Wednesday, September 13, 2006


Why India lags China

Why India Lags China.

Its a combination of lack of leadership, ills of democracy type (universal adult franchisee) that India practices and its culture.

Any enterprise, let alone a nation, needs a "leader" who is not only able to draw support from all sections of the society but also has a vision and ability to lead/execute this vision. Today, India does not have a single leader who could be called a National Leader. Our Prime Minister, chief executive of the country, is not a popular leader elected by the people of the country. The popular support resides today in regional/caste leader such as Laloo, Karunanidhi, Mulayam, Mayawati. None of whom has any support outside there home state and therefore, their priorities are not linked to National interests alone. Even Sonia Gandhi, supposdly the only national leader, was unable to garner votes for her party in some of country's largest States - Uttar Pradesh and Bihar. In any case, she has chosen (like other popular and powerful leaders such as Bal Thakarey, Sharad Power) to sit back and not take the responsibility of running the country in her hands.

How did China manage this - China certainly had leaders who had vision and they did not have to worry about popular support.

Second problem - Democracy type. India follows a Parliamentary form of democracy where People elects their representatives and representatives in turn elect the Prime Minister (chief executive) of the Nation. As against this, United States follows a Presidential form of democracy where people elect the chief executive of the country directly. This would make a big difference for India, given its highly diverse characteristics and federal structure.

How did China manage this - China has a unified command that leads decision making to the chief executive of the country and does not have a federal structure a la India or US.

The third issue is off course - India culture which preaches "one has to do its duty without worrying about the fruits of ones efforts", exact opposite of what the western world preaches (result oreintation and end justifies the means). Each has its own advantages and disadvantages and today many western thinkers are promoting Indian way. I am no one to judge which one is better but it certainly makes a difference when it comes only to economic growth.

Tuesday, January 24, 2006

An interesting article from FT.

Martin Wolf: Democracy and the future

India needs strong governments to steer the country on a reform and development path. We cannot do with a Government (such as current Manmohan Singh government at the center) that keeps bowing to unreasonable demands of a regional party (CPI-M). Its another matter whether the demands of left are reasonable or not but the critical issue here is how can a small regional party with a few MPs keep the government hostage to its constant demands.
There are several examples of governmant retracting from its publicly announced policies (I am assuming these were well thought out as they were announced by responsible Ministers of the Government) on several occasions. Recent example is reduction in food subsidy.

There are two big problems with our current parliamentary forms of democracy:

1. Majority of the time Chief Executive of the Country or a State spend on ensuring that they remain on the position. Only in their spare time they worry about the nation or state problems and development.

2. Small group of MPs or MLAs are able to weild undue influence on the functioning of the government and its policies as is the case with CPI-M and central government.

Situation is no different in States, even where a single party has sufficient majority. Example or Madhya Pradesh is not very old. Dharam Singh government is on the brink of collapse.
The problem arises from the ability of the MPs/MLAs to withdraw support to the Prime Minister or Chief Minister at any point of time during their tenure without any problem. Though in a democracy, it is a highly desirable liberty granted to our elected representative, it has been misused so often that Rajiv Gandhi government thought of enacting anti-defection law. Even this has not worked and the time has come when we need to review the basic strcture of our parliamentary democracy.

There have been many suggestions. I personally advocate American form of democracy with some amendments to suit Indian needs. The logic, Indians should be able to elect their Prime Minister directly. If I want to choose Narayan Murthi as the Prime Minister (and off course he must be interested in being one) I should be able to vote for him. Last parliamentary election, even a few day before the swearing in ceremony of the new government, citizens of this country didnot know as to whom they have voted as next Prime Minister. This playing blind is not good for the country.

My solution is as follows:

1. Chief Executive of the Country and States (call him Prime Minister or President or Chancellor, doesnot matter) should be elected directly by the public. No person should be announced elected unless he or she gets at least 50% of the polled votes and at least 25% of the total electorate.

2. Current form of Parliament (Loksabha & Rajya Sabha) can continue but will be able to dislodge a directly elected CEO only by a privilege motion requiring at least 2/3rd votes of the total sitting members.

3. Any removal of CEO should result in fresh election for the CEO.

4. CEO should be free to choose his or her cabinet members but necessarily from the members of the Parliament.

5. Most of the current laws and rules about Parliament's approval for major policy decisions and legislative changes could follow.

It is disheartening to note that no such attempts are being made.

Saturday, October 29, 2005


What ails Indian power sector - Generation

Recently Ministry of Power issued a document titled “Minister of Power reviewed the progress of IPPs and the likely capacity addition”. This document is the reflection of the sorry state of (or lack of) foresightedness and planning at the highest level in the country.

Almost whole of the country (except for few eastern states) is reeling under severe power shortage. The current peak power shortage at the national level is approximately 13,000 MW (11-12% of our current installed capacity). The Ministry of Power’s own projections for capacity additions required by 2012 are 100,000 MW (almost equal to our current installed capacity.

Now compare these requirements with the actions on ground. The document referred above lists 10 projects in private sector that are actively supported by Ministry of Power and an Inter-Institutional Group (IIG) of financial institutions to facilitate early financial closure. The total planned capacity of these projects is 11500 MW. Out of this, more than 7000 MW are yet to complete any of the three major milestones in the development of a power project and essential for financial closure i.e. PPA, EPC and FSA. That means that these projects are yet to tie up fuel, buyer and turnkey contractor who will build the plant.

Considering the past track record of success rate of private power projects, not more than 2,000-3,000 MW would be actually setup. This is less than 5% of the required capacity additions for the plan period ending 2012.

This also means that rest of the capacity required would need to be added by public sector – almost one lakh MW requiring almost Rs. 4 lakh crores. At the commonly referred debt-equity ratio of 70:30, this would mean that the governments (Central government and state governments) will have to pump in Rs. 120,000 crores. Can they do it? Should they do it by diverting funds from other sectors? And this is generation alone, similar fund requirements are there for transmission as well as distribution sectors.

The task is Herculean and requires efforts of that magnitude. The problem is our Ministry is busy doing exactly the same things they were doing 10 years ago. The babus inside the ministry have no vision or foresight to look beyond what they have been doing for years and are comfortable with. At this point of time, when they should have been busy planning few lakh MWs (a power project has a gestation period of 3-8 years depending upon the fuel), they are busy with few thousand MW. They are unable to comprehend that the country need one lakh MW or more of generation capacity and this mean that have to find out different ways and different approaches.

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