Chana market crashes

Chana spot market crashed in the last few days due to weak market sentiments caused by the imposition of stock holding limit on Chana. Similarly, the futures prices too nosedived after the exchanges were asked by the Forward Markets Commission (FMC) to impose a special margin of 10% on long side of all running contracts of chana from 30th September 2011.

Earlier, limited stocks available in the market and disappointing first advance estimates of pulses production by the agriculture ministry encouraged traders to take huge long positions in the futures market. Chana prices in the spot market increased by almost Rs.500 a quintal in the September month to touch a high of Rs.3700 a quintal (Source: NCDEX September spot price). Weak supply in major chana producing states amid strong demand ahead of festivals supported prices at higher levels. Prices of pulses across the board remained steady on account of rising demand in the domestic market and slow arrivals from farmers and traders to the wholesale markets.

As per the first advance estimates of production released by the Ministry of Agriculture, chana production (Kharif) is estimated at 6.43 million tonnes against 7.12 million tonnes in 2010-11, a decline of almost 10 per cent. Production of tur (pigeon peas/arhar) is projected to be at last year’s level of around 2.9 million tonnes, while urad (black gram) and moong (green grams) would see a shortfall in production.

According to the weather watch report from the Ministry of Agriculture, the total sowing acreage of kharif pulses as on 30th September 2011 stood at 110.14 lakh hectares as against 121 lakh hectares that were reported last year in the same period. This was mainly on account of shift in crop area of pulses towards oilseeds and cotton in major producing states such as Maharashtra and Andhra Pradesh.

Globally production of chana is likely to decline by almost 6% in 2011 due to poor crop harvesting expected in Australia and Canada. The Australian Pulses Traders Association has mentioned that he total production of Australia’s desi chickpeas is likely to decline by almost 10-12% to 3.05 lakh tonnes despite strong sowing acreage of almost 5.02 lakh hectares reported in 2011. This will be on account of poor productivity of chickpeas crop.

Similarly in Canada, Agriculture and Agri - Food of Canada has mentioned in its latest report that in 2011-12, pulses area is forecast to fall by 48% from 2010-11. This is much lower than originally intended because of excessive moisture in many growing areas. Production is expected to fall sharply to 65,000 tonnes, the lowest since 2004-05. Supply is forecast to be lower than last year and is expected to limit exports by 90% to 50,000 tonnes in the international market.
All the above mentioned factors had been supporting chana prices at higher levels. However, in the last two-three days, china prices in the spot as well as futures crashed as the commodity exchanges imposed a 10% long margin on chana contracts.

Government’s announcement to have a contingency plan for additional production of pulses in Rabi 2011-12 to overcome losses of Kharif pulses also supported the bearish market sentiments. Alleged rumors of government taking an extreme step to control rising prices of essential commodities (read inflation) by banning trading in futures (or some commodities) also created a fear in the market. Hence, market participants in the futures market started liquidating their positions to cover their losses (or book profits) to maintain the margin limit on the exchange.

The government of Rajasthan too, acted by imposing a stock limit on chana separately from the other pulses. Henceforth, total pulses stock limits shall be 550 tonnes instead of 500 tonnes for wholesalers (per license). For chana, the stock limit has been fixed at 250 tonnes and for other pulses it is 300 tonnes.

The Central Government has set a target for itself to achieve an additional production of 2.78 million tonnes pulses during the ensuing Rabi season through area expansion and productivity enhancement.

Disclaimer:The views expressed are my personal and all the information contained herein is based upon information available in the public domain.

Sugar prices to remain firm in the year 2009-10

Over the past few days, sugar prices shot up on fall in production and ever increasing demand. Nearing festivals and wedding season has given a boost to the rising prices. Moreover, with the imported raw sugar lying idle at ports as a result of UP government not allowing its mills to process it unless crushing in the state is over, is also making sugar pricier. Mills owners also attribute the rising prices on lower availability of sugar in the market. The Central Government has made available 16.39 lakh tonnes of sugar for the month of January which the market participants feel is not enough to meet the domestic demand. Also, a high international price is also fueling the price rise across the country.

Sugar prices crossed the psychological mark of Rs.40 per kg last week in the retail market. Prices had been firm throughout the year 2008-09 on mismatch of demand and supply. Prices had been ruling over Rs.30 per kg in the retail for the last one year and the consumers are now more or less habited to paying the price. Although, the ministries concerned with the price rise has been ensuring people that every thing would be fine in the coming days, as steps are being taken to ensure that prices do not keep touching new heights. But, the fact is that prices are not expected to come down soon as prices are determined by demand and supply situation. As far as supply is concerned, it may increase in the short term and prices may soften a bit, however, overall production is still estimated to remain around 160 lakh tonnes which is much lower than actual demand for sugar.

According to Food and Agriculture Minister Sharad Pawar, India is expected to produce only 150 to 160 lakh tonnes of sugar in 2009-10 and the present firmness in the sugar price would remain for a year. The estimated production in the year 2008-09 was 145 lakh tonnes.

The rise in production will be mainly because of higher diversion of sugarcane to the mills manufacturing sugar. Last year, apart from monsoon playing havoc on sugar cane production, diversion of sugarcane to the khandsari and gur manufacturers were other factors that supported higher sugar prices. Although, this year the administration has taken some steps in this regard, yet, diversion cannot be ruled out. Farmers sell their crop to khandsari and gur manufacturers as they get instant payment on delivery unlike, in sugar mills, where arrears are paid later after realization of sugar. In October 2009, Venus Sugar Ltd in Uttar Pradesh (UP) had secured a Court order restraining the operation of kolhus (manufacturers of gur) in the cane area assigned to it by the State Government. Further, sugar mills located in Uttar Pradesh are paying around Rs.220 per quintal for cane purchased by them against Centre’s Fair and Remunerative Price of Rs.129 per quintal.

Sugar production in Maharashtra is set to rise marginally this season on higher cane crushing. The state is likely to produce 48 lakh tonnes in the sugar year 2009/10 that began in October, slightly higher from 46 lakh tonnes produced a year ago. Although, the state is expected to crush more sugarcane this year, however, production would rise marginally on fall in the sugar recovery. In the first quarter of the sugar season (October to December) millers have produced 22 lakh tonnes of sugar which is 2.8 percent higher compared to last year’s corresponding figure.

However, production in Uttar Pradesh is expected to remain flat this year due to a number of causes. First, delay in the start of crushing will affect the recovery of sugar in the state. Second, though this time less sugar cane would be diverted towards jaggery manufacturing yet, bad monsoon had already affected the cane production in the state. Third, the UP government ban on imports of raw sugar following protests by farmers who said overseas purchases suppressed cane prices and curtailed their bargaining power with mills has locked up 15 lakh tonnes of raw sugar in ports. As of now mills in Uttar Pradesh, India's second-largest producer churned out 17 lakh tonnes of sugar against 18 lakh tonnes last year in the same period (October to December).

India is expected to consume over 230 lakh tonnes of sugar in 2009-10. The deficit would have to be met by imports and from last year’s buffer stocks. However, India doesn’t have enough buffer stocks {The current 2009-10 season (October-September) opened with domestic white sugar stocks of around 31 lakh tonnes.} to bridge the widening gap between fall in production and expected demand. Even if the country manages to bring some stability in the prices using the stocks that it has with it right now, it would definitely face shortage in the next year as there would be hardly any carry over stocks. Moreover, record global prices do not sound good for Indian consumers who will have to shell out more this year to purchase sugar. Sugar prices have already crossed the Rs.40 per kg in the retail market and the next target for the present Central Government is to watch consumers pay Rs.50 per kg in the coming days.

Consumers should be ready to pay more for sugar

Distressed at not getting an adequate price for his produce, a debt-ridden sugarcane farmer in Uttar Pradesh committed suicide. In order to repay his loans, he wanted to sell his produce for a minimum of Rs.270 per quintal.

After protests from the farmers and pressures from the opposition over sugar pricing which favored sugar mills, the government has made it clear that the difference between the fair and remunerative price (FRP) and state-advised price (SAP) would have to be paid by the mills and not by state governments.

The government had earlier announced the new sugar pricing policy which was rejected by the farmers. Instead of SMP (statutory minimum price), a Fair and Remunerative Price (FRP) of Rs.129.82 per quintal linked to 9.5 sugar recovery was announced for the current season (2009-10). The guidelines under the new policy also stated that anything above the FRP would be borne by the state government which often announced SAP higher by 30 to 40 per cent than SMP. As a result, SMP of Rs.107 per quintal became meaningless which was announced earlier (Last year SMP was Rs.82.25 per quintal). State Advised Price (SAP) in Uttar Pradesh varies from Rs.165 to Rs.170 per quintal, depending on the quality of sugarcane. In reality, sugar mills pay over SAP to the farmers.

As a result, farmers were not happy as the FRP announced was much below SAP at a time when sugar mills were making huge profits. The farmers protesting against government new move had two demands.

1. Withdraw the provision that makes state liable to pay the difference if it fixes an SAP higher than FRP.
2. Pay farmers a price of Rs.280 per quintal.

Farmers feared that as state would have to pay the differences, it will stop announcing its own SAP because it could not afford to pay the difference. Further, the SAP announced by the UP government was un-remunerative as farmers believed that anything below Rs.250 to Rs.280 per quintal was not fair.
Not happy with the sugar mills offer, sugarcane growers in some some parts of Uttar Pradesh have decided to set-up co-operative crushers and crush their cane themselves. Farmers at the moment are not ready to sell their produce till they are paid Rs.280 per quintal. The deadlock has resulted in slow progress of cane crushing and is likely to affect production.

Over the past few months, the scenario in Indian sugar sector has not been good for the farmers. Sugar prices touched peak often due to faulty government policies and inadequate actions on industry estimates which had been voicing their concerns to the government that production for the season 2008-09 is expected to fall drastically due to bad monsoon. There were also reports that farmers in Maharashtra were converting their standing crop into fodder to feed their cattle and sell the rest on remunerative prices. Further, farmers in Uttar Pradesh were more than eager to sell their produce to jaggery manufacturers who were paying higher prices than sugar mills and that too instantly. All these factors along with government not responding swiftly to minimize the differences in demand-supply allowed sugar mills to make handsome profits.

India’s sugar production is estimated at 16 million tonnes for 2009-10 against 14.7 million tonnes last year, while the estimated total annual consumption is pegged at 23.5 million tonnes. However, last season (2008-09), the government had a carryover stock of 9.5 million tonnes which provided some relief to the sector.

The Union government has taken numerous steps at different times to check the rising prices and though, it helped a bit, yet sugar is currently trading around Rs.40 per kg in the retail market. The government had earlier (this year) allowed the import of raw sugar for refined and domestic consumption against export of refined sugar. Further, to check hoardings, the port charges for storing sugar were raised sharply to force traders to vacate godowns (warehouse) immediately after custom clearance. Also, the Ministry of Consumer Affairs has directed that no bulk consumers whose consumption is more than ten quintals annually could store sugar beyond fifteen days’ requirements in its godowns.

In spite of all these steps, Indian consumers should be ready to pay more for sugar as the commodity is already trading at a peak at a time when prices should be lower. Delay in crushing in northern states should be a warning to the Central government to be more prudent in sugar sector policies.

Bringing some innovations in Sachin's Split formula for One Day Cricket

Sachin Tendulkar, in a recent interview had suggested to split the 50 overs one day cricket into two innings of 25 overs each to make it more attractive. 50 overs match had been the most charmed form of the game until IPL happened. Therefore, to make the game more attractive vis-à-vis T20 game, he lend his voice which now have become a hot topic.

Initially, there were not many supporters, but, when a man of his calibre speaks, everyone takes a notice. With the popularity of T20 matches, and, the popularity bar rising each day, it becomes necessary to bring in some innovations to make One day cricket more charming and save the game. One such formula is to split the game into two innings of 25 overs each as suggested by Sachin. Under this format, each team will play for 25 overs each and then, again, play for another 25 overs each. According to Sachin, 50-overs cricket is becoming too formulaic because results of "close to 75% of matches" could be predicted after the toss. But two innings of 25 overs would create new strategies and drastically reduce the influence of winning the toss in favorable conditions, especially during Day/Night matches.

The success of IPL has reduced the interest in One Day cricket to a certain extent. This has forced the England and Wales Cricket Board to scrap the Friends Provident trophy, the only 50-over domestic cricket tournament, in favor of an expanded Twenty20 competition along with a 40-over format. Many players have supported Sachin’s idea. But, there are some issues that need to be considered before implementing this format.

According to ICC cricket manager Dave Richardson, splitting the innings could take away scoring opportunities for the batsmen. He added: "I don't necessarily like the idea of playing two matches of 25 overs each with the openers batting again. The charm of one-day cricket is seeing someone batting at four and scoring a good hundred.”

If we compare the statistics of a T20 matches, we should find that the number of centuries are very limited. When we divide the 50 overs in two innings of 25 overs each, there would be many occasions when the middle order batsmen would not get a chance to bat. In contrast, an opener would always get to bat twice. This will result in very few centuries by a player.

In this scenario, the best thing to do is to make some changes I Sachin’s split formula.
Unlike, having two separate inning of 25 overs each, what ICC can do is to make the second inning 0f 25 overs a continuation of the first inning of 25 overs. Let me illustrate this with an example:
Say Team A decided to bat and scores 125 runs for 4 wickets in their allotted 25 overs. Team B bats and scores 115 for 5 wickets in their 25 overs. Now, when Team A comes to bat again, they will simply resume their previous paused game. They will not restart all from the base, but will continue from where they left, i.e., they will start from 125 for 4 wickets. The batsmen out in the first innings cannot bat again. Same would be for Team B. In this way, one can see more runs and more partnerships from the batsmen.

Unlike, in Sachin’s split formula where hitting a century becomes a very difficult task, in this newly twisted formula, one can continue to see their favorite batsmen feeding on good bowls and hitting centuries occasionally.

Inlfation still in negative zone

Government data showed on Thursday that the annual rate of inflation for all commodities stayed negative for the eighth straight week, but prices of food items continued to surge.

The annual Wholesale Price Index-based inflation declined 1.58 per cent in the week to July 25 after falling 1.54 per cent on an annual basis in the previous week. The year-on-year inflation rate was recorded at 12.53 per cent during the corresponding week of the previous year.

The official WPI for ‘All Commodities’ for the latest reported week rose by 0.04 per cent to 236.9 points from 236.8 points for the previous week. On a disaggregated basis, the primary articles group index rose 0.4 per cent as the index for ‘food articles’ group rose by 0.8 per cent due to higher inflation in items such as fish-marine (eight per cent), arhar (four per cent), urad ( two per cent) and fruits and vegetables, moong, mutton, wheat, masoor and condiments and spices (one per cent each).

However, the prices of eggs (two per cent) declined.

The index for ‘non-food articles’ group declined by 0.4 per cent due to lower inflation in raw wool (11 per cent), soyabean (five per cent) and niger seed (one per cent).

Raw silk (four per cent) and raw rubber (one per cent) moved up. The fuel and power index remained unchanged at its previous week’s level of 338.2 points.

The manufactured products group index declined by 0.1 per cent as the index for ‘food products’ group declined by 0.3 per cent due to lower inflation in oil cakes (three per cent) and imported edible oil (one per cent).

However, the prices of cotton seed oil, groundnut oil and sugar (one per cent each) moved up. The index for ‘textiles’ group rose by 0.1 per cent due to higher prices of cotton yarn-cones (four per cent) and cotton yarn-hanks (one per cent).

The prices of synthetic yarn and hessian cloth (four per cent each) and texturised yarn and polyester staple fibre (three per cent each) declined.

The index for ‘paper and paper products’ group declined by 0.2 per cent due to lower prices of newsprint and printing paper white (one per cent each).

The index for ‘basic metals alloys and metal products’ group rose marginally due to higher prices of zinc ingots (three per cent) and steel ingots, zinc and lead ingots (two per cent each).

For the week ended May 30, the final WPI for ‘All Commodities’ stood at 234.4 points compared to 232.6 points and annual rate of inflation based on final index, calculated on point to point basis, stood at 0.90 per cent as compared to the provisional estimate of 0.13 per cent points.

Federer Creates History

Roger Federer created history yesterday when he defeated Andy Roddick in a marathon five sets to surpass Pete Sampras’s total of 14 Grand Slam titles. Federer, from Switzerland, overcame Roddick 5-7, 7-6 (8-6), 7-6 (7-5), 3-6, 16-14 in a dramatic final on Centre Court - a victory which makes him arguably the greatest player in Grand Slam history. After this win everyone will be discussing Federer. But, the man who stole the show was Roddick who till the last game didn’t allow Federer to break his serve. Contrary, Roddick broke a couple of Federar’s serve. He held his nerve till the last serve and he proved that it was not easy for Federer to overcome him and surpass Sampras’s total of 14 Grand Slam titles. The best thing about Roddick was his service. Federer was forced to make more unforced errors. But, when the game started getting tough, Federer got tough (50 aces in a game). Only one time in the whole game, Roddick seemed to be under tremendous mental pressure when Federer won the second set where Roddick was leading.

One man that must be jealous of this would be Nadal who was out due to knee injury. The fight that Nadal would have given Federer in any game was given by Roddick. So, it’s not only a completion for Federer but also for Nadal. With this win, Federer also reclaimed his number one position from Nadal which he held since past few months.

Overall Records Accomplished by Federer:

Wimbledon 2003 — Wimbledon 2009 15 Grand Slam titles
Wimbledon 2003 — Wimbledon 2009 20 Grand Slam finals
Wimbledon 2005 — U.S. Open 2007 10 consecutive Grand Slam finals
Wimbledon 2004 — Wimbledon 2009 21 consecutive Grand Slam semi-finals

There is no escaping high sugar prices

According to the Indian Sugar Mills Association (ISMA), sugar production in India this season (October 2008-September 2009) is expected to fall to 15.5 million tonnes, much below the estimates given by the Agriculture Ministry (16 mt); this would be over 40 per cent decline from the previous year figure which stood at 26.4 million tonnes. Various analysts may differ on this figure; many have over projected the figure assuming that the current high prices would lead to a significant increase in the production. But, as Indian agriculture depends mostly on monsoon it would be too early to say that the figure for the next year would lead to surplus.

It was evident in the month of July-August (2008) that the production would fall this year (crops were badly affected by the failure of monsoon). Yet, the Indian government failed to take corrective measures to ensure that the common man is not affected by the sudden fall in the production figure. It took months for the Indian government to allow the sugar mills to import duty-free raw sugar to sale locally after processing it under the Advance Licenses (AL) agreement. Now, when it is evident that the production has in fact fallen drastically, the government is yet to take a decision on allowing duty-free white sugar (refined) for the domestic consumption.

At present, imports of both raw and white sugar attract 60 percent import duty. But, mills are allowed to import raw sugar at zero duty against advance licenses subject to fulfilling an obligation to re-export one tonne of white (refined) sugar for every 1.05 tonnes of raw sugar imported. With the production figure falling in India, international prices have also moved up. This makes import of even white sugar at zero duty not viable as there are other costs like transportation, packaging, sales tax, etc which takes the overall cost above or around what it is being traded right now in the Indian market.

Many mills in Uttar Pradesh and Maharashtra have already closed their crushing due to unavailability of sugarcane. The others are to follow them in a few weeks. In India, sugarcane is used to produce sugar as well as jaggery. With the shortage of sugarcane, much of the sugarcane this year was diverted towards jaggery as the farmers were getting better pay there. There are reports in the media that the sugar mills are encouraging farmers to go in for cane cultivation by offering them higher prices and incentives. They fear that farmers may divert towards other crops which seems to be attractive at present. Prices of various commodities like rice, maize, oil-seeds, etc have increased in the past few months. At the same time, these crops are shorter duration crops and have quicker returns unlike sugarcane where the farmers have to wait for a few months to realize their payments. Thus, it seems that farmers would be attracted towards other crops. So, it is not easy for the Indian Sugar industry to come out of this mess as production this year may not rise drastically as predicted by many experts.

The consumption in India this season is expected to be around 23 million tonnes which is much higher than what India is estimated to produce (15.5 to 16 million tonnes). The deficit is expected to be met by imports which is not viable at present as the prices are currently ruling high. Therefore, in near future, sugar prices would continue to rule high due to sugarcane shortage and demand from the cold drink and ice-cream makers. Also, it is a marriage season in the North India, so demand would be good throughout this quarter. At, present retail prices are ruling at around Rs.23 to Rs.26 per quintal. So even if imports come into play, prices will still rule around Rs.20 to Rs.22 per quintal which is still higher than the previous year.

Hope of Bihar: Nitish Kumar

I am writing this article because I want to share my experiences from my recent trip to my home state. Though, the trip was small yet, it gave me insights of how people of Bihar now perceive their state should be. Not many people may be aware that before Laloo Prasad Yadav became a disease for the people of Bihar there was yet another person who almost ruined the state. Jagannath Mishra. Laloo Prasad just stepped into the waiting shoe and continued from where the former had left. The only difference was that during the Laloo’s rein, the media became more powerful and people of the state started realizing their mistakes. All hopes were shattered.

Entered: Nitish Kumar! Initially people were skeptical about him but the way his government has performed, people have changed their views. Everywhere developments can be seen. More and more roads are being built. Flyover at necessary points is being constructed. Performances at the primary schools have increased drastically with the appointment of new teachers and surprise checks to see if the teacher hasn’t bunked the classes. Police is trying its best to be more people friendly. Crime rates have been drastically reduced with many hardcore criminals behind the bar. All this was near impossible a few years back.

The one thing that is still awaited is electricity in the rural areas. The government has promised to work on it and there are works being carried out. Generally it takes few years to set up an electricity plant to generate electricity as the central government has to allocate coals for it. In the case of Bihar, the central government is yet to allocate coal blocks for plants that are coming up.

The overall atmosphere is pleasant. People are eagerly waiting for the things to improve more. It will take few more years to bring things back to track. Nitish Kumar is the hope. The general election is just at the door. This will decide the fate of his government as the people in Bihar are known to vote on the basis of their castes; developments come later. But, one shouldn’t be surprised if people vote for Nitish Kumar.

Sugar prices to remain firm

Sugar prices have been continuously rising since past few months. It was predictable. Sugar experts all over the country had warned the government through their analysis about the mismatch of demand and supply; and how the prices would rule firm in the near future. In my earlier blog, I had mentioned how sugar prices would rule firm at the year end. The agriculture minister was wrong from the very beginning. Though, it has allowed sugar mills to import duty-free sugar against advance licenses (AL) on a ‘tonne-to-tonne’ basis, yet the decision came very late. Already, sugar prices are ruling very high.

A few weeks back, the agriculture minister Sharad Pawar had said that the production in India would fall to around 18 million tones from 26 million tonnes a year ago. Yet, the ministry was reluctant to allow imports. The difference in opinion between the agriculture minister and the commerce minister has affected the sugar sector badly. Yet, the decision will bring some cheers to all those involved with the sugar sector. I will explain the reason for saying some cheers.

With this decision, the mills can now import the duty-free sugar and sell it in the domestic market after reprocessing it into white sugar. The export obligation can be made later on from the domestic production, but within two year. This will help bring down the prices by making available more sugar in the market. According to earlier policy, which believed in ‘grain-to-grain’, the mills that were allowed to import raw sugar had an obligation to re-export the same consignment after reprocessing it within two years of the AL being issued. But, the present policy means that the mills can meet the export obligation by processing cane independently.

Though, in the near term prices may cool a bit, yet, in the long run the sugar sector will see many happenings. The prices will climb to a new height unless government comes out with more liberal policies for this sector. The reports coming from various quarters indicate that the production of sugar this year will fall even below the expected 18 million tonnes. It should be noted that last year due to average monsoon in the sugarcane growing areas of Maharashtra, farmers had converted their standing cane for fodder. Poor monsoon led to poor production of fodder; hence, farmers had no other option but, to convert their crop into fodder. So, the farmers then chose to harvest the cane for fodder rather than waiting for the crops to mature to sell it to the sugar mills.

Sugar recovery too this year is expected to fall drastically. Sugar recovery is the percentage of sugar mills extract from every tonne of cane crushed. The average recovery in Uttar Pradesh so far this season has been 8.8 per cent against 9.48 per cent in the same period last year. As a result, the overall production in the state is expected to fall. Lower recovery of sugar is due to cane plant suffering damage from the frost.

Even the area under cultivation was lower last year as the mills were (are) not in a position to pay farmers the State Advised Price (SAP). At the same time, due to poor monsoon, yield too fell to around 32 tonnes a hectare from 58 tonnes a hectare in the year 2007-08. One thing that the government needs to carefully examine is the pricing of cane. What should be the right price for the mills to be able to pay to the farmers? More important, who should dictate the price? It is irony that the Union Government comes out with Statutory Minimum Price (SMP) and the state comes out with their State Advised Price (SAP), usually much higher than the SMP to score brownie points without realizing the implications of such policy. When the prices rule very high and the consumers are in pain, it is the Central Government that has to act and not the state government. So, why should a state be given a right to decide the pricing of cane when it doesn’t come into picture?

Due to poor availability of cane for crushing, most of the mills are expected to shut their crushing by March end. Normally, crushing continues till April. In Maharashtra, out of 145 mills that had started crushing this season, 14 have already closed, compared to one out of 165 mills last year (2007-08). So, the overall picture looks bleak for the sugar sector. In the near term, prices will rule in a range as the government will ensure sufficient supply in the market through free sale quota (FSQ) as this is a election year.

Reducing Your Taxes Through Investments

The Income Tax Act of India says that under section 80C, an individual can reduce his taxable income by Rs.1 lakh by investing in certain investment instruments. Following instruments come under section 80C:

• Provident fund
• National Savings Certificate (NSC)
• Tax Saving Mutual Funds
• Pension Plans
• Fixed Deposits
• Life Insurance policies

The maximum combined investments through all these instruments is one lakh in a year. But, in a hurry to invest people fail to realize that though deductions can be claimed by investing in such instruments, yet they end up paying tax on the income earned through interest or would be liable for capital gains tax on redemption of these schemes. Lets, have a look at these instruments.

1. Equity Linked Savings Schemes (ELSS): These are very high risk instruments. But, as risks are high so is the expected gains. This is also known as tax saving mutual funds. It has a lock in period of three years. Returns are not guaranteed as the amount invested is invested by a mutual fund in diversified stocks in the stock market. So, the return is purely dependent on the type of funds, track records and the performance of the stock market. One can save some money by buying directly from the mutual fund as there is no entry load if applied directly, or else you may end up paying an entry load of around two percent. It is one of the most important instrument as in the long run the stock market will see a rise.

2. Public Provident Fund: The risk involved is low. One can invest from a minimum of Rs.500 to a maximum of Rs.70,000 in a year. Interest rate is 8 per cent per annum compounded while the lock in period is 15 years. It should be noted that the interest earned is tax free, so, the effective yield becomes much higher after adjusting for tax benefit. But, the problem with this scheme is that one has to remember to invest at least an amount of Rs.500 every year for continuous 15 years or the account will become defunct. The other negative thing about this scheme is that the interest rates are fixed by the government from time to time.

3. Life Insurance Policy: Life is full of uncertainties. So, one should have some backup plans. One can invest in an insurance either from a investment point of view or take an insurance to cover your families in case of any wanted incident. From an investment point of view on can choose such policies that offers a guaranteed return on maturity. In other case, one can go for term insurance where your families will get the sum assured in case of death of the person insured. Premiums in insurance can vary from monthly to quarterly or half yearly or even annually. Similarly, a policy can have maturities from five years onwards. Premiums paid and proceeds received from an insurance policy is generally exempt from tax.

4. Fixed Deposits: These are low risk instruments. One should always note that only those fixed deposits which have a maturity period of five years or more are exempt from tax. The interests vary from banks to banks. One can have fixed deposits either in a scheduled bank or any post office. But, income from such fixed deposits are taxable. So, if one takes tax into consideration then, the effective yield will be lower than the interest paid.

5. National Savings Certificate: These are also low risk instruments. It comes in denominations of Rs.100, Rs.500, Rs.1000, Rs.5,000 and Rs,10,000. The forms are available at any post offices. The maturity period is six years while the interest rate is 8 per cent compounded half yearly. Here, too interest is taxable.

6. Government Infrastructure Bonds: The problem with these tax saving bonds are that they are open and available only for a fixed period. The major institutions that offer these bonds are ICICI, IDBI and Rural Electrification Corporation. Term periods can range from five to seven years and interest may vary from 6 to 9 percent per annum.

7. Pension Plans: These are highly risky instruments. Various insurance companies such as LIC, Tata AIG Life, Aviva, ICICI Prudential and Bharti Axa Life offer such pension plans. On maturity, the investor receives one-third of the amount while the remaining 2/3rd goes into an annuity that provides regular income in the form of pension. Only premiums till Rs.10,000 per year are eligible for deductions from total income. Like Unit Linked Insurance Plans (ULIP’s), a substantial amount of the money invested into Pension Plans goes into paying ‘fund charges’ and commissions. Moreover, the annuity received by the insured investor is taxable. Terms can extend from 10 years upwards. Though some return may be guaranteed but, a large part depends on the debt market, share market and inflation. Hence, high risk.

8. Unit Linked Insurance Plan: These are also very risk instruments. This is by far the worst tax saving instrument to invest your money in. A huge amount of commission, charges and entry load is deducted from the amount you have invested. The remainder is invested in a set of funds that invest in the debt and share market in different proportions. In some cases, the commission may be around 50 per cent of the amount invested. Term period is usually five years and above, while returns are not guaranteed as depends mostly upon market performance and how your plan performances.

9. Senior Citizens Saving Scheme: These schemes are for people over the age of 60 years and retired personnel over 55 years. This scheme is available at all public sector banks in the country. Investments have to be made in multiples of Rs.1000 till a maximum of 15 lakhs for a period of five years. The deposit made gets an interest of 9 percent per year from the date of deposit which is computed quarterly. Interest is taxable and is deducted at source.

Taxable Salary

The salary slab for the year 2008-09

Upto Rs.1,50,000 is non taxable. For Women it is Rs.1,80,000 and for senior citizens it is Rs.2,25,000.
Next upto Rs.3,00,000 the tax is 10 per cent, i.e. 10 % for income between Rs.1,50,000 to Rs.3,00,000. For women and senoir citizens it is between Rs.1,80,000 to Rs.3,00,000 and Rs.2,25,000 to Rs.3,00,000 respectively.
For income higher than Rs.3,00,000 and upto Rs.5,00,000 it is 20 per cent.
Anything above that is taxable at the rate of 30 percent.

The first thing that anyone needs is to calculate the gross salary. Salary in India have different components, depending upon the nature of the company and the nature of the field of work. A marketing guy will have different salary components (more of variable) than a guy doing financial work. Some of the important components are HRA (House Rent Allowance), Medical reimbursements, conveyance allowance, etc.

Salary Structure:

1. Basic Rent: This is fully taxable

2. House Rent Allowance (HRA): According to the Income Tax Act, if you are receiving HRA and also paying house rent, in that case you can claim deductions from your gross salary by showing the rent receipts. But, the house should not be in the name of your kids, spouses or your own name.

While calculating your HRA exemptions, you should note that there are two categories for such exemptions- metro cities and non-metro cities. Exemptions in metro should not be more than 50 per cent of your Basic (it can include Dearness Allowance) and in the case of other cities it is 40 per cent.

HRA Calcultation:

1. 50 per cent of your basic salary (40 % per non-metro cities)
2. HRA received
3. Rent paid in excess of 10 per cent of salary.

The minimum of the three will be exempted from your gross salary. Suppose your basic salary is Rs.12000. HRA is Rs.6000 and you pay Rs.7000 as your rent.

HRA as per rules will be:
1.6000 into 12 months (or whatever is the actual) for a metro
2.6000 (actual received) into 12 months (or actual)
4. ((7000-(12000*0.1)) into 12 months (or actual)

The minimum of the three will be exempted.

3. Medical Reimbursements: Upto Rs.15,000 per year is exempted if you provide the bills.

4.Conveyance Allowance: Maximum of Rs.800 i.e. upto Rs.9600 per year is tax free for the conveyance. No bills are required for this amount.

5.Then, there are phone bills, leave travel allowance and employee stock options, on which you can claim deductions.

6. Provident Fund: Look into your salary, there will be Provident Fund component. If your salary includes PF then the whole amount on PF is tax free (Maximum limit is Rs.70,000 in a year). You can deduct the amount while calculating your taxable income.

India and Terrorism

I feel that the approach by the Indian Government after the Mumbai massacre is just a ploy to silence the masses that are not happy by the government's policies in dealing terrorism from across the border. We have been knowing with valid proofs that all the attacks carried out on Indian soil in the name of Jihad or Kashmir, whatever, are fully supported by the institutions in Pakistan. Still, what our government had been doing all these years is to promise to act. It’s a different story that they do not know what their responsibility should be when India's safety is concerned. Just look at the example of NSG commandos. It was formed for national security. But, now it is being to secure all those corrupt politicians who are a liability for this country.

Priyanka Gandhi had hinted after the Mumbai incident what should a government do in such a situation. She had said that she wonders what Indira Gandhi would have done in such situations. The answer is go to the root problem and finish it. But, the question that arises now is that is India capable of attacking Pak Occupied Kashmir (PoK) where most of the terrorists train and dismantle their terror camps? According to me, the answer is both yes and no. Yes, because we have the capabilities (arms) and techniques to do that. No, because our leaders are useless and selfish. I believe Manmohan Singh as an economist or a finance minister is much better than to be Prime Minister. He is the weakest Prime Minister in the Indian history.

We tend to do what others tell us. US is the big brother to guide and interfere in our issues either directly or indirectly. Did US after the twin tower attack made a list of unwanted terrorists and submitted to Afghanistan? Did it beg Afghanistan to take concrete steps to stop terrorism from their soil? NO. They just started dismantling the terror camps by attacking them. So, why is India always found to be begging when they know that the response from the other side will be no. It had been almost over than two decades since we started facing terrorism from the Pakistani soil. Even after India released Masood Azhar after the Kandahar hijack, what did Pakistan do to support our cause? Think, if the hijack was planned in America and the terrorist were released on Indian soil. America would have not bother to attack India if they had not arrested the terrorists. So, what is India waiting for?

The Real Joker

Pakistan is a failed state. No one needs to prove this. The fact that a joker rules it is enough to conclude that the future of Pakistan is in bad hands. After the recent Mumbai attacks by the terrorists from Pakistan, fingers have been pointed at Pakistan, as the lone captured terrorist, Ajmal Amir Kasab, has told the police that he hails from Pakistan and had undergone trainings at Lashkar-e-Tayyeba's camps. If we turn the pages of history we would find that it not a new thing. Pakistan have never supported India's views that terrorists still exists in Pakistan Occupied Kashmir (PoK) and they had been receiving aids from their Intelleigence Services, ISI. 

Earlier, there were leaders in Pakistan that had strong belief in what they were saying, though, most of the times they were wrong. But, the views that are emerging from Pakistan after the Mumbai attack shows that Pakistani President, Asif Ali Zardari is a joker. He should be in a circus rather ruling the disturbed Pakistan. I can now reason why her wife Mrs. Bhutto was more powerful than him during her days of rule in Pakistan. Here is a man who claims to have graduated from a college in London which did not exist. And look at today, he is demanding evidence. Lets have a glance on his views on different days after the Mumbai blasts.  
November 29: He said that he would act swiftly if given any evidence of involvement by Pakistani groups or individuals in the 26/11 attack.
He later acknowledged that 26/11 perpetrators could be “non-state” actors from Pakistan. 

December 3: “We have not been given any tangible proof to say that he is definitely a Pakistani. I very doubt that he (Kasab) is a Pakistani”

On December 7, the British Daily, The Observer reported that it had establish that Kasab came from Faridkot village in Pakistan.

On December 12, Pak's Dawn newspaper traced Kasab's father in Faridkot. 

December 17: He said that there was still no proof that the gunmen who attacked Mumbai came from Pakistan. 

On December 19, former premier of Pakistan Nawaz Sharif had said that Kasab is a Pakistani. “It has been said this individual named Ajmal Kasab hails from Faridkot,” Shariff told Geo News. “I got this checked. The village and its surroundings were cordoned off. His parents are not being allowed to meet anyone.” His father has already identified his son through pictures that had been flashed in the media.  

Earlier, Mr. Zardari had even agreed to send the ISI chief to India to help Indian officials in the probe. But, later he denied of having said that. Moreover, the founder of the group Jaish-e-Mohammed chief who was earlier reported to be under house arrest was a fake attempt to fool the world. Different officials in Pakistan say different things. One day they say Masood Azhar is under house arrest and on the other day they say they don't have any idea of his whereabouts. What message does Pakistan want to convey to India and other world communities? Is is not enough now! Will someone show the door to this joker because even in a circus a joker cannot continue to act beyond his time. He has to make room for others to continue. Its time up Mr. Joker.

Why oil prices should not be cut?

Swaminathan S Anklesaria Aiyar has an article in The Times of India (19th October 2008) citing reasons why the government should avoid reducing petrol and diesel prices.

Government, Inflation and Farmers

The recent rise in inflation figures to a record high had made government and the central bank to come out with several policies (fiscal and monetary) to contain the rising inflation. Several commodities were banned from trading in futures trading like, potato, chana, rubber and soya refined oil. Previously, the government had also banned many other commodities like wheat, turmeric and so on. It had a notion that futures trading in agricultural commodities lead to a rise in prices in the spot market and thus, rise in inflation. Though, the committee set up by the government to study this notion (Abhijit Sen Committee) said that it didn’t found any conclusive evidence to prove that trading in futures market lead to rise in the prices of the commodities in the spot market and vice versa. Still, government continued with the ban of certain commodities.

Often, inflation has been projected as a bad for a growing economy. But, a steady and healthy rise in inflation is a must for the fruits of economic development to reach every quarter of the population. There are large sections of people who could benefit from the rising inflation. But, the government ensures that that does not happen. To appease a certain section of population, it sacrifices the benefits that could be received by other section. Whenever inflation figure moves up, government bans export of several food items like wheat and rice or announces some policies that badly affect farmers. It never allows its farmers to benefit from the rising prices. Indian farmers never think of producing good crop and sell it outside to gain more money. They are never allowed the opportunity to cash in. The government primarily does this to appease the urban population and ensure that in the election the ruling party wins by securing more votes from this population. It is irony that more than 60 or 70 per cent of India stay in villages and most of them are engaged in farming activities.

There is Minimum Support Price (MSP) by which a government says that it will buy their produce at a price that is either at the MSP or at a higher price determined by market forces. But, if we look at the past incidents, we will find that it never allows market participants to cash in. There are several blockades like railways refusing to allow them to transport their stocks and so on. Moreover, the MSP is only for big farmers having large produce owing to large lands. In India, barring a few per cent of farmers, others have relatively very small amount of produce. These farmers either sell their produce to an agent or in a market in nearby city. Apart from this, there are huge taxes on export of certain goods so that the farmers sell it in the domestic market just to keep inflation under control. The recent policies of government in certain agri -sector show how government is anti-farmer. It is high time for the government to change its agri-policies. It should learn from global scenario and allow farmers to produce more and find the market for that produce.

The government has also announced a debt waiver to a tune of Rs.70,000 crore for the farmers. But, people are yet to find out what happened to that waiver. The fact is that farmers hardly get the benefit of such waivers and when they get an opportunity to sell their produce at a higher price, government intervenes in the name of inflation. Others enjoy the real benefit. If we look at the farm loans, it presents a dismal picture. Presently, it is mandatory for the domestic scheduled commercial banks, expect regional rural banks (RRB) to allocate 18 per cent of their total loans and advances as well as non-SLR investments towards agriculture sector. Advances to the agriculture sector can be in the form of direct finance or indirect finance. Indirect finance is limited to a maximum of 25 per cent of the specified 18 per cent, i.e. 4.5 per cent of total loans and advances for agriculture sector. So, banks are not suppose to increase their indirect agriculture lending beyond the maximum 25 per cent of their total agriculture advances as priority sector advance. In reality the picture is different. While the public sector banks more or less remain within the prescribed limit, the private sector banks most often are found to breach the maximum 25 per cent as indirect finance. What this means is that poor farmers who genuinely need funds for their seeds and other agriculture expenses are denied loans. Government needs to ensure that all the scheduled commercial banks in India, both public and private do their needful so that these farmers who are the backbone of our country are able to get loans whenever they require. The huge success of micro-finance institutions in different parts of India proves that genuine farmers need genuine access to credit.

There had been a decline in India’s GDP growth for the first quarter in this fiscal year and the projections from various quarters too, is bad. So, government should make sure that at least agriculture sector is not affected by ensuring that farmers get cheap loans on time, making fruits of development reach them, and allowing farmers to cash in with the rising prices. Rising prices can act as motivational factors for increasing acreage and yields.

Remembering our teachers who showed us the way

“Guru Gobind dono khade kaake lagoon paye,
Balihari guru aapne ke, gobind diyo dikhaye”
-Kabir

“God and teacher are both standing side by side, whom should I look for blessings,
Its the teacher whom I should first go and hug as he made me aware of GOD”

In India we celebrate Teacher’s Day on 5th of September in the memory of Dr.Sarvepalli Radhakrishnan, the second President of India, who was born on this day. In our school days, we used to come to school as usual with gifts for our favorite teachers. A teacher is the first person after the parents who introduces the child to this world. He not only teaches him/her but also shape the destiny of the child. Many unanswered question, lots of confusions that surround the child is answered by the teacher. Teachers are responsible to show us the true path, guide us through our difficult times and make us a good individual. Gone are the days when teachers were looked upon as next to God. What has led to this sudden change?

Today one can see teacher unnecessary reasoning with the students, beating them mercilessly, harassing them and even in some case molesting them. In a very rare incident, teachers from Gujarat were accused of rape a few months ago. The respect that the student had for teachers is vanishing. The students now ridicule teachers; they are beaten up and even killed in many instances. So, are all teachers like that as assumed my majority of students?

As children are regarded as the future of a nation, so are the teachers the builders of the nation. Teachers deserve more than that they are given. Just because a few are bad does not mean all teachers are same. These teachers are responsible for your success. They have guided you when you were in school, they helped you when you were in college. They will help you whenever you call for any help. So, my friends, let us on this teacher’s day try to make something different. Let us forget our egos and give the respect to our teachers that they deserve.

Thank you teacher for helping us
To learn what we need to know
We'll all remember you
No matter where we go.

Thank you teacher for being
So nice and kind and good;
We like you so much, teacher,
We'd stay here if we could!

By Joanna Fuchs

The sorrow of Bihar

Bihar has been known for floods. Every year the government has a daunting task of evacuating people from the flooded area. But, neither the state government nor the central government had ever taken appropriate tasks to tackle this situation. Many lose their families, many their lives. Crops worth many crores are lost. Yet, the government either at the state level or at the central level fails to deliver. So, who is responsible for the floods? Who should be held accountable for lost lives and damaged crops?

The river Kosi is also known as the “Sorrow of Bihar” as it has caused widespread human suffering in the past. This year it has created a record as it picked up an old channel that it had abandoned over a few centuries ago near the border with Nepal and India. More than 25 lakh people have been reported affected as the river broke its embankment at Kusaha in Nepal thus, submerging several districts of Nepal and Bihar (Bihar was worst affected). The worst affected districts of Bihar included Supaul, Araria, Saharasa, Madhepura, Purnia, Kathiar and parts of Khagaria and Bhagalpur.

Prime Minister Manmohan Singh declared Bihar floods as “national calamity” and announced immediate assistance of Rs.1,000 crore for rescue and relief operations and 1.25 lakh tonnes of food grains. Many individuals came forward to help apart from organisations and institutions. This has been a repetitive task every year. Is there no solution to end this? Will people of Bihar have to be dependent on others forever and face floods every year. Why don’t persons who are responsible for horrendous mistake held guilty and punished?

A blame game starts every year after such incidents. According to Bihar Chief Minister Nitish Kumar, 2004 satellite image shows that the Kosi embankment had come under pressure four years ago at the same place where it breached the barrier on August 18 this year. The western channel of the Kosi was blocked and the eastern channel was under pressure. In 2004, Bihar was under RJD rule. So, did Laloo Prasad Yadav miss something during his tenure? The river embankment upkeep was either poor or did not receive the attention it should have from the then RJD government.
The Bihar CM had also urged External Affairs Minister Pranab Mukherjee to take up the matter with Kathmandu, a day before the embankment breached 12.9 km upstream of the Kosi barrage on the Nepalese side. But, Mr. Mukherjee got back to him saying that Nepal was preparing for the swearing-in of Prachanda as Prime Minister and there was no authority who could deliver immediately,

The maintenance of the Kosi embankment is the job of the Ganga Flood Control Commission (GFCC), set up in 1972, under the Ministry of Water Resources at the Centre. Bihar is only the implementing agency because the Kosi water is a subject of the Indo-Nepal treaty. So, can Bihar government blame the Centre for the failure. No. It is the duty of the state government to implement such policies that are beneficial for their public. If the Centre had refused to help, it should have taken the help of media to force the Centre to have a talk with the Nepal government (it is irony that media reported about the Bihar floods when the destruction had been done}. It should be noted that earlier, engineers from Bihar who had gone there to do maintenance work were not allowed to do so by the local Nepalese. At least, the blame game would have not started, as the true facts would have been there in front of everyone.

On the other hand, the Ministry of Water Resources Ganga Flood Control Commission Director Co-ordination S S Chaudhary says that he had written to the engineer-in-chief (North) Water Resource Department of Bihar on April 1, asking about flood protection works on the Kosi. He had also requested a copy of the estimate/scheme duly approved by competent authority together with relevant drawings for the work to be done on river Kosi in Nepal portion on the recommendation of Kosi High-Level Committee (KHLC) for the protection works before the flood of 2008. But, the Commission got no reply from the state government. Moreover, on August 15, the Union Ministry received a report stating that all the embankments in Bihar were safe for Water Resources.

Kosi is not the only sorrow of Bihar. The real culprits for the floods are our politicians. We are the people who often send them to legislative assemblies to represent us by giving them votes. The sorrow of Bihar therefore should be the politicians (and we ourselves) and not the river, which had given livelihood to many generations. Therefore, time has come for some hard decisions. Ministers and bureaucrats should come above politics.. But first, relief and rescue operations should be accorded top priority for two to three months and mega camps with a capacity to accommodate over 10 lakh people needs to be set up in each of the affected districts.

Improving water systems in India

Jaideep Mishra has a very good article in The Economic Times dated 1st September 2008 on improving the water systems in India after the turbulence caused by the river Kosi in Bihar.

The battlefield of Singur

The problem with India developing with such a pace is that these developments are contained within the city. Poverty has been rising with a much faster pace then ever. The recent report by World Bank shows that poverty has increased more. The natural question is what’s government doing? Well, the answer lies in Singur! The government is busy with finalizing various land deals for various corporate to make their investments. In doing so, the government is forgetting one thing that it is taking fertile land from the farmers. Government has an option to give infertile lands or those lands, which are hardly tilled by farmers to these corporate. But, government pays no heed to poor farmers woe.

In an article in The Hindu Business Line, Ranabir Ray Choudhary rightly describes the present situation of Singur. He says that if the Tata pant meant for Nano production comes up, the entire farm culture in the area will die a slow death and if the greenery spreads across the horizon, the State’s industrial prospects will suffer a near fatal blow.

Mr. Choudhary rightly describes the agony of poor farmers by stating that the babus of Kolkata know that their children will get a computer job after college. But, the fathers of Singur do not know what will happen to their sons once they grow up because there is no land to till anymore. They see no future for their sons. Why would then they think about the future of the children of the Kolkata babus?

What will a farmer do with the money he received? Invest somewhere. He may fail. What after that? With land in hand at least he has a fixed capital. So, the solution lies not in giving monetary support to these farmers. Giving back land would not help. It will have a far larger negative affect on the investments not only in West Bengal but also in other states. There is a mixed feeling about the disputed land if it is returned. Many feel that the land may have become non arable. The solution does not lie in returning the land. The solution lies in rehabilitation. But, past experiences of several governments prove that it is not so easy to rehabilitate about several thousand farmers. Now, the situation seems so tensed that other investors who had any future plans to invest in the state are doing a rethink.

Going by the attitude of Mamta Banerjee it seems that she is not interested in talks but raising voices. Had she been ready to talk with the government, the Singur fiasco would not have crossed the danger line. The Telegraph reports that the government of West Bengal had a proposal to build a market complex to rehabilitate farmers who are unwilling to hand over land in Singur. According to the proposal, finalised and approved by the government, half of the 40 acres of the vested land that is part of the Tata Motors project could be utilised for the market. It would house around 1,500 shops, each measuring 436 sqft. With a township expected to come up, the shops could sell grocery and other commodities for household use.

Change is necessary for development. So, the farmers of Singur will have to live with the fact that they have no option but to give their lands to the government, provided government promises to rehabilitate them.

Why Mumbai can’t be Shanghai?

Pollution, encroachments, traffic congestion, unplanned urbanization - that’s amchi Mumbai. Let me ask my readers a very simple question. Can Mumbai be Shanghai? Mumbai has always been compared to other cities in the past. As it is a financial city of India, the city developers need to come out with a better plan to redevelop it into a good city where people can do business as well as reside. But, do we need comparison for that. Why do people compare? They may compare to set a benchmark or a target. If someone has achieved it then, why not us, is the first thought. The other reason may be to not repeat the mistakes that others had faced while achieving those set targets or benchmark.

So, what are the hurdles before Mumbai to be a Shanghai like city? The most important is that India is a democratic country unlike China where even the press is not free to express their views. When India is faced with a problem, our media tries to make aware of the situation not only to our people but also to the whole world. But, Chinese response is to problems is to hide them. SARS and bird flu epidemics are examples. The second is the objective. The object of economic development should be welfare of the people. It shouldn’t be to just build nice looking infrastructure for showing to foreigners.

There are many other issues which need to be taken care of before taking any steps as many previous steps had been a failure. Let us try to examine the Mumbai city. Mumbai is home to more than 15 million people and also to Asia’s largest slum. The city had been ever expanding with no concept of development. So, a few years ago when the government in Maharashtra realised that the Mumbai city is on the brink of collapse it asked McKinsey & Co. to come out with their studies on how to develop Mumbai into a world class city. Then, a year later Prime Minister Manmohan Singh, too echoed that Mumbai should be developed into a better city.

The report had set the estimated cost to be around Rs.2, 00,000 crores. The report focuses on six key areas- economic growth, transportation, housing, other infrastructure, financing and governance. Each area is crucial and also linked with each other area.

Transport and housing are the two crucial areas in terms of transforming the city. Except for railways, transport system is shaky. Railways are the lifeline of Mumbai. The civic authorities had never paid attention towards other transportation. So, when you can travel to a place say in half an hour by a train, the same distance by a bus will take about more than an hour. The traffic on roads is terrifying. Same is the situation in trains in terms of crowd. If we look at New Delhi, there the developers already had a plan for the next ten years and they started building not only metro but also many number of flyovers to ease traffic. At the same time it also widened the road to smoothen the traffic. But, Mumbai waked up late. The city needs mass rapid transport system like metro and many numbers of flyovers and broader roads. By the time metro will be ready, population in Mumbai would have exploded. Roads are hardly expanded. They are just rebuilt with path holes everywhere.

Housing is a problem in Mumbai. There had been many causes of building collapsing. There are many old buildings that either need to be repaired or need to be demolished. But, the corrupt civic authorities let these buildings be there to cause casualties in future. Mumbai is a city of slums. More than half of the city lives in slums. One can find slums at every corner of the city. These slum dwellers have been coddled by political parties because they are a rich source of votes. So, developing these sites become extremely difficult. Everywhere one can find illegal construction and encroachments. The settlement and rehabilitation of such families is a Herculean task as land availability is a problem in Mumbai. The bottom line is that urban planning decisions are not driven by city planners but the builders and developers for profits. Therefore, the cost of doing business in Mumbai is just too high because of extortionist land prices and a deteriorating and over-stretched infrastructure.

Then there is a problem of floods in Mumbai. A mild shower and we hear news of water logging. Drainage system needs a special maintenance. Most of the water logging is due to clog drainage.

The McKinsey report had also suggested a corporate like pattern of government with a CEO and a centralized decision-making structure. Presently, this city is divided between the desires of the State Government and the Municipal Corporation. Each of them has different politics and compulsions. Apart from those two, there is a municipality of authorities in the form of other autonomous bodies such as the Mumbai Metropolitan Region Development Authority (MMRDA).

If we look at corporate governance, it resolves around boards that are accountable to shareholders. Their executives do not have permanent tenure and they are judged by their performance. But, in the government it is reverse. They have a permanent structure of the bureaucracy whose performance does not count and impermanent structure of politicians where consistency does not count. This has resulted in a situation where anything like long-term plan for a city like Mumbai is simply a pipedream as the people who are asked to make decisions worry about the next elections and the people who are assigned the task of implementing any plan await the will of their impermanent bosses. So, there is no way to transform this system of governance.

Financing is not an issue today. The problem is proper planning and implementation. But funds alone can’t do any thing. Mumbai can’t take any more population. Migration of people from other states needs to be checked. This can be done only when the government makes equal efforts to transform other cities also into a world class city. I don’t think we are doing that. Ultimately, after a few years we will see people traveling in metro and mono rails as we them traveling today in local trains. If anyone thinks that this will reduce the burden on other transportation then, they are day dreaming. Mumbai need wider roads but no civic authority has ever thought to expand the roads as these will require demolishing road side structures (their other source of pay). It needs more gardens for people to relax and breathe easy. But lack of space is a constraint. It needs more hospitals but we often hear that patients have been turned off due to unavailability of beds. There are more cars and lesser parking space. The problems are countless.

I am not saying that these cannot be solved. But, by the time they are a new set of problems will be ahead of us to solve. The solution lies not in solving the problems but finding the root cause and treating it. We need to have a long term vision.