Sunday, October 19, 2014

[Exasperated by the way Musharraf ran rings around them, the BJP rulers of India moved some divisions to the border. General Musharraf gave an interview to Steve Coll and sent a message: if you want anything from me, you must give something in return - and by that he meant some return on Kashmir. It is a pretty pointless game: Pakistan sends terrorists - or does not notice they are crossing the border - and they attack the Indian army or civilians; in return, India threatens dire consequences, but does nothing. The only sufferers in this game are the Kashmiris, who have to live with hostile, paranoid, overbearing Indian soldiers.. This column was published in Business Standard of 10 June 2002.]

What Musharraf is telling us

This is the patriotic season, and patriotism requires abuse of Musharraf. Many are doing that very well. So no great harm will be done if I take some time off and recount just what Musharraf is telling us. Here, it is not his speech to the nation on 27 May that is important; it is his interview with Steven Coll, Managing Editor of Washington Post two days earlier.
Coll asked Musharraf if infiltration across the line of control had stopped. Musharraf said, “I have always been saying that there is nothing happening across the Line of Control…we will ensure that terrorism does not go from Pakistan anywhere outside into the world.” He did not say, “We have stopped everyone from crossing the line of control”; instead, he said, nothing is happening. Coll found that evasive, and again asked him, “Are there new initiatives that your government can take now to advance the cause that you outlined in January?” Musharraf repeated, nothing is happening across the line of control. But he said he could not take responsibility for what is happening in Kashmir. He condemned the attacks on Indian Parliament, in Jammu and in Calcutta because the assailants had killed civilians, and said he would “move against anyone involved here” if he was given proof. He thus implied that killing Indian police or soldiers was not terrorism. A third time Coll asked, did Musharraf mean that he had consistently seen no activity, since January, or that he had stopped the infiltration “right now, this week”? To which Musharraf replied, “I repeat: there is nothing happening on the Line of Control. That is what I would like to repeat.”
So Musharraf was persistently and deliberately vague; he refused to say that he had stopped infiltration since 12 January as he had promised. And in the same breath he kept saying, “There must be reciprocation.” He also made it clear that by reciprocation he did not mean de-escalation of the military buildup. He meant that the Indian army should leave the towns in Kashmir and go out to the outskirts; and that India should allow international media and human rights organizations (such as Amnesty) into Kashmir. The Indian army is killing people, burning houses and raping women; that must stop. And the line of control should be monitored by the UN.
What did he think India was trying to achieve? Two things. First, it was trying to stop infiltration from Pakistan so that Kashmir could be isolated and all resistance crushed. And second, India was trying to destabilize Pakistan. “Wherever there is an ethnic division which can be exploited, wherever there is a sectarian division which can be exploited, these are the two areas which they have exploited all along in the past years. All along. And we know that. We know that there have been training camps across on their borders when there were certain ethnic differences within our society. They have been involved with that. We are very sure that they carried this out…” And why does he think we did such nasty things to them? Because “they want a subservient Pakistan which remains subservient to them…They are arrogant and they want to impose their will on every country in this region.”
Musharraf was very illuminating about Pakistan’s strategy. He said his forces follow a strategy of deterrence – that is, of promising to make war costly enough for India to deter it. They are capable of “offensive defence” – and he said, “These words are very important.” He meant that while his troops would try to make incursions into Pakistan expensive for the Indian army, they would also try to take some territory; such real estate would be useful in the bargaining after the war. It was the territory we had taken in Sind in the 1971 war that gave us an upper hand; this time, Musharraf would try the trick on us. And in case India tries to confine the war to Kashmir, he has massed 150,000 ex-servicemen close to the line of control; they will stage a massive infiltration into Kashmir, combine with the rebels inside and engulf our forces. “Such dynamics will be unleashed … that maybe even I may not be able to control.” In other words, the tactic of 1947 and 1998, of sending armed men into Kashmir without admitting them to be Pakistani soldiers, will be tried out on a much larger scale.
Finally, his most important message: “Pakistan is no Iraq. India is no United States.”
That is the truth. Ever since September 11, this government has suffered from an illusion. It has believed that because the US could avenge the attacks of September 11 upon people of its choice in Afghanistan, India had acquired a right born of precedent to punish Pakistan for its support of terrorism in India. But acquiring a right is not enough; you have to enforce that right. Advani has said ad infinitum that India’s problem was its own and it had to tackle it itself. In that spirit, the government mobilized the armed forces and prepared them for a military conflict with Pakistan.
But India is not the US; Pakistan is not Afghanistan. The US could remove the Taliban and replace it by a friendly government; India does not have the military might to do so. Even if a military calculation showed that it did, it would have to reckon on nuclear destruction before a friendly government was installed in Pakistan. And without a friendly government, terrorist incursions into Kashmir cannot be stopped. The best that can be achieved with a war is that some territory would be taken, some battles would be won. At the end of it there would still be the same or similar government in Pakistan; India would have to negotiate with it. And even if, in another Simla agreement, Pakistan agreed to stop all infiltration, there is no way of keeping it to its promise forever.
So however intense the frustration of our rulers, they have no way of overcoming it. Some of them earlier justified the killing of Muslims in terms of Gujarati Hindus’ spontaneous outrage. They too – Vajpayee, Advani, Joshi, Fernandes – are outraged; in outrage they can start a war. But their action will be just as ill directed and pointless; it will achieve no worthwhile purpose. If they had any sense – and any concern for public money – they would pull back the troops.

So is there no solution? No response that would work? Collect all VHP hooligans, make them grow beards and learn Punjabi, and send them to Pakistan for theological training. If nothing else, it would ensure peace in Gujarat. And who knows, they may convert the Pakistanis to peace.
[Narendra Modi is praised for his administrative innovations in Gujarat; no one remembers Digvijay Singh, who made equally successful experiments in Madhya Pradesh in the 1990s. The Congress removed him from chief ministership and brought in the considerably inferior Ajit Jogi, and consequently lost the state to BJP. Digvijay Singh came to Delhi and served the Congress establishment loyally but to no purpose. It was a political tragedy.]

Digvijay Singh’s experiments

Seetha went to interview Digvijay Singh and found, to her surprise, that he was a liberal. Hearing that, the Indian Liberal Group asked him to give a lecture, and made C R Irani the chairman. What an irony! Indira Gandhi has a demonic image in the liberal pantheon; Rajiv Gandhi is known as a liberal without guts. And here was one of their devotees giving a lecture in the name of Minoo Masani.
Diggy Raja took a dig at the liberals, saying there was too much stress on liberalization, and too little on reforms in governance. Liberals are all in favour of the free markets and the minimal state, but however minimal, the government had unavoidable functions. These functions were being ill served by our governments; that is where reforms were necessary. He described some that he had tried out.
First, he tried to realize Rajiv’s vision. Rajiv created the third tier of government, with the intention of transferring those functions that most touched the common man to gram panchayats. Then he found that panchayats were being captured by sarpanches; every sarpanch tried to build up a little empire. So now he is trying to breathe life into the community self-help groups. Thus he decreed that any community with more than 40 children could get a school within 90 days. Within 18 months, 26000 schools came up, with 18 lakh students; 47 per cent of them were from scheduled castes and tribes. These grant schools could engage their own teachers; as a result, they got better education at a lower cost. Against the salary of Rs 8000-10000 a month in government schools, they paid Rs 1000; and if a teacher did not turn up or did not teach properly, they could dismiss him.
Then he created a village education campaign: 5-15 illiterates could come together and engage their own teacher, and the government would pay for him. In 2000, 217000 such groups came up, and 3 million people were made literate. Madhya Pradesh achieved a rise of 20 per cent in literacy I the 1990s. Today, literacy in Madhya Pradesh is higher than in neighbouring Andhra, and male literary is higher than in Punjab and Haryana.
Raj Narain, when he was health minister in the Janata government in the 1970s, had set up a scheme for barefoot doctors in the country; it was forgotten the day he stepped down. Now Digvijay Singh has created barefoot doctors in MP. Doctors were upset, but he told them that they did not want to go and work in villages, so quacks flourished; he wanted to replace them with trained quacks. So he arranged for village youths to be given three months’ training in primary health care, and to be able to stock and sell non-scheduled drugs. By now, 18000 have been trained.
Then he turned over government hospitals to communities, and gave them the authority to decide and levy charges, with the proviso that if a patient said he could not pay, he would be treated free without further questions; payments were entirely voluntary. Now the same hospitals are providing health care at 25-30 per cent of market rates. Their X-ray machines never worked; their technicians got a cut on patients sent to private facilities outside. So he gave them an incentive, and the machines began to work.
Irrigation facilities were handed over to elected water users’ associations; watershed committees were given funds to spend. As a result, productivity has improved. There was a proposal to build a reservoir near Ratlam for Rs 15 million; local villagers came and said they could build it for half as much. They finished it in 9 months to standards set by PWD engineers. Every stage in public construction raises costs by 25-20 per cent on account of bribes; so the cost easily doubles. Now Digvijay Singh thinks that the PWD should only give out tenders; the detailed project report, the work and its supervision should all be contracted out.
The central government is prepared to give foodgrains to the poor at throwaway prices. Andhra is using such foodgrains on a large scale in public employment programmes. Digvijay Singh’s approach is different. He thinks money is the culprit. Under the old feudal system, labourers were paid in kind. They are still handicapped by lack of money: however cheap the grains, the poorest have not the money to buy them. So he has arranged grain banks, from which poor people can withdraw grain during lean months.
Villagers of MP may be unused to money; Digvijay Singh is not. Sixty per cent of the state’s revenue goes into salaries; another 18 per cent goes to interest, leaving very little for development. The situation will get worse; government servants are living too long, and pensions will exceed salaries in 12 years’ time. So in 1994 he abolished 20000 posts of daily wagers. After re-election he issued a white paper explaining why it was necessary to reduce the strength of the civil service. All departments other than education and health were asked to reduce their strength by a third; these posts will be abolished, and not be filled when the incumbents retire. Now appointments are being made on terminable contracts. Even elected politicians are terminable in MP; the people have a right to recall members of municipal corporations and panchayats. Only two were recalled. In one case the member lost his seat for corruption. In the other one, the mayor convinced the electors that she had stopped the corruption of the corporators and that they had ganged up against her; she retained her seat.
How does Digvijay Singh know all this? For one week in the year, he sends off his officers into villages; every single village in the state is visited. There they have to collect information in a set questionnaire. They also have to ask for and listen to complaints and report them. Thus once a year, Digvijay Singh gets up-to-date information on how his experiments are faring. And as a test check, he himself takes off in a helicopter every day during the week and drops down randomly in villages, and listens to the people.
Amongst others, Digvijay Singh wants to guarantee people their cultural freedom. He thinks there is enormous cultural diversity amongst the minorities, Hindu, Muslim and other, which the communalists are trying to destroy. Hindutva is cultural terrorism. After the Gujarat riots, thousands of Gujarati hooligans were trying to invade villages in Ratlam district and attack Muslims; Digvijay Singh sent police to thwart them, and stopped the carnage at the border.

And one more thing. I did not see the horde of obsequious hangers-on around Digvijay Singh that is the sign of an important politician in this country. He had a guard and a couple of companions; that was all.
[While I was in the finance ministry, many industrialists used to come to lobby me. Some continued to visit me after I left the ministry and joined the press, in the hope that I would write in their favour. I am a liberal and a believer in unilateral free trade; so I generally disappointed them. But I made an exception in favour alkali manufacturers, because their overseas supplier was a monopolist and was practising price discrimination.]

Some uncomfortable facts of life

Recently I had unlikely visitors - from the Alkali Manufacturers’ Association of India (AMAI). They want higher protection. I told them they had lost their way - that the North Block was a couple of miles south of where I was. They could be sure of getting a warmer protection in that edifice, for it housed a business that converted protection to industry into support for the ruling party.
Anyway, AMAI insisted that they had not lost their way, that I was the person they wanted to educate. First, the story they are telling the finance ministry. They say that they do not want tariff protection; they want tariff correction. Why? Because they are an industry the government should value. They have invested Rs 45 billion in the industry, they sell soda ash worth Rs 20 billion a year, and they pay Rs 4 billion in taxes - excise, sales tax, cess on salt, limestone etc. The duty on soda ash used to be 40 per cent. Chidambaram reduced the maximum customs duty to 35 per cent. Then Yashwant Sinha reduced it to 20 per cent last year.
The rest is familiar spiel. If the duty is not raised, the soda ash industry will be wiped out. With it, half of the demand for salt will vanish. The livelihood of 450,000 families - 2 million people - will be destroyed. Of these, 95 per cent will be Gujaratis, for that is where the salt industry is concentrated.
Soda ash is used in the making of glass, soap, detergents and dyes. None of these industries is complaining. But AMAI says they have not reduced their prices even though they could get cheaper soda ash from abroad during the past year. So they may have made bigger profits, but their consumers have not benefited (but no prices of these products are given). AMAI gives figures to show that production plus imports have exceeded domestic demand every year. That should mean that someone has been building up stocks - over a million tons since 1994-95 - equal to over six months’ production. AMAI does not say which idiot did it and why, at a time when soda ash prices rose little. Which makes me think these figures are phony - that like the figures Sebi puts out, they do not mean what they are said to mean.
These arguments and supporting figures are not enough to change my general view, to which I will come later. What caught my interest, however, was something else. The finance minister, in his budget speech last year, said, “There are some cases of anomaly in customs duty between raw materials and intermediate goods on the one hand, and intermediate goods and final products on the other....soda ash is an input for the production of glassware, detergents etc and currently attracts the peak customs duty of 35 per cent along with the final products. I propose to reduce it to 20 per cent.” In other words, soda ash bore the same duty as the products made from it, and he reduced duty on it. To eliminate an anomaly? But there was no anomaly; even if the duty on an intermediate and its product is the same, the product gets protection equal to the duty on its value added. The finance minister either did not know economics, or fudged facts, or both.
And why did he do so? A possible pointer is to be found in a letter written by William Daley, US Commerce Secretary and Charlene Barshefsky, US Trade Representative, to Murasoli Maran on 28 January 2000. There they expressed “our concern over what has become a de facto embargo established by your government since 1996 under a temporary injunction imposed by the Monopolies and Restrictive Practices Commission (MRTPC).”
They said that India’s 38.5 per cent tariff was the highest in the world and, together with other import fees, yielded an unacceptable 69.9 per cent burden on US soda ash exports. They had received a petition from John Andrews, President of ANSAC, asking them to withdraw the preferential treatment to $1 billion of India’s exports to the US given under the Generalized System of Preferences if India did not reduce the duty on caustic soda.
What was this de facto embargo? AMAI went to MRTPC in 1996 and said that ANSAC was a cartel of American soda ash producers who were exporting to different countries at different prices calculated to destroy the soda ash industries of those countries. It gave figures purporting to show that ANSAC’s export prices to countries that had a soda ash industry were lower than to those that did not have one. So MRTPC imposed an embargo on ANSAC’s exports to India. The abolition of import licensing last year abrogated that embargo.
In sum, the industry’s case is that ANSAC is a cartel that aims to destroy the Indian soda ash industry and establish an import monopoly. The NDA government, which is usually so kind to indigenous industry, still reduced customs duty on soda ash to 20 per cent. It did so under US threat - that it would withdraw preferences on $1.1 billion of India’s exports unless India was kinder to ANSAC.
But why is ANSAC exporting to India at prices far below the Indian industry’s cost of production? Not because it is a cartel, but because its cost of production is less than half of Indian cost. For huge hoards of soda ash are found naturally in Wyoming; American producers have simply to mine them and ship them. Whereas the Indian producers have to produce salt, and then turn it into soda ash by electrolysis.
So - what should be done? The first part of my answer is the same as before. It is the job of the government to ensure a rapid growth in total output and employment, not to protect any particular industry; if the threat to an industry poses severe regional problems, the industry should be subsidized to adapt itself, or the region subsidized to grow new industries. So the government should abolish all tariffs and devalue to give equivalent protection. AMAI’s complaint of high domestic costs is valid; railways need to reduce their costs, roads need to be improved and a competitive market for power needs to be created to reduce power costs. With these steps and a subsidy for modernization, the soda ash industry could certainly survive. If it cannot, so much the worse for it.

But there is a second part - that if it is established that ANSAC charges different countries different prices, then remedies against exercise of such price discrimination are necessary. The ideal would be international action against such monopolies under the WTO. If that is not possible, then there is a case for an import duty equal to the difference between ANSAC’s export price to India and the highest export price it charges.

[Pervez Musharraf was the most interesting leader Pakistan has had. He was a general; so he took what he thought were reasonable risks. He was a leader; so he talked a lot. He tried hard to reach a settlement with India; his idea of dividing Kashmir into four was a promising start. Unfortunately, he invaded Kargil heights secretly, and thereby destroyed any trust Indians might have had in him; after that, India's BJ{ rulers were no longer prepared to believe him, and he lost his chance. This was my reaction to a speech of his, published in Business Standard of 22 January 2002.]

A crash course in leadership

GIM – the Great Indian Middle Class – has almost cured me of television; the great family epics it loves bore me to death. Ten minutes of Aaj Tak or half an hour of Australia vs South Africa is about as much as I can take. But looking for the news on Aaj Tak, I blundered onto General Pervez Musharraf. I could not tear myself away. It was a riveting performance.
The late Shantanu Rao Kirloskar had a publicity adviser for some time. He used to make Kirloskar rehearse his speeches – record them, make him listen and improve his delivery. It would seem that Musharraf does not have a media adviser or has one who is scared of being locked up. For most of the time, he appeared in the bottom left-hand or bottom right-hand corner of the screen. It depended on whether the top left-hand corner was occupied by a picture the venerable Qaid-e-Azam or the top right-hand corner was occupied by the venerable flag of Pakistan. Someone – maybe Musharraf himself – decided that the emblems of power had to be given prominence. Good for the emblems, but they diminished the President. Being at the bottom of the screen, he looked like a schoolboy peering over a desk. The desk was invisible, but it could not be missed, for Musharraf mostly read from a text. He did not use a teleprompter. A teleprompter would in any case have found it difficult to cope with, since he switched unpredictably from Urdu to English. Often the whole sentence was in Urdu, but the key words were in English. Understandable, since he had so many audiences to address. He addressed Atal Bihari Vajpayee by name, but also the US, the international community, and of course his home audience. It was a difficult, an ambitious speech.
So naturally, its basic object was obscured, most of all from Indian audiences, which hear what they want and not what they need to from Pakistan. Its basic aim was to avert an Indian military attack. I do not know what our rulers want to do – whether they want to attack Pakistan or just win the UP elections. But they have certainly tried to give Pakistan a scare; as General Padmanabhan said, the army has prepared for a war, not a military exercise. Words do not matter; but five corps have been moved to the border, and three have been placed just behind in reserve. These actions are meant to speak, and they speak unambiguously: India has prepared for a war.
And it is a war Pakistan cannot afford. Why not? On the face of it, Pakistan is better placed to fight a war today than it was in 1971. The military balance is roughly the same, and Pakistan does not have to divide its armed forces between the east and the west. Against India’s 1.1 million men under arms, Pakistan has 550,000. Whereas in 1971 Karachi was left defenceless, Pakistan today has submarines and destroyers that can put up a fight. It has 387 fighters and bombers against our 869 – an air force with no aggressive capability, but enough for defence. It has 3450 armoured vehicles against our 5271, and 1752 guns against our 4455. On paper it has a big enough force to fight a defensive war.
So why does Musharraf, the man who launched the Kargil adventure, not want to fight? I cannot read his mind; but if I were him, I would ask: what objective will I achieve with a war? The answer has to be, none: there is no respect in which he can alter India’s behaviour to his advantage by going to war. To be a worthy leader of his country, he had to find an honourable way of not going to war.
That is what his speech was about. To stop India from attacking, he had to convey a message that he will stop cross-border terrorism, and make it credible. To this end he banned Lashkar-i-Tayyaba and Jaish-e-Muhammad. He banned Tahrik-e-Nifaz-e-Shariat-e-Mohammad, which was to Afghanistan what Lashkar and Jaish were to India: it trained and sent Pakistanis to fight in Afghanistan – and could, now that it was unemployed, have taken up the business in Kashmir. He banned Lashkar-e-Jangvi and Sipah-e-Mohammad, the two principal private armies fighting the civil war between Sunnis and Shias. And a few more. He said, “No organization is allowed to form Lashkar, Sipah or Jaish”; in other words, he has announced a ban on the training and marshalling of private armies. “It is for the government to take a position on international issues. Individuals, organizations and political parties should restrict their activities to the expression of their views.” He promised the Americans: “Pakistan will not allow its territory to be used for terrorist activities anywhere in the world.” It does not matter whom he made the promise, as long as he keeps his word.
All this he did to dissuade India from attacking. But he also had internal reasons. We in India have little inkling of the social conditions in Pakistan. We are so busy thinking ill of it that we do not observe what has been happening there. Something between 300,000 and half a million Indians went to the Middle East after the oil boom of the 1970s. Many more Pakistanis did – probably a million or a million-and-a-half from a population a sixth our size. Most of the Indian migrants’ remittances were used to smuggle in gold, so they had little effect on the rest of the economy. But the flood of foreign currency into Pakistan was so huge that exchange controls and import controls were overwhelmed. The imports destroyed all industry except a rather sickly textile industry; as Musharraf remarked, Pakistani Mullah warlords go about in Pajeros. The surfeit of foreign exchange enabled the rich people of Pakistan to live half their time in the west. When the Middle Eastern oil boom ended, Pakistani workers fanned out further west. I have been approached by homesick Pakistanis in Amsterdam; the last time I went to Oslo, many kiosks there were manned by Pakistanis. Arab grandees picked up concubines in Pakistan; Arab eccentrics financed mosques, religious schools and private armies. Osama bin Laden was one such eccentric. The 1990s have been particularly bad for Pakistan; there was no growth of productive employment, and idle young men turned to crime, often financed by money from the rich abroad and at home.
It is this disintegration of Pakistan, its turning into a lawless state, that concerns Musharraf; that is what he would, in his own fumbling way, like to address. It is worth watching him do it because he is a leader in the making, a leader who was thrown into his job because Nawaz Sharif’s dirty trick against him failed, a leader who is teaching himself to run a country.