Scanning Pro-Maoists

From Deccan Herald:

A Home Ministry circular alerts heads of paramilitary forces and police in the Maoist-affected states that the CPI-Maoist has 57 “front bodies” of peasants, labourers, women, students, tribals and trade unions who have helped the banned outfit raise the level of its tactical warfare, including winning court battles and getting their arrested leaders released.

Apparently one of the 'front bodies' includes a group that has a former supreme court justice as a 'key member':

Among the groups being watched include People’s Union for Civil Liberties that has Justice (Retd) Rajinder Sachar as one of its key members. The group was formed in 1976 by Jaiprakash Narain.

If that doesn't tell the Home Ministry that it is barking up the wrong tree by targeting these groups and 'intellectuals' in general, I don't know what will. It's not only ex-Justices who are in the government's spotlight:

Blaming “unrealistic judicial activism” as the main reason for increased Maoist activities, the [Law and Justice] minister said: “If the courts had exhibited restraint and gone according to ground realities in the forests, the situation would have been totally different today”.

Here's another former Justice speaking out in support of dialogue & addressing root causes:

A group of 25 intellectuals and activists, including Justice V R Krishna Iyer and Arundhati Roy, on Monday welcomed the statement by Congress president and UPA chairperson Sonia Gandhi that the ''root cause'' of naxalism has to be addressed while decisively acting against them.

“We welcome the public statement of Sonia Gandhi that the extreme neglect of the tribal areas is at the root of the present crisis in those regions.

“We hope that this appreciation of the need to go deeper into the question would lead to initiatives for immediate cessation of hostilities and dialogue so that the process of people-oriented development can be made feasible,” they said in a statement.

As B S Raghavan argued in Business Line:

The so-called war on Maoism has fast degenerated into a war of words. This phony war is entirely the offshoot of the political establishment, governing class and security agencies unleashing their combined might against those whom they castigate as the apologists, accomplices and sympathisers of Maoists, defined as any group of balanced, thoughtful analysts who have the temerity to argue that full-throated, blood-curdling cries of a ‘fight-to-the finish' with all the forces at the Government's command are no answer to Maoism.

Liability Caps

The Americans want the Nuclear Liability Bill which caps the suppliers' liabilities in case of mishaps. One has to agree that they practice what they preach. I mean, $75 million liability cap to cover damages from oil spills. How pro-oil companies can a country's politicians be?

In Thrall Of Finance

Interesting article from Deccan Chronicle:

In the ongoing war between international finance capital and the citizens of the world, it is remarkable how many recent battles finance has won. Recent events have shown how economic policies of governments and the socio-economic rights of citizens in both the developed and developing worlds are increasingly hostage to the whims of financial markets, based on fear of the havoc they can create. Even more than before, the world seems to be enslaved by finance.

Link here. Reminds me of the ancient mariner and the wedding guest.

A Glimmer of Hope Regarding The Naxal Issue?

Apparently, the Congress chief has this to say about the Naxalite problem:

“Our country is facing an enormous challenge from the Naxalites. While we must address acts of terror decisively and forcefully, we have to address the root causes of Naxalism. The rise of Naxalism is a reflection of the need for our development initiatives to reach the grassroots, especially in our most backward tribal districts.”

She should be more careful when expressing such things which can be interpreted as offering support to the Naxalites : Supporting Maoists will invite 10 year jail. Of course this threat of jail-terms seems to be totally unconstitutional - our Constitution apparently even protects people that talk against the very idea of India itself.

Aside from that, the article notes that the PM gets the problem and also that Industry gets it:

The Prime Minister, Dr Manmohan Singh, has however been a bit more specific in his appeal to industrialists that they should “partner” the Government in the latter's efforts to develop the interior regions of the country. Among other things, he is reported to have said that industry needed “to plough back cash into the areas from where it is hoping to make money”.

The CII president, Mr Hari Bhartia, reportedly said that Dr Singh wanted industry to invest in building trust in the Naxalite-hit districts, and that improvement of the “condition of the people in these areas has to be a priority for the state and industry”.

Importantly, the CII chief said that industry was “not immediately looking at doing business there... we want to go in and build trust”. This is a noble intention stated unequivocally, and Mr Bhartia should be complimented for the exercise.

Positive news definitely.

Interesting Side-effect of GM Crops

Explosion of pests around farms growing genetically modified cotton. Article here: Pests explosion leads to call for GM review

IPL: Fixing Was A Regular Occurrence

Michael Atherton has it off-record from a 'former international player':

... one leading former international player told me categorically, albeit off the record because of his fear of reprisals, that fixing was a regular occurrence.

Article here. Difficult to know how much credence to give an anonymous source, but keeping in mind that the IT department supposedly had a list of 27 players who were gaming the system, it does seem that it is happening.

He also writes:

I have always been deeply ambivalent about the IPL: the gross commercialisation, the greed, the pandering to celebrities and the salesmanship of some older players who should know better have done little to enrich the game.

And:

Modi’s marketing genius — and it was just that — will be missed, further straining revenues. It will begin to feel more like a cricket tournament than a giant commercial advert with cricket attached.

Funny he calls IPL a giant commercial advert with cricket attached. I'd said something similar in a mail to the Hasiru Usiru mailing list:

I believe cricket as it is in our country currently, is nothing but a hanger on which ads for lousy products like the fizzy drinks can be hung. It is also a money-making enterprise for its practitioners and administrators. The money is not always made playing the game as it should be played. I could care less about IPL's fate.

Oh well, the advert will go on, no doubt about it.

Private Sector Profit-Motive And Where It Leads

[This was posted to HU list in a (rather pointless) public sector/private sector discussion.]

and financial institutions being a special species within the private sector, this story does not allow for any generalized critique on the private sector itself.

I would not agree completely with that (but I'll still give some non-finance sector examples below). The finance services sector in the US was where the action was as of the time of crisis. The share of finance sector profits in all corporate profits in the US for 2007 when the crisis was at a peak was 40%, up from 10% in the 1980s (see link). The share of GDP of the finance sector increased from 23% to 31% from 1990 to 2006. The US had already outsourced manufacturing to lower-cost countries, so the predominance of the finance industry is not surprising. And the finance industry does not produce anything, it just moves money around.

That being so, all the efforts of the private sector 'innovators' was centred around that 'hot' sector. So I say that the bad behaviour of the finance sector during that time just shows what the private sector affinity for profits leads to when taken to an extreme limit. And this was achieved by "effectively capturing the US govt" as a former chief economist of the IMF notes (click here to go to the article). And this is how private industry seeks to make things easy for itself everywhere, though they are not successful to that extent. Even if one agrees that financial institutions are a special species - a species making up 31% of the US GDP - then maybe they should not be in the private sector at all.

I'll give non-financial sector examples illustrating the effects of private industry's profit-motive below. Of course, one swallow does not make a summer. But there are stories all around if we look.

To take the effects of the profit-motive on a non-financial sector industry, let's see how where the meat for hamburgers comes from, why and hence how eating a burger made of ground beef in the US is not completely safe. From The New York Times (note that Cargill according to the article is the biggest private company in the US at the time of writing):

... confidential grinding logs and other Cargill records show that the hamburgers were made from a mix of slaughterhouse trimmings and a mash-like product derived from scraps that were ground together at a plant in Wisconsin. ...

Using a combination of sources — a practice followed by most large producers of fresh and packaged hamburger — allowed Cargill to spend about 25 percent less than it would have for cuts of whole meat.

Those low-grade ingredients are cut from areas of the cow that are more likely to have had contact with feces, which carries E. coli, industry research shows. Yet Cargill, like most meat companies, relies on its suppliers to check for the bacteria and does its own testing only after the ingredients are ground together. ...

Unwritten agreements between some companies appear to stand in the way of ingredient testing. Many big slaughterhouses will sell only to grinders who agree not to test their shipments for E. coli, according to officials at two large grinding companies. Slaughterhouses fear that one grinder's discovery of E. coli will set off a recall of ingredients they sold to others.

I would recommend the full article.

Another instance is the drinking water pollution in the US. Again from another New York Times article:

In the last five years alone, chemical factories, manufacturing plants and other workplaces have violated water pollution laws more than half a million times. The violations range from failing to report emissions to dumping toxins at concentrations regulators say might contribute to cancer, birth defects and other illnesses.

However, the vast majority of those polluters have escaped punishment.

[The NY Times ]research shows that an estimated one in 10 Americans have been exposed to drinking water that contains dangerous chemicals or fails to meet a federal health benchmark in other ways.

... stretched resources [at the regulators] are only part of the reason polluters escape punishment. The Times's investigation shows that in West Virginia and other states, powerful industries have often successfully lobbied to undermine effective regulation.

Not exactly a ringing endorsement of private industry. The private military-industrial complex and private oil sector also play a big and not so benign role in the US, which can be observed in countries not so far from us geographically. Here's another example of the oil sector influence on the US govt.

Another example is usage of high fructose corn syrup in fizzy drinks and other food items. HFCS is less costly compared to sugar. Hence it was widely adopted by the processed food industry in the US, including the cola companies. The obesity epidemic has been attributed partly to it. An interesting but long video on the topic and the resulting obesity problem: http://www.youtube.com/watch?v=dBnniua6-oM. The doctor explains a neat trick used by the cola companies : they include caffeine in the cola. caffeine is a diuretic, so it makes the drinker thirsty. So guess what he/she is going to do? Yes, pop another can of cola!

The story of pharma companies seeking to influence doctors by giving gifts, free trips, and other incentives has been around for some time (see link to an article in The Hindu). Of course, this is happening in India now too.

No wonder the American people are losing faith in their institutions including businesses (see link to Time.com article).

I also disagree that the story of the crisis was "incredibly complex". Though the technical details of some of the financial instruments etc are definitely difficult to grasp for lay people like me, the basic theme is simple: greed. The basic story is also pretty straightforward as I understand it: Giving loans to anyone who had a pulse, packaging the loans, and then dicing and slicing the packages into all kinds of different financial instruments and selling the instruments and placing bets on these instruments failing, backed by insurance provided by reckless (or clueless) insurance companies.

IPL Quote Of The Season?

I've steadfastly kept away from either watching or reading about IPL since its inception. Except for the last few days as the skeletons have kept tumbling out of the closets. Even then all I've watched or read has been on the News Channels on TV and in the News sections of newspapers. So I think this definitely is the quote of the season as far as IPL is concerned.

Salman Khurshid according to Business Line:

The Minister for Corporate Affairs, Mr Salman Khurshid, played the IPL controversy with a straight bat. He also ducked with aplomb all bouncers on possible corporate governance failures among the franchises. That he was a classicist in cricket came out in the open when he said last week at an industry event that IPL isn't cricket although it looks little bit like it. “It (IPL) looks like cricket, but it isn't”.

"IPL isn't cricket although it looks a bit like it". Bravo sir.

On IPL

Two opinion pieces on the crapola that is IPL. One, a serious one from P Sainath. An excerpt from it highlighting the media's acquiescence on the whole matter:

It was just 10 years ago that cricket was rocked by the game's biggest-ever match-fixing scandal. That too had its centre of gravity in Indian cities, and involved Indian bookies and Indian businessmen. But along comes a new hyper-commercialised version of the game. It has scandal-waiting-to-happen written all over it and the media say “wow! This looks great,” promptly going into the “willing suspension of disbelief” mode. This venture had the right names, high glamour and, above all, big advertising and corporate power. There were obvious conflicts of interest (apart from what it did to cricket, the game) from day one. Here was Big Business in open embrace with its political patrons. There were also those who did not give the public office they held a fraction of the time or importance they gave to the BCCI-IPL. But few serious questions came up in the media.

The other a tongue-in-cheek one from T. C. A. Srinivasa-Raghavan. The defines the problem as follows, before coming up with a theorem, a corollary and a lemma:

To the extent that cricket is the only sport that Indians seem to enjoy, the demand for it far exceeds supply.

The convenience that TV offers, of being able to watch it in the comfort of your home, has enlarged the supply-demand gap disproportionately because even those who would not otherwise watch cricket watch it now.

Add to this the fact that the Board of Cricket Control in India (BCCI) has the monopoly over cricket, and the perils of short supply become very evident. The flies begin to gather.

Top it all off with the terrifying amount of money floating about in the world looking for sure-fire investments, and what you get is an IPL-like phenomenon, namely, super-normal profits caused by a huge demand-supply gap and a monopoly.

Indeed, the IPL is different from other controlled businesses — like mining, for example — only in that it is entertaining and therefore more visible. But it has its share of sleaze balls in the same proportion as Defence deals, road-building contracts, mining and so on. They also get attracted to what in economics are called ‘supernormal profits'.

Land Grab In Tribal Areas

Plain and simple. And the tribals are supposed to grin and bear it? From Business Line:

..according to a knowledgeable scholar, Dr Walter Fernandes,between 1947 and 2004, nearly six crore persons were forcibly displaced due to acquisition of land for development purposes, and of them 40 per cent constituted Scheduled Tribes.

Out of a total population of generic tribals of eight crore, 2.4 crore people were involuntarily thrown out of their land, home and occupation. This figure constitutes 30 per cent of the total tribal population.

Official figures admit that only 28 per cent of the displaced tribal population has been rehabilitated. Assuming that even this low figure is not an exaggeration, what happened to the remaining 72 per cent of the displaced tribals numbering 1.44 crore?

When the Ministers and MPs in illegal occupation of vast official mansions in Delhi, owing crores of rupees to ‘‘We, the People'' in rent, electricity and water charges, and having their own extra homes elsewhere, are sought to be evicted, do not they raise Cain and cling to their illegal possessions, defying Parliament and the people? Do not the fat cats of the corporate domain let out a howl whenever the exemptions they have grown accustomed to are touched? You want the poor, the deprived and the downtrodden, subsisting without food or water, to feel ecstatic when you trample them under foot?

The law-and-order maestros are horrified at the violence and savagery from the side of Maoists and want to exterminate them at all costs and by all means. True, violence is abominable and deserves to be condemned.

But, then, people are forced to take to violence because only then the powerful governing class deigns to invite them for talks! People have come to know by experience that the government functionaries are stone deaf and the only way to jolt them is by exploding a bomb or setting fire to public property, for, only then, everyone from the Prime Minister down rushes out to listen to them.

Who Is The Nuclear Liability Bill For?

Prithviraj Chauhan has denied that there is US pressure to pass the Nuclear Liability Bill, while at the same time admitting that 'only US companies' will be affected. Now ET claims that the US ambassador is doing a sales job for the Bill among opposition leaders. So who really wants this Bill?

Lost Trust

Must be a tough thing to admit:

In the past decade, nearly every pillar institution in American society — whether it's General Motors, Congress, Wall Street, Major League Baseball, the Catholic Church or the mainstream media — has revealed itself to be corrupt, incompetent or both. And at the root of these failures are the people who run these institutions, the bright and industrious minds who occupy the commanding heights of our meritocratic order. In exchange for their power, status and remuneration, they are supposed to make sure everything operates smoothly. But after a cascade of scandals and catastrophes, that implicit social contract lies in ruins, replaced by mass skepticism, contempt and disillusionment.

FDI - Takes Away More Than It Gives?

Businessline looks deeper into FDI and comes up with some interesting conclusions. 

BIAL PPP - More Public Less Private

From The Hindu:

Bangalore: The notion that the public-private partnership (PPP) model is the salvation for Bangalore’s infrastructure deficit has been sharply questioned by the report of the Joint Legislature Committee on Bengaluru International Airport (BIA).

The report, tabled in the Legislative Assembly on Monday, reveals that the Karnataka Government spent a significant proportion of the project cost for the construction of the BIA without incurring any returns for a project that was promoted by three private companies — Siemens, Larsen and Toubro and Unique (Flughafen Zurich AG) Zurich Airport.

What the report establishes is that although the Government held only a 13 per cent share in the company, it spent substantial amounts, which, rightfully, should have been counted as equity in the project. If this had been done, the Government would have been entitled to its share of profits.

...

In effect, after having invested Rs. 50 crore as its share of share capital, the Government spent at least Rs. 600 crore more.

Govt Not To Involve Itself in Land Grab

From FT:

India’s top business organisation is warning that a bill on land purchasing due to be introduced in parliament this week would hinder industrial development by making it more difficult for private companies to buy sites for big factories.

Under the proposed bill, state power to acquire land for infrastructure or defence would be enhanced and protections would be put in place to ensure fairer compensation for farmers whose land was taken.

The state, however, would no longer take the lead in buying land for factories, office parks, residential areas or economic zones. Instead, that would be left to private groups, with the condition that once the buyer was able to secure at least 70 per cent of the required land, the state could step in to compel those holding out to sell.

Nice. But as expected, the business world doesn't like it one bit. Too bad.

News to Cheer You Up

Something to cheer one up on a cold cloudy day. Violence and threats bring a government to its knees:

Through the second half of October and for most of November this year, Rajasthan was engulfed in an unusual form of protest, spearheaded in the main by gram panchayat officials. Joined in some places by elected MLAs and MPs, and backed covertly by a section of District Collectors, the panchayat staff held meetings, sat in dharna, issued threats, and when these did not suffice, blocked highways, to get a single point across. They would not tolerate civil society participation in social audit of works done under the National Rural Employment Guarantee Scheme (NREGS).

The protestors filed cases in two courts and obtained stay orders against the inclusion of non-governmental organisations (NGOs) and social activists in future social audit exercises. It would have been easy enough for the Ashok Gehlot Government to convince the courts that civil society participation brought credibility to the audit exercise. Not only did the government not do that, it went a step further and called off the audits it had announced for one panchayat each in 32 of the State’s 33 districts.

Nuclear Liability Bill

Soli J. Sorabjee warns against a new bill that is being planned to appease foreign companies who want to get into the Nuclear power generation sector in India:

It is claimed that foreign companies are reluctant to invest in India as they do not want to run the risk of having to compensate without a cap for a nuclear accident on account of imposition of absolute liability. It is understood that the government to appease the foreign investors proposes to introduce a Civil Nuclear Liability Bill whereby inter alia the compensation payable in case of a nuclear accident is capped at $450 million.

In effect, this means that in case the actual damage and the cost of remedying environmental degradation exceeds the proposed ridiculously low cap of $450 million or any other sum, the government would have to bear the remaining burden. This would be directly contrary to the Supreme Court’s ruling that it is not the role of the government to meet the costs involved. The effect of a cap in reality would be to shift the financial burden of the consequences of the accident to the taxpayer. According to the Polluter Pays Principle that has been embedded in our jurisprudence, the liability and responsibility for compensating the victims of accident and remedying the environmental damage caused is that of the offending industry alone. No part of the liability can be limited nor passed on to the government.

There can be two views about the advantages or disadvantages of foreign investment in India in the nuclear energy sector. But there can be only one view: health well-being and protection of our people are paramount and must override dollar considerations. Foreign multinationals are not solicitors of the fundamental rights of our people. The Bhopal Gas case is a burning reminder.

Indian Telecoms Run to Mamma

Rock bottom rates and tariff wars among mobile operators might soon be a thing of the past with sector regulator Trai deciding to intervene in the market and end years of forbearance. Operators would then have to present a business case each time they come out with a tariff package. Only once the regulator is convinced the new tariffs are profitable would they be approved.

With the Indian telecom market's growing maturity, Trai had moved to a orbearance regime in 2004, wherein operators did not require prior approval for tariff packages, but were left to market forces. Operators simply had to file their tariffs with the regulator within a week of implementing them.

Bharti Airtel (BHARTIARTL.BO: 319.850) CEO Manoj Kohli had recently urged Trai to look into predatory pricing, where operators offer tariffs at below cost.

Well, well, well. Who'd have thought that the market couldn't work it all out? The predator would be bankrupted over time leaving the strongest competitor in the field. Right? Apparently not. Markets work in mysterious ways. Link

Is Electricity Different?

[This was posted to Hasiru Usiru mailing list]

From Prayas' Of Rocks and Hard Places: A Critical Overview pf Recent Global Experience with Electricity Restructuring:Navroz K. Dubash and Daljit Singh: December-2005):

Physical Demands of the System: Is Electricity Different?

Proponents of electricity markets point to gains from restructuring in the airline industry, trucking, telecommunications and natural gas to support their cause [Malloy 2005], but electricity has several characteristics that make it stand out. Since electricity cannot be stored, demand must match production at any given moment in a manner that keeps voltage and frequency stable across the whole network [Joskow 2003a; Sioshansi and Hamlin 2004]. Sprawling transmission networks help achieve this task by providing scale over which to smooth supply and demand; network congestion reduces the efficiency of the network at performing this role. Moreover, the AC transmission network is like a gigantic commons, in which bilateral contracts between two parties can introduce externalities through loop flow effects [Joskow 2003a; Van Doren and Taylor 2004]. The balancing task is further complicated by slow supply responsiveness because generation capacity has a long lag time, and low system elasticity of demand because consumers tend not to be price responsive. Congestion in transmission networks can shrink the geographic scope for competition, exacerbating the problem of matching demand to supply. For several of these reasons, system reliability requires provision of "ancillary services" and complementary, and complex, markets for these services [Joskow 2003a; Lave, Apt, and Blumsack 2004].

On the generation end, the capacity mix matters to how electricity markets work. For example, in hydropower based systems, reservoir discharge along a river has to be coordinated to maximize production, which may result in dispatch quite inconsistent from the demands of market competition.

In brief, electricity systems are machine like in their nature. Under vertical integration, coordination is achieved through direct control, while electricity markets have to indirectly ensure technical coordination through economic relationships. Commenting on this challenge, U.S. deregulation guru Alfred Kahn, has observed "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works well" [quoted in Kahn 2001].

(All italics/emphasis mine)

Regards,
Dinesh.

Electricity reforms - an alternative approach

[This was mailed to Hasiru Usiru mailing list]

This Prayas report discusses reform of the electricity sector (i.e., "standard model" which is: unbundling utilities, preparation of unbundled entities for competition by management/ownership changes possibly full privatization, lowering entry barriers by liberalization, stronger regulation) with respect to India. All italics/emphasis mine.

Of Rocks and Hard Places: A Critical Overview pf Recent Global Experience with Electricity Restructuring:Navroz K. Dubash and Daljit Singh: December-2005)

On competition
Competition, albeit poorly understood and poorly defined, is well on its way to becoming the contemporary magic formula to a healthy power sector. The tone is set by the Electricity Act, 2003, the preamble of which states that "promoting competition" is an end in itself, or at least as a taken-for-granted means to a better electricity sector. The Act is written to enable, if not mandate, competition in electricity although it does also encompass several other types of reform measures in its ambit.
...
Editorials in the business newspapers are unanimous in urging adoption of competition; a recent sample from the Business Standard declares "… critical if India is to remain competitive … is that competition be introduced in the [electricity] sector" [Business Standard 2005]. Commenting tariff hikes and their subsequent roll-back in Delhi during the summer of 2005, one of only two states to have privatized distribution, news commentators confidently assert "…competition is the only alternative" [Karnik 2005] and "competition … must be allowed in residential areas" [Times of India 2005].
...
empirical evidence suggests that "aggressive but plausible" estimates of price savings from wholesale electricity competition are 10%, translating to retail price savings of about 5% [Wolak 2004]. By contrast, subsidy reform, loss reduction, and a host of other more prosaic improvements are likely to result in savings many times greater, with far fewer downside risks. From this perspective the preoccupation with electricity competition in India is somewhat perplexing.

...

An alternative approach for India
The Indian electricity sector is between a rock and a hard place. The recent past of state- led dysfunction offers few reasons for hope, and the future, at least in the form of the international model of restructuring and competition, promises more confusion and only uncertain success. Electricity market optimists declare the problems with the model can be fixed. Pessimists suggest that once all the fixes are in place, the costs may well outweigh the benefits, and price signals will have been considerably muddied. Both agree that electricity markets have been far more challenging to implement than anyone had earlier thought. In this context, organizing the sector around improved regulation becomes a viable alternative option. In reality the long-term choice for India is not the easy one between a discredited state-led past and a shining market future, but the far more difficult one between flawed regulation and imperfect competition.

For countries like India, there is a strong case for stepping back to look at specific national priorities, rather than examining every option only through the lens of a market- based structure, which in the case of India is anyway a distant and uncertain dream.

First, it would be wise to adopt a "no-regrets" strategy on reforms that goes beyond the wish list approach of the National Electricity Policy to more concrete and time bound steps. Debate over competition should not be a delaying tactic or hindrance toward progress on more prosaic and necessary reforms. Leading the list of "no-regrets" measures is certainly management improvements in the distribution sector, whether under public or private ownership. Closely related is the need to strengthen the ability of regulatory institutions, which have already improved transparency in the sector and are undoubtedly critical to ensuring distribution improvements. Again, even if competition is introduced in the future, investment in strong regulatory institutions will certainly not have been wasted. Similarly, investment in transmission upgrades will be beneficial irrespective of industry structure.

Second, the sector is currently trapped between the ephemeral promise of the invisible coordinating hand of the market, and the reality of weakened and uncertain planning institutions. In the short to medium term, more deliberate planning is inevitable, particularly for generation capacity. Indeed, one of the weaknesses of fully restructured markets has been inadequate incentives for generation. Open access for a small proportion of demand in India is unlikely, by itself, to result in the desired investment. Instead, there is a strong case for use of Integrated Resource Planning (IRP) techniques to ensure that low cost generation (or demand side) options are fully explored. Additionally, there is no reason why IRP cannot be mated to competitive bidding mechanisms to enhance efficiency. However, planning needs to go beyond the short term needs of the sector, to develop and embrace a cohesive long-term vision.

Third, a preoccupation with organized electricity markets and in particular the full standard model obscures a more productive discussion to be had on emergent new directions in electricity reform that stress hybrid approaches. For example, experience in major developing countries such as South Africa, China, and Brazil suggest that both the state and the private sector will continue to play a major role in electricity through mixed or hybrid structures.

...India would be better served by focusing on fundamental, if unexciting and challenging, basic management reforms in the sector, particularly at the distribution end. Under the right conditions, competition can be a tool to an end. It is unlikely to be a shortcut.

Regards,
Dinesh.