not a freeze as such]." Given that the chief U.S. delegate, James Kelly, had expressed the "hope" that North Korea could abandon all its nuclear projects in "a permanent, comprehensive and transparent manner" and given that the chief DPRK delegate, Kim Kye-gwan, had said that Pyongyang "could abandon all [its] nuclear weapons and relevant projects", the common ground and divergence, as regards the positions of the U.S. and the DPRK on the fundamental issues, cannot be missed.

The U.S. tends to suspect that a "freeze" could turn out to be the DPRK's ruse, a red herring being drawn across the dialogue track to delay or even dodge the issue of "a comprehensive, verifiable, irreversible dismantlement (CVID)" of Pyongyang's nuclear weapons programmes. This plurality of programmes is a reference to the U.S.' insistence that North Korea is currently seeking to produce nuclear weapons through two different routes - the use of plutonium, which is still available to Pyongyang from its old nuclear energy plants, and the uranium enrichment process, for which Pakistan is suspected to have provided the technical expertise. The question of Pakistan's own capabilities and their origin does not impinge on the six-party talks, though.

From the DPRK's perspective, any insistence by the U.S. on the existence of a plurality of programmes is only a complicating factor. While the CVID was generally agreed upon during the second round of the talks as a desirable goal, the DPRK did not acknowledge, even on that occasion, that a uranium enrichment programme had been added to the plutonium-use plans.

About the exchanges on the issue of plurality at the latest round, Wang noted that "it is on the question of enriched uranium that the U.S. and the DPRK hold very different views". However, it is the DPRK's offer of a "freeze" that is prominently subsumed in the latest accord on the need to define the "first steps" towards the CVID (although the nomenclature CVID itself was not specifically used by Wang in his June 26 statement).

The parties have now authorised a relevant Working Group to "convene a meeting as early as possible to discuss and define the scope, duration, verification and corresponding measures for the first steps towards the goal of denuclearisation".

The Working Group, which was set up following the second round, had already met twice to prepare the ground for the latest parleys. It consists of the same six parties, although the representatives have greater technical skills than the diplomats who participate in the main conferences of this process.

The latest collective accord on the initiation of a process to define the "first steps" is indicative of some willingness on the part of the U.S. as well to consider "nuclear freeze" as one of the first steps. However, it is anybody's guess, especially in view of the presidential election in the U.S., whether the "freeze" formula will indeed take off as a viable option.

Wang's summing up of the general positions of the other parties in this process was no less revealing. He said: "China, Russia, the Republic of Korea [South Korea] and Japan would like to adopt simultaneous actions to address the concerns of the DPRK. The U.S. also indicated that it would study the requirements of the DPRK."

Pyongyang's "concerns" pertain to its sense of insecurity in the face of the overwhelming military supremacy of the U.S. in the DPRK's immediate neighbourhood. Pyongyang has often interpreted various U.S. pronouncements as coded or even highly transparent threats to launch a pre-emptive nuclear strike against the DPRK.

The keenness of some parties to consider "simultaneous action" in this context has to do with the perception that the DPRK should be compensated at all stages of its movement towards a comprehensive dismantling of its nuclear weapons programme. It is this aspect that was summed up as an accord on resorting to "words for words" and "deeds for deeds".

The basic issue here is one of providing some security guarantees to the DPRK, an aspect that Bush acknowledged during his visit to East Asia in October 2003.

Perceivable, beyond these immediate diplomatic nuances, is the critical importance of the dynamics of the U.S.-China interactions on this issue. Wang Jisi, a well-known Chinese expert on U.S. policies, noted recently that Beijing had already signalled a critical "message" on the Korean nuclear issue. "The message was that Beijing and Washington share more common ground than Beijing and Pyongyang do."

This was based on the "official news report" that former Chinese President Jiang Zemin had told Bush that China did not endorse the DPRK's decision to withdraw from the nuclear Non-Proliferation Treaty - a pullout which is behind the current crisis.

An oil giant under siege

CHARU SINGH in Moscow world-affairs

The Russian oil giant Yukos faces the prospect of re-nationalisation, with its assets being seized by the state for non-payment of tax dues. Is President Putin preparing to strike at the oligarchs?

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THE big question doing the rounds in Moscow is whether Yukos, Russia's richest oil major, is facing re-nationalisation, which could be brought about by a clean transfer of the company's stock from its majority holders to the state or entities sponsored by it. Speculation in this regard is supported by the recent sting operation undertaken by the Federal Tax Ministry against the beleaguered company.

Bailiffs accompanied by armed officers descended on Yukos' headquarters in central Moscow last fortnight, demanding the payment of a $3.4 billion tax claim for the year 2000 that was upheld recently by a court. They carried copies of an execution writ that authorised the Tax Ministry to seize money from Yukos' bank accounts and freeze the company's assets. They also ordered that an inventory be taken. The bailiffs gave Yukos five days to cough up the massive tax claim. Subsequent to this action, the Tax Ministry announced a second tax claim of $3.4 billion, including fines and interest for the year 2001.

A desperate Yukos announced that the seizure of its bank accounts would force it to stop production within five days as it would not be able to pay the operating costs. Yukos stated that it had in excess of $1 billion in its bank accounts, which fell far short of the required amount. The company faces a default of $2.6 billion in international loans if its bank accounts are frozen. In a statement, Yukos said: "The action of the bailiffs to arrest the company's bank accounts poses a direct threat to Yukos' current production activity, which is of strategic importance for Russia's fuel and energy sector." The statement indicated that the seizure of the bank accounts "poses a direct threat to making current tax payments... and also throws into doubt the company's ability to make payments to its international creditors." So far, international creditors have maintained silence, and right now it is unclear whether they would come forward to announce a default on the $2.6 billion in loans extended to Yukos. Further, Yukos' credits have emergency clauses calling for their immediate repayment if the circumstances of the company become problematic. Among the creditors are Bank Menatep, the majority shareholder company founded by Yukos' former chief Mikhail Khodorkovsky, and a consortium of western banks that include Citigroup and Societe Generale.

The announcement of the second tax bill has caused considerable consternation within the company. Analysts are of the opinion that this announcement, coupled with the freezing of the bank accounts, is targeted at increasing the pressure on the beleaguered company's owners, so that they are forced, out of desperation, to hand over their controlling stake in the company to the state, or those sponsored by it, in lieu of taxes. This is a direct hit at Menatep and Khodorkovsky, its main shareholder, and his partner, Platon Lebedev. The two men have spent over eight months in jail after their dramatic arrest last October at gunpoint on charges of large-scale fraud and tax evasion. A Yukos spokesperson voiced the fear that the second tax bill "should automatically lead to default". Further, the tax authorities have yet to calculate the claims for 2002 and 2003. Analysts expect that the total claim could well cross $10 billion. This makes the bankruptcy of Yukos rather imminent. Analysts are of the opinion that Yukos may manage to meet the first tax claim, but there is no way by which it can meet the second, as that would require an all-out sale of assets. Analyst Steven Dashevsky, head of research at Aton, said in Moscow recently: "A combination of the two tax bills will almost definitely lead to the sale of core assets. Yukos in its current shape and form is not likely to exist."

Meanwhile, Yukos has been making frantic efforts to reach an out-of-court settlement with the government, which have not worked. Proposal after proposal has failed to draw a favourable reaction from the authorities. As the bailiffs presented their execution orders for the payment of taxes for 2000 to Yukos, the company offered its stake in Sibneft, the company it had earlier gained via merger, as collateral, but to no effect. The Yukos stake in Sibneft has a current market value of $4.7 billion. The Yukos spokesman said: "We offered the Sibneft stake as collateral. But as soon as they heard the word Sibneft, they just stood up and left." Before this offer, Yukos had proposed making a partial payment for the 2000 tax claim and suggested an out-of-court settlement, in which Yukos indicated its willingness to pay $1.17 billion over two years. However, the company then refused to pay the balance amount, which was charged under the heads of fines and penalties.

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Analysts are no longer split about where Yukos is headed; they feel that it will not survive in its current configuration. James Felkner, head of research at Troika Dialog, said in Moscow Times, "If there are any negotiations, the level of brinkmanship is superior to that of the Cuban crisis. These guys are just laying on more and more charges." He further added, "There is a high probability of the ownership reverting to the state. The thing is being gobbled up."

Meanwhile, the international community and foreign investors are watching the tax strike against Yukos with growing anxiety. The World Bank has voiced its alarm, warning in its latest report on Russia that "the uncertainty surrounding the beleaguered Russian oil giant, Yukos, is weighing on the economy because of the damage to investor confidence." The World Bank's chief economist for Russia, Christopher Ruehl, told the press recently: "Is it a one-off? As long as we do not have an answer to this question, Russia has a problem of confidence. The key problem is destabilisation."

Other analysts are also wondering whether the strike against Yukos is a single case or will be repeated against big business generally. Analysts are split on this. Many feel that it is a single case, and will set an example for the big business and a warning that companies must pay taxes, avoiding tax evasion schemes, and, above all stay out of politics. Khodorkovsky had earned President Vladimir Putin's ire by reneging on the unwritten pact under which oligarchs were given a free run in business as long as they stayed clear of politics. Khodorkovsky crossed this line openly by gaining influence in the Duma (Parliament) and in Russia's Communist Party. Some commentators feel that the Yukos example could be applied more generally and many Russian business barons who benefited from the dubious privatisation deals of the 1990s could be in trouble. The premiere Russian daily, Kommersant, noted interestingly: "This is not dialogue, it is a royal summons. Big business is painfully facing up to the government's demands for social responsibility. This is capitalism with Putin's face."

As analysts mull over the fall-out of the strike against Yukos, the former oil giant's shares fell by 8.9 per cent to 210.41 roubles, after the report of the new tax claim for the year 2001. The stock has plunged by 51 per cent since Khodorkovsky's arrest, shaving $21 billion off Russia's second biggest oil producer's market value. There is a feeling in Moscow that the market was caught "off guard," especially after positive statements given out by Putin a week earlier indicating that the government would not let Yukos go bankrupt. Putin had then said: "The Russian authorities are not interested in the bankruptcy of a company like Yukos. The government will do all it can to prevent the collapse of the company. But what happens in the courts is a separate matter. The courts should speak of this themselves." This statement had generated a false sense of security in the market on the matter, despite the fact that Putin had hinted that the courts would function as they pleased.

Meanwhile, the world's attention remains focussed on Russia and the strike against Yukos. Many investors and concerned parties are waiting to see whether this strike remains confined to Yukos or develops into a witch-hunt against big business. There is speculation that the country is headed for re-nationalisation of some kind in the energy and natural gas sector, with the state maintaining complete control over the development and maintenance of oil pipelines. Interestingly, Yuri Trutnev, Russia's Natural Resources Minister, highlighted recently the need to deprive prominent oligarchs of their largest oilfields. He said the oligarchs had left two billion tonnes of oil and four trillion tonnes of gas for their heirs. This is a direct hint at the reserves of oil and gas in the fields that Khodorkovsky, Mikhael Fridman and Roman Abramovich and others bought at throwaway prices in the mid-1990s. Trutnev said: "Nobody is working these oilfields nowadays. It means the fields aren't bringing in any revenue for the state." He added: "What we need are new owners who will actually develop these oilfields."

Yukos' fate, Khodorkovsky's trial, which is to be resumed on July 12, and the future of the Russian energy and natural gas sector could be inextricably linked. What remains to be seen is whether the link is going to be moderate or extreme.

Jamali's exit

The resignation of Prime Minister Mir Zafarullah Khan Jamali from his post once again points to the undisputed power that President Pervez Musharraf wields in the ruling establishment of Pakistan.

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IN the 56-year history of Pakistan, military and civilian heads have been at the helm of affairs for 27 years each. But there is more to this fact than meets the eye, for in or out of power, the military has had a firm grip on every sphere of life in the country. For instance, Mir Zafarullah Khan Jamali was the 25th civilian Prime Minister to leave office in the 27 years civilians could claim to have been in power. In contrast, there have been only four military rulers who exercised power directly in the 27 years of military rule.

In fact Jamali, Pakistan's first Prime Minister belonging to the Baluch community, was fortunate to have been allowed to continue in office for over 19 months, a privilege granted only to five of his predecessors. After all, his only qualifications for the office were his lack of a political base and pliable nature. Jamali did not acquire a political `spine'. On the contrary, he never missed an opportunity to proclaim that President General Pervez Musharraf was his boss.

Then what led to the ouster? The only thing that is clear is that Musharraf was in a hurry to oust Jamali. There is no other explanation for the anointment of Chaudhry Shujjat Hussain, the leader of the military-controlled Pakistan Muslim League (PML), as his interim successor. In less than six weeks Hussain has to hand over power to international banker-turned-politician Shaukat Aziz, once he is elected to the National Assembly (see box).

Musharraf characterised the event as the smoothest ever transfer of power in the history of the country. It is another matter that no one is prepared to take his words at face value as the truth is that there has been no transfer of power. Power remains with Musharraf. Shaukat Aziz has no political background and perhaps therein lies the reason for the change of guard.

Apparently, Jamali tried his best to convince Musharraf to let him continue, but to no avail. Ten hours before he decided to `resign', a confident Jamali told mediapersons that neither had he decided to resign nor had anyone asked him to quit. He complained about media speculation on his future.

Once it was clear to Jamali that his fate was sealed, he joined hands with Hussain and sought just one concession from Musharraf. Jamali wanted to block the chances of Humayun Akthar, Commerce Minister in his government and son of a former General, succeeding him. Jamali suspected that Akthar was behind the campaign for his ouster. It appears that Musharraf anticipated the request.

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Hussain too had reasons to be wary of the emergence of Akthar as Prime Minister. Akhtar, like Hussain, hails from Punjab and could pose a challenge to his political base in the province, which is ruled by his brother, Chief Minister Pervez Elahi. Evidently, the President appears to have taken a considered risk in nominating Hussain as the interim Prime Minister. Hussain is not in good health and could not be expected to cope with the pressures of office and resist Musharraf.

SOME recent incidents seem to have worked against Jamali. He reportedly spoke against the domination of the military during his last foreign tour. Moreover, Jamali reportedly told a close friend that he would fix Musharraf once he stepped down from the post of Chief of Army Staff (CoAS) as he had promised in December.

Jamali also failed to persuade the coalition of six religious parties, the Muttahida Majlis-e-Amal (MMA), to drop its opposition to Gen. Musharraf's continuance as the CoAS. In fact, his perceived acceptability to the MMA, many of whose leaders held him in some esteem despite his proximity to the Americans, was one of the reasons why Jamali was chosen to be Prime Minister.

In the event, faced with an embarrassing constitutional deadlock which lasted for over a year because of the refusal of the MMA to endorse the various changes introduced by Musharraf into the Constitution through executive orders, the President had to give an assurance that he would resign as CoAS by the end of 2004. Only then could Musharraf secure the support of the MMA for the constitutional amendments which have, inter alia, restored the presidential powers to dismiss an elected Prime Minister and to dissolve the National Assembly, which the late President General Zia-ul-Haq had arrogated to himself and which Nawaz Sharif had got abolished in 1997, when he became Prime Minister for a second time.

Several weeks before Jamali's resignation, circles close to Musharraf indicated that he might not honour his commitment. The reason given was that the situation in the country stemming mainly from its role as the frontline ally of the United States in the "war against terrorism" demanded his continuation in the post of CoAS. Subsequently, Musharraf declared in media interviews that he was not bound by the pact as the MMA had gone back on its pledge to support the military-dominated National Security Council (NSC).

Meanwhile, Jamali committed the blunder of openly soliciting the support of the Opposition. He perhaps calculated that if he could win over the Opposition, Musharraf would spare him.

The uncertainty and the intrigues that have come to characterise Pakistani politics were summed up by a prominent politician of the country: "Joh kal tha, aaj nahi hai; jo aaj hain kal nahi rahegi; kya kal aanewala ayega? Wah re Pakistani jhamooriyat" (The one who was here yesterday is gone (Jamali); the one who is here today won't be there tomorrow (Shujjat Hussain); and will the one who is expected tomorrow (Shaukat Aziz) ever arrive? Hail Pakistan's democracy).

Pakistan in ARF

Pakistan joins the ASEAN Regional Forum as a full-fledged "participating country", signifying its strategic importance in the region which plays a crucial role in global politics in the post-Cold War era.

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PAKISTAN'S recent admission to an elite security-dialogue forum, which the Association of South East Asian Nations (ASEAN) pilots, is the stuff of a real homecoming story.

From July 2, Pakistan is a full-fledged "participating country" in the ASEAN Regional Forum (ARF). The decision was taken at its latest annual ministerial meeting in Jakarta on July 2. By convention, the ARF regards its members as participants, the idea being that the forum, primarily an association for South East Asia's security-dialogue with major and emerging powers of the Asia-Pacific region, should not be mistaken for a strategic alliance with military overtones.

The forum now consists of 24 participants. While the 10 ASEAN members form the core group, the other participants include the United States, Russia, China, India, Japan and Australia. Relevant to the significant expansion of the ARF is the fact that South-East Asia, once Pakistan's strategic habitat, is now a resurgent region with much relevance to the evolving post-Cold War era.

Several decades ago, Pakistan "belonged" to the old United States-led South East Asia Treaty Organisation (SEATO). When SEATO itself became irrelevant to this region, Pakistan, too, fell off the radar screens of the pivotal countries of South-East Asia. However, Islamabad made them sit up and take notice by carrying out nuclear weapons tests in 1998 in the specific context of India's Pokhran-II detonations. From then on, an informal countdown began for a new equation between South-East Asia and Pakistan.

With India having been admitted by the ARF as a participant-country well before Pokhran-II, New Delhi's "nuclearisation" did come up, in a big way, for discussions at the ARF's annual ministerial meeting in 1998 in Manila. (Frontline, August 28, 1998).

Not that India, a conscientious opponent of the discriminatory nuclear Non-Proliferation Treaty (NPT), owed any particular explanation to the ARF for what was essentially an exercise of a sovereign right.

It became evident soon thereafter that it might only be a matter of time before the ARF thought of inviting Pakistan, which cited the Indian nuclear detonations to justify its own tests in 1998, to join the forum as a participant.

Indeed, a few countries including Japan, a non-ASEAN participant of the ARF, seriously considered the idea of inviting Pakistan to the ministerial meeting of 1998 itself as an observer or as the guest of the Chair, the Philippines. In the event though, the move failed. Several factors of power politics accounted for the lack of consensus. One of them is the open displeasure of India, a full-fledged ARF participant, over such patent moves to bracket it with Pakistan.

Pakistan's relevance to ASEAN, the core group within the ARF, increased dramatically after the terrorist strikes on U.S. soil on September 11, 2001. For a variety of reasons of historical realpolitik and because of Pakistan's original sponsorship of the Taliban, which sheltered Osama bin Laden in Afghanistan, the U.S. quickly drafted Islamabad into the "global coalition against terrorism". Pakistan's military ruler, Pervez Musharraf, cited his own India-oriented "strategic" reasons to take a prominent position on the U.S.-led anti-terror bandwagon.

Alarmingly, countries like Singapore, a proactive player in the anti-terror exercise, discovered the existence of a terrorist network, Jemaah Islamiyah (JI), in South-East Asia itself. Several key ASEAN members as also some intelligence networks in South-East Asia and the West tend to believe that the JI is an Al Qaeda affiliate. Towards the end of 2003 and in recent months, at least one ASEAN state has traced some JI activists to a few terrorist training camps in Pakistan.

These developments have provided a sense of urgency for an ASEAN dialogue with Pakistan on security-related issues. A parallel trend is that the Musharraf administration has, by and large, come to be regarded in the ASEAN circles as a serious anti-terror campaigner.

Not surprisingly, the ASEAN Foreign Ministers reached a unanimous decision, during their annual session at Phnom Penh in 2003, to recommend that the ARF open its doors to Pakistan. But the ARF, which met on the following day at the ministerial level, shelved the issue, on the main ground that the larger forum had not had sufficient time to study it. Although India, Russia and the U.S. had, on that occasion, expressed views that had the collective effect of blocking Pakistan's entry, it became obvious, even then, that the ARF would not hold out for a much longer period.

Finally, the ARF's senior officials, who met at Yogyakarta (Indonesia) unanimously decided to recommend that the Foreign Ministers of the forum's participating countries invite Pakistan to join them.

Earlier, states like the U.S. had suggested that the ARF evolve a fuller perspective on its geopolitical reach in the context of the desire of some countries to join it. While New Delhi did not disagree, it was keen that Pakistan, if admitted to the ARF, should not utilise the forum for raising India-centric bilateral issues. India's concern on this score was shared by other ASEAN states, too.

Subsequently, the ARF sought and obtained from Pakistan a commitment that it would not include purely bilateral issues in the forum's agenda. Pakistan honoured this commitment during its participation in the ARF meeting and no statements were made regarding the South Asian security situation or the Kashmir issue.

According to ARF diplomatic sources, the nuclear proliferation issue was discussed in a wider international context. However, it is important to note that some ASEAN states look upon the (perceived) potential for a nuclear exchange between India and Pakistan over the Kashmir issue as a security concern to the wider international community.

Pakistan's ARF odyssey is noteworthy for another reason, too. While most ARF participants have acquired membership after becoming full-fledged "dialogue-partners" of ASEAN on economic cooperation, Pakistan has done so without following the same path. According to diplomats from ASEAN and the West, Pakistan's relevance to nuclear proliferation and terrorism is the prime factor. For Pakistan itself, an overwhelming strategic imperative was to join India in Asia's only security-dialogue forum.

A Chinese expert, Hu Shisheng, who has made a study of the regional implications of India's strategic interaction with ASEAN, has brought into focus yet another factor. At a meeting in Singapore on June 23, Hu pointed out that the "China factor" could be discerned in almost "every development" concerning India's "look-East strategy". The centrepieces of this strategy, of course, relate to India's participation in the ARF and economic linkages with ASEAN states.

Liu Xuecheng, an expert associated with the Chinese Foreign Ministry, noted that Beijing had consistently advocated, since the end of the Cold War, that countries in the ARF region should "cultivate a new concept of security". China's own new security concept is that the principles of mutual trust, mutual benefit, equality and coordination should determine inter-state relations.

Given the obvious sensitivities among Pakistan, India and China as participants within the ARF forum the question is how Pakistan, as a new entrant, would play the forum's general game of regional security through mutual cooperation.

ASEAN is keen that China and other powers with nuclear arsenals, recognised as a collective category under the NPT, should accede to a relevant protocol on the acceptance of this 10-state region as a nuclear weapons-free zone. China has indicated its willingness to do so, although the process is yet to reach a decisive stage.

India, which is not an NPT-signatory, has already offered to accede to this protocol. Indeed, it did so while participating in the ARS session in 1998 soon after the Pokhran-II detonations. However, no concrete progress has been made on this front, if only because India is not in the NPT's league of nuclear powers. India's offer, however, is an index of its peaceable intentions.

Pakistan, which has now joined India and China by acceding to the ASEAN's Treaty of Amity and Cooperation, may follow India's lead by offering to sign the relevant protocol on the acceptance of South-East Asia as a nuclear weapons-free zone.

A weak mandate

The Liberals will rule Canada for a fourth consecutive term but leading a minority government in cooperation with the left-leaning New Democratic Party, as Prime Minister Paul Martin's party fails to win an absolute majority.

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THE Liberals will continue to rule Canada, though with reduced power. The ruling party hovered between confidence and fear in the 36-day run-up to the federal elections as opinion polls showed it and the Conservative Party in a dead heat. Although it won 135 of the 308 seats at stake, it fell 20 seats short of a majority and hence will join forces with the New Democratic Party (NDP), a left-leaning party, which secured 19 seats, to form the government. That still leaves the Liberals one short of a majority. A couple of recounts are to be held, and they hope the results will improve their numbers. The Liberals were in a similar situation 25 years ago. The Liberals, who won 172 seats in the 2000 elections and 155 seats in the 1997 elections, will not court the separatist Bloc Quebecois, which got 54 seats.

The Conservatives won 99 seats. Of the 308 ridings, seven are new owing to a redistribution of electoral boundaries.

Prime Minister Paul Martin surprised political observers when he called for elections just months after he took over the job from Jean Chretien in December last year. The takeover followed a protracted fight between Martin and Chretien, which almost threw the party into disarray. Chretien, who ushered in the Liberal era in 1993 and managed to retain power in the next two national elections, had to quit following pressure tactics and other means used by the Martin camp.

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By the time the election campaign came to a close, polls showed that the Liberals' popularity had slumped. This made Liberal Party members, especially those who belonged to the Chretien camp, and political pundits wonder if Martin's gamble of going in for early elections would pay off.

The Conservatives seemed stronger following the merger of the Canadian Alliance and the Progressive Conservative Party, and the election of a new leader, Stephen Harper. In the day-to-day campaign game of attack and counter-attack, both Martin and Harper made policy guffaws. Harper's pronouncements on some of the burning issues of the day probably cost the party votes - and seats.

As the results were out, Martin acknowledged that he "got the message" from the voters. Although the electorate wanted the Liberals back in office, it was not willing to give the Liberal leader victory on a platter. The winners secured 36.71 per cent of the popular vote, while the Conservatives got 29.61 per cent, Bloc Quebecois 12.40 per cent, and the NDP 15.69 per cent. The vote share of the Liberals and the Conservatives together showed a decline in their strength compared to the last elections.

Former Prime Minister and Progressive Conservative leader Joe Clark's "endorsement" of Martin out of his frustration at not being able to prevent the merger of his party with the Canadian Alliance had caused ripples in the right-wing movement. Harper's views on the Supreme Court's role and other significant issues also went against the Conservatives.

As before, the Central Canadian province of Ontario helped the Liberals back to power with 75 of its 106 seats. The province has been the bedrock of Liberal support but this time it gave the Liberals 25 seats fewer than last time. (However, it must be remembered that Ontario gained three more ridings in the redistributed electoral map.) There were fears that Ontario voters would be apprehensive of the Liberals as the provincial government, headed by them, had imposed a premium on healthcare, thereby breaking one of their election promises. The Liberals had scored a landslide victory in the Ontario provincial election in 2003.

The Liberals' victory, more so their showing in Ontario, again raised the perennial bogey of "western alienation" - the deep-rooted feeling of alienation in western Canada owing to the east-centric policies of successive federal governments. This has been the favourite whipping horse of the right-wing parties, especially the Reform Party and its successor, the Canadian Alliance. If former Reformers and Alliance members, in their new roles as dyed-in-the-wool Conservatives, did not raise the issue to a national fervour in the election campaigns, it was because they were seeking to garner Ontario votes. But the results have prompted right-wing writers to harp on this aspect.

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In his campaign tours, Martin, an easterner, made desperate attempts to quell any fears the western voters, particularly in British Columbia, may have about Liberal rule by making last-minute trips to the province. Alberta, another Western province, is beyond the Liberals' conquest. It looks as if the trips were worth it, with the Liberals gaining three more seats - from five in 2000 to eight now. But what makes British Columbia important is that the lone independent elected to Parliament comes from this province. The key question is whether the Liberals will woo him to form a majority government. On the face of it, the Liberals would not want Chuck Chadman, the former Alliance member who quit the new Conservative Party after he lost the nomination and ran as an independent.

The results have turned the once-fierce rivals, the Liberals and the NDP, into strange bedfellows. What concessions NDP leader Jack Layton will squeeze out of Martin remains to be seen. Layton has already started giving hints of the bargains he would strike.

The Conservatives expect the coalition to collapse in six months or at the most a year's time , but both Martin and Layton have vowed that they will make it work. The Liberals and the NDP share common ground on some social and economic issues. But how they will hammer out suitable policies on contentious points, particularly healthcare and taxes, will be eagerly awaited. In a post-election speech, Layton promised to kick Martin on his shin every time the latter broke one of his poll promises.

Another ticklish issue that Layton has promised to bring to national attention is that of proportional representation. The stakes for it are high and it is hard to imagine that the Liberals or for that matter the Conservatives will support such a major electoral reform. One can see Layton's point here - though his party took a larger share of the popular vote than the Bloc, it has fewer seats. It is doubtful whether there will be any takers for his suggestion of holding a national referendum, a buzzword in constitutional matters, on this issue. That would be an agenda for the future; for the present he has to see how his party and the Liberals will cooperate to run the country.

South Asian strength

EUGENE CORREIA world-affairs

IT has been a watershed election for South Asians, who have doubled their number in the Canadian Parliament from five to 10. Nine of the new members are of Indian origin, while one is from Pakistan. Of the five incumbent MPs, four have been returned; the fifth, Harbans (Herb) Dhaliwal, a federal Minister in the outgoing government, did not contest.

The redoubtable former Premier of British Columbia, Ujjal Dossanjh, has been elected from Dhaliwal's Vancouver South riding. One of the few candidates handpicked by Liberal chief Paul Martin, Dossanjh is tipped to occupy a ministerial seat. Dossanjh had created history when he became the first South Asian Premier of a province (British Columbia) in 2000.

The number of candidates of South Asian origin this time, 42, is a record. In the 2000 election, there were at least 30. The recent election also saw the victory of three South Asian women and of a husband-and-wife duo, the latter a first in the history of Canadian elections.

Predictably, Liberal MP Gurbax Singh Malhi and Conservative MPs Gurmant Grewal, Deepak Obhrai and Rahim Jaffer have been returned to Parliament. Grewal's wife Narinder (Nina) , a political novice, defeated the seasoned Liberal politician Dr. Gulzar Cheema in the newly created constituency of Fleetwood-Port Kells in British Columbia by 2,484 votes.

Cheema is himself a history-maker, being the first South Asian to be elected to the legislature of the western province of Manitoba in 1988. He later shifted his residence to British Columbia and ran unsuccessfully in the 1997 provincial elections. Elected to the Legislative Assembly of British Columbia in 2001, he went on to become a Minister of State for Immigration and Multiculturalism.

Gurmant Grewal squeezed past Sukh Dhaliwal, one of Martin's men, by 480 votes in Newton-North Delta. First elected to Parliament in 1997 on the Reform party ticket, he was again in Parliament in 2000, both times from Surrey Central, the riding that was split into Fleetwood-Port Kells and Newton-Delta North. It was one of the needle fights for the Sikh community.

Herb Dhaliwal, who had opposed Martin in the Liberal leadership race, had found his riding executive taken over by Martin supporters when he was away on a foreign tour last year. With Dhaliwal opting out of the race, Martin nominated Dossanjh as the Liberal candidate.

Dossanjh's victory seemed sure, though his switching of sides from the NDP to the Liberal Party in 2004 caused a lot of heartburning in both parties. He had lost the provincial NDP government to the Liberals in 2001.

In Ontario, Gurbax Singh Malhi retained the Bramalea-Gore-Malton seat for the fourth time for the Liberals, defeating Raminder Gill (Conservative) by over 7,000 votes. Gill, who had won the seat in the provincial elections in 1999, lost it in last year's provincial elections to Dr. Kuldeep Kultar (Liberal).

Two other Sikhs in the Liberal camp,Ruby Dhalla (Brampton-Springdale) and Navdeep Singh Bains (Mississauga-Brampton South), have also made it to the House of Commons. Dhalla, who was nominated by Martin, beat Sukalyan (Sam) Hundal of the Conservative Party while Bains defeated Parvinder Sandhu, who owns the Chandigarh-headquartered WWICS, an immigration consultancy office.

Liberal Wajid Khan, a Pakistani-Canadian, took Mississauga-Streetsville in his first run at public office from Conservative Nina Tangri who was making her third bid at electoral office.

Yasmin Ratansi, who won in Don Valley East, had made an unsuccessful electoral bid in 1988. She soundly defeated Dave Johnson, a Conservative heavyweight, to retain for the Liberals the seat that was held by former Minister David Collenette, who retired from politics.

Ratansi, who migrated from Tanzania, is joined by fellow Ismaili Muslim Rahim Jaffer (Edmonton-Strathcona) from Alberta. The 32-year-old won for the third time for the Conservatives. Similarly, Deepak Obhrai (Conservative) held his Calgary East (Alberta) seat with a big margin. In the Alberta riding of Edmonton-Beaumont, Conservative Tim Uppal's hopes rests on a recount. He lost by 40 votes to David Kilgour (Liberal).

Mobina Jaffer, an Ismaili born in Uganda, is in the Senate, the Upper House of Parliament. The Vancouver-based lawyer was nominated by former Premier Jean Chretien in 2001.

On the Indian government's web site on the Indian diaspora, it is erroneously mentioned that Kieth Martin, who won from a British Columbia riding, is "originally from Goa". A former Reformer who switched over to the Liberal side, Dr. Martin is reported to have said that he is "one-fourth" Indian, as he believes his grandmother (from his mother's side) was of Goan origin.

To keep paintings pristine

Conservation experts across the country meet and discuss the restoration and preservation of ancient paintings and review the advances made in the field.

WHEN it comes to conservation, paintings are a class apart. They are multi-layered; a defect in one layer gets transmitted to the other layers by and by and the ultimate damage may seem irretrievable. However, over the years, restorers of paintings have performed miracles, giving back to damaged paintings their pristine condition.

This conservation work is a continuous process, and it was to review the advances in the field that recently the Indian Association for the Study of the Conservation of Cultural Property collaborated with the Allahabad Museum to assemble conservation experts and let them talk on their metier.

Professor Govind Chand Pande - historian, philosopher, writer - set the tenor of the discussion by giving a gifted outsider's view of the discipline. He called attention to the fact that traditional methods had taken care of our invaluable art heritage over the centuries and cautioned conservators that in the mad rush to adopt modern processes, traditional methods should not be neglected altogether - rather, the attempt should be to combine the best of the old and the new techniques.

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A.S. Bisht, a modern-day conservator of eminence with years of experience behind him, was equally cautionary. He compressed all his experience into a few vital maxims: preventive conservation is more important than curative conservation; pollution afflicts all antiques unless controlled constantly; air-conditioning helps against pollution if it is operated all the time.

Another vital maxim, he said, was that art objects selected for acquisition by a museum should be first examined by a conservator in order to assess their condition and check their authenticity. Modern science and technology have provided curators and conservators a number of means of authenticating an object.

Elaborating on the topic, V. Jeyaraj of the Madras Museum in Chennai detailed the use of infra-red rays, ultra-violet rays and X-rays for authenticating paintings. In days gone by, overzealous restorers concealed patches of lost pigments; fakers did the same though for a different purpose. They took an ordinary painting, made a few cosmetic changes in it, and passed it off as the work of a master. Jeyaraj said that infra-red, ultra-violet and X-ray photography laid bare the secrets of ancient paintings on canvas and wood.

Cleaning old paintings is an art by itself. Old paintings get darkened because of grime and discolouration of the varnish layer. Over-painting by zealous restorers is another affliction plaguing ancient paintings. Here again, modern tools steal the show. Anupam Sah of INTACH-ICCI described how powerful laser beams deftly get rid of extraneous matter.

Miniature paintings, which constitute a precious part of our art heritage, benefit a great deal from conservation. C.P. Unniyal, who heads the Conservation Laboratory of the Salar Jung Museum, Hyderabad, spoke on the cleaning of miniatures. He described how the removal of surface accretions using selected solvents bring out the blaze of the original colours used by the artist and reveal his skill and mastery.

Sukumar Menon, a conservator from Delhi, described the stunning effect that resulted from the cleaning of a painted jhoola; the wooden railings of the jhoola were painted with lacquer for preservation.

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Paintings on cloth like Tibetan thangkas and kalamkari pieces get hardened and brittle with time. Vivek Kumar Tyagi recounted the methods of softening and strengthening Tibetan thangkas. Bessie Cecil from Chennai did similar work for kalamkari pieces, which are indigenous to South India and are acclaimed for their artistic qualities.

In an exciting discovery, C.B. Gupta, formerly a restorer in the National Museum in New Delhi, found 26 manuscripts inside a Buddhist image of unbaked clay which he took up for treatment. He treated the manuscripts too.

In fact, illustrated manuscripts have claimed the attention of the Central government in a big way. A national manuscript mission was launched in February 2003. While launching it, Prime Minister Atal Bihari Vajpayee remarked, "We in India have been making many claims about the progress made by us in ancient times in diverse fields of science and technology... There is much truth in these claims. However, modern science and modern mind accept only those claims as true that are backed by evidence. Our vast treasure of manuscripts provides, will provide, this evidence."

Innumerable manuscripts lie unseen as family heirlooms and in the holdings of temples and palaces. Some of these are illustrated manuscripts with paintings of unsurpassed beauty. The National Manuscript Mission has a five-year programme to get at all the manuscripts and conserve them.

Ritu Jain, Project Director of the Mission, spoke of the preparation of a catalogues catalogorum, which would be a comprehensive alphabetical register of works in Indian languages. Actually work on the catalogue was initiated by the Madras University in 1935 but in later years its progress slowed down considerably. Now, it will be accelerated and completed with the support of the National Manuscript Mission, which would set up manuscript resource centres and manuscript conservation centres across the country in order to increase the effectiveness of the project through decentralisation.

Experts discussed some other aspects of the discipline too. Gautam Lunkad made a presentation on fibre-optic lighting that would illuminate painting galleries without harming the paintings. Framing of paintings is itself a matter of technical skill and unobtrusive design that would play up the beauty of a painting.

I.K. Bhatnagar, who was until recently the Dean of the National Museum Institute in Delhi, had the last word. It was not enough that conservators did their work, he said. Their work had to be evaluated constantly because they handled ancient objects of a highly delicate and sensitive nature. Conservators would have to evaluate the effectiveness of the methods and materials used by them if scientific conservation is to retain its credibility, he said.

N. Harinarayana is a former Director of Museums, Tamil Nadu.

A secular response

Will Secular India Survive? by Mushirul Hasan (ed); Imprint One, Delhi, distributed by Manohar Books, New Delhi; Rs.800.

THE Bharatiya Janata Party (BJP) has long presented a conundrum to social scientists and political analysts, one that become particularly nagging after the National Democratic Alliance (NDA) government came to power in New Delhi in March 1998. How did a party, which in its pre-Janata avatar (the Jan Sangh) never left the fringes of politics nor commanded many more than 20 to 30 Lok Sabha seats, suddenly cross the 100-seat barrier and then the 150-seat and 180-seat marks?

What, besides the anti-Babri Masjid agitation, and the Vishwa Hindu Parishad-Rashtriya Swayamsewak Sangh's (VHP-RSS) persistent work, holds the key to this impressive success? How do we assign relative weights to different causative factors in explaining the BJP's ascendancy: the historic decline of the Congress; the shrinking of the liberal space in Indian politics; the growing appeal of "identity politics" in many parts of the post-Cold War world; the VHP-Bajrang Dal's street-level mobilisation; the BJP's enormously flexible strategy of coalition-building, which allowed it to occupy spaces temporarily vacated by others (the Congress as well as regional and caste-based parties)?

Was there a still deeper process at work well before the 1980s, related to India's insufficiently developed "secular culture", and a failure of the Congress leadership even at its high noon (just after Independence), to negotiate the terms of a viable, sturdy, secularism? Or are the causes relatively more recent and not as well-entrenched as might have been thought? To what extent has the BJP's toxic ideology taken root among the upper and middle layers of Indian society, especially in rural India? Do secularists tend to underestimate the ideological appeal and influence of the RSS and accord excessive importance to contingent "mobilisational" factors such as the Ayodhya agitation, and the campaign around the Congress' "pseudo-secularism"?

Or, as critics of secularism like Ashis Nandy and T.N. Madan have argued, is modernist secularism itself fundamentally flawed? If our general objective is relatively peaceful and harmonious relations between different religious communities, then might we not be better off with the notion of mutual tolerance, itself respected by different religions (which can, therefore, unify around it)? Tolerance, they hold, is deeply rooted in Indian tradition and therefore more "natural" to Indian culture. Might tolerance not be a far more satisfactory alternative to the "imposition" of secularism from "on top"?

Some of these questions assumed increasing salience and complexity as sections of the intelligentsia trimmed their sails and became apologists for Hindutva in the late 1990s. Those who refused to compromise on secularism were hard put to explain Hindutva's seemingly unstoppable `Long March' through the institutions, and the growing influence and rising votes of the BJP in election after Lok Sabha election. A ray of hope appeared in early 2002 when the BJP suffered defeats in Uttar Pradesh, Punjab and Uttaranchal, but this was quickly lost in the darkness that set after the Gujarat Assembly elections of December that year.

Coming soon after Independent India's worst state-sponsored pogrom, those results were a shocker. A year on, the BJP swept the elections to the legislatures of Madhya Pradesh, Rajasthan and Chhattisgarh. Its victory in the approaching Lok Sabha elections looked near-certain, even inevitable, to many - right until the elections were held and results declared on May 13. It is during this gloomy interval that this book was written. The title captures its preponderantly sombre mood. But the questions many of its authors raise are by no means steeped in pessimism and hopelessness - despite those disorienting and demoralising times. It is a tribute to the intellectual integrity and secular commitment of much of India's liberal intelligentsia that essays like those in the present edited volume could be written in a genuine spirit of inquiry and critical self-appraisal without a loss of perspective - in particular, on secularism as a categorical imperative, without which the very existence of India as we know it, might be jeopardised.

There are many rich insights and much inspired analysis in these essays, which cover a wide range of subjects. Thus there is a discussion of Hindu-Muslim relations; secularism and its relationship to participatory and inclusive democracy and to individual rights; the question of identity; the shaping of the BJP's intellectual agenda; the Gujarat carnage and its causes; Hindutva's political and mobilisational strategies; caste, class, property and communal identities; and even a note, albeit brief, on the media and secularism.

One of the strengths of the book is the attempt (in essays by Neera Chandhoke, Martha Nussbaum, Zoya Hasan and others) to root the conception of secularism not so much in a cultural or historical context as in the spirit of the Constitution with its emphasis on democracy, equality, universal citizenship rights and inclusiveness. Thus, it is less relevant to ask if India has always been a multicultural, multi-ethnic, multi-religious society (which it has), than to ask how we can build a minimally civilised, inclusive, democratic society today.

And here, secularism is not an option; it is an absolute necessity, an imperative, moreover one that is in keeping with the Constitution, itself closely linked to the ideals of the freedom struggle. A contemporary notion of secularism is best derived from the egalitarian and universalist ideas embodied in the Constitution. Secularism alone can create equal rights for all citizens, regardless of religion, ethnicity or culture.

Chandhoke makes a powerful plea for re-presenting secularism within this framework, thus cutting through competing definitions (for example, equality of all religions, equal respect for all faiths, or separation of religion from the state). She argues against treating secularism as a "free-floating" concept detached from the "democratic imagination": "If we relocate secularism in the wider concept of democracy as well as see it as an integral part of the democratic imagination, we can, perhaps revive the concept." Nussbaum discusses of two useful paradigms drawn from U.S. constitutional history: Massachusetts and Rhode Island. While the first tried to define citizenship and citizen's rights according to religion (Christianity), the second was inclusive of all religions and embraced universal rights, forcing the First Amendment to be adopted. Nussbaum places great value on the way the Constitution has evolved towards the second paradigm - despite weaknesses such as lack of affirmative action for women and Muslims.

Pratap Bhanu Mehta, by contrast, poses a different question - , that of Hindu and Muslim identities and secularism, connecting it to individual freedom. His discussion is somewhat lame - in part, because he gives too much credence to the stereotype of Muslim co-optation and "appeasement" by the Congress, rather than full Muslim participation in democratic politics. In reality, the relationship between Muslim masses, their elites and the Congress is far more complex. As Zoya Hasan shows, there is major democratic deficit as regards the accommodation or integration of Muslims within structures of representation and of power. Social and educational backwardness, and lack of social opportunity are widely prevalent among Muslims. Discrimination against Muslims is incompatible with egalitarian and participatory democracy.

AMONG the other important themes discussed here is the ascendancy of the Hindutva ideology and of BJP politics, discussed in essays by Radhika Desai, Amrita Basu and Srirupa Roy, Aijaz Ahmad, Mushirul Hasan, among others. These recognise that some roots of that ascendancy lie in the upward mobility of the middle class, and to an extent, the propertied middle castes. Some authors analyse the links between this mobility and the neoliberal economic policy regime of the 1990s (continuing into the contemporary present). Yet, there is no full-length discussion in any of the essays of the powerful role of neoliberalism in reshaping both the ideology and the social base of the BJP. Neo-liberalism in the Indian context is imbued with profound dualism and growing inequality between classes and regions. Its ascendancy has led to a burgeoning middle class with rising consumption, which is seriously alienated from the people, and secondarily, to a business elite that is highly predatory and criminalised.

This middle class ascendancy occurred in particular circumstances - defined by post-Cold War despondency about non-alignment and an embrace of the West, rise of ethnic-religious identity politics in India's neighbourhood (and beyond), and intensified India-Pakistan rivalry. Therefore, it came with a heavy baggage of chauvinist-nationalism, militarism and an abiding faith in the utility of force in a (naturally and inevitably) Hobbesian world.

The BJP was the greatest beneficiary of this nationalism. In turn, it gave it a particularly malign dimension, a nuclear edge, and a domestic target as well - the disloyal Muslim, always in league with the Inter-Services Intelligence (ISI) of Pakistan. This combination - aggressive, bellicose nationalism, and Islamophobia and anti-Muslim prejudice - proved potent. The BJP also executed a major shift in its ideological make-up to woo the "new middle classes" spawned by neo-liberalism. From an emphasis on a more-or-less closed economy, with a degree of protection and regulation favouring traders and small business - but never workers or landless rural labour - it moved to embrace the Washington Consensus. While in power, it opened up the economy and indiscriminately privatised public assets.

The lack of a discussion of the connections between neoliberalism and communalism is not just a minor error of omission, but a glaring absence. No framework marked by such an absence can explain why the BJP has gained the kind of acceptance it has among the upper crust of Indian society and become the party of choice for Big Business.

Radhika Desai attempts a very useful partial explanation in respect of the middle castes. But her explanation, that these castes have no stake in secularism and tend to gravitate towards the BJP, or rather, "a diffuse form of Hindutva", needs further discussion, and surely some qualification. It is true that many parties representing the upwardly mobile middle castes have had few compunctions about allying with the BJP. But that is not because they have a special affinity for Hindutva, only because they find it politically expedient to do so. Some would gladly go with a secular "ally" - on the "enemy's-enemy-is-a-friend" principle. The essay by Basu and Roy has a factually rich and theoretically well-grounded discussion of the Gujarat carnage, which tries to answer a range of issues: the pogrom's violence and its ferocity, its function within the RSS-BJP scheme of things, its international and national contexts, Atal Bihari Vajpayee's vacillation over sacking Narendra Modi, and the participation of Adivasis and Dalits in anti-Muslim attacks. This further enriches our understanding of Gujarat and its importance for secularism.

The essays by Aijaz Ahmad, Mushirul Hasan, Amitava Kumar and Tahir Mahmood raise questions about the future of the political challenge to the BJP, and by implication, the future of the secularist project itself. This is particularly relevant after the rout of the BJP in the latest Lok Sabha elections. (It lost in 23 out of India's 28 States.) This opens up a great opportunity to promote and consolidate secularism. One central issue here is whether the Congress will programmatically reject soft Hindutva and embrace principled secularism. This is no easy question to answer in respect of a party which has been complicit in the spread of communalism in numerous instances - even if it does not have the pro-active aggressively communal orientation of the BJP.

The Congress-led United Progressive Alliance (UPA) won the last election on a Left-of-Centre platform, affirming secularism as well as issues of equity and justice - in opposition to neoliberalism. During the election campaign, the Sonia Gandhi leadership was as unsparing in attacking communalism as it was emphatic about addressing livelihood issues. Presumably, this could mount some pressure on the UPA to remain loyal to its secular popular mandate. Some pressure will be brought upon it to do so from the Left and progressive civil society elements including from those within the National Advisory Committee (NAC) on the Common Minimum Programme (CMP).

However, the critical test will come on three issues: justice for the Gujarat victims, detoxification of communalised institutions of the state, and correction to the approach hitherto followed by the Central government to the Ayodhya litigation, effectively shielding the guilty of December 1992.

If the UPA argues strongly for the transfer of all major cases of violence outside Gujarat, along the lines of Best Bakery litigation, it could begin to re-orient itself both on ethnic-religious identity issues and questions of justice. On the other two issues too, there is much to be done. We will soon know in which direction the UPA, and especially the Congress, moves.

An ongoing disaster

Contamination of soil and groundwater caused by the toxic waste left in Union Carbide's abandoned Bhopal plant poses a new health hazard for the survivors of the 1984 gas disaster, and the Government of India fails to come to their rescue.

V. VENKATESAN in Bhopal Photographs: A.M. Faruqui

THE two police constables keeping vigil at the 65-acre (26 hectare) abandoned factory site of Union Carbide India Limited (UCIL) in Bhopal, may just be doing their duty. But the protection of the structures which shelter toxic chemicals since the disastrous gas leak from the factory in 1984 has not helped allay the fears of the local population that the waste material dumped in and around the factory site is responsible for the soil and groundwater contamination in the neighbourhood.

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The Government of India, under the pressure of public opinion over the indefinite fast undertaken in New Delhi by three activists - Satinath Sarangi and the two Goldman Environmental Prize awardees Champadevi Shukla and Rashida Bee - decided on June 23 to convey its "no objection" to the United States Court of Appeals for the Second Circuit considering environmental contamination claims "unrelated" to the 1984 disaster. But the gas-affected people were not elated: for them, it meant that the government agreed with them but did not feel a moral obligation either to mitigate their grievances at home or to intervene in the proceedings before the U.S. court.

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The government perhaps thought its responsibility was over with the issue of the "no objection" letter to the U.S. court to direct Union Carbide Corporation (UCC) to clean up the mess it left behind in its Bhopal plant. The government did so after making sure that such a letter would not infringe the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985, which it initially thought would cover the victims' current environmental claims too. Once it was convinced that the Act excluded survivors' claims for environmental damages, the government could have shown its readiness to intervene in the class action suit, and urged the U.S. court to order such relief as demanded by the plaintiff organisations. By only claiming that it had "no objection" to such relief being granted, the government reduced itself to a passive bystander to the ongoing litigation in the U.S., as if the case was of concern only to the survivors and that it was not moved by the enormity of the corporate crime committed by UCC in India. The government probably thought its "no objection" letter was necessary to erase any impression of lack of sensitivity towards the gas victims.

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Had the government expressed its solidarity with those who are fighting the case in the U.S., it could have used the opportunity to correct years of environmental degradation and the consequent health hazards, directly attributable to the manner in which UCIL maintained its plant.

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By issuing a "no objection" letter, the government has now tacitly approved the evidence of groundwater contamination caused by the Bhopal plant. Although the plant commenced its operation in 1969, it was only in 1979 that it began to manufacture pesticides that it previously imported. As a by-product of the expanded operations, hazardous wastes were produced. UCIL kept these wastes in tanks and pits at the plant site, as well as in three solar evaporation ponds (SEP) constructed on the non-contiguous leased property some 800 metres north of the plant.

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On November 15, 1999, Greenpeace published a report entitled "The Bhopal Legacy", after testing soil and groundwater samples from the vicinity of the plant at the University of Exeter in the United Kingdom. The test results demonstrated extensive and in some locations severe chemical contamination of the environment surrounding the plant.

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The Greenpeace report ought to have spurred the government to examine the findings through its own agencies. With the gas survivors seeking justice in U.S. courts, the government faced no pressure to act. However, new evidence has now come to the fore - thanks to the discovery process in the class action suit before the U.S. court - pointing to the fact that UCC had prior knowledge of the possibility of groundwater contamination at the Bhopal site.

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There were, for instance, material differences in environmental disposal practices between the Bhopal plant and the UCC plant at Institute, West Virginia, U.S. The UCC was aware that groundwater contamination of the aquifer was likely in Bhopal because the design of the U.S. facility was based on water discharges to the Kanawha river. In Bhopal, all waste water streams from the pesticide unit would discharge into the SEPs.

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At the design stage itself, UCC knew that its technology and design choices created a foreseeable risk of groundwater contamination. Union Carbide's engineering department at South Charleston, in a document dated July 21, 1972, warned of the "danger of polluting subsurface water supplies in the Bhopal area, and recommended that "new ponds will have to be constructed at one to two-year intervals throughout the life of the project in order to prevent this danger". This recommendation was never implemented. The department also proposed a "waste liquid incinerator" to address the problem of groundwater contamination, but this too was not incorporated into the design of the Bhopal plant. Only three SEPs were planned and built.

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The decision of the U.S. Court of Appeals for the Second Circuit in March refers to a UCIL document, which indicates that in March 1982, it was aware of a leak from one of the SEPs and that another SEP showed "signs of leakage". The decision referred to another document of April 1982, which showed that UCIL was greatly concerned about continued leakage from an SEP.

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In their appeal petition before the U.S. court, the plaintiff-survivors alleged: "Union Carbide's objective was to recover assets from UCIL and surrender its land lease to Madhya Pradesh State authorities. Since the lease conditions required environmental clean-up of the site before the land was returned, UCC sought to conceal the widespread on-site and off-site environmental contamination that it had caused with a largely cosmetic site remediation effort undertaken at minimal expense." The State government, which took over the land from UCIL's successor, Eveready Industries India Ltd. (EIIL), in September 1998 did not exercise caution in ensuring that the land was returned to it in its original condition, fit for industrial purposes, as required by the lease.

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The plaintiffs' petition has highlighted several other startling facts. The project document of UCC had estimated that the "total inflow" into the three SEPs would be at 5.550 metric tonnes for each year that UCIL was in operation. In 1989, UCC was aware that this accumulated toxic waste was leaching into the soil and the groundwater at the site because the lining of the ponds "might have developed leaks resulting in permeation of the effluent into the soil".

The internal documents of UCC, examined by the plaintiffs during the discovery process, throw more light on its "Bhopal Site Rehabilitation and Assets Recovery Project". Since no Indian organisation has had similar exposure in terms of environmental remediation, Union Carbide decided to appoint a global management firm, Arthur D.Little & Co (ADL), as its consultants for the purpose of implementing the project along with an Indian agency, the National Environmental Engineering Research Institute (NEERI).

The Indian agency had produced two reports, the first in April 1990 in response to the State government's request, and the second in October 1997, after EIIL retained it to assess the environmental conditions on the plant premises. The second NEERI report found contamination within the plant site at the waste disposal areas. However, it reaffirmed the first report's finding of no groundwater contamination in and around the plant site.

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Internal documents show that UCIL, despite using NEERI's findings to its advantage, was sceptical about their validity. Another internal document in 1996 revealed that NEERI's investigation was conducted under "ADL's guidance", since "NEERI, although a premier organisation, did not have experience" in environmental testing. UCIL officials submitted a draft of NEERI's final report to ADL experts for evaluation.

Experts of ADL questioned the report as they identified major issues concerning groundwater at the site. In its letter of March 1997, carrying its comments on the report, to the resident general manager of EIIL, C.K. Hayaran, ADL specified: "There does not appear to be sufficient information to discount a potential impact to groundwater from contaminated soils present on the facility." Yet NEERI disagreed with ADL's reservations and prepared its final report ruling out groundwater contamination.

In 1994, pressure exerted by victims' organisations compelled the State government to order an inspection of the closed UCIL factory. The inspection revealed that 44 tonnes of tarry residues generated during the manufacture of "Sevin" and 2.5 tonnes of another chemical, alpha naphthol, which were collected in drums, troughs and bags, had been stored in open areas within the plant premises. These hazardous materials were subsequently shifted and stored in a covered area. As Frontline's pictures reveal, those stored in covered halls are not secure from rainwater, because of the gaps in the ceilings. This heightens the danger of leaching and groundwater contamination.

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In October 1997, a three-member committee with representatives from NEERI and the Madhya Pradesh Pollution Control Board visited the factory site at the instance of the Union Ministry of Environment and Forests. The committee noticed that the drums and bags were in a rundown condition so much so that any attempt to shift them might lead to their breaking, resulting in spillage of hazardous waste. They also observed that residues, after melting, were spreading on the floor and outside the shed. The committee warned that during the rainy season the hazardous waste that had spilled might contaminate water and spread to other areas. The SEPs were lined with a film of polythene to prevent seepage. However, the resistance offered by such a sheet to a complex mix of corrosive substances has been found ineffective. Under the circumstances, it was inevitable that toxins from the SEPs would have contaminated the groundwater in the adjoining areas.

Another study, carried out by Srishti, a Delhi-based organisation, in January 2002 examined the movement of chemical pollutants from one level to another through the food chain. The samples were analysed at the Facility of Ecological and Analytical Testing (FEAT) laboratory of the Indian Institute of Technology (IIT), Kanpur.

Soil, groundwater, vegetables grown in the area, and even human breast milk were investigated and were found to be contaminated with toxic chemicals and heavy metals that cause multiple diseases, including fever, diarrhoea, respiratory and nervous disorders and cancer.

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Another study, by the People's Science Institute (PSI), Dehra Dun, in September 2001, showed a high concentration of mercury in groundwater near the former UCIL factory. The PSI collected groundwater samples from seven handpumps and seven tubewells in the residential areas surrounding the factory from where specific complaints about the quality of groundwater had emanated.. Samples were also collected from the SEPs and from an open well. The PSI report warned: "The human nervous system is very sensitive to mercury. Exposure to sufficiently high levels of mercury causes permanent damage to the brain and the kidneys."

The State government, which recommended to the Centre, to issue a no-objection letter to the U.S. court, has been awfully remiss in ensuring the supply of potable water to the affected residents. This was despite the fact that a Supreme Court Bench comprising Justices S.D. Sinha and Y.K. Sabharwal had directed the State government on May 7 in Research Foundation for Science vs Union of India to supply fresh drinking water in tanks or pipes expeditiously. Survivor organisations have found that the supply of drinking water through tankers in the affected areas is far below the requirement, forcing people to collect water by working the handpumps. The Department of Bhopal Gas Relief and Rehabilitation of the Madhya Pradesh government has claimed that it has tested all sources of groundwater in the gas-affected areas and wherever it found contamination, it either closed them or allowed their use only for non-drinking purposes such as washing clothes. But the department did not reveal the details of the tests. Nor did it explain how it would ensure the non-use of contaminated water for drinking purposes, or mitigate its harmful effects if used for non-drinking purposes.

Says N.D. Jayaprakash, co-convener, Bhopal Gas Peedith Sangharsh Sahayog Samiti, one of the plaintiff organisations seeking environmental relief before the U.S. court: "The Government of India must do much more than merely filing a `no objection' letter; it has to oversee the clean-up process and also take up the cause of all those who have been affected by drinking contaminated water or otherwise exposed to the toxic effects of environmental contamination." Considering the absolute lack of interest in this matter in government circles in Bhopal and New Delhi, his advice would appear to be a tall order.

The celluloid connection

EVER since the birth of the Dravida Munnetra Kazhagam (DMK) in 1949, politics and cinema have intermingled in Tamil Nadu. But the only full-time film actor whom the Tamil electorate was prepared to accept as a full-fledged politician fit to lead the State was M.G. Ramachandran, popularly known as MGR. For he was the man who symbolised their travails, struggles and aspirations. MGR split from the DMK and founded the Anna DMK (later All India ADMK) in October 1972 and became Chief Minister in 1977, which post he held until his death in December 1987.

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MGR grew in politics and films simultaneously. In his 30s, he was a khadi-clad, rudraksha-wearing Congressman, struggling to make a mark in films. He worked to a plan in both his films and politics. In his earlier films such as Marma Yogi, Andaman Kaithi, Nadodi Mannan and Manthiri Kumari, he espoused his personal ideals such as helping the poor, being chivalrous and fighting injustice. This made him popular among the poor people of Tamil Nadu.

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As the DMK rose in popularity in the 1950s, he hitched his stars to the party and started campaigning for it. He used songs and dialogue in his later films such as Anbe Vaa, Oli Vilakku and Vettaikaran as propaganda vehicles for the DMK. It was a symbiotic relationship between MGR and the DMK. Each used the other to grow. In the early 1960s, he became a Member of the Legislative Council (MLC). In 1967 and again in 1971, he was elected to the Assembly on the DMK ticket from the St. Thomas Mount constituency in Chennai. While his film career and acts of generosity made him popular, his political role brought him in direct contact with the vast network of his fans association. This gave him access to people and helped in knowing the pulse of the masses. After MGR was suspended from the DMK in October 1972, he founded the ADMK and used his films such as Idhayakkani and Nettru, Inru, Nalai to boost the party.

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C.N. Annadurai, the founder of the DMK, and M. Karunanidhi, DMK president and former Chief Minister, used Tamil films to espouse the cause of rationalism, social reforms and the party's ideals. Anna's storyline and dialogues in Oor Iravu, Velaikkari and Sorkavaasal and Karunanidhi's powerful dialogue for Parasakthi were trendsetters in Tamil films. It was in Parasakthi that Sivaji Ganesan made his entry into Tamil films from theatre.

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Sivaji Ganesan, actor non-pareil, was not astute enough to brave the rough and tumble of politics. In the 1950s, he was with the DMK. He was pilloried when he visited the Tirumala temple because a fundamental tenet of the DMK is rationalism. He later joined the Congress and accepted K. Kamaraj as his leader. Unlike MGR, Sivaji Ganesan, although a marvellous actor, never used songs and dialogues in his films to boost his image or for his personal advancement in politics. Nor did he use his films to shore up the Congress' image in the State. In the Tamil Nadu Congress Committee, Sivaji Ganesan came up against a wall in the form of a group led by G.K. Moopanar.

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After MGR's death in 1987, the AIADMK split into two, one led by his widow Janaki Ramachandran and the other by Jayalalithaa. Sivaji Ganesan had differences with the Congress leadership over which faction to support. So he founded the Tamizhaga Munnetra Munnani in February 1988. In the January 1989 elections to the State Assembly, he backed the Janaki faction. The Jayalalithaa faction and the Congress led by Moopanar contested separately. Sivaji Ganesan contested from Papanasam and was defeated. The elections saw the return of the DMK headed by Karunanidhi to power. The Tamizhaga Munnetra Munnani slipped into oblivion and Sivaji Ganesan retired from politics.

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Jayalalithaa, now both AIADMK general secretary and State Chief Minister, has acted in several films opposite MGR. In the early 1980s, MGR introduced her into politics. At that time she was leading a quiet life, reading books and writing for Tamil magazines. She came under klieglights again at the World Tamil Conference organised by MGR in 1981 in Madurai when he was Chief Minister. She choreographed and acted in a dance-drama titled, "Cauvery Thantha Kalaiselvi" (The Artistic Daughter Bequeathed by the Cauvery). He formally brought her into politics in 1982 when P.U. Shanmugam was AIADMK general secretary. Jayalalithaa was nominated to the government's high-level committee on the noon-meal scheme. She later became the party's propaganda secretary and Rajya Sabha member.

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The death of MGR, the split in the AIADMK, the subsequent merger of the two factions, Jayalalithaa presiding over the reunified party, the AIADMK's return to power in 1991, Jayalalithaa's election as Chief Minister, the party's defeat in the 1996 elections and her return to power in 2001 are important events.

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In recent times, a number of Tamil actors have played bit roles in politics. S.S. Rajendran was first DMK M.P. and was later elected to the Assembly from the Andipatti constituency in 1980 on the AIADMK ticket. He founded the MGR-SSR Latchiya DMK. He is not active in politics now. Some actors failed to live up to the expectations they generated. Two such are Bhagyaraj and Ramarajan. Even when MGR was alive, Bhagyaraj became popular with his earthy films. In 1984, when MGR released a Tamil paper called Manramurasu (edited by Musiri Puthan, who headed MGR's all-world fans association), he ordained Bhagyaraj his kalaiulaga vaarisu (successor in the world of arts). MGR also presided over Bhagyaraj's marriage to actress Poornima. All this gave Bhagyaraj a big mileage but he failed to cash in on it. In February 1989, Bhagyaraj launched the MGR Makkal Munnetra Kazhagam; the party failed to take off. Ramarajan also failed to cash in on his popularity. He was a Jayalalithaa loyalist and was elected to the Lok Sabha from the Tiruchendur constituency on the AIADMK ticket in 1998. In the 1999 elections, he was not given the ticket. His film and political careers have hit a roadblock now.

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T. Rajhendherr, actor, director and storywriter, among other things, recently founded his second political party, the Akila India Latchiya DMK (All India Ideal DMK). He was in the DMK and swore his loyalty to Karunanidhi, but he left it to launch the Thayaga Marumalarchi Kazhagam, with a sizable fan following. He returned to the DMK and was elected from the Park Town Assembly constituency in Chennai in 1996. He contested on the DMK ticket once again in 2001 and was defeated. Later he quit the party following differences with the leadership.

Actors Sarath Kumar and Napoleon, both belonging to the DMK, are a Rajya Sabha member and an MLA respectively. Another actor, Radha Ravi, represents Saidapet in Chennai for the AIADMK. Film actors Isari Velan and R. Soundarajan became AIADMK MLAs when MGR was Chief Minister. Soundarajan even became Minister. S.S. Chandran is an AIADMK Rajya Sabha member.

Star strike

The Pattali Makkal Katchi sets its followers on a violent course of action against actor Vijaykant, but the latter's fans hit back. Now Vijaykant is planning to launch a political party.

FOR 14 days a political party and a film star in Tamil Nadu were engaged in a pitched battle. But it ended as suddenly as it began, with neither side in a position to claim victory. When Pattali Makkal Katchi (PMK) activists attacked film actor Vijaykant's fans, burnt the fans association offices and attacked cinema halls screening his films, they learnt at least one lesson: that Vijaykant's aficionados are not butterfingered boys.

What provoked PMK men was an observation by the actor on June 13 about politicians becoming Ministers without getting elected by the people. They read it as an innuendo against Dr. R. Anbumani, son of PMK founder Dr. S. Ramadoss. Anbumani became Union Health Minister first and then got elected to the Rajya Sabha. The fracas ended with PMK president G.K. Mani asking his partymen on June 27 "not to take action any more" because the "party leadership knows how to meet this situation politically" and there were people's problems to be addressed.

The incident only firmed up Vijaykant's resolve to start a political party. He announced on July 2 that he would consider the question after knowing his fans' views on it. "If I start a party, it will be on my birthday. Or the announcement may be made on Tamil New Year's day [in April 2005],"he said.

Sources close to him say that in his assessment the people of Tamil Nadu are looking for an alternative to the Dravida Munnetra Kazhagam (DMK) and the All India Anna Dravida Munnetra Kazhagam (AIADMK) and the party he launches could provide that alternative. His fans' association's flag may become the party flag.

What may stand the actor in good stead is the organisation and structure of his fans association, which is built in the form of a political party with units at the village, panchayat, town and district levels. According to Vijaykant, 575 of his fans were elected to the local bodies at various levels. S. Ramu Vasanthan, general secretary of the Vijaykant Fans Association, says: "Only nominally our movement works as a welfare organisation. In fact, it functions like a political party. We have 35,000 units and each unit has at least 100 members."

Behind Vijaykant's moves is his bitterness that neither the DMK nor the Congress/Tamil Maanila Congress (TMC) used his services although he had in the past expressed his admiration for DMK president M. Karunanidhi and the late TMC leader G.K. Moopanar. What also rankled him was that while his colleagues in the cinema field - Sarath Kumar, Napoleon, Radha Ravi, S.S. Chandran and T. Rajendherr, among others - had been elected to the Rajya Sabha or the State Assembly, he had not been considered. This despite his having a much bigger fan following and his remaining the puissant president of the South India Artistes Association (SIAA).

In the past four years, Vijaykant has frequently revealed his political ambitions. While affirming his affinity for the Tamil/Tamilian cause, he also expressed his nationalistic outlook. He started wearing khadi and made his piety obvious by wearing vibhuti (sacred ash) on his forehead.

With the Tamil Nadu electorate decisively rejecting Tamil film actor Rajnikant's opposition to the PMK and his endorsement of the Bharatiya Janata Party, and Rajnikant abandoning any plans that he might have had to start a political party, Vijaykant felt it was time that he tested the political waters. He did so at a public meeting of his fans at Kallakurichi, a small town in the Vanniyar heartland in Villupuram district, on June 13. (The PMK represents the interests of the Vanniyars, a dominant caste in the State.) At the meeting, Vijaykant raised some inconvenient questions. Farmers in Thanjavur were eating rats, "did anyone elected from Tamil Nadu ask for the Agriculture portfolio to help them? Did anybody ask for Water Resources to resolve the Cauvery issue? They were after portfolios that would fetch income," he said. He took a potshot at those who became Union Ministers without getting elected.

The DMK and the Congress ignored his remarks. (There are 12 Union Ministers from Tamil Nadu belonging to the Congress, the DMK and the PMK.) But the PMK took them as an affront to their chinna iyah (`junior Sir" - Dr. Ramadoss' son). And its members went berserk. They attacked Vijaykant's fans association units, burnt the actor's effigy at Cuddalore, Kurinchipadi, Salem, Trivellore, Devakottai and Chennai, mobbed cinema halls screening his films. They warned that the screening of Vijaykant's forthcoming film Gajendra would not be allowed in "Vanniyar areas". Not surprisingly, none of the PMK's allies, the DMK, the Congress, the Marumalarchi Dravida Munnetra Kazhagam and the Left parties, condemned the violence.

Vijaykant's fans hit back. They burnt Dr. Ramadoss' effigies, attacked PMK offices and allegedly burnt down a party office in Cuddalore.

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What was a red rag earlier for the PMK was a huge public meeting organised by Vijaykant (as the SIAA president) and the film industry at Neyveli, again in the Vanniyar belt, on the Cauvery issue in 2002. But the PMK was wary as many of its cadre were either fans of Rajnikant or Vijaykant and even had their pictures adorning their homes.

H. Raja, BJP legislator, put the issue in perspective when he said that the violence revealed the PMK's intolerance to criticism and posed a challenge to the freedom of expression and democratic rights.

For the PMK to get a taste of its own medicine was something new. It had earlier got away with similar actions against Rajnikant and his fans. The stand-off between Rajnikant and Dr. Ramadoss erupted after the PMK founder lambasted Rajnikant for scenes showing him smoking and drinking in the film Baba. The PMK leader said such scenes would corrupt the youth.

What took matters to a head a few weeks before the Lok Sabha elections in May was Dr. Ramadoss using abusive language against Rajnikant in an off-the-record conversation with reporters at Tiruvannamalai. A Tamil daily, however, published it. That touched off a row. When Rajnikant's fans showed black flags to Dr. Ramadoss in Madurai during his election campaign, his security men beat them up.

At a press conference in Chennai on April 12, Rajnikant called Dr. Ramadoss "the king of violence" and said his fans associations would work against PMK candidates in the six Lok Sabha constituencies they were contesting. He pledged his fans' support to the BJP-AIADMK alliance.

However, BJP and the AIADMK candidates were trounced in all the 40 Lok Sabha seats in Tamil Nadu and Pondicherry.

According to Jnani alias N.V. Sankaran, political analyst and Editor of the Tamil monthly Dheemtharikida, Vijaykant's politics and image are different from that of Rajnikant. "Vijaykant has never been a supporter of Hindutva and the BJP. Although he came from a family with a Congress background, he has, like DMK men, exhibited pro-Tamil feelings. At the same, he has avoided giving an impression that he is a DMK man.

"Even when circumstances compelled Rajnikant to observe a fast on the Cauvery issue, it was not accepted that he had pro-Tamil sentiment. Vijaykant's strength is his pro-Tamil image. Even the propaganda that his mother tongue is Telugu will not cut much ice. Tamilians did not care about MGR (M.G. Ramachandran, AIADMK founder and former Chief Minister) being a Malayali and looked upon him as a Tamil actor, the same holds good for Vijaykant," Jnani said.

Vijaykant has been working to a plan on his Good Samaritan image. Generous to the poor, he supports the education of poor students and organises mass marriages, and his fans do social work. According to one observer of the Tamil film industry, Rajnikant's fans remained mere fans but Vijaykant's fans have social awareness. Vijaykant showed mettle in resolving disputes in the SIAA. He organised a gala cultural event in Singapore in which Rajnikant and Kamal Hassan took part, and the proceeds went towards clearing the SIAA's debts. He fully backed the demands of the Film Employees Federation of South India (FEFSI), which has on its rolls workers of about 25 categories.

For now, Vijaykant is focussing on the grassroots - he is reportedly in the process of strengthening his fans association units.

LETTERS

other
The real Vajpayee

A.G. Noorani has ripped to shreds the last vestiges of respectability from Vajpayee's purported liberal visage ("The man behind the image", Frontline, July 16). The media have been more than a willing tool in manufacturing this false construct in the face of evidence to the contrary at various historical junctures, as enumerated by Noorani.

If it were not for the sinister design behind this convenient mask, it would have been easy to dismiss Vajpayee as one who puts the fun into fundamentalism, given his litany of retractions, the latest being in Mumbai. In our pantheon of Prime Ministers, he will surely stand tall, head and shoulders below the rest.

D. Sudhir Kozhikkode

The Cover Story ("The real Vajpayee", Frontline, July 16) has impeccably analysed the multi-faceted personality of former Prime Minister Atal Bihari Vajpayee. Vajpaee is a loyal man of the BJP and he helped the party taste power at the Centre. Although it was the Congress' policies and the help of the Rashtriya Swayamsewak Sangh (RSS) and the Vishwa Hindu Parishad (VHP) that was crucial in propelling the BJP to power, Vajpayee had only one mission - to rescue the BJP through his moderate or his hardline views - on Ayodhya, Gujarat, Hindutva and so on. Despite being out of power, he is a towering personality in Indian politics, and credit should go to him for striking a balance between the hardliners and the moderates in the BJP. The BJP used his face for the recent Lok Sabha elections but benefited little. That will pave the way for the rise of L.K. Advani as the supreme leader of the party.

Akhil Kumar Delhi

The Cover Story makes a genuine attempt at assessing the man behind the image. In our search to find the "Real Vajpayee", we may have to turn to Keats, who writes of the differences between things of transient value and those of eternal significance: things `unreal' and `real'. Vajpayee as "poet" is the `real' Vajpayee. Vajpayee as "politician" is the `unreal' Vajpayee - more so as a "politician in power". Now, when he is out of power, he seems utterly confused, especially when he attempts to trace the causes of the BJP's defeat in the recent Lok Sabha elections. As your Cover Story reveals, Vajpayee as former Prime Minister finds himself "alone at the top", as there no takers for his reasons for the party's defeat. As the head of a coalition government, he survived on the basis of the "compromises" he made. While in office the `real' Vajpayee went through a transformation for the worst - he compromised on principles/ideology just to remain in power. "Blame Game at Mumbai" only indicates that neither Vajpayee nor the BJP are sure of the causes of the defeat. During the election campaign, Vajpayee should have been graceful enough to own up personal responsibility for the deaths at the venue of the saree distribution held as part of his election campaign in Lucknow, instructed party leaders like Narendra Modi and Vinay Katiyar not to indulge in personal attacks on Sonia Gandhi and shown the political courage to sack Modi. That would have been the `real' Vajpayee I know of from my school days.

Onkar Chopra New Delhi

The article by A.G. Noorani reads well. But Vajpayee remains one of the greatest statesmen India has had. I think I will never find a magazine or a newspaper that is neutral and does not support a political party. Why does Frontline not publish an article about Sonia Gandhi, her political career, her work for India or for Indians?

Madhusudhan Vasudevamurthy Christchurch, New Zealand

With his statement in 1992, that he regretted the demolition of the Babri Masjid, Vajpayee, the liberal, came to the fore. With Advani being charge-sheeted in the Hawala case, he pushed Vajpayee to the pedestal. It served two purposes - getting rid of the "political untouchability" tag to forge alliances and to appeal to secular voters who were fed up with Congress misrule. The `mask' helped to cobble up a coalition and keep it running, although on crucial issues the man behind the `mask' showed his `true' colours as a `swayamsewak'. Now with the `mask' failing to woo voters, it is being conveniently discarded.

S. Raghuram New Delhi

The Cover Story rightly exposed the stuff BJP leaders are made of. Even Atal Bihari Vajpayee, who was considered the only statesman in Indian politics, turned out to be a power-hungry politician. He would have risen in stature had accepted the responsibility of his party's defeat in the general elections and retired gracefully.

Siddhartha Raj Guha Jabalpur

AIDS

Asha Krishnakumar has comprehensively discussed the rising burden of HIV infection and AIDS in various parts of India, and stressed the fact that women are more vulnerable to HIV infection ("Women and the high risk", Frontline, July 16). As AIDS is not curable and available treatment modalities are either inaccessible or unaffordable to many patients, it is imperative that more attention is focussed on preventive strategies.

In a recent study conducted in an English medium school in urban Bangalore involving almost 400 students in the 13-15 age group, misconceptions about anatomy, childbirth and HIV were found to be common (Saksena and Saldanha, 2003). Similar misconceptions and lack of awareness about sex are prevalent among adolescents too. Given the inadequacy of information on topics such as `sex and reproduction' in school textbooks, students depend on movies, peers and television for information. The topic of sex is also taboo in most of our households and less than 10 per cent of parents discuss sex-related matters with their children. There is an urgent need to incorporate sex education in schools if we want to check the `AIDS menace' in time.

Dr. Sudhir Kumar Vellore, Tamil Nadu

Saving water

"A walk to save water", (Frontline, July 2), brought home the need to remember the role played by people in villages across the country to preserve their water resources. Maharashtra's innovative programmes should help conserve the State's water resources.

Rahul Padavi Nandurbar, Maharashtra

Ruling by proxy

The hasty transfer of `power' to the interim administration and the subsequent developments, including increased attacks by the resistance forces, signal further violence in war-torn Iraq.

THE political drama in Baghdad, enacted under the direction of the Americans, had to undergo a last-minute change in the script. There was to have been an elaborate ceremony on June 30 to mark the symbolic handing over of "full sovereignty" to the Iraqis. President George W. Bush, who was in Istanbul to attend the North Atlantic Treaty Organisation (NATO) summit, was expected to be present in the Iraqi capital. But without any prior indication, Paul Bremer, the American Pro-Consul, met Iyad Allawi, the interim Iraqi Prime Minister, two days before the scheduled date and went ahead with the transfer of authority. It was later explained that the date for handing over "sovereignty" was being brought "forward".

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No credible reasons were given for this sudden transfer of power and the stealthy exit of Bremer within hours of the hastily arranged ceremony. British Prime Minister Tony Blair, America's closest ally, who was also in Istanbul, apparently had no inkling about Bremer's plans. He looked surprised when the Iraqi "Foreign Minister," with whom he was addressing a joint press conference, suddenly disclosed the details of the plan.

It is obvious that the American military establishment panicked after the attacks on their forces intensified dramatically towards the end of June, lending credibility to the rumours that the resistance was planning a major offensive to coincide with the handing over of "sovereignty". It was a pitiful exit for Bremer: he came to Iraq with the tag of a "counter-terrorism" expert but had to leave the country virtually unannounced, as practically the entire country had risen against the American occupation and the puppet regime. Until recently, Bremer and his advisers described the Iraqi resistance forces as "dead enders" and "remnants" of the previous regime. The new CIA-trained Prime Minster of Iraq, however, is taking the resistance more seriously. Immediately on assuming office, he threatened to impose "martial law" and hinted at the postponement of the promised elections, which, according to the United Nations Security Council Resolution, would have to be held within seven months of the interim government's assumption of power. John Negroponte, the new American Ambassador who replaced Bremer, will preside over the biggest American embassy in the world with a staff strength of more than 3,000. The 1,60,000 foreign soldiers, mainly American, will remain in Iraq to protect the new government from the people's wrath.

The fighting in Iraq again escalated in the second week of July, when the resistance struck in the heart of Baghdad. Resistance forces engaged American troops in long-running daylight street battles, which had not occurred for quite some time. The fighting erupted on the day the interim government signed into effect a new security law giving itself more draconian powers, including the right to introduce martial law for limited periods. (The Iraqis have anyway been living under martial law for the last 15 months.) The new law gives the government the right to impose curfews, set up checkpoints, and search and detain suspects. Oil pipelines are being sabotaged on a regular basis by the resistance forces.

According to analysts, the increasing number of attacks reflects a new level of confidence among the resistance forces. The headquarters of Allawi's Iraq National Accord Party was among the targets chosen by the resistance fighters. Moqtada al-Sadr, the radical Shia leader, after initially saying that he would cooperate with the interim government, changed tack after his loyalists failed to get representation in the government. He has now once again called upon the Iraqi people to revolt.

Allawi, like his American backers, prefers to characterise the resistance as consisting of mainly foreign fighters and Saddam loyalists. At the same time, he is making an effort to lure back the Baathists and former soldiers of the Iraqi Army by offering them limited amnesty. He has been boasting to the media that his government provided the intelligence to the American forces on the activities of the resistance in Falluja, which is now being regularly targeted by American war planes and helicopters. According to reports, most of those being killed in the air attacks are innocent civilians, among them women and children.

Allawi is trying to project the image of a tough ruler cast in the "Saddam" mould, while at the same time downplaying his reputation as a collaborator. He has reintroduced the death penalty, which the American authorities had abolished with great fanfare. He is acting more like an elected leader than the head of a "caretaker government". However, it will be difficult for fair and free elections to be held as scheduled in Iraq. Paul Wolfowitz, the American Deputy Defence Secretary, who had once predicted a cakewalk for the American forces in Iraq, said in the last week of June that the resistance could only be defeated in "five years, more or less".

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THE international community is not impressed by the so-called "transfer of power" though some of the pro-Western Arab states would like to give the new Iraqi government the benefit of the doubt. The Jordanian monarch has even offered to send his troops to Iraq as peacekeepers. The new government refused the offer. Accepting protection from a neighbouring monarch whose family still had pretensions of presiding over the destiny of Iraq, would be the kiss of death for Allawi. The news that Yemen had also offered to send troops to Iraq was quickly denied, though the Yemeni government clarified that it would consider sending troops only after the American forces had left. Most Arab governments privately feel that the transfer of sovereignty is a ploy by Washington to retain control over Baghdad and Iraqi oil resources. The fact that American soldiers will remain outside the control of the interim government, with total immunity from punishment for any illegal acts they might commit, is proof enough for most people in the region that what the Iraqis now have is fake sovereignty.

Diaa Rashwan, an analyst at the Al Ahram Centre for Political and Strategic Studies in Cairo, is quoted as saying that the main reason for the violence in Iraq "is the presence of foreign occupation troops. Because they have a new government and the occupation is still there, I don't think they will stop the violence. The principal problem will continue". Some of the diplomats belonging to the pro-Western monarchies have expressed optimism about the changes that have taken place, saying that the Iraqi people, fed up with the violence, want peace and security. "The militancy will be defeated and Saddam will be hanged," is the prediction of one diplomat.

Very few Arab governments, however, are expected to give diplomatic recognition to the present Iraqi government. They are watching the way the political situation is evolving. Before Bremer left Iraq, he issued 97 legal orders, which are binding on the new government and will cover all the key aspects of Iraqi life, economy and politics.

More than $20 billion of oil revenues collected by the Bush administration from the proceeds of Iraqi oil sales have not gone into the rebuilding of the shattered infrastructure. Instead, it has flown into the coffers of the former Coalition Provisional Authority, according to the reputed international charity organisation Christian Aid. The Christian Aid Report states that the majority of Iraq's reconstruction projects has been awarded to American companies, which charge up to 10 times more than Iraqi firms.

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Oct 9,2020