Friday, March 23, 2012

Commerce Ministry says special treatment to Indian telecom equipment manufacturers is violation of WTO agreement

As per the report in the Economic Times dated 21-3-2012, the Commerce Ministry wrote a letter on 12-3-2012 to the Secretary, Telecom Department stating that the proposal of the Telecom Department in the draft of the National Telecom Policy 2011 for granting preferential access to the domestic telecom equipment manufacturers is against the WTO (World Trade Organisation) agreement to which India is a signatory.

The draft national telecom policy fixed the target that by the year 2020,  80 per cent of the demand for telecom equipment should be met by the domestic  manufacturers with the value of 65 percent of the equipment added in India. The draft policy has made this proposal for encouraging domestic manufacture of the telecom equipment. At present, 90 percent of the demand for the telecom equipment in India is met by imports. The draft national policy also held the view that encouraging the domestic manufacture of equipment with the technology developed domestically in India is necessary in the interest of national security. This proposal in the draft national telecom policy is based on the recommendation of the TRAI.

But the Commerce Ministry raised the objection to this proposal on the ground that as per thee WTO agreement signed by India, such preferential treatment cannot be given to the domestic equipment manufacturers and no condition should be imposed for procuring the equipment from domestic manufacturers only. The telecom companies procuring thee equipment for the expansion of their network should be left free to procure the equipment from which ever vendor they prefer, whether Indian or foreign.

The European Union, USA and Japan already raised objection to this proposal of the draft national telecom policy for encopuragin domestic manufacture. Recently the US Assistant Tradee Representative (South & Central Asia wrote a letter to the Telecom Department against this preferential treatment to domestic manufacture.

But the point to be noted is that even the draft national telecom policy says that the preferential treatment to the domestic equipment manufacturers is subject to the international commitments of India. So the international commitment is the WTO agreement signed by India banning any preferential treatment to domestic manufacture and the draft national policy commitment is to give preferential treatment to domestic manufacture!

The only way to come out of this problem is to nationalize the telecom services since the WTO agreement is not against the procurement by Government companies from domestic manufacturers. Otherwise India will remain a technologically dependent country in telecom sector inspitee of the tremendous growth in the number of telecom subscribers, with a permanent possibility of threat to its national security due to the imported equipment.

Wednesday, March 21, 2012

Anti-Competitive, pro-monopoly attitude of Telecom Department

What should be the maximum share a telecom services company can have in terms of the number of subscribers? What is the maximum quantity of spectrum which can be allowed for a telecom services company?

The TRAI recommended that the market share can be upto 35 per cent automatically and upto 60 percent with the recommendation of the TRAI, and the maximum spectrum that can be allowed to a company can be 25 per cent of the total spectrum available in a circle. The Telecom Commission took decision in favor of this recommendation.

But the Competition Commission of India opposed this decision of the Telecom Department on the ground that allowing such a big share in the market to any company will be against the principle of allowing sufficient competition and it will lead to monopoly.

This compelled the DoT to delay the implementation of its decision in favor of a maximum cap of 35 to 60 percent share in the market and upto 25 of the spectrum. However, as per the reports in the news papers, the DoT is likely to inform the Cabinet that since the TRAI is there to take care of the issues related to competition in telecom sector, the telecom sector has to be exempted from the purview of the Competetion Commission of India. But the Competition Commission holds the view that even though the TRAI is there to frame policies in telecom sector to encourage competition, it is the Competitive Commission that has the powers to regulate anti-competition and it is the Competitive Commission that has the necessary expertise to analyse the complex issues related to competition, from the financial, economic and legal perspectives.

In any case the TRAI’s recommendation and the decision taken by the DoT on that basis to allow market share upto 35 percent and to allow spectrum share upto 25% to a telecom company is nothing but encouraging monopoly and discouraging competition. The DoT should stop the implementation of its decision for encouraging competition in the telecom sector.

Sunday, March 18, 2012

2G Spectrum auction as per the Supreme Court Judgment-TRAI Consultation Paper dated 7-3-2012-Consequences to be faced by BSNL-What can be the way out

(I am placing below the gist of my study on the TRAI’s consultation paper dated 7-3-2012 on the issue of auction of the spectrum as per the Supreme Court’s judgment. The said auction has a profound implication for BSNL. I think that a stage has arisen wherein those interested in safe guarding the Public Sector must utilize the opportunity to start a serious battle for saving BSNL. For this purpose, ideological struggle as well as class struggle are necessary. The gist of my study on the consultation paper is not a well structured or well written one and still in a raw stage. However in view of the urgency of the point to be made known, I am submitting this study for the information of the readers---p.asokababu)


a)      Mobile services were started in 1994 by the private operators. Initially two operators were allowed in the 4 metros by granting the license on the basis of a “beauty contest”. In the next phase, on the basis of competitive bidding, 14 licenses were issued in private sector. In 1999 the DoT/MTNL were allowed as the 3rd cellular operator in the metros and circles. The licenses of MTNL and BSNL became effective from 29-1-2000. Licenses for the 4th Cellular Operator were issued in 2001 on the basis of competitive bidding and the price of the pan India license was Rs 1658 crore. In 2008 A.Raja issued licenses on the basis of FCFS(First Come First served)  principle without any competitive bidding at the value of the 2001 price. These 122 licenses were cancelled by the Supreme Court terming the FCFS principle as arbitrary. But there are some more licenses issued between 2003 to 2008 on the basis of the same FCFS principle, but they were not cancelled by the Supreme Court since they were not questioned before it. The Supreme Court directed the TRAI to make recommendation for grant of license and allocation of spectrum in 2G band in 22 service areas by auction as was done in case allocation of 3G band and directed the Government to decide for the auction of spectrum and allocation of the licenses on that basis.

b)      The TRAI issued a pre-consultation paper on 3-2-2012 asking for the views of the stake holders. All the telecom companies except MTNL, but including BSNL have responded. Thereafter the TRAI issued the consultation paper on 7-3-2011 seeking the views of the stake holders on it by 21-3-2012.

c)       In its response to the pre-consultation paper, BSNL demanded for allowing trading/leasing/sharing of spectrum, which is normally against the principle to be followed by a PSU. What is the reason and should we oppose it or support it, is the question. To understand this, we have to understand the history of the allocation of the spectrum in various bands to the mobile service companies.
Allocation of Spectrum-quantity and quality

a)      The spectrum for 2G services was allotted in 900 MHz band and 1800 MHz band for GSM technology  and in 800 MHz band for CDMA technology. At first the spectrum for GSM was allotted in 900 MHz band and the earlier licensees including BSNL and MTNL got it. Since the spectrum in 900 MHz band was exhausted for allotment, further allotments to the later licensees was done in 1800 MHz band.

b)      The spectrum for 3G services was allotted in 2.1 GHz band and the BWA spectrum was allotted in 2.3 and 2.5 MHz band. The 3G and BWA are advanced technologies providing for high speed data transfer.

c)       The issue now is about the getting back of the 2G spectrum allotted to the 122 licensees cancelled by the Supreme Court and its auction, keeping in view the constitutional principles of equality, efficiency and public benefit, competition etc. How to do this? That is the question for the consultation. But to answer this question, so many issues have to be taken into consideration.

d)      To observe the principle of equality, it has to be considered in quantity and quality. What is the amount of spectrum available for the auction and who have to be allowed in the auction, how to ensure equality in the quality of the spectrum allotted to all the operators etc.

BSNL’s problem-famine amidst plenty

e)      Quantity wise, BSNL is the topmost company in holding the spectrum. The initial allotment of the spectrum (2G) to a company was 4.4 MHz for GSM. The contracted allotment was for 6.2 MHz. There are companies having the spectrum more than this contracted amount and companies having less than this contracted amount. If the spectrum over and above the contractual spectrum of 6.2 MHz per circle is counted, BSNL is having a total excess spectrum of 63.4 MHz whereas Airtel is having 31.8 MHz excess spectrum and others are having still less excess spectrum.

f)       Quality wise also, BSNL is in an advantageous position along with MTNL and one or two private operators. The spectrum in 900 MHz band originally allotted for 2G services can be now utilized for 3G services also due to technological developments, but the license condition is not permitting it since it was allotted for 2G services only. BSNL is having 6.2 MHz spectrum in almost all circles and similarly MTNL is having 6.2 MHz quantity spectrum in 900 MHz band in each of the Delhi and Mumbai Circles. Only Airtel in several circles and one or two private operators in a few circles are having such a quantity of 900 MHz band spectrum.

g)      Therefore a question has arisen regarding spectrum liberalization i.e., allowing the operators to use the 900 MHz band spectrum also for 3G and other advanced services. The point for the consultation is when this liberalization has to be done? Before the commencement of the auction or after the completion of the auction? But if the liberalization has to be allowed with equality, all the companies should have the 900 MHz band spectrum or any other band equally efficient for providing advanced services. But there is no spare 900 MHz spectrum available to allot to the companies that will now participate in the auction. The alternative is to allot the 700 MHz band spectrum (not yet allotted to any operator) to the new operators barring the existing operators having the 900 MHz spectrum from the auction. But in such case the new operators have to pay a higher amount in the bid for the efficient 700 MHz band spectrum where as the existing operator like BSNL, Airtel etc having 900 MHz spectrum are not paying anything even though the 900 MHz band can be utilized for advanced broad band wireless services after liberalization.

h)      TRAI in its earlier recommendation suggested that the holders of the 900 MHz band spectrum have to pay additional amount since its quality is upgraded. This means the BSNL is having a considerable quantity (6.2 MHz in each circle) of the quality 900 MHz band spectrum and hence has to pay a heavy amount, may be in thousands of crores again, for the spectrum already held by it. Since the Government earlier not allowed it to procure equipment for the expansion of its 2G services and since now it is not having the capital to procure the equipment that may be required for the up gradation of the 900 MHz quality band spectrum it has for providing the advanced services, it has proposed for the trading/leasing/sharing of this spectrum. This reflects the bankruptcy of the Government’s policies in not allowing the BSNL to procure the equipment in time and allowing the precious spectrum allotted to be wasted and the management’s incapacity to make the best use of the quality spectrum available for expanding the services.  Such allowing of the precious natural resource to waste is against the Supreme Court’s judgment directing the State to see that the natural resources are efficiently utilized for the benefit of the people.

i)        Another big question for the consultation is that who should be allowed to participate in the auction for the spectrum now, based on the recommendations to be given by TRAI and decisions to be taken by the DoT on that basis? The operators whose licenses are cancelled are demanding that only they should be allowed to participate in the auction in order to encourage competition. They are demanding that for the start up spectrum of 4.4 MHz/6.2 MHz only they should be allowed since all the existing operators are having this startup/contractual spectrum. They are saying that if the incumbents are allowed, they will have more advantage with established network and hence will bid aggressively and will eliminate them thereby reducing competition. Hence according to them, the incumbent operators should not be allowed in the first stage of the bidding for the initial/startup/contractual spectrum. But the incumbent operators like Airtel, Vodafone etc are arguing that they should be allowed in the auction since more competition in the auction will result in more money to the Government and in case only the cancelled licensees are allowed excluding them, it will result in less demand and more supply for the spectrum thereby resulting in nominal price to the spectrum auctioned. Both are right regarding their point. But the situation is not a welcome situation. To avoid monopoly, competition has to be encouraged and to encourage competition, the participation in the auction has to be restricted to the cancelled licensees. But it will result in loss of revenue to the Government since due to restricted participation, the price of the spectrum would be less. But in case all are to be allowed, it will result in higher price for the spectrum in the auction and hence higher revenue to the Government, but it will result in monopoly and anti-competitive situation resulting in higher tariffs to the subscribers. The result is either the revenue to the exchequer has to be sacrificed or the subscriber has to be taxed.

j)        Real solution

From the above discussion it is clear that the privatization resulted in so many problems regarding the allotment of the precious natural resource spectrum. It is also very clear that the equitable distribution of the spectrum to the private operators with benefit to the exchequer and to the subscriber is not possible due to various reasons. Hence the real solution is that the state should own and utilize the natural resource for the benefit of the people, that is the telecom services sector should be nationalized and effectively maintained so that the benefits of technological evolution are passed over to the subscribers without any controversy. Pending this, the PSUs should be immediately allowed to utilize the spectrum available with them fully, in quantity as well as in quantity, by allowing them to provide advanced services using the 900 MHz spectrum and 3G spectrum and for this purpose they should be allowed to procure the required equipment expeditiously. Such liberalization of the use of spectrum only for the PSUs is not against the Supreme Court’s judgment for equality among the operators since such principle of equality has to be applied between the private operators only and it cannot prevent the state and its instrumentalities from utilizing the natural resource for the public benefit.

Tuesday, March 6, 2012

TRAI Recommends Rs 600 Crore interim subsidy for BSNL’s losses on rural land lines

Vide its letter No.402-26/2011-I&FN dated 5-3-2012 addressed to the DoT Secretary, the TRAI recommended an interim subsidy of Rs 600 crore to BSNL for compensating the losses on its rural landlines installed prior to 1-4-2002.

BSNL requested for a subsidy of Rs 2580 crore per year stating that

(a)    For rural wire-lines, installed before 1-4-2002, the existing cost of operations are high in comparison with revenue accruals;

(b)   It does not make business sense for BSNL to maintain these high cost rural lines at very high net loss unless it is financially compensated by the Government;

(c)    Rural wire-lines are key to broadband adoption in rural areas. Terefore the TRAI is requested to recommend to DoT for provision of continued support to these rural DELs ( Direct Exchange Lines) installed before 1-4-2002.

BSNL also requested that pending final recommendation, the TRAI may consider issuing interim recommendation for an adhoc amount as interim relief.

The TRAI has considered this request for interim relief. Keeping in view the urgency of the matter and considering that it would take some time to issue a consultation paper and that time would also be taken for the consultation process, the Authority recommended that a subsidy of Rs 600 crore be given to BSNL purely as adhoc measure. Keeping in view of the fact that at this stage it may not be possible for the Government to obtain any additional funds for this purpose through the normal budgetary process, the Authority recommended for a subsidy grant of Rs 600 crore from USOF ( Universal Social Obligation Fund). The TRAI has further stated that this amount of Rs 600 crore and the source i.e., the USOF are purely ad hoc arrangement and the final recommendations in this regard will be made by the Authority after due consultation process, i.e after consulting the private telecom operators and other interested parties.

All the mobile services providing companies including the BSNL are contributing 5% of their revenue every year to the USOF. The USOF is intended for providing compensation to the services run by the telecom operators in loss making areas in the interest of the society, as a social obligation. The unutilized fund in the USOF is estimated to reach Rs 36000 crore by 31-3-2013.

For the past three years, from 18-7-2008 to 17-7-2011, BSNL was given a subsidy of Rs 2000 crore per year from USOF to comensate the losses on the rural landlines installed prior to 1-4-2002. In the said recommendation of the TRAI recommending this compensation of Rs 200 crore per year for 3 years, the TRAI also stated that the Central Government, after seeking a recommendation of TRAI, on review, may continue the reimbursement at the same rate or at a lower rate beyond the three years, for a period decided by the Government from time to time.

Therefore in any case, the final recommendation from the TRAI now after completing the consultation process will not be for an amount more than Rs 2000 crore per year.

It is to be noted that earlier the BSNL has been receiving the compensation for the losses on its landlines in the form of ADC (Access Deficit Charge) paid by the private telecom operators as a certain per centage in the revenue on each call originating from their customers to the BSNL land line customers. But due to the pressure from the private telecom operators, this was gradually reduced and was totally abolished with effect from July 2008. It is also to be noted that the license fees paid by BSNL to the Government was reimbursed by the Government to BSNL to compensate for the losses incurred on the rural landlines. The reimbursement was 100 per cent for the years 2001-02 to 2003-04. It was reduced to 2/3rd of the license fee for 2004-05 and 1/3rd in 2005-06 and stopped completely there after.

In the year 2005-06, BSNL received ADC of Rs 3304 crore , and License fee reimbursement of Rs 583 crore. And a reimbursement of Rs 1766 crore from USO fund,that is, a total compensation of Rs 5653 crore. But the License fee reimbursement was totally stopped from 2006-07 and the ADC was stopped completely from July 2008.

While BSNL is incurring an operational expenditure of Rs 702 per month per one rural landline, its revenue is only Rs 58 per line per month. Therefore the loss on rural landlines per year will be around Rs 10000 crore per year. But even the BSNL management has been claimining only Rs 2580 crore only per year as the compensation on the rural landlines. It is very meager compared to the actual loss.

Therefore the real issue for the survival of the BSNL is to get the full compensation for the losses incurred by it on the rural landlines which are maintained as a social obligation and not as a business. The compensation, as per the TRAI, cannot be more than Rs 2000 crore and even for deciding the quantum with in this limit, it  has to consult all the private operators and others who are totally opposing any compensation to BSNL. A determined struggle is required to pressurize the Government to save BSNL by paying adequate compensation to BSNL for the losses incurred by it on the landlines.

Monday, March 5, 2012

The World We Live In Today-3

The total population of the world is  about 700  crores . In this, 92.5 crore people ( 13.1 per cent, or almost 1 in 7)  do not have enough to eat, in the year 2010.The number of hungry people increased from 88 crore in 1970 to 92.5 crore people in 2010. Of this, 57.8 crore are in Asia Pacific region, 23.9 crore are in Sub-Saharan Africa region, 5.3 crore are in Latin America and the Caribbean region, 3.7 crore are in Near East and North Africa, and 1.9 crore are in the developed countries.  

60% of the world’s hungrey are women. 50 per cent of the pregnant women in developing countries lack proper maternal care, resulting in over 3 lakh maternal deaths annually from  Child birth.

Children who are poorly nourished suffer up to 160 days of illness every year. 50 lakh children die every year due to poor nutrition. Every 5 seconds, a child dies from hunger related diseases. 22000 children die each day due to conditions of poverty.32.5 per cent of the children in developing countries (one out of three) suffer from malnutrition, as measured by stunting of the growth. (Recently the Prime Minister Manmohan Singh admitted the fact that 40 per cent of the children in India are undernourished.)

104 crore people in developing countries live on $ 1.25 a day or less. 107 crore people lack access to clean water. 203 crore people suffer from water borne diseases each year. 12 percent of the world’s population uses 85 per cent of its water, and none of the 12 per cent lives in the developing countries.

The reason for the hunger is not that the world is not producing enough food. The world agriculture produces enough food to feed every one. It produces 17 per cent more calories per person today than it did 30 years ago, despite a 70 percent population increase. This is enough to provide every one with atleast 2720 kilocalories per person per day. The problem is that the poor people do not have enough money with them to purchase enough food.
But why poverty is there? Because of the unequal distribution of wealth and the increase in the economic inequalities.
(Sources: The websites,  and

Sunday, March 4, 2012

The World We Live in Today-2

Yesterday (blog entry dated 3-3-2012) we have seen certain facts regarding the increasing economic  inequalities in the world to understand how the wealth is being concentrated with a few people while vast majority of the people are facing poverty. Yesterday’s blog entry may be treated as Part-1 of a series of blog entries giving important details regarding the economic and political trends deciding the way in which the world we live in today is moving on and effecting our lives and thoughts.
Another important feature creating serious problem to the vast majority of the people in the present day world is the growing unemployment. As per the World of Work report published by the UN affiliated International Labour Organisation (ILO) on 30-10-2011, the global economy is on the verge of a new and deeper job recession and the austerity policies (job cuts, pension cuts, cuts in welfare measures etc) being followed by the Governmetns in the developed and developing countries are further making the situation worse.
Out of the potential work force (people in the age capable of doing work) of 323 crores in the world, 20 crore are unemployed. That is, the unemployment rate is 6.2 percent in the world taken as a whole. In countries like Spain and Greece, it is 40 per cent. The unemployment increased after 2007. 4.3 crore people lost their jobs after 2007. To reach the stage of employment that prevailed in 2007, the world needs at least 5 years, upto 2016 or 2017. The special study made by the ILO showed that popular discontent was spreading and the risk of social unrest is higher than last year in one third of the 119 countries studied for preparing the report. As per the Human Development Report 2010, unemployment and poverty worsened sharply . The unemployment in 2010 reached 10 per cent imn US, and the average unemployment in the developed countries in 2010 was 9 per cent.
Even among the employed (about 300 crores in the world), 153 crores are in vulnerable employment ( those working on own account or unpaid family work) working on own account. 63 crore workers (20.7 per cent among all workers in the world) are living with their families at the extreme 1.25 dollar a day ( about Rs 63 per day).
In India, as per the data published by the NSSO(National Sample Survey Organisation), there is a dramatic falling down in the growth rate of employment. During the years 2000 to 2005, the growth rate of employment was 2.7 per cent. But it fell down to a mere 0.8 per cent during 2005-2010, that is almost no growth in the employment. But it is to be noted that during the period 2005-10, the growth rate of Indian economy (GDP growth rate) was 8 per cent. Thus although the Indian economy grew at a rate of 8 per cent per uear during 2005-10, the groth in employment is only 0.8 per cent. This is “jobless growth”. 51 per cent of the workers are “self employed” and another 15.6 per cent are “casual” labour. Thus the vast majority of the workers, almost 87 per cent, are in the unorganised sector getting poverty level wages. 

Saturday, March 3, 2012

The growing economic inequalities between and with in the countries making the capitalist system unsustainable

The present day capitalist system is driven by the international finance capital, which is more interested in gambling and looting than in increasing production and purchasing power of the people. As a result on one hand, the wealth is becoming more and more concentrated with a fewer number of individuals where as the vast majority of the people are becoming poor day by day. This inevitable trend, which is the law of thee capitalist development, is making the international finance driven caopitalist system unsustainable.Even the leaders of the advanced capitalist countries are realising this, though unable to find a solution due to their commitment to the capitalist order. In the World Economic Forum held at Davos(Switzerland) held in January 2011, Mr. Min Zhu, a special advisor at the IMF, stated that “the increase in inequality is the most serious challenge of the world.”
The share of the workers in the total income has been  going on decreasing. During the period 1990 -2008, as per the  Human Development  Report 2010 published by the United Nations. In 65 out of the 110 countries this decline is there. Insome large countries, like United States and India, there is a substantial decline of upto 5 percentage points during this period. This resulted in the average decline of 2 percentage points in the share of the workers in the total income of the world.
The inequality in income is measured by the Gini Coefficient, where 0 represents complete equality where every one has the same income  and 1 represents complete inequality where one person has all the income and every one else has 0 income.  It was observed that since 1988 the inequalities are growing continuously and the Gini Coefficient now reached a serious stage of 0.71.
At present, the richest 2 percent of the world own half of the world’s wealth. The GDP(Gross Domestic Product, the combined income of all people in a country) in the poorest 48 countries is less than the combined wealth of the World’s 3 richest persons. The poorest 40 per cent of the World’s population aaccounts for 5 per cent of the global income, whereas the richest 20 per cent of the world’s population accounts for 75 per cent of world income. The average yearly income of the richest 20 per cent of the people in the world is about 50 times greater than the yearly income of the poorest 20 per cent of the people.
The inequality within the country is also growing in alarming proportions.
 In the USA, the top 1 per cent owned 47 per cent of the wealth in 2007, whereas in 1968 it held only 28 per cent of the wealth.While the income of the top 1 per cent rose by 18 per cent during the past 10 years, the income of the middle calss has fallen down. As of August 2011, America’s top 400 people held a combined $1.53 trillion in personal wealth(one trillion dollars is equal to 100000,00,00,000 or 1,00,000 crores dollars. 1.53 trillion dollars means 1,53,000 crore dollars.At present, one dollar is equal to Rs  49.50. Therefore 1.53 trillion dollars is equal to Rs 75,73,500 crores. Thus the top 400 persons in America own a personal wealth equal to 75,73,500 crores.). Between 1982 and 2011, the total combined fortune of the top 400 persons in America increased by 612 per cent in real terms, after taking inflation into account. Between 1983 and 2009, America’s richest 5 percent grabbed 82 per cent of the nation’s gains in wealth. The nation’s bottom 60 per cent of the house holds actually had less wealth in 2009 than in 2003.
In India, the number of dollar billionaires (having wealth of atleast Rs 5000 crore value) increased from 52 in 2010 to 69 in 2011 and their combined assets equal 30 per cent of the GDP (total income of the country). On the other hand nearly 80 per cent of the Indian population are surviving on less than Rs 20 a day. As per the report in the Times Of India dated 7-12-2011, the inequality in earnings doubled during the last two decades. India’s Gini Coefficient , the measure of inequality, has increased from 0.32 to 0.38 during the lat two decades. The consumption of the top 20 per cent households grew at almost 3 per cent per year in the 2000s compared to 2 per cent in the 1990s, while the consumption of the bottom 20 per cent house holds remained unchanged at 1 per cent per year. Of all the developing countries, India has the highest proportion of informal employment, consisting of a disproportionate number of women, home based workers, street sellers and workers sub contracted by firms in the formal sector.
The increase in inequality indicates the reduced purchasing capacity of the vast majority of the population. When the purchasing power is thus reduced, the production will suffer since the commodities produced will not be sold to the full extent. This is the cause of the crisis in the economy. Therefore to see that there is no crisis in the economy, the income inequalities have to be reduced. But the Governments in America, Europe and India etc which are serving the cruel desires of the international financial capital for looting the economies and people are adopting the policies meant for increasing the inequalities further.
The only way to save the world from the impending severe economic crisis is by organising struggles of the working class and the people for an alternate policy that will reduce the inequalities and increase the purchasing power of the vast majority of the people.

Friday, March 2, 2012

Slow down in the economy--The remedy is more dangerous than the disease

Alarming slowdown of the economic growth

The growth rate of the GDP(Gross Domestic Product) of India slipped to 6.1 per cent in the Q3(third quarter, that is October to December 2011) of 2011-12 against the 8.3 per cent growth rate witnessed in the same period, October-December 2010. This is the 6th time that the growth rate declined, in the last 7 quarters. This proves the seriousness of the economic slowdown. The worrying factor is that the growth rate in manufacturing sector fell down to 0.4 per cent in October-December 2011 against 7.8 per cent during the same period in 2010. Thus there is virtually no growth in the manufacturing sector.  The mining sector witnessed a  drastic slow down with a growth rate of 3.1 per cent in October –December 2011 compared to the same period in 2010. Despite a bumper harvest, said to be due to the effect of a higher growth in 2010, stood at 2.7 percent during October –December 2011 compared to 11 per cent in the same period in 2010. The growth rate of GDP as a whole for the period  April-December 2011 is 6.9 per cent compared to 8.1 percent during the same period in 2010. The growth rate in construction sector fell down to 7.2 per cent in October-December 2011 as compared to the 8.7 per cent growth rate during the same period in 2010. The services sector ( IT, telecom services, tourism, hotels, etc) also witnessed a slow down with a growth rate of 9.9 per cent in October-December 2011 compared to the 11.2 per cent growth during the same period in 2012.  The actual growth rate for 2011-12 could even be lower than the 6.9 per cent predicted by the Government. (In 2010-11, the growth rate was 8.4 per cent).  

The wrong reasons mentioned by Corporates

 The Corporate news papers are mentioning the following   factors as the reasons for this slow down in the economy:
a)      The Reserve Bank increased the interest rates to curtail inflation (Meaning it prevented circulation of more money by increasing interest rates). It acted as a disincentive for investing in industries by taking loan. Thus it reduced the confidence of the investor!

b)      Continued hike in the international oil prices resulted in increasing the cost and reducing the profit and hence acted as a disincentive for the investors

c)       The demand for goods was slack at home and abroad. Due to the slowdown of the economies of the advanced capitalist countries, exports to those countries suffered.

The wrong prescription by the Corporates and their ideologues

Basing their argument on the above said factors, the Corporate media, the economists favoring the Corporates are prescribing the lowering of interest rates by the Reserve Bank so that the Corporates will get bank loans at reduced interest rates and hence invest more in industries and will thus help the growth. The various Associations representing the Corporates like CII(Confederation of Indian Industries), FICCI (Federation Of Indian Chambers Of Commerce and Industries), ASSOCHAM (Associated  Chambers of Commerce and Industry of India) are demanding the Government to implement reforms in a fast manner for increasing the growth of the economy. The reforms they want are reducing the interest rates, allowing more and more FDI, reducing the taxes and duties on the Corporates and allowing them to take over the assets of the PSUs and the natural resources  at throw away prices.  They are also pressurizing the Government to allow more and more space to the Corporates in the agriculture. The sum and substance of these proposals is that the Corporates should be granted more and more incentives to encourage them to produce more.
But these Corporates, their media and the economists supporting them are thinking about the supply side only and forgetting about the demand side. The slow down in the economy is due to the slow down in the demand ultimately. The slow down in the demand is due to the reduced purchasing power available with the vast majority of the population. Without strengthening the demand, what is the use of producing, when what will be produced will not be purchased?

The prescription of the Working Class

Hence against these demands of the Corporates and their pen pushers aimed to loot the economy, the central trade unions have suggested the following measures in their meeting with the Finance Minister Pranab Mukherjee on 16th January 2012:

1.       Stop the price rise of essential commodities by banning the speculation and forward trading in the essential commodities and by strengthening the public distribution system and by reducing the prices of the petroleum products.
2.       Remove the ban on recruitment and provide employment. Link the stimulus package given to the Corporates with the conditions for banning retrenchment, lay offs, closures, wage cuts and job cuts.

3.       Statutory minimum wages be ensured to the crores of the workers in the unorganized sector.

4.       The MNREGA(Mahatma Gandhi Rural Employment Guarantee Act) be extended to urban areas and 200 days employment in a year be ensured along with provision of statutory  minimum wages

5.       The PSUs are having a cash reserve of Rs 6 lakh crores. They should be allowed to utilize these reserves for their expansion and development so that more jobs are created.There should be no disinvestment of PSUs.

6.       The proposed reforms in banking and insurance sector for allowing more and more FDI thereby causing danger to the stability of our financial system should be withdrawn.

7.       Budgetary support should be given to the traditional sectors like jute, textiles, plantations, handloom, coir etc.

8.       The rate of interest on EPF, GPF and savings by ordinary people  etc should be enhanced.All should be ensured pension in their old age.

9.       Income tax exemption for salried persons should be raised to Rsx 3 lakhs per annum and fring benefits like housing, medical and educational facuilities should be exempted from the income tax in totality.

10.   The resources for all these activities be raised by increasing duties on imported power plant equipments, imposing wind fall tax on petroleum products exported from stand alone refineries, increasing the taxes on the rich and affluent sections having the capacity to pay a higher taX. The Corporate service sector, traders, wholesale business, private hospitals and institutions should be brought under  broader and higher tax net. The export duty on iron ore exports should be increased. Effective measures should be taken to unearth the huge accumulation of black money within and outside the country. The huge amount of Rs 3 lakh crores unpaid tax from the Corporates should be collected. The huge tax concessions given to the Corporates should be stopped. The huge amount of unpaid loans should be collected  from the Corporates by the Nationalized Banks. Serrvice Tax should be imposed on ITES, outsourcing sector, educational institutions and health services running on commercial basis.

Similarly it is also necessary to help the peasants by extending loans at reduced interest rates, by investing more for developing irrigation, by ensuring remunerative prices to their products etc.

If these steps favoring the workers, peasants and common people are taken, it will result in increasing their purchasing capacity and hence the demand. If the demand is thus increased, there will be growth in the market and hence the scope for growth in the economy.

The attitude of the Government

But the Government under the pressure of the Indian and foreign big corporate is not going to consider the demands of the trade unions and peasants, except announcing some small concessions here and there in the coming budget and propagate it as a pro-people measure. The main thrust of the budget will be to favor the Corporates at the cost of the people and it will result in further slow down in the economy and consequent hardships to the workers and peasants. The remedy prescribed by the Corporates and their ideologists is more dangerous than the disease.

Struggles against the wrong policies should be intensified to save the economy

The struggles against these pro-corporate policies should be further broadened and strengthened to change these policies and to ensure healthy growth of the economy.

Thursday, March 1, 2012

Government and Private Telecom Operators filed/to file review petition on Supreme Court’s Order cancelling 122 licenses

As per the report of The Hindu Business Line dated 29-2-2012, the Government will file a review petition in the Supreme Court challenging its ruling that auction is the only fair method for allocating natural resources and also questioning the ruling of the Supreme Court against the First Come First Serve principle followed in allotting spectrum. In short the Government is questioning the reason of the Supreme Court for cancelling the 122 licenses!This decision of the Government pleases the private telecom operators who acquired the spectrum at dead cheap rates. The contention of the Government is that the policy making is the jurisdiction of the Government and hence the Supreme Court should not question what ever the policy made by the Government , even if it results in looting of our natural resources by the Indian and foreign big capitalists.
Thus it is clear that the Government wants the continuation of system of allotting the valuable natural resources like minerals, ores, spectrum etc  to the capitalists chosen by it at a throw away price. This is nothing but the Government itself aiding and abetting the looting of our natural resources by the Indian and Foreign big capitalists. Tata Teleservices Limited has already filed a review petition in the Supreme Court against the inclusion of 3 of its licenses( for 3 circles) for the 2G spectrum among the 122 licenses to be cancelled.
The Russian Company Systema JSFC, which is the partner in the telecom company Systema Shyam(MTS) whose 21 licenses(for 21 circles) of 2G were cancelled by the Supreme Court order, issued a notice to the Government of India stating that such cancellation of license is against the obligations of the Government of India under the Bilateral Investment Treaty(BIT) between India and Russia. It threatened to to commence the proceedings against the Government of India under the Conciliation Rules of the UN Commission On International Trade Law, in case the dispute is not settled within 6 months. The DoT is consulting the law ministry regarding this notice issued by Systema.  Sistema Syam(MTS) also plans to file a review petition in the Supreme Court against its judgment.
Other telecom operatorslike Uninor, Lop etc whose licenses are cancelled, may also resort to filing the review petition.
The Indian and Foreign big capitalists looting our natural resources  and the Government aiding it, will fight tooth and nail against this judgment of the Supreme Court since it curtails this  looting. Let us hope that their efforts will become futile and they will get no order from the Supreme Court in their favour.