Checkmate- Rural Credit & Financial inclusion

Reserve Bank of India feels that a set of new generation banks should be permitted to enter the banking arena so that it could fill the rural space where there are giant opportunities. A discussion paper on new banks is under preparation. However, the Central Bank has clearly stated that it wants to restrict bank licences. It does not want to unnecessarily expand the list in the Second Schedule of the RBI Act (the list of Scheduled banks). The central bank is also not interested in giving licences to large industrial houses from operating banks because of potential conflict of interest. Industrial sponsored banks could give unwarranted but preferential credit and write off loans to related companies and other favoured borrowers. India has weak corporate governance; hence restrictions should be placed so that use must not be misused.

According to RBI, there is a huge uncovered area for stretching banking. Only 30 % of the country’s area is covered by the banking sector. The rest goes without banking. If financial inclusion, the mantra of the Government of the day, should translate into reality, then the spreading of banks to rural areas is compulsory. Government’s experiments with Regional Rural banks have met with disaster. They have suffered heavy losses, because their preference was in one area while the taste of the Customer was in another. Rightly, RBI wants the new generation banks to localize their operations in rural areas, rural lending. There is plenty of rural space, where one would not be privy to competition. But the operating costs will be very high because of poor logistics. A bank’s geographical area would be large sized even though rural deposit accounts and credits are very small. Agricultural defaults in many states are high since political loan waivers have encouraged willful default. Due to extensive political patronage, Banks find it difficult to seize the land defaulters have pledged. Further, loans up to Rs 10 lakhs have been exempted from collateral security and third party guarantee.

The success of micro finance pioneer Bangladesh’s Grameen Bank, has given enough ammunition to the Indian counterparts – Microfinance institutions have come up. Micro Finance Institutions in India started off as non-profit NGOs. They depended upon public munificence for expansion. To grow faster, many of the NGOs converted themselves to for profit Non Banking Finance Companies (NBFCs). These NBFCs raised equity from various sources. For every one Rupee of their own, they could raise Rs 6/- from Banks. This enabled them to grow fast as they had toe-hold on the pulse of the rural people. SKS Microfinance, the largest player in the field has recently raised a whopping Rs 1600 Cr through Public finance. SKS is now bigger than some banks, with almost seven million borrowers worth Rs 5000 Cr in credit and around 20,000 employees. SKS and other MFIs could evolve themselves into Banking. RBI Guidelines insist that new banks must have equity capital of at least Rs 300 Cr, and no promoter group should have a stake of over 10%. These NBFC can raise more than enough equity with a wider shareholder base. NGO approach was sparse, and they could offer very little by way of Credit, while rural India wanted giant networks. Giant networks require massive capital, which can be attracted by for profit corporations. Besides scale economics will permit giant MFIs to lower the interest spread to poor clients.

Micro Finance institutions do not want to convert themselves into banking as they would come under the purview of RBI regulations. They have flourished in the consequent freedom to innovate and expand according to an eminent economist. RBI takes ages to approve branches, while MFI can freely open many at will. The staff pattern in the MFI is flexible, cheap but as banks they will face unionized wages and inflexibilities. If they turn into Banks, they have to park 25% of their money in Government securities and 6% with RBI, suffering losses. Financial discipline will go haywire if political loan waivers are put into practice. MFIs are also into consumerism, making a profit on the Credit extended to the borrowers. If MFIs have to borrow from Banks, they have to shell out 12-14% as interest, but if they become banks, they can generate deposits at 3-6%. As per the present guidelines of RBI, not only non profit NBFC can accept deposits while for profit NBFC cannot accept deposits in the wake of fly by night thriving NBFC which mushroomed in 1990 and went bust and couldn’t repay.

If rural spread is the need of the hour, and if financial inclusion need to be promoted these MFIs should be registered, and a mechanism should be evolved so that they would serve the rural areas, with their wherewithal, experience, and rural geography. RBI should come of the standard theories, should innovate and take India to a path whereby non banking areas will be served by localized institutions. However, a check mechanism needs to be put in place, so that the MFIs can play a useful role in carrying thrift and credit to the authentic India.

Petroleum companies taking us for a ride?

Indian petroleum companies are shedding crocodile tears for no apparent reason.

Myth: 1] Indian oil Corporation has gone on record and stated that it incurred a loss of Rs 3,388.89 Cr in the first quarter of current fiscal as against a nett profit of Rs 3,682.83 Cr recorded in the first quarter of last year.

2] The Company made a net profit of Rs 10,000 Cr in 2009-10 and the Dy Chairman, Plg Commission states that this is inclusive of the 50% subsidies provided by the Government to the tune of Rs 20,000 Cr during 2009-10.
3] It is a fact that Government revised the prices of petroleum products by Rs 3/- in the last quarter of 2009-10, the benefit of which would have cascaded to 2010-11, and in the second instance, another adhoc increase, just a month ago, raising the price of petrol by Rs 3.50/litre, diesel by Rs 2.00, LPG Cylinder by Rs 35/-, Rs 3/per litre for kerosene. Kerosene is mostly used by the Below the Poverty Line families.

4] Oil companies contend that they incur $ 3 barrel on processing of every barrel of Crude oil. This year (April-June, 2010), they state that their gross refining margin (GRM) was Rs 7.36 per barrel.

5] The oil Companies admit that ‘refining margins were low due to inventory losses on oil as oil prices had come down compared to the closing stock(April 1).

While oil companies put forward such arguments to prove the acute under pricing in the import of crude, and the under recovery caused by the sale of oil, which is only 50% subsidized by the Government, they argue for increased prices from the consumer. Simple Law of demand and Supply pricing.

Reality: 1] One should go into the mathematical calculations of the purchase of Crude oil, quantity of Crude oil purchased, what is the demand: supply position of Petroleum products in India, how is the pricing done in the existing circumstances, and when there has been no appreciable increase in the petroleum prices in the international market, why are the Petroleum Companies in India are on a song, and hungry for more revenue? Now, how could the profit of Rs 3,682.82 Cr during the last first fiscal, turn into a loss, assuming that Government did not part with Rs 1,694.45 Cr as 50% of its share in the loss. This is only a notional adjustment in the balance sheet. Loss is a loss, whether it is subsidized by people or Government.

Dr B K Chaturvedi Committee went into the issue of usage of Kerosene oil in the Country. His findings have been documented. The study revealed that the use of kerosene has come down from 40% to 51% used earlier, only 1% is used for cooking purposes; out of 39% PDS Kerosene, 18% finds a way to the black market to adulterate diesel, 24% of rural consumption used for lighting is in villages where there is 100% electrification. Only 40% of the kerosene finds use. The rest is not used. Government’s subsidy for kerosene is Rs 17.92/a litre. What happens to the kerosene which is said to be distributed? The distribution is only in paper. Why can’t the Planning Commission do a detailed study to unearth the truth?

2] The truth is Petroleum companies’ profits are notched. They are virtual profits. How can any body say that factoring government subsidies, Companies make profit? These are monopoly Companies who are answerable to nobody.

3] During the year, the Government revised the petroleum prices at least on two occasions. Yet, why should there be a steep loss. Is it operational efficiency? Seepage? Misue?

4) How come such a vast change in refining? Has the government gone into the pricing of refining? In the first instance, they use the term cost of processing of Crude oil, and in the second case, they say gross refining margin. What does these two mean? Let the Economists of North bloc ponder over this aspect

5) The oil inventory showed it held excess stock. This stock had a price that was higher than the prevailing price as on 1 April 2010. The Oil Companies also admit that negatives on account of exchange losses due to Rupee depreciation and higher provisioning of bonds(the Government bonds that was given in lieu of 50% of the under recoveries). If they contend that these anomalies must be factored into the price of petroleum products, it is not fair and decent price determination.
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Due to dollar depreciation, the invoice value of crude import should have come down, as the prices are paid in dollars. There is a comfortable cushion in this. In India, you are selling in Rupees. You don’t link the price to the Dollar. Hence twin advantage. Please use the same matrix for comparison.

The Company argues that the nett revenue lost by IOC was Rs 11,013.58 Cr. It was compensated Rs 3,671.26 Cr from upstream firms like Oil & Gas Corporation, GAIL and Oil India. Consequent to non revision of retail selling price in line with the international prices, net under realization was Rs 7,341.59 Cr. The usual practice was that the Government reimbursed Rs 20,000 Cr for under recoveries of IOC, BP, and HP during 2010-11.

The oil Companies agree that the net sales during 2010-11 went up by 23% to Rs 71,257 Cr. IOC alone had 17.254 million tones of petroleum products against 16.703 million tones duing the corresponding period (April-June 2009) while it exported 1.058 million Tonnes. The Refineries refined 13.278 million tones of Crude oil against 12.466 million tones a year ago during March-June of 2010 and 2009. The refineries are said to have clamped Rs 6.50 per litre as charges.

The oil Companies do not do any homework and incapable of working an alternate strategy. One aspect that Planning Commission should look into the capacity of motor cars being sold in India during a year, and whether the present infrastructure has capacity to withstand them. Secondly, if the demand for petroleum products could be brought down through planning, it will have a cascading effect on the supply and pricing. Merely to boost the manufacturing output, if uneven growth in manufacture of motor cars is made, the infrastructure would break down. It is good to draw a road map to build 7,000 km of highway Roads. But the wear and tear, its optimum capacity and longevity are factors that needed to be factored in. It can’t be utopian. Banks find it easy to provide vehicle loan as the motorcar is a tangible asset. But whatever incremental growth that is achieved should be practical and long withstanding otherwise, it will become Robinson Crusoe paradox situation.

Why not rain water harvesting in Kerala?

The story of depletion of flowing water in God’s own country is a classic example of excess water everywhere five decades ago , due to poor water planning caused water water no where. Kerala used to have an average 5 lakh million cubic meters of fresh water from its 44 rivulets and 19 lakes. Kerala has 44 rivers, 41 flowing westward and 3 flowing eastward cut across Kerala with their innumerable territories and branches. Periyar (244 Kms), Bharatapuzha (209 Kms) Pamba (176 Kms), Chaliyar (169), Kadaundi and Chalakudi (130), Achenkoil (128), Kalada and Muvathupuzha (121) etc are some of the important rivers that dot the Kerala landscape, flowing westwards. The three eastward flowing rivers are: Pambar, Bhawani and Kabani
[Quiet flows the Bharathapuzha, the Second largest river in Kerala with a length of 209 Kms. The river originates in Annamalai hills located in the Western Ghats. It flows in the western direction. The water has high mineral content. It is closely connected with Kathakali, the renowned dance form of Kerala. The Bharathapuzha is the backbone of Kerala.]
Kerala was the land of abundant water. It had ample rainfall. But this is old fable. Today, its per capita usage of Water is worst than that of Rajasthan! It occupies the 20th place amongst the States in India in the per capita usage of Water.

The Government of Kerala suggested that Rs 675 Cr hydro electric project be planned along Chalakudy-Anamalai inter state highway (Vazhachal forest division), a dam 23 m high and 311 m wide so that the Athirapally water falls be utilized for the dam projected as a peak load station expected to produce 163 MW. However, the Ministry of Environment & Forests,Govt of India refused it permission and clearance as the riparian ecosystem would affect 138.6 hectares of forest land, fish sanctuary, habitat of rarest and highly endangered species of birds and animals. It is a right decision taken to save the ecofragile ecosystem.

But Kerala needs development. It requires drinking water. A land of rivers and plenty of water, yet low per capita consumption per person during summer is a horrid tale. Some things need to be done. Something must be done.

Even this year’s monsoon which saw torrential rain and shortage of water during the summer which preceded it has seen the rainwater flow away towards the sea. The Water Authority sit on pins and needles during summer to get water projects that have Bharathapuzha as the source. To conserve water and save the endangered river from going dry when the heat rises, proposals have been made to construct permanent and temporary check dams across the river and its tributaries. But only four of these have been completed and another two are under construction in Shoranur and Ottapalam. Water from Bharathapuzha is supplied to nearly 170 grama panchayats on the banks of the river in Palakkad, Malapuram and Trichur districts.

Much of the water that is available in Kerala is washed down to the Arabian Sea owing to the lack of proper storage and distribution facilities. Most of the Schemes to cover the drinking water problem only exist only on paper. Rs 560 Cr Bharathapuzha action plan submitted to the State Government five years ago is in cold storage. The Plan envisages a Bharathapuzha Basin AUTHORITY, construct 453 check dams across the river and its four main tributaries at an estimated cost of Rs 157.5 Cr; 30 across Chitturpuzha; 60 across the Gyathripuzha; 10 across the Kalpathypuzha and 50 each across the Thoothapuzha and Kunthipuzha. Another 600 check dams have been suggested across the major stream of the Bharathapuzha. The Plan proposes setting up of 11 regulators at a cost of Rs 137.5 Cr. It is estimated that 4,000 million cubic meters of water flows from the Bharathapuzha a year and the quantity stored in all seven reservoirs on the basin is less than 10% of the wastage. The Report submitted in June 1997 calls for an autonomous river management authority with wide powers to manage various aspects related to the river system and its basin. No ecological damage, no submerging of riparian forest, no destruction of habitat of highly endangered species.

Bicycle Revolution will restrict traffic congestion?

Bicycles were introduced in the 19^th century. There are around one billion worldwide bicycles, twice as many as, automobiles. Bicycles form principal means of transportation in many regions. Today’s automobile industry has paced itself to manufacture half a million automobiles, apart from buses, three wheelers, lorry transport, etc. The roads are designed to carry a particular laden weight.Today, roads carry 4 times the load it is supposed to carry that the roads are likely to bust at its seems. The chaotic traffic has affected the speed of many of the modern day fast vehicles which needs to snarl on.

Shanghai has been a fascination for Indian businessmen, and often the conversations drift to India’s infrastructure comparison with that of China. A little known and unfashionable Shanghai suburb has an equally important lesson for Indian town planners in how to better plan its cities. Over a year, a quiet transportation revolution has been unfolding in sprawling Minhang district. This revolution has invested in a very low tech but extremely effective solution to battle the problems of crowing infrastructure bottle-necks that are so common to Indian Cities- the bi-cycle.

In an effort to coax the fast growing city’s middle class to abandon their gas guzzlers for two wheelers, the local government is making available free bicycles to residents. Free bicycle renting programme are by no means unique to Shanghai; New Delhi is also experimenting with this Scheme. But the sheer scale of the effort and the unprecedented public response has made Government sit up and take notice. Shanghai like booming world cities has seen its urban infrastructure stretched to its limits in the past decade. A programme attached to metro-rail terminals presently has a coverage of 230 stations with 12, 000 bicycles.. The bicycles are available 24 hours a day. Each resident is given an ID Card, with which one can rent and return bicycles at any of the stations, usually located near metro rail terminals. Private renting companies have also been roped in by the Government. This rage has spread to Xuhui district where another network has been created on similar terms. Residents are charged 2 Yuan (Rs 14/-) for every hour of renting. The Scheme works on the principle of seamless connectivity between metro network, the bicycle renting programme and bus routes.

Bicycle dedicated lanes- even at the cost of space for cars- and expanding space for pedestrians help disciplined movement of traffic. Car licenses are auctioned to the highest bidder at a average cost of the car, which dissuades buyers for going in for new cars, they revert to using bicycles. India, should take a leaf out of China to practice austerity at the same time an ideal way to reduce congestion. Our think tanks will they emulate the example of China?

Kochi calling- Winds of change?

A unifying theme will be the tension between two values; that of being scientific (scientificity) and that of relevance. These need not- and should not- be in conflict; an important goal for economics in the future is to bring them into better harmony. Circulating of the wagons was the creation of an outer circle of critics and dissidents: economists who thought of themselves as alternatives or heterodox. The outer circle, which contains many serious and creative thinkers, has continued to grow and pose serious challenges to the mainstream emphasis, assumptions, methods and conclusions.



Indian economy was opened up to the World 18 years ago. Tariffs were reduced, trade restrictions went down, and investment flows were allowed. This was the economic paradigm of 1991. India moved to progressive, transparent trade regime which stimulated strong increase in trade and investment.

Addressing a CII meeting, Mr Suresh Krishna, well known industrialist, recalled a visit to Wall-mart to know which are the Indian made items were on the shelf. He moved from rows to rows. He could find nothing. At last, in one of the rows, he found a Door mat costing$2 .40 cents (when 1$= Rs 13/-). That was the only Indian product that was sold in Wal-mart in the 90s. We can conclude, even ere liberalization, Coir Door Mats were popular in the United States. In the MBA syllabus, Door mat syndrome was a popular expression. In the entrance to any house, there was a door mat which was vividly used by the visitor, to dust his shoes, and then after entering, the services rendered by the door mat were forgotten. Many people use, but no recognition, that was door mat syndrome. In Kerala, almost 153 years ago, the coir industry took its formative birth, and grew itself as a traditional industry, and it did not mature as a vibrant modern industry. It is still traditional with obsolete machines.

India’s rates of taxation was the highest with each Finance Minister priding himself as an expert whose tally of taxation of different items should be higher than that of his predecessor. You have Personal Income Tax, Services Tax, professional Tax, property Tax, Motor Vehicles Tax, indirect taxes, and what not. The Central Excise tariff is difficult to comprehend, because the Finance Minister imposes Central Excise levy, but it becomes 0% because of a notification which has been issued by the Commissionrate of CE. There are some rates which are reduced by notification. There are certain items out of the tax net, but suddenly brought in. It is very difficult for the trader, to be a master of Central Excise formalities, procedures, and taxation. The Central Excise tariff codes are aligned to the ITC (HS) Codes at the six digit level, and Customs Tariff codes are aligned at the 4 digit level. In the 8 digit level ITC(HS) Code which is used by the shippers for shipping the goods, there are for some items, no entries, so they use the ‘Others’ category or the residuary category. Customs officials, do not part with the incentives meant for that product, because, ‘Others’ are not defined. The legal text of the Tariff consists of Sections, Chapters, Headings, Subheadings, subheading notes and the General Interpretative Rules (GIR). The Indian Customs Tariff has 21 sections and 99 chapters. A Section is a grouping together of a number of Chapters which codify a particular class of goods. The Section notes explain the scope of chapters / headings, etc. The Chapters consist of chapter notes, brief description of commodities arranged at four digit and six digit levels. Every four digit code is called a ‘heading’ and every six digit code is called a ‘subheading’. The 4 digit and 6 digit tariffs are approved by the World Customs Organization which meets in Brussels periodically, and there is an overhaul once in five years. All amendments are carried out by consensus. Product, sub product, spin off product, which are known by different names in different areas come under some other description which makes the shipper write a different product name which is universally accepted. When Customs goes for random checking, they give some other name to describe the product which is not in the Tariff, Harmonized Code of Nomenclature, nor in the ITC (HS) Codes. If these products are ‘Plant exports’, then lot of problems arise in the Port of Entry. The customs asks for innumerable identification documents. Transaction cost on account of delay increases making Indian goods uncompetitative due to higher prices.
Kochi Port grew by 17% in the first quarter of the current fiscal (2010-11) while overall cargo traffic went up 23% of the first quarter of the previous year. Container traffic at Kochi was 2.90 lakh TEUs for the whole of 2009-10. Inspite of the dip in the world economy’s growth, mostly contributed by America’s recession, Indian business was slightly affected and container trade grew by 4.5% over the figures of 2008-9. The Country’s container trade volumes have been growing at a steady 16.73 per cent in the first quarter. Volume for the first quarter of the previous year was movement of 1.8 million TEUs. The impetus for the container volume trade has been largely due to the fact that Kerala state was the only export state that achieved positive growth at 9.2%. Haryana came a poor second with 0.1% growth. In 2008-9, there has been 100% growth, with spices, cashew, marine products, engineering goods, coir, coconut, and exports from CSEZ registering impressive growth. It is a matter of great pride, they were able to continue the same impressive trend into 2009-10. The fist quarter has seen spectacular growth in spices exports to touch Rs 1025.30 Cr (against Rs 788 Cr) registering 30% in Rupee terms and 42% in dollar terms. Against last year’s figures of 81,950 tonnes, the volume exported was 1, 06,315 tonnes, a straight forward growth of 30%. The Port authorities have been requesting the Commerce Ministry to allow at least 10 lakh tonnes of import of palm oil to be routed through Kochi, so that the movement of containers would grow at a higher pace.

IMF is of the view that India’s growth in 2010-11 is predicted at 9.4% though our Finance Ministry and Planning Commission are more cautious and predict an economic growth of 8.5%. The opening of Vallarpadam Container will give greater impetus to the Cochin port in increasing the level of its operations. The optimum capacity of the Vallarpadam Container terminal is expected to be 30, 00,000 TEUs, when the birth length will be 1800 meters and dwarft will be 14.5 meters enabling ships having up to 8,000 TEUs to call at the terminal. The first phase is conceived to have a handling capacity of 1.4 million TEUs.

The terminal project cannot rest on its oars as the Cochin channel needs more dredging, taking care that the dredging do not create any Sea erosion and soil erosion. The land at Fort Kochi, Wellingdon Island, Vallarpadam, are susceptible to coastal erosion as the natural break waters off Cochin sea coast do not have resistance to the sea pressure.

It has been a dream for many Cochinites that mother ships call here, rather than feeder vessels. The Cochin Port was devised to receive passenger traffic as well. Apart for independent oil terminal, Cochin port can be a vantage Port, if more attention is bestowed to it by the authorities concerned. South India’s cargo business is slated to be nearly 2 million TEUs a year, which represents 25% of India’s trade.

With the heralding of Vallarpadam Container terminal, Cochin people believe that they have never to look back. The old days of aroma, pepper, spices, coconut, marine products will again beseech Kochi along with the winds of change.

Small & Medium Enterprises require govt. policy support

Some say businesses are about the idea of Power, while businesses are about the power of ideas. Micro, Small and Medium Enterprises is defined in India on the basis of investment. Micro (upto Rs 25 lakhs), Small (upto Rs 5 Cr), Medium (upto Rs 10 Cr). There is a MSME Act, 2006 which govern the enterprises, and MSME Ministry administers it. For all intents and purposes, MSME depends upon the scale of investment.

It is gathered that 40% of the total manufactured output and 45% of India’s exports of US $ 185 billion, is contributed by 26 million industrial units provding employment to around 60 million workers. 15 million units are registered including the core which is micro industries.

The task force on MSME under the direct supervision of the PM’s office, and Dr B K Chauturvedi’s commission appointed by the Planning Commission have come to the conclusion that tardy and needful Credit are not provided by Commercial Banks and Banks which are in the 2^nd Schedule of the Reserve Bank of India Act. In order to kick start, the commissions made it an absolute necessity that Banks will finance micro industry without collateral or third party gurantee upto a Credit of Rs 10 lakhs. That means units who have investment in plant and machinery upto Rs 25 lakhs, will get Credit upto Rs 10 lakhs without any collateral security or third party guarantee. That would also mean, that a Small industry having an investment in plant and machinery upto Rs 35 lakhs, wants a Credit of Rs 10 lakhs only, would he cover under the definition so notified by RBI? Coming to the benefits, when the investment is made the criteria, even in cases where the Pre-shipment Credit and post-shipment Credit, Schemes like Market Development Assistance Scheme, and other generalized Schems operated by the MSME, why do they insist on ‘turnover’ being the consideration for granting of loans., when the definition is built on ‘investment’ in plant and machinery. The Ministry’s benchmark thumb rule is the definition the Act prescribes and it cannot be changed by the administrative apparatus citing a slew of reasons. Basic structure of the MSME Act should be the depth and pattern of any scheme envisaged by the Ministry. Unfortunately, this discrepancy went unnoticed by the Task Force and/or the Planning Commission’s study.

Small and Medium Enterprises are the most vulnerable to the vagaries of peaks and troughs and affected by the economic weather in the industrial landscape. Neo liberal policies in the context of abrupt bad weather in the global economy brought to focus that the financial crunch drove SMEs out of business. Credit Guarantee Schemes, tax concessions, priority lending, (abstract) marketing linkage, turning the course of the geography and direction of markets by re-routing the supply to the domestic market which remained untapped, inspite of plentiful space and market advantage, etc made a critical impact on the SME Constituency. Indian manufacturing sector with its highly distributive channels need to be programmed to focus on retail and village markets, which have high purchasing power, largely remain untapped with the result the stakeholders do their purchase from the up-country or a greater market which are set up without any tag to the market pull or market push. Many super malls in the medium scale have closed down operations in the metropolis. Why? Location of a retail shop plays an important role in its sales pattern. A medium size textile shop at one of the sub satellite towns’ closed shop even though a big sized mall is busy 12 hours a day, is situated opposite to this. If the textile shop owner had approached for a twin agreement with the large mall, and latest fashion quality products were displayed, the shop could have survived. In the case of fashion goods, people look to latest patterns, where small sized shops won’t attract buyers. People who buy modern fashionable dresses, often visit large textile shops, hence mini, tiny, shops in satellite towns, cities may not pay dividends.

Blanket freedom to import in some sectors is a key problem which has overshadowed the policy edifice of MSMEs. Indiscriminate import of edible oils have seen the death knell of India’s domestic oil industry. Corporate sectors vulnerable to shocks; however, the shocks do not straight away affect the SME sector. The causes that ruined the SME in America and Europe are a distinct policy in India due to distinct economies and sociology factors.

In the United States, 8, 50,000 small business loans were financed in part by Securities whose issuance was supported by Term Asset-backed Securities Loan facility (TALF).

No body can blame Banks alone for not providing Credits. Nobody can blame the system of banking that is responsible for micro, mini, small industries not getting proper credit at the needed time. Is economic downturn responsible for slowing of bank Credit? But it is too early to determine that how much of the reduction has been driven by weaker demands for loans from such business, how much by deterioration in the financial condition of such businesses during the economic downturn and how much by restricted Credit facilities? Unfortunately, SIDBI which is the watch dog for providing support to SMEs through refinancing has never conducted a study.

In India, the Cluster development was largely unintended growth which practically came up because of some advantage like raw material advantage, existence of a main factory which could outsource work, the location of intermediary industries who can support in the building of the value chain, talented workforce available in a particular region, excellent topography for moving the finished goods, good water, power, excellent roadways, proximity to sea ways, air ways, etc. However, when the Government tended to tinker with Clusters, it was always not a success story because of the flaws in the conceivement of the Cluster, its linkages, SWOT, etc. The diagnostic study does not form a pattern; it is evolution of the Cluster, its product base, with its particular programme that should form the Key. UNIDO pattern of Clustering is not objective for a Country like India. The interventions suggested are imagined and not the real needed requirement of different clusters. Competitiveness of individual firms on a collective basis which Clusters seek to achieve has failed in many of the Clusters, because the chosen Clusters did not have the objective to grow. Many distortions in public policy have been the bane of SME Policy. If India has to build a powerful MSE sector with linkages to credit-market-labour-competitiveness, it has to build powerful edifices, and re-structure its aims and objectives which are contemporary.

Is Athirapally hydro project desirable?

If you are very choosy about God’s Own Country, you will describe a number of positive things that is unique to the state. You will also list out Kerala’s negativity, which will consume a larger paper than all the good that you wrote. Kerala is nevertheless a tourist’s paradise, for every year, a large trek of people from countries across the globe which are not noticeable in the atlas, land, come and seem to enjoy.

Kerala’s past, in the opening years of history has been formidable. It was known to the ancient sea faring tribes, voyagers, traders, merchants. There have been regular plying of vessels carrying riches from the Orient, and they take back invaluable pepper, spices, and other remarkable crops, which had great value in the international markets. Kerala people knew the stories of Arabian Nights much before other parts of India and the world were aware of. But these traders came strictly to trade, make a barter trade, bring their goods, take goods from Kerala. When Jesus Christ introduced to the world, Christianity, his direct disciple St Thomas, came to Kerala. There is vivid history of Christianity having spread to the four corners of Kerala. Christianity came here, much before it went to Europe. Islam also spread to Kerala much before the world was aware of this religion. The Jews came here in herds, when they had to run away for their lives. In the 15th century, we have seen the European powers one on the tail of others, coming to trade, colonizing the country and looting its wealth for their well being. English, French, Dutch, Portuguese, all belonged to this School.

It has been in the blood of Kerala people to voyage. Set sail by sea. This adventurous trait of the ordinary Kerala man, and the appetite to do hard work, and the vision to succeed, made him leave Indian shores in search of greener pastures. As a single person, the ordinary Keralite called mallu, in North India, always performed admirably, but as a team, there was always poor performance. This limitation of behaviour had strayed to every part of life of a Keralite. When six economists are gathered, there are seven opinions. But when six Keralites discuss, they will give ten opinions.

Opening up of educational institutions by Christian missionaries, had a large impact on the educational field. In the old Ernakulam, there were only two Government Colleges, one Maharajas College and another Law College. All the other colleges were privately run. There is a powerful educational lobby in Kerala, where education is both in private and public forms. Dr T M A Pai would have conceived the privatization of commercial education, but it was Kerala, who developed private education in such a big way. Though there was higher education, and many educational pursuits, there was no matching economic or industrial growth in Kerala, which could absorb the talents. Central investment was/is the lowest in Kerala. The private sector is also reluctant to set up their units in a big way. All these have made Kerala absorb consumerism, and not manufacturing activity. Trading is a way of life. There are more malls in Kochi than in a metro like Bangalore or Hyderabad. People’s craze for gold is higher here than in any other place. One Economist in a lecture pointed out that Kerala required more policing because of its craze for Golden jewellery which accounts for sizable investment in each household. His comment should be taken seriously. Second is fashion consciousness. I do not think, there is any other place in the world, where fashion is part of culture. Tradition is breadth. Festivities are part of every Keralite. Hospitality is a trade mark, special to Kerala. The religious cosmopolitan culture has held the state proud. But today, the name of Keralites crop up everywhere where a terror act has disturbed the public peace.

Militancy of labour has been benchmarked with Kerala, rightly or wrongly. This has been the chief reason, why industries fear to thread to Kerala territory even though they see lot of potential. In Kerala, they say there is rampant unemployment. But if I look around for a car driver, carpenter, plumber, electrician, I seldom get one. In Kerala, there is more Voluntary Unemployment than in any other state because the Gulf remittance from one member in the family takes care of the other members of the family making their both ends meet.

Vallarpadam Container terminal, growth of IT industry, growth in Kochi Export Processing zone, bio-technology and industrial hubs concept promoted by the Kerala Government has started yielding results. Cochin port, Nedumassery Airport, are all on their feet booking profits through improving their business. This is a good sign.

Then there was a Jairam Ramesh effect on Kerala based export merchandise. From 2007-9, when he was the Minsiter of State for Commerce, he highly patronized the Kerala sectors, tea, marine products, cashew, coconut, coir, and rubber. The price of 1 kg of rubber is Rs 175/-. This has been made possible by Jairam Ramesh effect. Every Saturday/Sunday, he used to tour Kerala, and actively participate in raising the standard and productivity of these industries. A tiny industry like Coir exports rose from Rs 475 Cr to Rs 800 Cr. Spices exports, got many schemes, Spices Park, branding of spices produce, participation in international exhibitions, developing use of vanilla, etc were outcome of his support.
Now let me come to Athirapally Project. The Kerala Government which never bothered to use Mr Jairam Ramesh, even though he was more than friendly to the Kerala crops, now accuse him of playing spoilt to Kerala’s development. When he was Minister of Commerce, I had taken him to Kodungallur, and showed him the historical monuments there, and explained to him. Based on his note, Central Government gave a bonanza of restoration of Kodungallur as a historical monument and sanctioned Crores of Rupees.

Athirapalli is one of the most bewitching waterfalls in Kerala having a high percentage of aquatic and eco diversity in the State. The outlay for the entire project is estimated at Rs 675 Cr. The expected power production is arrived as 163 MW. The dam is supposed to come up in the east of Chalakudi, along Chalakudi Annamali inter-state highway (Vazhakal forest division). The dam is expected to have a height of 23m and will have a width of 311 m. The dam is projected as a peak load station where Water will be diverted via penstock (pipe) to turbines downstream. A dam toe powerhouse downstream of the dam will be built to maintain Athirapally-Vazhachal Waterfalls. On the basis of the expert committee of River valley projects, power should be generated only between 7-11 p.m. during Feb1-May31 which are the driest months in the Kerala calendar. It has also ordained that 7.65 cubic metre/second (cumec) of water over the Atirapalli falls must be maintained always.

Environmentalists and public spirited hydrologists argue that the river experiences the maximum flow during July (102 cumecs) During the dry months of Feb,March and April, its flow is reduced to 14-15 cumec, and if the water level be reduced to 7.65 cumec during the dry months, there will be no waterfall at all. It is also argued that for power generation, 7 Km long penstock will absorb 86% of water from the dam, which indirectly will leave people living upto 7 kms devoid of drinking water, as no alternate sources exist. The project being a peak loading station, Chalakudi River will experience heavy fluctuation in its flow during the 4 hours when power is generated during which time the release of water can be as high as 130 cumec. Overflowing problems and affliction to downstream Chalakudi River diversion scheme which irrigates and provides drinking water to way side villages and panchayats in Trichur and Ernakulam district will cease. The riparian forests of the Chalakudy River have revealed the existence of a thick riparian vegetation of more than 10 metres width for a distance of 10.5 km downstream from Peringalkuth, covering an area of 58.5 hectares. Out of this, 26.4 hectares lie within the Vazachal area, including three large islands densely covered by riparian forests.
The riparian forests of the area have been found to be characterised by the presence of typical riparian species of plants, in addition to evergreen and semi-evergreen species. Out of the 319 species of flowering plants identified from the study area, 24 are endemic species of the Western Ghats and 10 are rare and endangered.
Moreover, the Chalakudy River is known for its diversity, as it contains 85 species of fresh water fishes out of the 152 species known from Kerala. Among these, 35 are endemic species of the Western Ghats and nine are considered to be endangered. Highly endangered Cochin Forest Cane turtle and the river bed is the nestling site of Malabar pied hombele birds. The area is supposed to be the best elephant conservation spot. . Any disruption to this ecofragile ecosystem will spell disaster.

The Power Engineers also feel that reduced water flow would not even help production of 26.7 MW as against 163 MW envisaged (234 million units of energy). In such a case, the cost: benefit analysis vis-à-vis the investment costs, running costs, maintaining costs, and recovery of costs would be unviable. The notional cost for the destruction of ecology and ecosystem would be unimaginable. Kerala’s density of forests has come down because the estuaries have been destroyed. Sea and Coastal erosion is taking a heavy toll due to unscientific dredging. Our fish sanctuaries have vanished, and bird habitats have disappeared. As per the state records, there is a transmission loss of 3020 million units. Why don’t we try to curb transmission losses by at least 10 to 15%, which will allow a nett energy of 303 million? The other way, is increase productivity of the existing hydro electric projects by up-grading the machines. Hydro electric projects are no answer for restoring balance to the power needs of the state. Mr Nehru called Bakranangal as the temple of India. Today, there are many alternate sources to produce electricity. And the cost of producing power is also cheaper.

In view of so many negative features that deters go ahead for the Athirapally hydro electric power station, can we blamed Hon’ble Shri Jairam Ramesh alone. We have to give solid arguments countering each of the points. Our eco systems are already overburdened. Any callous attitude or action will cause catastrophe tomorrow? We do not have the right to destroy the fragile eco-system which belongs to tomorrow’s generation.