Money does grow on trees, Prime Minister

Member of Parliament

There is no way we can take lightly the Prime Minister’s recent address to the nation. It was, unarguably, an exceptional step for him to take, renowned as he is neither for his loquacity, nor for his oratorial skills. Why then did he mount his Rocinante of ‘91 vintage and futilely lance opponents of his policies by alleging that they were “spreading canards”? Also, which Sancho Panza on his staff persuaded him to use this insulting noun? But for this, his otherwise rather nondescript address would have been best left to its inevitable fate of oblivion. Not, however, now.

Telephone call

First: this rather admonitory “money does not grow on trees”. Just a day after this astonishing, also so unneeded, reprimand, I received a telephone call from a retired soldier colleague, who had served with me as my tank driver, sharing with me for many years my tank lean-to shelter at night. I save his name lest he be nagged by the otherwise inefficient Intelligence Bureau. “Sahib”, he said in his thick Shekhawati dialect and accent, “please educate the PM that money does actually grow on trees and plants; we get all our fruits, vegetables and animal feed and also firewood from a ‘tree’. So tell him to think of the farmers, not of the ‘foreigners’, who over two centuries back came as a company and took away our land. Not one ‘biswa’ [a measure of land] was left to us”. I promised him I would do so, but advised him not to disturb his retired life over such depressing thoughts, for just as our ‘dhabas’ defeated a rather cocky Colonel from Kentucky, US of A, India will defeat this, too. And not one word of this anecdote is made up.

Therefore, next to the fabled merits of multiple retail shops of (in)famous names.

Please reflect first on the merits of India’s unorganised and widely dispersed retail trade, explained with admirable clarity and succinctness by S. Gurumurthy (“‘Reform’ at Nation’s Cost,” New Indian Express , September 20) : “The unorganised retail trade in India represents the traditional, community-centric, low-cost … employment intense retailing that includes, but is not limited to, kirana shops, owner-run-general stores, paan-beedi shops, convenience stores, and hand-cart and pavement vending. In this model a whole family works in one shop and a whole community is engaged in the trade in a defined area. Most advocates of corporate … and retail firms … ignore [this] critical contribution of the [existing system] to the Indian economy and society (emphasis added). This “multi-layer retailing is the most decentralised economic activity in India after agriculture. Second, it constitutes almost 98 percent of the total trade with an estimated 12 million outlets. In contrast, organised trade accounts for just 2 percent. Third, it is the largest employment provider after agriculture, employing an estimated 40 million people”. In contrast, the world’s largest retail chain, Wal-Mart, employs just about five lakhs. Fourth, being “self-employed … with their families”, this activity comprises “120 million people”.

It is “retailing that continuously generates … huge community-based entrepreneurship”. And then “it contributes over 14 percent of India’s GDP, while all [the] companies in the BSE 500 Index, put together is some 4 percent”. Also that the “unorganised retail segment has been growing at an average rate of over 8 percent a year for the last eight years (1999-00 to 2006-07). … second only to construction …” Let us consider seriously that “if [this] social capital link to retail trade is unsettled, the entire distant and remote supply chain will suffer over a period, disturbing the social equilibrium and the organic social links that have evolved over … centuries”.

There is then a further ‘canard’ spread by our dear PM and his ilk, suggesting that concerns like ‘Walmart’, and others of that variety, overflow with the milk of human kindness and act only out of empathy and compassion for India’s farmers and poor. Gurumurthy very effectively comes to our assistance here, too, the evidence, even in the U.S. being to the contrary: “Walmart entered in Austin neighbourhood of Chicago in 2006. And by 2008, some 82 of the 306 small shops had closed down.” Further, “the Economic Development Quarterly study found the closure rate around Walmart location at 35-60 per cent.” Such studies in the U.S. reject the UPA’s assertion that FDI in retail does not hurt small shops. On job creation, a January 2010 report titled ‘Walmart’s Economic Footprint’, prepared for the New York City Public Advocate, says that “Walmart kills three local jobs for every two it creates”. Jayati Ghosh, an eminent Indian economist cited by Karan Thapar, asserts that “one Walmart store in India will displace 1400 small retail stores costing 5000 jobs”. This, too, is dismissed by the government as “meaningless”.

Misplaced view

As for Walmart offering better prices, please recognise it does not buy or pay for goods over the counter. It purchases the nation’s next harvest in futures market and fixes farm prices. It also “imports cheap goods and destroys local production like it has done in the U.S.” And an outstanding example of this is provided by President George W. Bush, who gratuitously observed “that [rice] prices had gone up because newly prosperous Indians had begun eating more”. In truth, as detailed by USA Today (April 23, 2008) and CNN (April 24, 2008) the “California Rice Commission and USA Rice Federation” denied there was a “shortage of rice”, explaining that it was because ‘Sams Club’ (Walmart’s wholesale division) was holding ‘huge stocks’, and ‘pushing up the prices’.

Two UPA government reports — of the Planning Commission Working Group on Agriculture for the XI Plan (2007-2012), and the 19th report of the Standing Committee of Parliament on Food (2006-2007), to Parliament — “themselves nail the lie that Walmart will link farm-gate to its gate and make Indian farmers rich”.

There is then that absurd assumption that this variety of capital inflow is the answer to our present trade and current account deficits. First, this is neither true nor tenable. Secondly, whose misgovernance/absence of governance has brought about this situation? Please do not place all blame on the ‘global situation’ when you do not hesitate to pat your back about crossing the 2008 fiscal obstacle course. “The trade account deficit of about US$150 billion and the current account deficit exceeding 3 per cent of GDP is very alarming and may lead to a balance of payments crisis of much graver nature than the 1990 position”. It is this continuous pressure on the “trade account and the sudden withdrawal of funds by FIIs from the stock market that has weakened the Indian Rupee”, (Rs. 16 in 1991 to as low as Rs.50 per U.S. dollar) during the UPA-2’s Rule, resulting in a “devaluation of more than 300 per cent”. (Thus becoming) one of “the major causes of imported inflation in the country during the past two decades”. Should our domestic savings, contributing almost 90 per cent of investments in the country, go down, which without fiscal and monetary incentives could well happen, and should the Investment to GDP ratio fall below 30 per cent, then surely we will revert to a ‘sub-Hindu rate’ of growth. That is why prime ministerial favours to foreign investors and step-motherly treatment to our dear desi s is so difficult to grasp.

Finally, a brief word about the totally wrong phraseology, to which all have by now succumbed. The measures recently undertaken are not in any sense ‘reforms’, and I am very glad our distinguished Deputy Chairman of the Planning Commission has candidly and correctly said so. These, at best, are ‘administrative’ measures which the government has now, with much fanfare, announced. Misplaced again, for the first reform needed, the very first is ‘reform of government’, and reforming governance is vital so that corruption is minimised and efficiency in administration maximised. I am doing what I promised my soldier colleague I would do. Are the knights of “El ingenioso hidalgo …” listening?

The U.S. experience proves that big retailers like Walmart are destructive for the community and will not generate the benefits that India has been promised.

Sudarshan – a man simple, yet profound


S Gurumurthy


Kuppalli Sitaramayya Sudarshan, who headed the Rashtriya Swayamsevak Sangh (RSS) for nine years as its fifth Sarsanghachalak and when hale and Imagehearty himself, nominated Mohan Bhagwat as his successor, passed away on September 15. A rare human being — simple, unassuming, honest, innocent, child-like, and, most important, Sudarshan was least given to being strategic or clever. He could be faulted for innocence but not ever for deceit.


His personality and his image stood diametrically opposite. He headed the RSS imaged as communal. However, anyone who knew Sudarshan was stunned by the extent of gap between the perception about the RSS and the reality of who Sudarshan was. The perception about the RSS being an undesirable outfit at the minimum extending to being an extremist at the maximum and the reality of Sudarshan being an affable, friendly and innocent to a fault showed how bias and prejudice could conceal the truth and advance falsehood. It was his innocence that landed him in political controversies at times.


Perez Chandra, an uncompromising and ‘unfriendly’ journalist who gave up writing because he could not find a media in which he could write the raw truth honestly, also a born Christian and a fierce nationalist, fell for Sudarshan’s innocence and simplicity. He met Sudarshan often, asked inconvenient questions and was bowled over by his innocence. Sudarshan used to match his provocation with patience and a smile. Perez used to wonder and bemoan how a simple, innocent and transparent Sudarshan, incapable of hurting a fly, was seen outside as communal, even as an extremist. Contrary to his image again, Sudarshan was friendly with many religious Muslims. He founded the Rashtriya Muslim Manch, interacted with Muslims all over the country, and interpreted the Quran as an inclusive religious text. Unfortunately such good work never leaked outside, thanks to unverified bias in the public domain.


Sudarshan studied engineering, but applied his knowledge wholly for improving humans, rather than re-engineering machines. He had read Descartes and Newton better than the best physicist. Intellectually acutely endowed, Sudarshan used his scientific acumen to argue how the western world view had dehumanised life and reduced humans into robots. He opposed westernisation, of India particularly, on logic, not jingoism. A staunch advocate of Swadeshi, Sudarshan combined the thoughts Mahatma Gandhi and Deendayal Upadhyaya to interpret Swadeshi as an economic idea related not just to sociology but to culture as well. He integrated economics to lifestyle. He believed that market forces, advertisements and corporates should not be allowed to hijack human lifestyle, which was long bound to basic values embedded in one’s culture and civilisation. He saw an emerging clash between market and culture.


The way the West is going today — with 55 per cent of the first marriages, 67 per cent of the second and 74 per cent of the third, breaking up; 41 per cent of babies born to unwed mothers, a half the households led by mostly single women parents and as many households dependent on government bailout — Sudarshan was perhaps right in his apprehensions about what unbridled market forces would do to families, couples, women and children and finally the society in India.


Sudarshan was doubtlessly simple, yet undoubtedly profound.

Why did the economy go back to the 1991 position?

As the heat over foreign direct investment in retail rises, not only the opposition parties but people like Swaminathan Gurumurthy, Convenor of Swadeshi Jaagran Manch, are also fiercely against the government’s proposal.

Shobha Warrier talks to the ‘swadeshi’ man on what his views are on FDI in retail and the politics behind it.

The prime minister has told the nation that the Indian economy is as bad as it was in 1991. How do you react to this statement from the same person who has brought in the change and has been in charge of the nation for so many years?

There are two aspects which have to be examined first. The prime minister has to answer first, why did the economy go back to the 1991 position? After having developed, and grown – India was seen as a rising global economic power from 2005-08 – how, in the last couple of years has the economy nosedived? He has to explain this to the people.

That the prime minister himself has to warn the country that it is as bad as 1991, means it’s a serious situation. So, he is answerable to the country how he took the country back to the 1991 days.

In 1991, you could say the policies that were pursued were restrictive and that was why the country underperformed. Now, in the last 20 years, you have liberalised, you have brought in so many changes. Why is it under performing today?

What, according to you, are the reasons why the economy was under performing?

Problems are of five kinds according to me; that is, the balance sheet of the government, the balance sheet of the corporates, the balance sheet of the banks, the external balance sheet of India and the balance sheet of the households. The household balance sheet is fairly alright. Our corporate balance sheet is not poor. They are not running in huge losses.

The bank balance sheet is okay. It’s the government balance sheet and the external balance sheet of India that are in problem. Why has the government balance sheet got into problem? The government gave encouragement to the industry in 2008 and 2009 by giving a lot of tax concessions to ride out of the so-called recession.
The amount of benefit was almost Rs 100,000 crores (Rs 1 trillion). The amount foregone by the government through concessions is over Rs 7 lakh crores (Rs 7 trillion).

Now, the government has no courage to withdraw the benefits because the corporates put pressure on them. This country is being run by “pink” mindset and the pink newspapers.

Next is the way they have maladjusted the expenditure side. For example, the Rural Employment Guarantee Scheme is just to fetch votes; indirectly a bribery. It is a cesspool of corruption and is consuming Rs 100,000 crores (Rs 1 trillion). You are not only disfiguring the balance sheet of the country but also spoiling the work force of the rural areas.

For the last six-seven years, the game has been going on but no political party wants to talk about it because it will affect the vote bank. Who disfigured the balance sheet like this? This government. This has resulted in a huge budget deficit and that is one of the reasons why the rupee weakened. You also mismanaged the external front by liberalising your imports based on your stock market money.

You have no reason to run a trade deficit of $120 billion with China and starve the local industries. Because the external front weakened, the cost of the economy went up by at least 25 per cent. You brought in inflation. When inflation went up, savings went down, and when savings went down, there was a capital shortage and pressure on interest rates. It was all brought in by this government by its actions.

Like the prime minister says, is FDI in retail and other sectors the answer to solve all these problems? When the government says FDI in retail can create millions of jobs, a study says even if it were to take 20 per cent of the retail market, eight million jobs will be lost.

If Walmart is killing three jobs to create two jobs in the US, the proportion cannot be more in India. It will kill more jobs in India. The very day India announced that FDI in retail would have no impact on small retailers, Atlantic City, the web cousin of Foreign Affairs magazine, carried a headline news that ‘Radiating death – Walmart spells doom for small business.’

They have said that the closure rate of small shops near Walmart is 35-60 per cent. For every mile from the Walmart super markets, the closure rate is 15-20 per cent. It radiates this closure. At the same time, you are claiming that there will be more employment opportunities and small business will not be affected.
But it is not Walmart alone that is going to enter the Indian market…

You must look at what the biggest player will do. That there are other players also means, more competitors will be doing the same job. Whatever Walmart does, the other players have to do worse. Otherwise, they will not survive.

What is the difference between what the big Indian retailers have been doing and what the MNCs will do?

There is a difference. Their pockets are not as deep as the foreign players. For example, players like Walmart can establish their malls everywhere without looking at profits for the next, say five years or 10 years. They can undersell and finish off all the local retailers. I don’t think the Indian corporates can have this kind of an approach.

Because they are not big enough?

They don’t have the equity or capacity to pose this kind of danger. Another worry of mine, other than losing employment and destruction of small shops is the impact it will have on rural food security. Sixty per cent of the food grains produced in India is distributed within villages and only 40 per cent enters the commercial arena. Most farmers produce food for only themselves.

If this is so, how can you establish a farmgate to retailgate link? If you draw two per cent out of the 60 per cent, it is going to be disastrous.

What is the guarantee that they will outsource from Indian farmers, like the government expects? If they get cheaper food products from elsewhere, won’t they bring them to Indian market, like you see Fiji and Californian apples even today in Indian market?

They can outsource 70 per cent of their products. Let us assume they pay a higher price here and lower price outside, they can make their margin. My worry is taking even five per cent food grains from the Indian rural market. If that is so, what will happen to the food security of those people?

Thirty-five crore small farmers and about 25 crore farm labour are dependant on what is produced in the rural market.

Supporters of FDI in retail talk about FDI in countries like China, Indonesia, etc., and say no economic crisis has happened there because of FDI in retail. What do you say on this?

Can you manage your economy like China? You can manage only if you can manage your politics or media or police or army like China. Only if you can manage foreign countries like China.

China has limited the entire globalisation process only to coastal China. There is no free movement of people, there is no free exchange of information. It is juts impossible to follow China.

Another thing is, the number of retail shops in India is at least three times higher than that of China. Retail penetration is very high in this country. China destroyed traders and substituted them with ration shops for over 40 years.

Similarly, they had wiped out the Chinese trading class and farmers. So, when they opened up, Chinese business class had to come from outside. They needed the business class from outside when they opened which is not the case in India. Traders, farmers and business class are in existence in India. It is not a comparable situation.

Will FDI in retail create a buoyancy in the Indian economy like the government expects?

I don’t think so. It can only manage the sentiments. The idea of managing the economy through managing the sentiments is only a short term measure. The prime minister says 50 per cent of the FDI will go into developing the infrastructure. Do you expect them to do so when they are here to do business?

Why should they develop the infrastructure here? They may probably set up cold storages but why should they develop roads here? But basic infrastructure, you have to develop for them to put up their storage facilities. They may start the axillary infrastructure if you put up the main infrastructure. How foolish it is to expect them to develop infrastructure in the country! I don’t know how it goes uncontested.

The criticism against the Marxist party (CPM) is that they are against capitalism, and the criticism against the BJP is that it is a baniya party…

I am very happy if the BJP supports the baniyas. I am very happy if Marxists support the small traders because they are anti-capitalists. I don’t see anything wrong in this.

Do you call bringing FDI in retail or any other sector, reform?

I don’t think reform has never been defined. Today, anything that the western countries want is “reforms”. If you oppose what they want, you are against reforms. The entire retail development in the US can be attributed to the destruction of society there by promoting crass consumerism. Retail investment is a product of consumerism.

FDI in retail, FDI in insurance, FDI in pension fund… which is going to be the most dangerous, according to you?

According to me, FDI in retail will immediately affect the economy. Making pension fund dependant on the stock market will be very dangerous.

In fact, the US economy has become dependant on the stock market. When the stock market falls, the economy falls. Instead, you should follow the German model where pension funds are banked. The social security system of Germany is based on banking model and not on stock model while American social security model is based on equity model.

Germans seem to be far more successful because Germany is the only country that is running surplus budgets. It has also surplus trade balance. And, we are basically a bank based country. Only two per cent of the savings gets into the stock market. That is why the government is able to meet its deficits.

This year, we will be depositing Rs eight lakh crores (Rs 8 trillion) in the banking system and the government will be borrowing Rs six lakh crores (Rs 6 trillion). If the people put money in the stock market, the government will become insolvent in this country.

And, the prime minister of this country said four years ago, if I recollect, don’t go to banks, go to the stock market. But the country didn’t listen. Our culture is aligned to the banking system.

The government says subsidies must go as it is eating the economy…

There is subsidy in every country. America is giving $20 billion annually as subsidy for agriculture, European Union also. Subsidies is the only way you can equalise.

The subsidies that are eating into the Indian economy is the petroleum subsidy. Seventy-five per cent of it can be attributed to the depreciation of the value of the rupee.

Our prices are sufficient to recover the international prices up to $100 per barrel provided the value of the rupee is 45 or 46. But the rupee value has depreciated by 25 per cent, and that is because of the mismanagement of the economy. So, don’t blame subsidies, blame the fall in the value of the rupee.

23 Italians receive Hindu Diksha

By Express News Service – PUDUCHERRY
06th August 2012 10:22 AM
  • Divine course: The Italian devotees during the Shiva Diksha ceremony in Puducherry on Sunday | G Pattabiraman / Express
    Divine course: The Italian devotees during the Shiva Diksha ceremony in Puducherry on Sunday | G Pattabiraman / Express
As many as 23 Italian citizens from Vatican received Diksha from Brahmasree Veda Samrat A Raja Sastrigal at a Veda Patasala (religious school) at Karuvadikuppam here on Sunday. The three-hour ceremony was held at the Gomaatha Kovil amidst chanting of mantras and hymns by the Italian devotees.
The Italian team (consisting of four children) comprised professionals like teachers, doctors and engineers. All of them had undergone a basic course under Raja Sastrigal in Vatican, before coming here. It all began with one Italian man, Flavio, who got influenced by the Hindu way of life, came into contact with Raja Sastrigal, way back in 2001. Sastrigal went to Vatican and stayed there for three months to teach Flavio, and his wife Stepano, the basics of Sanskrit hymns and Vedas. Over the years, the couple has gathered followers, who were also influenced by Hindu spirituality.
The couple developed their diction and pronunciation over the years. The few local people assembled were astonished to hear the Italians’ near-perfect rendering of Sri Rurdram Chamakam, Rudrajapam, Srisuktham, and portions from Upanishads.
Flavio and Stepano even changed their Italian names, adopting Hindu names Shivananda Saraswati and Savithri. Aurora, an Italian team members, told Express that she believes India is a Karmabhoomi and the Hindu way of life has led to understanding herself better.
The Italian lady, who is now known as Lalitha, said she would follow the footsteps of her Guru Shivananda Saraswati. The training for chanting the mantras and hymns lasted for about three hours and Raja Sastrigal performed kalasa theertha (sprinkling of holy water) on the trainees as per the rituals of the Hindu religion at the end.
The team members would spend a couple more  of  days in Puducherry, before returning for more learning after a few months.

Rs 300 for voter identity card!

GUWAHATI, Sept 24: Rupees 300 can give you a fake Indian voter identity card in the northeast. This was revealed by the three illegal Bangladeshi nationals, who were picked up by the Guwahati Police from a city hotel on Sunday night, following an interrogation. Md Masud, Shohel Rana and Shafikul Islam entered Tripura with Bangladeshi passports and later took the help of Shikhan Mian, who is a resident of Tripura, to visit Assam. Police sources said Shikhan Mian was paid Rs 300 by each of the three Bangladeshi nationals to arrange Indian voter identity cards for them. The four including Shikhan Mian reached Guwahati from Agartala on Sunday and stayed in a city hotel. Acting on a tip off, the border police raided the hotel and nabbed the four persons. The border police also recovered Bangladeshi currency and passports from the arrested persons.

‘Reform’ at nation’s cost

S Gurumurthy

Indeed ironical. On the same Friday (September 14) Prime Minister Manmohan Singh rolled out the red carpet for Walmart, New York City, America’s largest, shut Walmart out. Again ironically the very Friday the UPA government handed the FDI bouquet to Walmart and lobbyists assured that small retailers are safe, Atlanticcities, a web-newspaper from the stable of the famous Foreign Affairs magazine, carried a devastating headline news: ‘Radiating Death: How Walmart Displaces Nearby Small Businesses’. Weeks ago, on June 30, over 10,000 people, shouting “Walmart = Poverty”, marched through Los Angeles, America’s richest city, against Walmart stores. On June 1, hundreds protested in Washington DC against Walmart. “Say-No-To-Walmart” is an ongoing movement all over the United States.

Why focus on Walmart? It is world’s most powerful retailer; it has ‘spent’ a lot to get the UPA nod for FDI in retail. Even as lobbyists here celebrate Walmart, it has become untouchable where it was born, in the US. Why is Walmart so hated in the US? “Walmart will devastate local businesses,” say New York trade unions and local communities. The mass protesters at Los Angeles too cited the same reason: “small business will close down”; and screamed “Walmart has no heart and no morals. We don’t want you in Los Angeles.” Politicians in the US, however, seem to be like the UPA’s cousins. In March last, the Los Angeles City Council had put a moratorium on big retailers, but, Walmart got building permits just a day before! Recall the 2G permit cut off date?

Yet, the UPA certifies Walmart and its competitor cousins as compassionate to small retailers and farmers. It promises they will employ millions here. The evidence in the US is to the contrary. According to the Atlanticcities article, Walmart entered in Austin neighbourhood of Chicago in 2006. And by 2008, some 82 of the 306 small shops had closed down. The Economic Development Quarterly study found the closure rate around Walmart location at 35-60 per cent. Walmart radiated closure of 20 per cent of drug stores every mile from its stores; and 15 per cent home furnishing, 18 per cent hardware and 25 per cent toy stores. Studies in the US nail the UPA lie that FDI in retail will not hurt small shops. On job creation, a latest report (January 2010) titled ‘Walmart’s Economic Footprint’ prepared for the New York City Public Advocate says that Walmart kills three local jobs for every two it creates. So the job creation argument too is a lie. The third justification that the ‘farmers will get better prices’ is a clever lie, and so needs a closer look. It suppresses the vital fact that Walmart does not buy, or pay, over the counter. It buys the nation’s next harvest in futures market and fixes farm prices. It also imports cheap goods — from China — and destroy local production like it has done in the US. Take the first case, with the recent experience of the US and the world.

Rice prices in the US and world markets shot up by three times in April 2008 as compared to January 2007. It was then that the US President George W Bush made the funny remark that prices had gone up because the newly prosperous Indians had begun eating more! What was the truth? The USA Today (April 23, 2008) and CNN (April 24, 2008) quoted the California Rice Commission and USA Rice Federation as denying shortage of rice and saying there was enough stock. Why then were prices rising? It was because, said the CNN, Sams Club (Walmart’s wholesale division), holding huge stocks, was pushing up the prices. US farmers accused speculators and futures market for the high prices. It was not farmers who traded in farm futures. Investment funds accounted for 40 per cent of wheat futures trade in the US in January 2008, which rose to 60 per cent by April. Wheat futures that was $4 a bushel in early 2007, rose to $14 per bushel in April 2008. The US farmer, who had sold his harvest in futures market, lost and Walmart, which had bought the futures, gained. Even if some farmers had some stocks Walmart, which had stocked at cheaper prices, refused to buy at higher prices, pointed out the media.

Look at it this way. If the US farmers get remunerative prices from Walmart why does the US, with two per cent farming population, grant annual farming subsidies of $20 billion and the European Union, for its five per cent farming population, gift a subsidy of $74.5 billion annually. The experience of the US and West nail all three justifications for the FDI in retail as lies. Foreign direct investment in retail will incrementally hit the 12 million family retailers in India; it will not help farmers; it will cut jobs. Even more dangerous, it will destroy the rural food security.

Two of UPA government’s reports — of the Planning Commission Working Group on Agriculture for the XI Plan (2007-2012), and the 19th report of the Standing Committee of Parliament on Food (2006-2007) to Parliament — themselves nail the lie that Walmart will link farm-gate to its gate and make Indian farmers rich. The reports describe the farm-gate thus: a total of 59 million of farming families (32 crore rural people) live on subsistence farms of five acres or less (while US farms are 250 times and the Australian, 4000 times, larger); about 60 per cent of food products is barter-exchanged and consumed by farmers and farm labour, and as seed and animal feeds within villages; only 40 per cent move out of villages for commercial marketing. Even if a small part of the large local needs is drawn by an efficient Walmart from the farm gate to its gate, that will mean urban pricing in rural areas that will destroy the food security of two-thirds of Indians in villages.

The Montek Ahluwalia-led Planning Commission report laments that ‘the marginal farmers are certainly going to stay for a long time’ and ‘what happens to them has implications for the entire economy.” However, the small farmer is no waste. He is more efficient. His productivity a third higher, than in large farms. Small farmers use one-third of the total cultivated area and produce 41 per cent of nation’s food and 110 million tonnes of milk. If large ones replace them, the nation’s food production will fall by 7 per cent. The reformers do not know that recent global researches have confirmed that economy of scale that applies to industries does not apply to agriculture, where small ones are more efficient than large ones.

QED: The ‘reformers’ betray illiteracy; clamour for fame as reformers; secure it at nation’s cost. Reformers or deformers?

Pranab Mukherjee, Omita Paul and corruption in Finance Ministry


CT – JULY 17, 2012


Is she a lobby centre for corrupt corporations?


Is the role of Omita Paul, India’s Presidential candidate Pranab Mukherjee’s confidant over long years and the de facto No 2 in every Ministry that the latter has occupied in the last eight years, that of a fixer?


Does she act on her own behalf or on behalf of Mukherjee? Is she a lobby centre for corrupt corporations? Or is she a buffer to take the heat off any scandal/wrong doing? And what is the reason for Mukherjee’s silence when blatant act of her nepotism and corruption are reported in the press? Is he helpless or being helpless?


Whatever be the reason, the former Finance Minister is constructively responsible for all acts of Omita Paul.


First the obvious question: What is the reason for the appointment of Paul in the number two position in the three key Ministries that Mukherjee has been a Minister.


Paul has been continuously appointed as an advisor with the rank of Secretary in the three key Ministries — Foreign, Defnece and Finance — which has been co-terminus with the tenure of Mukherjee. Her appointment as Advisor in three different ministries is without precedent in independent India and it is not because of her specialized knowledge on the subject matter of any of the three Ministries.


All attempts to get information on the law/guidelines under which she was appointed and the papers relating to her appointment under the RTI have been in vain. Hers was an arbitrary appointment for arbitrary goals. Even the Secretary of the Ministry was subordinate to her.


Though there have been extra-constitutional authorities and power centres in the past, the country has not known an official power centre like that of Paul. It may be mentioned that Paul was also appointed as Information Commissioner at the time of election between UPA-I and UPA-II and that the then Leader of Opposition L K Advani and the Prime Minister on May 9, 2012 found time to select her as Information Commissioner for five years. The post of Information Commissioner was an insurance cover in case the Congress lost the election. She worked for eight days and disposed a total of 58 cases before re-joining as Advisor-cum-Secretary in the Ministry of Finance once UPA came back to power.


That Paul was an independent power centre, and worked for the benefit of herself, her family members and the corporate lobby and in the process compromised national interest is obvious from the incident relating to appointment of SEBI chief.


Did she not manipulate the entire system in order to have her candidate, U K Sinha, appointed to the post of Chairman of SEBI so that he would favour companies like Reliance and Sahara? It would also enable her to have her brother appointed to the post vacated by Sinha at UTI AMC, which has emoluments of four crores per annum. This despite the fact that her brother did not have required qualification to be appointed to the post.


But first her role in removing honest officials from SEBI to install Sinha:


The decision to give extension to the existing Chairman and members of SEBI by the Secretary and the Minister (approved on 19/10/09) was canceled at her behest (21-22/12/09), the existing members were never considered later for extension (10/8/10), she changed the composition of the committee to select the Chairman, had her own experts nominated to the Committee (25/8/10), ensured that the candidature U K Sinha is by the so-called search route.


The search route was taken to conceal the illegal emoluments of Rs 4 crores (Per Annum) drawn by Sinha in a Public Sector Enterprise (PSE). If his emoluments were revealed he would not have been selected on grounds of lacking integrity as the ceiling of pay for PSE is Rs 1.25 lakh per month. Concealment of emoluments was also necessary for Paul to push the candidature of her brother for the vacant post at UTI AMC so that he could enjoy the lavish salary without others knowing the real reason for the appointment.


After having Sinha selected as Chairman, Paul ensured that even the Appointment Committee of the Cabinet (ACC) does not come to know about the emoluments of Sinha while confirming his appointment. (Refer confidential letter DO no 2/23/2007-RE dated 13/12/2010 of Dr Thomas Mathew, to Est Officer Annexure -1 item 4 (ii) Scale of pay: Not available)


It is obvious that the concealment of Sinha’s emoluments was deliberate and designed to mislead the selection committee and the ACC to presume that he was being paid the maximum pay payable to a PSE chief of Rs 1.25 lakh per month.


Sinha’s emoluments were over Rs 4 crores per annum (Rs 3.62 crores for 10.5 months as per balance sheet of UTI AMC) which is not possible in a public sector organization like UTI AMC. The Establishment Officer vide his order dated 4/1/08 had stated that the deputation was covered under Rule 6 (1) and not 6 (2) (ii) of IAS Cadre Rules. Sinha not only got his emoluments increased after the decision of the Establishment Officer in 2008, but also increased it with retrospective effect from December 2006 and raked in a bonanza of over Rs 10 crores in the process.


Was the purpose of appointing such a person to the sensitive post of SEBI chairman to settle issues of thousands of crores in favour of the concerned companies which had lobbied with Paul?


The allegation of Paul acting on behalf of the corrupt companies is borne by the fact that Dr Abraham as a WTM (Whole Time Member) of SEBI Board had leveled allegation in a letter written on 1/6/2011 to the Prime Minister that Sinha tried to influence him on four cases. One of the cases related to securities fraud of Reliance group and others related to Tayals of Bank of Rajasthan, Sahara, and MCX. While trying to influence him Sinha had stated that these were “engaging the attention of Union Minister for Finance or Mrs Omita Paul, Advisor to the Finance Minister”.


The denial of extension to the then Chairman and members of SEBI by Paul, the fact that extension was stopped when SEBI recommended action against the Reliance group to the Finance Ministry on an eight year complaint by Gurumurthy involving over Rs 25,000 crores of benefit to the promoters, the extraordinary interest taken by Paul in having Sinha appointed as SEBI chairman by suppressing his illegal salary from the selection committee and the Appointment Committee, and the subsequent actions of Sinha all show that Paul was involved in harming national interest by promoting corporate interest of the respective companies.


Sahara was a company taking deposits from small un-bankable people. From 2008 onwards, during the tenure of Mukherjee, it violated the deposit norms under section 58A of Companies Act which allowed it to collect unsecured deposits from debentures for 10% of its own fund. By doing that it could have collected only Rs 230 crores but went on to collect over Rs 20,000 crores. Almost the entire money collected was siphoned out and there were virtually little assets in the company in whose name deposits were taken so that the group could not be compelled to refund the amount. It was the largest ponzi scheme involving two crore poor people.


Dr Abraham had passed orders on the company which were contested by Sahara in the High Court. But by a freak chance the matter came before him for adjudication because the CJI referred the matter to SEBI. He adjudicated the matter at the fag end of the tenure (23/6/11) directing the group to refund the entire money to the investors. His order was upheld by the Tribunal and is likely to be upheld by the Supreme Court also. The order of Dr Abraham is proof of his competency and honesty, while the shenanigans of Sinha at UTI AMC are proof of his cleverness and manipulative skills.


The second case that interested Paul was the securities fraud of Rs 513 crores of Reliance group (Mukesh Ambani group). Reliance Petroleum shares were short sold for Rs 290 by the group and later bought back when there was a hefty fall in price when the group sold the shares in the cash segment. The Reliance group made Rs 513 crores in five days .The securities fraud took place in November 2007. Such a blatant act of securities fraud by the promoter was unprecedented.


The penalty under the law is three times the amount of the fraud and the total amount involved was Rs 2000 crores along with criminal prosecution.


Reliance tried to settle the matter by paying a fine of only Rs 2 crores and then Rs 8 crores through consent order. It was not even willing to pay back the fraud amount of Rs 513 crores. These meager offers of settlement were made by Reliance to buy time so that the honest officers of SEBI could be replaced by more pliant ones.


Sinha changed the circular on the consent order (25/5/2012) in a manner that favored Reliance group and continue the settlement of the criminal offence through a consent order. This is in sharp contrast with the case of Rajat Gupta whose offence was much less but then he did not have an Omita Paul or U K Sinha to bail him out.


The third case is about the Tayals of Bank of Rajasthan in whose favour the outgoing member Prashant Saran passed a favourable order so that he could be re-appointed. The order only confirmed the allegation of Dr Abraham. Similar conclusion was made by the media. Kindly refer links in Financial Express and Mint on Saran’s order.


The fourth case is related to MCX which wanted to open a parallel stock exchange. The Ministry ensured that Dr Bimal Jalan Committee report is taken up by SEBI after Sinha became the Chairman so that the portion relating to not listing of the shares of the stock exchange company is rejected. This would enable MCX to list the shares of the stock exchange and help in giving market value to the MCX license. Further the terms of complying with other norms too have been diluted.


Other related scandals


On the slot vacated by by Sinha at UTI AMC, Paul wanted her brother to be appointed and though the four financial institutions under her were agreeable the foreign shareholder was not. As a result the post of the CMD remained vacant for fifteen months because Paul wanted to have her brother appointed. Great harm to public interest was done because UTI has around Rs 60,000 crores invested in the financial market and large part of the money comes from government sources.


It was only when the candidature of Mukherjee was considered seriously for the post of President that Paul’s brother withdrew from the race for the post of CMD of UTI AMC. The advertisement released subsequently for the post thereafter shows that neither Paul’s brother nor Sinha had the qualification to take up the post because it states that the person should be a seasoned financial service professional with minimum 20 years of experience. He should also have a degree of MBA from a top university or a CA. Both of them are neither financial service professional nor do they have a day’s experience. In fact, the advertisement which was released for the first time honours the commitment given by the government to the JPC II on securities scam that a professional would be appointed through an advertisement.


Sinha, who had increased his emolument through a rubber stamp Board on the grounds of industry parity, conveniently forgot that he was appointed to an executive post and industry parity is given to persons in non-executive posts like pilots etc. He did not disclose that his deputation was covered under Rule 6(1) of the cadre rules and that the organization was a PSE where the maximum pay that could be drawn was Rs 1.25 lakh per month. It was for this reason he appealed to the High Court against the order of the Information Commission that UTI AMC is covered under the RTI Act. Both Sinha and Paul wanted the illegal emoluments to be a secret for their respective reasons.


The other act of nepotism involved Paul’s husband, who was favored by an unprecedented amendment in the IT Act. The following exemption granted in the year 2011 was notified for being applied retrospectively from the year 2007-08 to cover the entire tenure of Paul in the UPSC Section 10 (45) of the Income Tax Act stated:


(45) Any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission.


Retrospective amendment to undo a judgment or wrong has been known but never to pass on a benefit like the one above. The amendment was sought to be justified on the basis of sixth pay commission report but there no such recommendation in the report.


Paul, out of sheer vindictiveness, used her influence to initiate disciplinary proceedings of major penalty against an honest officer like Abraham who exposed her corruption and refused to compromise. His order against Sahara is in sharp contrast to the manipulations of Paul and Sinha. In fact there is sufficient material to charge her for offences committed by her under PCA and IPC. Answers are needed on whether all these actions of Paul narrated above were within the knowledge of Mukherjee? Some of them were also covered in the press. He gave official approval whenever the same was required.


Which brings us to the original question: Is he helpless or being helpless?


Paul is the responsibility of Mukherjee. The latest extension given to her on 15/6/2012 states that her tenure is “co -terminus with the tenure of Shri Pranab Mukherjee as Finance Minister”. Speculation is already rife about her being given a position higher than that of Secretary to the President.


(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)