Posted by: John Elliott | September 9, 2009

Is Patel crying ‘Wolf’ on Air India or is he for real this time?

At last it looks as if the government might be making a genuine effort to sort out the problems of its ailing Air India airline. A rescue plan is being finalised by ministers involving Rs5,000 crore ($1bn-plus) new equity that would be paid in tranches over three years.

“This is a fundamental call (to Air India) that there must be a turnaround or the government is not going to support you – it is not a carte blanche,” Praful Patel, India’s aviation minister, told me a few days ago. The airline must, he said, cut costs and increase revenue or it would not get the rescue package that will probably be paid in tranches over three years.

How many times have we heard that before! Is Patel crying “wolf” or is it for real? I should maybe have written “surely not again”, instead of be “at last”, in the first paragraph because there have been many failed rescue attempts over more than 20 years. I remember Ratan Tata and Rahul Bajaj (who head broadly successful business groups bearing their name), being put in charge of what were then two airlines in the 1980s by an over-optimistic Rajiv Gandhi, then the prime minister.

There have been odd spurts of success since then, but now there are heavy losses – Rs5,000 crore ($1bn-plus) in the year to last March, and a similar figure is expected for this year unless savings are made. Patel has said he’d like to sell the airline, but has been told by the government to keep it flying.

aviation minister Praful Patel and Arvind Jadhav of AI (Business Standard graphic)

aviation minister Praful Patel and Arvind Jadhav of AI (Business Standard graphic)

Air India is notionally India’s national carrier, but its real role for decades has been to line the pockets and make life comfortable for those directly involved in its affairs – from ministers and bureaucrats, who get kickbacks on aircraft and other orders and benefit from freebies and powers of patronage, to top executives, pilots and other staff who often don’t work but do block change.

If the airline also carries non-government passengers, that is a bonus for India, but it is not the real reason that those in charge want it to continue flying.

There has been little progress in the past four years or so, except for a flawed and incomplete merger of the old Indian Airlines national and regional carrier and the international Air India under a new National Aviation Company of India (NACIL).

Patel painted the merger two years ago as the solution for the two airlines’ problems, but total losses since it was implemented have rocketed to Rs7,000 crore. He’s  been aviation minister since 2004, and I’ve been blunt, some might say unkind, about his record in the past on this blog – see Bed and Bhai Runs Indian Aviation and (on ministerial jobs after the recent general election) , so I went to see him last week. I thought I should hear his views about why the merger has been such a failure, and what can be done now.

“The people in the system have worked to defeat the merger – the unions and directors and levels of management,” Patel told me. There were “vested interests in the unions and the management – up to general managers and executive directors”.

Patel is the most urbane and unflappable of India’s ministers, and is also a wealthy businessman. He owns one of India’s biggest bidi and tobacco derivative operations, based in his home state of Maharashtra where he packs political punch alongside Sharad Pawar, a veteran top politician who runs the National Congress Party and is agriculture minister. So he knows how to run things.

He is credited with reforming aviation by creating NACIL’s merged Air India, authorising its purchase of 111 aircraft, allowing foreign airlines massively increased access to Indian airports, rapidly increasing the number of domestic airlines and available seats, and pushing through the privatisation of Delhi and Mumbai airports.

Sadly the record of implementation is not so good. Air India has not really been merged, and it does not now (and some say never did) need 111 new aircraft to replace its ageing fleet, especially when it faces massively increased competition from the foreign airlines that Patel allowed in.

Most airports in the country are nowhere near ready to cope with the increased traffic that has been allowed. The airport privatisations were swamped in tendering controversies and ended up with real estate and land developers grabbing the franchises – and the construction of a glamorous but faulty new domestic terminal in Delhi, parts of whose roof blew off in a gale recently after earlier leaks.

Patel understandably makes the point that airlines all over the world are bleeding so neither Air India, nor he, should not be picked out for special blame. That is partly true, but those airlines that aren’t being forced to close by the world’s economic crisis are taking dramatic steps to cut costs and improve efficiency, whereas till now Air India has done virtually nothing, despite the merger. It is therefore fair to criticise Air India and the government for not implementing change.

For a start, I (like many other people) haven’t understand how Patel could imagine that merging two failures without changing the ownership or top management would achieve anything except compound failure. When I asked Patel about that two years ago at a Delhi conference, he dodged the question and said he was confident that there would be advantages 

He now admits that not enough has been done, and primarily blames the airline’s staff (as the quote above shows). He says that the government has not had the power to make things happen and claims that the government can only give “macro directions” – and that, indeed, is all that seems to have been done, though Patel could have used much more muscle if he had bothered or wanted to.

There have been some economies – cutting back on duplication of routes, manpower and assets, says Patel. But internal opposition has blocked merging the information technology systems and the airline still has two airline codes – IC and AI. Plans to halve a productivity bonus have also been opposed.

A new chairman and managing director was appointed in April last year but, as has happened many times before, he came from the Ministry of Civil Aviation so did not bring a fresh approach. He was removed after a year in the job and a new chairman and managing director, Arvind Jadhav, has been appointed.

Jadhav is also a bureaucrat but not from the aviation ministry, so can take a more independent fresh look at the problems. He is advertising internationally for a chief operating officer, hoping to hire someone who can transform this ailing airline.

But he has a huge task as he showed in an interview in India’s Business World weekly magazine last month, The Time For Talking Is Over, Jadhav where he spelt out the problems – here are some of them:

–   Air India has 32,000 employees compared with 12,000 “in any like-to-like company”.
–   Employees are not conscious of working for a business in crisis.
–   Pilots “sitting at home” are paid “80 hours of flying allowances”.
–   Despite a freeze on recruitment, “we have recruited”.
–  “There is a duplication of every activity and no single chain of command”.
–  “Revenues are 14,000 crore and costs are Rs19,000 crore” (approx $2.9bn and $3.9bn)
–  “We have 22 offline stations where we no longer fly”.
–  “We have an alarming number of aircraft (25) and engines (33) on standby”.
–   For 800 business class seats from Delhi, 750 meals are ordered but there are only 400 travellers – “no-one knows” where the other 350-400 go.

Is there any chance of such an array of problems being sorted? The government’s rescue package is based on six months of survival, with recovery starting in the next nine months, followed by profitability being achieved in the second half of the three years. Monitoring progress will be done not by Patel and his aviation ministry, but by a government committee chaired by the cabinet secretary.

I hope to meet Jadhav soon to discover how he plans to meet these targets – more on this blog then.

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Posted in India, India airlines, India corruption, India general election, India politicians | Tags: , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | September 4, 2009

A chief minister’s death highlights contradictions – and dynastic ambition – in Indian politics

The life – and tragic death in a helicopter crash on September 2 – of Y.S.Rajasekhara Reddy, the Congress Party’s chief minister of Andhra Pradesh, have captured some significant facets of modern political life in India, especially corruption and unbridled dynastic ambition.

YSR, as he was known, was chief minister for five years and worked effectively for the state’s overall development and the rural poor. He gained widespread respect and loyalty, despite allegations of significant family corruption that involved high profile cases such as the scam-ridden Satyam software company.

He was a skilful regional politician. Born a Christian, he knew how to build an unassailable regional power base and combine that with loyalty to the Gandhi dynasty that runs the Congress Party.

Mourners pay respects to YSR (AFP picture)

Mourners pay respects to YSR (AFP picture)

 

Now YSR’s coterie is trying to create a new dynasty in his memory by making his 37-year old son, Y.S.Jaganmohan Reddy,  (pic below) the chief minister.

As many tens of thousands of people gathered before YSR’s Christian funeral and burial on September 4 – with reports of suicides and heart attacks – the state government’s cabinet and other sycophantic supporters openly campaigned for the politically inexperienced Jaganmohan, who became an MP for the first time only five months ago.

A veteran politician has been given the job temporarily by Sonia Gandhi, who heads Congress nationally. But Jaganmohan – known as Y.S.Jagan – is still being projected as the future chief minister – with support from the family’s business friends and their political contacts who stand to gain from a dynastic succession that would continue favours arranged in YSR’s time.

(On a different note, there must have been fears that the unexpected disappearance of YSR’s helicopter could become linked with Naxalite terrorists who are active in the remote forested area where his aircraft disappeared. I wondered two months ago in a post on this blog what the Naxalites must do to rate nationally as a real threat to India’s security.  I suggested that the reason for many years of complacency is that they have never seriously attacked a centre of power – which they could have done if they had got to the helicopter before government rescue teams and had found YSR alive and made him a hostage. The speed and scale of the search for the aircraft suggests that this was a real fear in Delhi.)

ysjagan_photo

There were many reports of deals being done for the personal gain of the family, including contract awards and links with big companies and projects. That was in addition to substantial collection for, and payments to, the Congress Party ahead of the last general and state elections – the side of corruption which is generally tolerated in India because it is accepted that parties need funding.

Jaganmohan built up media, cement and mining (the family’s original business area) companies – including Sakshi TV, Sandur Power, Jagathi Publications, Bharathi Cement and Raghuram Cement – with the help, it is widely acknowledged, of his father.

Yet none of this seems to matter, judging by the huge mass of mourners – from Sonia Gandhi and prime minister Manmohan Singh to the poor – who gathered to pay their last respects.

 

tens of thousands thronged the streets for the funeral procession

tens of thousands thronged the streets for the funeral procession

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Posted in dynasty, India, India corruption, India dynasties, India politicians, Indian states | Tags: , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | August 25, 2009

Big sales and big attendance at India’s Art Summit

Hanuman and Obama (see below)

Hanuman and Obama (see below)

An art fair held in Delhi at the end of last week was, by any measure, a success. The organisers of the India Art Summit logged a total of just over 40,000 visitors and said that sales totalled Rs260m ($5.4m, £3.3m).

Sceptics have inevitably queried the figures, but the visitors’ seem genuine because they were based on a count at the entrance gates.

The sales figures are less reliable because they are based on what the galleries told the organisers, and no doubt include potential sales and a bit of optimism – negotiations are still in progress on many works around Delhi as I write. One contact has suggested the figures may also have been under-stated because of large cash payments that are likely to have been made.

But whatever the eventual sales, there was enough buying activity to indicate that the market for Indian modern art – and maybe contemporary art too – has bottomed out in the past two months and that serious collectors are now buying at prices that are often 30%-40% below the peak levels last year, and sometimes far more.

Friends tell me that serious collectors buying at the fair included Preeti Ambani of Tina Ambani’s Harmony Art Foundation (who paid a record $2.5m for an F.N.Souza oil at a Christie’s London auction in June last year at the peak of the market); Malvinder Singh, who must be flush with cash after selling his family’s Ranbaxy pharma company to Daiichi of Japan and owns the Religare Arts Initiative and gallery (and is in the news today buying ten hospitals); and Kiran Nadar, wife of Shiv Nadar who controls the HCL IT company.

Anish Kapoor sculptures (see below)

Anish Kapoor sculptures (see below)

I also saw Rajeev Sethi, Delhi’s arts doyen who runs the Asian Heritage Foundation, and Suhel Seth, an irrepressible marketing personality who’s on the board of British Airways, clinching deals.

For an entrance fee of Rs200, people had direct access to the stands of 55 art galleries, including 17 abroad – from the US, UK, Germany and elsewhere including even Latvia and the Philippines. And there was more than just the galleries. There were shows by young artists and children, and more exclusive seminars.

“There are good vibes, things are happening,” said Anders Peterson of ArtTactic, a London based analysis firm, who believes the market has bottomed out.

At the seminars, the successes as well as the fault lines of the Indian art market were discussed. Why is it for example that India has so many art investment funds – more than 12, and probably more than any other country, suggested Maithili Parekh of Sotheby’s. The Indian stock market watchdog SEBI is supposed to regulate them, but has done little, despite questionable links between funds and some galleries and auctioneers.

Amrita Jhaveri, an art consultant, talked about such conflicts of interest, saying “it’s an extremely cosy world based more on co-operation than competition”.

Anupam Poddar trimmedOther speakers included big collectors such as Anupam Poddar (left) of the Devi Art Foundation,  gallery owners such as Peter Nagy of Nature Morte, and top artists such as Subodh Gupta, all of whom who were accessible walking round the exhibition halls.

Galleries are shy about revealing exactly what they had sold, but everyone I spoke to was happy with the outcome, and several from abroad said it far exceeded their limited expectations.

London’s Lisson Gallery was rumoured to have reported sales of £1m (nearly Rs80m), which included one, or maybe two, works thought to be priced at £400,000-500,000, by Anish Kapoor, an Indian-born British sculptor who has an exhibition opening in September at London’s Royal Academy (pic with two of his works above).

Beck & Eggeling of Düsseldorf had a striking oil on canvas (below – and trimmed upside down above right) by Viveek Sharma of Barack Obama standing on his head on a chess board, supported by the Hindu monkey god Hanuman – presumably a metaphor for Obama taking on the problems of the world with the help of Hanuman, who once carried a mountain on his shoulders to help save the life of his master’s brother. The gallery sold that work for approaching $15,000 (Rs730,000) and also a small Picasso drawing for $25,000.

'Deep' by Vivek Sharma - Beck & Eggeling

‘Deep’ by Vivek Sharma – Beck & Eggeling

Among Indian galleries, the Delhi Art Gallery said it sold 15 works priced between Rs50,000 and Rs50 lakhs ($1,030–$103,000) including works by leading artists such as Souza, S.H.Raza. and Sohan Qadri, while the Dhoomimal Gallery sold works by H.A.Gade and Satish Gujral.

There were, of course, no M.F.Husain works available – they were excluded from the show for fear of vandalism.

The event was organised by Mumbai-based Hanmer MS&L Communications, which has no connections with the incestuous art world (that must be a good thing!).

It was a success beyond the figures and sales because it opened up India’s art market to people – young as well as old – who would be reluctant to walk into the forbidding arena of many art galleries. Many of them will be future buyers.

The exhibition halls were packed, especially on the last day, and looked, said Ashish Anand of the Delhi Art Gallery, “more like a trade fair’s public day than an art event”.

'Holy Bread' by Anita Arbidane - Ivonna Veiherte Art Gallery, Latvia

‘Holy Bread’ by Anita Arbidane – Ivonna Veiherte Art Gallery, Latvia

 For more art posts, click on Indian modern art below or in the Subjects (categories) drop-down box in column on the right

 

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Posted in Ambanis, Anil Ambani, Contemporary art, India, Indian contemporary art, Indian modern art | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | August 19, 2009

Husain paints in London as fanatics block his works at India’s art fair

      IMG_4162 trimmed              

India’s first large-scale international art fair opened today in New Delhi, but works by M.F.Husain, the country leading and oldest modern artist, are not on show because of fears that they might be attacked by right wing Hindu fanatics.

The fair organisers cannot afford the insurance, and the Indian government has failed to provide special police protection.

I talked to Husain, who is 94 next month, about this recently in London, where he lives and paints in a Mayfair flat every summer (above). In winter he is based at his other home in Dubai. He stays away from India because of court cases against him, and because of the risk that he and his works would be attacked.

Not having his works at the four-day India Art Summit only gives publicity to his critics, he says, adding that he also benefits because the publicity leads to more people seeking out his works than might otherwise do so: “Picasso said any adverse comment is better for an artist than praise because people become converts”.

Husain's BharatMataHe says that there are some 900 cases or complaints in India against his works, mostly alleging that he has offended the Hindu religion with nude depictions of goddesses, or of offending public decency and Indian nationhood.

“They have said I am traitor because I painted the map of India in the shape of a woman,” he says (picture left).

He is just one of several artists and writers whose work has been criticised and attacked on many occasions in recent years by Hindu extremists seeking publicity, with the encouragement from hard-line wings of the Hindu-nationalist Bharatiya Janata Party (BJP).  Exhibitions of his work have been attacked and closed down in many parts of India, making them high risk.

“It’s purely party political – not a single religious head has spoken a word against me,” says Husain. “They are extremists who want an agenda”.

He says he has been used to opposition and criticism from the time when he and other members of the 1940’s Progressives group such as F.N.Souza and Tyeb Mehta “were not allowed to meet students because it was said we were a foreign influence”. The critics “wanted us to paint like the Bengal school” instead of breaking from tradition into new styles.

IMG_4158 trimmedThere are six main legal cases against him. Three of them, alleging the India map painting is obscene, were dismissed 15 months ago by the Delhi High Court in a landmark judgement that was reinforced last September when the Supreme Court refused to hear an appeal. Three more cases are pending, one of which is being slowly investigated by the police.

The Delhi judge noted that nudity is part of contemporary art and plays a significant role in India’s rich cultural heritage. Husain picks up on that point and says that the buxom 9th to 12 century Chola bronzes from south India “formed the base for my depiction of the human form”.

The Delhi judge also significantly said that India should resist conservative extremists misusing the law to harass artists, and called on the government to legislate against this. Unsurprisingly, the government has done nothing, just as it was apparently not prepared to help when the Art Summit went to the Home Ministry and to Sheila Dikshit, the Delhi chief minister.

Neha Kirpal, the organiser, says was told by the Home Ministry’s security chief that it was not possible to provide special police protection for Husain works – it was the police’s job to reduce risk, not increase it with the painting on show. “We were shunted around everywhere and received no help”, said Kirpal. Today however P. Chidambaram, the home minister, told a delegation of artists that he had not ;personally been askwed for help.

This lack of government action goes to the core of the problem. Indian politicians do not dare to risk offending extremists for fear of reprisals, and the government has other more pressing priorities. Husain had hoped that the new Indian government, elected earlier this year, would do something to help, but that has not happened. “I’ve had tremendous support from the artists’ community but nothing from the government,” he says.
 
He is currently painting three series of works, some of them as large as 12ft x 4ft. A history of “Indian civilisation from the Maharabharata to Manmohan Singh” will, says Husain, take two years to complete. Reports suggest – though Husain refuses to confirm it – that this is being sponsored by Lakshmi Mittal, the Indian-born London-based steel tycoon, who will also build a new museum for the collection. Next are paintings on the Arab civilisation commissioned by the ruling family of Qatar for a new museum in Doha, and then there is a history of Indian cinema.

That’s a massive programme for any artist, but Husain works fast, sketching a new work in a few hours and colouring equally quickly – completing, he says, a 6ft x 4ft painting in less than a day, “though not every day”. Explaining the speed, he says that “after 50 or 60 years experience, my vision is there and I know what I want to paint” .

He would no doubt like to return to India, but not with the risk of attacks and criticisms on his work. “At this age, I’m happy and I’m working. What I plan to do is not possible in India….If I was 40, I’d have fought, but at my age I have an urge to create, so let them do what they like.”

       IMG_4168

 

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Posted in Contemporary art, Hindu extremists, India general election, Indian contemporary art, Indian modern art | Tags: , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | August 13, 2009

China aims to block India’s place in the sun

It’s probably the tip of the iceberg of China’s ambitions to thwart India’s emergence as a significant economic and maybe diplomatic and military power. I’m referring to what might appear to some to be a crazy article on a Chinese strategic issues website, which claims that China could “dismember the so-called ‘Indian Union’ with one little move”. 

The writer has argued that India’s national unity is weak and that China could exploit this by supporting separatist forces, such as those active in India’s north-east state of Assam, and split the country into 20 or 30 sovereign states.

“There cannot be two suns in the sky. China and India cannot really deal with each other harmoniously,” said the article. That almost certainly reflects Beijing thinking, even though the founder of the website has claimed the anonymous writer has no known government links.

The article was posted last Saturday and was publicised in India yesterday, prompting the Indian foreign ministry to say it appeared to be “an expression of individual opinion and does not accord with the officially stated position of China on India-China relations conveyed to us on several occasions”. But what else could India say – especially since the article coincided with apparently cordial talks between the two countries on their border that has been disputed since China defeated India in a brief 1962 Himalayan war.

It is not unusual for China to fly such extreme kites. Philip Bowring of the Hong Kong-based Asia Sentinel website pointed out in a New York Times article two days ago that the arrest last week of two Rio Tinto executives in Beijing for alleged theft and corruption followed an internet article written by an official of China’s National Administration for the Protection of State Secrets, which accused Rio of  commercial “spying” that had cost the nation $100bn in higher iron ore prices – an accusation says Bowring that “does not stand up to the most casual scrutiny of trade data”. Bowring then points out that “although the article is no longer on the website, its claims have not been corrected and its imprint on Chinese minds will not disappear”.

The imprint of the India internet article will also not disappear because, whatever the two countries may say officially, it sums up what has been happening for years.

As James Lamont and Amy Kazmin explained a month ago in an excellent FT round-up of the two countries’ tortuous relations, China has been encircling India by developing influence and outposts in Pakistan, Nepal, Myanmar, and Sri Lanka, and wants to usurp India’s major role in controlling the Indian Ocean and Arabian Sea.

Pakistan, which China has armed and helped become a nuclear power, has been destabilising India first in Punjab (in the 1980s) and then in Kashmir. China has also for years been encouraging separatist forces in India’s north-eastern states, including Assam, and will no doubt use its growing clout in Myanmar – and Bangladesh – to increase those activities. In the future it could perhaps use its growing influence in Sri Lanka – where it is developing a naval base and advised the government in the recent defeat of the Tamil Tiger separatists – to cause unrest among linked Tamil communities in southern India.

It has also strengthened its border claims – for example by opposing a $3bn Asian Development Bank aid project in Arunachal Pradesh, an Indian border state that China claims as “south Tibet”. And it tried to block international approval of the recent India-US nuclear deal with the US.

This is of course a dangerous game and sometimes India has to respond – recently for example by moving fighter jets to the China border and, of course, by meddling in other countries, as a comment by Abhyaan (below) explains.

I have heard a former senior Indian bureaucrat argue privately that China’s basic – and permanent – aim is to force India to focus on domestic issues and thus thwart it becoming a future international rival.

China, according to this view – which is surely correct  – is determined to be the world’s sole superpower after America, and does not want that status to be upset by a strong and democratic India backed by the US and Europe. Its tactics have become more insistent in the past two years as it has become irritated by India’s growing links with the US, culminating in the nuclear deal.

Everything that China does in relation to India therefore has to be seen through that prism. India will not fragment into 20 or 30 pieces – it is far too unified for that – but there is no prospect of permanent peace and co-operation between the two countries because, as the internet writer has said, “there cannot be two suns in the sky”.

This post is also on the FT’s http://www.ft.com/cms/s/0/26b241ba-8809-11de-82e4-00144feabdc0,dwp_uuid=a6dfcf08-9c79-11da-8762-0000779e2340.html

and Hong Kong-based http://www.asiasentinel.com/index.php?option=com_content&task=view&id=2006&Itemid=422 – see comments below

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Posted in India, India China, India China war, India defence, India security, Kashmir, Pakistan, Sri Lanka, Tamil Nadu | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | August 2, 2009

Britain agonises about the futility of its war in Afghanistan

When I was in Britain in June, the country was consumed with a frenzy over how members of parliament had fiddled and fixed their expenses claims, sometimes illegally. I have been back again over the past month and again the country is deep in agonised debate, but this time it is over a much more serious issue – whether British forces should be engaged in a war against the Taliban in Afghanistan and, if not, whether and how quickly they can get out.

Britain’s basic problem is that its government, which has ruled for too long, is coasting erratically towards a general election due next year and is riven with internal dissension and personal rivalries. Prime minister Gordon Brown has hordes of critics and enemies and very few supporters, and he lacks the authority or charisma to assert any form of leadership on major issues (apart from the economic crisis where he performed well last year).

Afghanistan dominates the front pages of newspapers and tv screens. Helmand, a province that few in Britain would even have heard of just a few weeks ago, is on everyone lips, and just about everyone I have met has a view – predominantly that Britain should not have gone to Afghanistan in the first place, that the war is unwinnable because there is no definable victory target, that the government doesn’t know what it is doing, that troops are under-staffed and under-equipped, and that it is criminal that British soldiers should die there to no purpose.

The government has failed to lead the debate or events. Worry about a dire lack of helicopters triggered a war of words a few days ago between the army chief and government spokesmen. The government went to court this past week to cut financial compensation awarded to wounded soldiers just as dead soldiers’ coffins were flown home to emotional receptions. And London police were even banned from wearing badges supporting the British troops.

Nearly 200 British troops have been killed (more than in Iraq), and many many more have been injured since the western invasion of Afghanistan began after the 9/11 attacks on New York and Washington.

Gordon Brown argued a few days ago that the “tragic human cost” had not been “in vain”, and said how important it was to try to make the country ready for a general election later this month. He was speaking after a five-week military victory at Panther’s Claw in Helmand, where Taliban insurgents had been killed or driven away.

He claimed land had been made “secure for about 100,000 people”, that the Taliban had been “pushed back”, and that a start had been made on breaking the “chain of terror that links the mountains of Afghanistan and Pakistan to the streets of Britain”. He and others said that Panther’s Claw had housed camps training future terrorists as well as heroin poppy fields, and that, this time, the army would stay and hold on to the area, instead of moving on elsewhere, as they had in the past, allowing the Taliban to return.

But what Brown did not say is that Panther’s Claw is a tiny tiny part of a country and will no doubt be infiltrated again by the Taliban, and that (as one army commander admitted), the plan to hold on to the area means there will not be enough troops to mount other attacks.

Nor, of course, did Brown say that the Taliban has simply been driven elsewhere where fresh training camps will quickly be set up, and that flattening a few poppy fields scarcely has any impact on the drug trade. More importantly, killing Taliban fighters and terrorists does not reduce the number in the “chain of terror” that wants to attack Britain – it increases it.

It is scarcely surprising therefore that a poll in the Independent newspaper this week showed a majority (58%) believed that the war is unwinnable, with 52% saying troops should pull out immediately. By nearly two-to-one, the view was that the Taliban cannot be defeated militarily while 58% said the war was “unwinnable”. That compares with a poll in The Guardian earlier in July that had 42% wanting immediate withdrawal.

The tragedy is that the military campaign is futile. Afghanistan is a mountainous country that has seen off British and Russian invaders in the past, and it cannot be conquered militarily and returned to some form of stable government. It is splintered into too many ethnic and religious groups, whose interests are complicated by rival political factions, war lords and endemic corruption, and by the involvement of Pakistan, for such a simple solution. And the more Britain and the US fight the Taliban, the more they encourage young Muslims elsewhere to joint extremists groups and become potential terrorists.

Western politicians are now talking about building links with the “moderate Taliban” and of increasing development aid. That of course is laudable but it will not end this war that should never have started.

Eventually, Britain will have to withdraw, and America too.  But not before many more young soldiers lose their lives.

And the lessons? Attacking Osama bin Laden’s supposed Afghanistan bases after 9/11 was a logical act of revenge for America, but turning it into an eight-year war has been futile. The primary focus for attacking terrorism should be in Britain, and elsewhere in the west, so as  to reduce the risk of Muslim youth becoming disenchanted extremists and terrorists.

This post is also on the FT website at http://www.ft.com/cms/s/0/7b3658a4-80b9-11de-92e7-00144feabdc0,dwp_uuid=a6dfcf08-9c79-11da-8762-0000779e2340.html

and on Hong Kong-based http://www.asiasentinel.com/index.php?option=com_content&task=view&id=1993&Itemid=212 where there are more comments in addition to those below

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Posted in India, Taliban, terrorism | Tags: , , , , , , , , , , , , , ,

Posted by: John Elliott | August 1, 2009

A Year of Elephant Rides – with over 50,000 hits

A year ago today my Riding the Elephant blog began its independent existence here after 15 months on Fortune magazine’s website.

Since then, there have been about 53,000 hits, or visits as they are called in web jargon, some on the old Fortune website posts that are now here on this blog – so thank you all for finding Elephant and for coming back.

I’ve written a total of nearly 80 posts on subjects ranging from India’s politics and Pakistan’s troubles to the Indian modem art market, the Jaipur literary festival, and Tata’s Nano car.

The consistently most popular has been a piece I wrote for Fortune in June 2008 on Tina Ambani, wife of Anil who runs one of India’s two warring Reliance business groups, spending a record $2.5m on a painting by F.N.Souza at a Christie’s auction in London.

Whether it is the Ambani or Souza name that pulls in readers every few days I am not sure, but the fact that an article on Mukesh Ambani, the elder of the two squabbling brothers, building an outrageously expensive multi-story home in Mumbai is the third most popular might provide the answer.

Second comes a piece on Jawaharlal Nehru period photographs. The pull there I guess is my mischievous headline – Nehru was lost for years in a trunk, which wasn’t quite true – find out why by clicking here.

The fourth is a promotional piece I wrote on an anthology of foreign correspondent articles that Penguin India published last year to coincide with the Delhi-based Foreign Correspondents’ Club’s 50th anniversary – (with a link to Penguin India for local purchases, or you can buy it from outside India).

After those four, the most popular have been a range of pieces that reflect the past very active year on the Indian subcontinent. While Pakistan has sunk into an ever deeper crisis, and the Sri Lankan government has defeated (for now, at least) the Tamil Tiger guerrillas, terrorist attacks have increased.

India has elected a new government that looks as if it is going to make a better job of running the country than the past stable but deeply divided coalition. The Nehru-Gandhi dynasty has emerged stronger from the election, and the country has been hit far less seriously than many others by the international financial crisis. The corrupt and bullying tactics of the country’s main communist party, the CPI(M), have at last led to it losing its 30-year-plus grip on the state of West Bengal and national politics.

Elsewhere, corruption rampages on in many areas of Indian life – mentioned explicitly or implicitly in stories here on subjects such as Satyam computers, highway construction, telecoms, aviation and foreign direct investment.

I was on holiday, mainly in the UK, for most of July and will not be back in India till August 7, so have not been writing as much as usual. But I’ll be back more frequently soon, with something almost immediately on Britain and Afghanistan, and then other planned pieces on privatisation and how some of the new ministers are faring.

So do keep reading – and please comment more. The main thing missing over the past year is a regular flow of comments!

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Posted in dynasty, India, India general election, India politics, Indian modern art, Mukesh Ambani, Nehru-Gandhi dynasty, West Bengal | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | July 15, 2009

What must Naxalites do to rate as a real threat to India’s security?

I was planning to write a post last month (but was diverted by other subjects) about how the Indian government, led by home minister Palaniappan Chidambaram, seemed at last to be getting to grips with the spread of the country’s violent Maoist-inspired Naxalite rebellion.

Tough action was then being taken at Lalgarh, a tribal region just 100 miles from Kolkata (Calcutta), where there was a long siege till the rebels were driven out of the area by para-military forces.

In the past few days, however, there have been reports that show the task of controlling the Naxalite insurgency has scarcely begun. First there was news that the rebels had predictably drifted away from Lalgarh into nearby forest areas, belying reports that they had been defeated.

india_naxal_affected_districts_mapsvg_editedThen, last weekend, more than 30 police were killed in a remote Naxal-held part of the state of Chhattisgarh. First two police were killed, then many more when a truck carrying reinforcements was blown up by a landmine.

It sounds like an all too familiar story – terrorists moving on to new areas when under attack, as the Taliban have done recently from Pakistan’s Swat area, and security forces travelling by road when they should be in helicopters, which is why eight British soldiers were killed at the end of last week (and many more earlier) in Afghanistan.

The left-wing extremism challenge to India’s national security has previously aroused little real concern in the country – and scant notice overseas – despite the fact that there is some Naxalite activity  in more than 200 of India’s 600 administrative districts and that about half that number are seriously affected.

The rebels control large swathes of remote and often densely forested areas – especially where tribal people risk losing land to development projects – that stretch (see map) from the Nepal border down through West Bengal, Jharkhand, Chhattisgarh, Orissa and Andhra Pradesh.

This frequently threatens land communications between the west and eastern sides of the country because the Naxalites landmine roads and blow up railway tracks.

Last year they accounted for over 900 deaths. Prime minister Manmohan Singh dubbed them the “single biggest internal security challenge ever faced” by India – but few people seemed actively concerned.

I have always assumed that the reason for the complacency – both in India and terrorist-sensitive countries such as the US and UK – is that the Naxalites have never seriously attacked a centre of power.

There have been (unsuccessful) assassination attempts on state chief ministers, but they have not killed a prime minister, nor a national leader, as both Khalistani Sikhs and Tamil Tigers did in the 1980s and 1990s, nor have they mounted large-scale terror attacks on the capital of Delhi and the commercial capital of Mumbai as Islamic terrorists have in recent years.

The Naxalite areas are also a long way from Delhi, and from the focus of the country’s national politicians, who are primarily preoccupied with Kashmir and Pakistan to the north and west, and with the politics of western and southern states.

“Congress and the BJP devote little attention east of Bihar because the eastern and north-eastern states have few votes, or mostly vote for regional parties, so the Naxalite problem is not receiving the political attention it deserves from the cabinet,” says Ravi Visvesvaraya Prasad, who heads C4ISRT Group, a Delhi-based defence and security think tank.

And even when, as is happening now, the central government does try to take action, it is hampered by the fact that security is a state government subject, so cannot be directly tackled nationally by Delhi.

The problem is becoming more serious because the Naxalites no longer just focussed on remote jungle areas, but are threatening economic development and maybe even urban centres. They played a significant role two years ago in the opposition to a now-abandoned special economic zone at Nandigram in West Bengal, where they are exploiting a vacuum left by the CPI(M)-led Left Front that has ruled the state for over 30 years but lost seats in the recent general election.

It was clear when I walked around the Barrackpur constituency on the outskirts of Kolkata during the election campaign that there was massive resentment about the CPI(M)’s failure to develop the area and protect agricultural land, and about the way it manipulated elections to stay in power.

“We will have an armed movement going in Calcutta by 2011, that’s for sure,” Maoist leader Kishenji claimed in a BBC interview earlier this month.  “Oppression by the establishment Left and its police” at Lalgarh had given the Naxalites their first major base in West Bengal since the mid-1970s. “We have struck a place which is the weakest spot of the state and which automatically makes it our stronghold (and our) first major guerrilla zone,” Kishenji added. Though the area was freed by security forces after Kishenji made these remarks, the Naxalites are still active – they ransacked a CPI(M) leader’s house last weekend.

The insurgency started as a peasant revolt in West Bengal 40 years ago. It is significant that they are now back where they began – thanks largely to CPI(M) misrule. Resentment is growing both over the state government’s attempt to industrialise agricultural land that it had originally allocated to the rural poor under much-praised land reform – as happened both at Nandigram and Tata’s abandoned Nano car factory at Singur – and over the repressive and violent way in which the CPI(M)’s cadres maintain power.

Two years ago, India’s then ineffectual home minister described the Naxalite problem as “under control”. Chidambaram fortunately has dumped that approach and recognises that a mixture of tough police and para-military action needs to be accompanied by constructive economic development.

But the problem will not be solved till it is recognised as a major security threat – one that could be exploited by India’s less-than-friendly neighbours Pakistan and China.

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Posted in Andhra Pradesh, India, India China, India Pakistan, India security, India terrorism, Naxalite, West Bengal | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | July 8, 2009

India’s shaky FDI rules need urgent clarification after Budget silence

(July 15: I have made some minor amendments in italics below following comments sent by a member of a Delhi law firm)

India’s foreign direct investment (FDI) rules are in a muddle that no one in the government currently seems able, or willing, to try to solve. No minister or bureaucrat has publicly acknowledged this, though it was indirectly confirmed on Monday when finance minister Pranab Mukherjee failed even to utter the words “foreign direct investment” or the acronym FDI in his budget speech – surely the first time this has happened since the main thrust of economic reforms began in 1991.

The muddle stems from complex and bewildering changes that were announced in three “press notes” by the industry ministry in February,  just before the recent general election campaign began.

The story illustrates the murky interface between government and big business in a country which still has the trappings of a semi-controlled – and business-manipulated – economy, 18 years after 1991.

Opposed by many in the finance ministry – including former finance minister Palaniappan Chidambaram – and by the Reserve Bank of India (RBI), the changes were pushed through by Kamal Nath, then the minister for commerce and industry, and were endorsed by Mukherjee when he became finance minister in December. Nath’s aim may have been partly to honour personal commitments he had made on relaxing FDI bans and limits in areas such as retail, which he had not been able to implement because of opposition.

Since then the changes have been neither formally clarified by the industry ministry, nor notified by the RBI under the Foreign Exchange Management Act (FEMA). Yet they are supposed to have become effective from the announcement dates, which is inevitably causing problems for would-be foreign investors – and worry about whether the changes would ever be enforceable in law.

“Ownership and control”

The changes shift the focus of FDI limits from straight foreign equity percentages to an assessment of whether or not an Indian company has both “ownership and control” – a concept introduced for the first time in Indian regulations by the second of the press notes.

The intention is to allow a foreign-invested Indian company – providing it is both Indian majority-owned (in terms of equity holdings) and Indian controlled (in terms of board membership) – to invest in downstream subsidiaries or associate businesses without the original FDI foreign stake counting against the new company’s FDI limit.

In FDI jargon, this legitimises cascading investments which have been used to bring foreign capital into sectors such as telecoms that need heavy investment. FDI limits here are bypassed by progressively adding foreign investment through tiers of subsidiary joint ventures so that, though official limits are exceeded overall, the rules are not technically broken.

Officially, the aim of the changes is to boost the inflow of FDI, which rose 85% to $46.5bn last year according to a recent UNCTAD study, and to make it easier for Indian companies to raise private equity and other foreign capital.

Officials and friends tell me the aim was also to end uneven application of rules in different sectors such as insurance (where there is officially a 26% FDI limit), telecoms (74%) and media (various). This included, according to some experts, clearing up lingering doubts (despite official approval) about whether Vodafone Essar has exceeded its limits with controversial holdings by two small minority shareholders, as well as indirect FDI allowed by insurance legislation, (even though insurance is formally excluded from press note two).

The timing of the changes was curious, coming at the fag end of the government’s five-year term in office when there was little chance of the new rules having much effect on FDI decisions before the election. The changes were not only complex – their presentation in three departmental “press notes” was bewildering. Wouldn’t it have been better to have put the idea in the Congress Party manifesto and announced it now?

Nath made his usual swashbuckling remarks that, probably intentionally, added little to understanding. Since the election, no one has tried to clear the air. Anand Sharma, the new commerce and industry minister, has indicated that he does not intend to review the policy changes, and Mukherjee has backed them since he became finance minister last December.
 
Who is the government favouring?

Inevitably, the timing of the announcement, and the conflicting views within the administration, have led to wild rumours of why the changes were done – wild, but widely believed. As I reported on this blog in February, The Economic Times dubbed the policy “irrational” and asked, “for whom is the government doing this?”. A friend, who has long watched companies bend government policies, emailed me that “this is meant to recycle politicians’ and bureaucrats’ money (and) fund elections”.   

Finance ministry and RBI officials have opposed the changes mainly because they believe they will bust existing equity limits. Supporters of the policy however say that this does not matter providing the company involved stays within Indian control. If it does remain Indian, they say, what is the harm of extra FDI?

“Foreign money is only foreign money if it’s owned and controlled by foreigners – otherwise it is not,” said one contact, trying, and failing, with such tautology to persuade me that the policy is sound. Surely, I replied it would be easy to dress up a semblance of Indian control in a foreign-run business, as has been done in some insurance joint ventures.

The government has said in various statements that areas where FDI is totally banned such as nuclear, multi-brand retail, lottery and betting, and foreign airlines in Indian carriers will not be affected, but this has not been formally spelt out. So what is to stop companies like, for example, Bharti Enterprises and Wal-Mart setting up an Indian controlled joint venture for their wholesale business and then forming a subsidiary for currently banned multi-brand retailing and dressing it up as Indian owned and controlled?

The same could surely be done by, say, EADS and Larsen & Toubro with their recent joint venture in defence where there is a 26% FDI limit, or by Vijay Mallya with a foreign carrier for his cash-starved Kingfisher airline and, or Mukesh Ambani for some of his Reliance Retail joint ventures.

It is not clear what happens in joint ventures where the equity or the board membership is split 50-50, nor whether FDI in both an Indian controlled company and its offshoot are counted if the offshoot is foreign-controlled.

The finance ministry has already mounted some challenges through the FDI regulatory body, the FIPB. It objects especially to the new policy being applicable retrospectively, which in effect would give an amnesty to past rule infringements. Bharti and Tata telecom companies have for example, according to media reports, been refused waivers for fines levied earlier for breaches of FDI rules. Bharti might also have problems clearing its proposed merger/takeover of South Africa’s MTN because of high FDI equity levels in its existing operations

The finance ministry is also objecting to a request from India Rizing Fund, an Indian controlled defence sector private equity fund with foreign money, that its investments should be exempted from the 26% rule under the new policy.

Basically, the changes smell. Maybe I’m being unfair but, given the mishandling and noting some those involved, it’s an inevitable conclusion – and will remain so till someone says something understandable to a layman, and not just to consultants who make money inventing and then applying policy quirks for their clients.

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Posted in India, India defence industry, India FDI, India general election, India industrial policy, India investment, Tata | Tags: , , , , , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | July 6, 2009

India’s Budget from a finance minister with no apparent reform agenda

When Sonia Gandhi, India’s Congress Party president and leader of the ruling United Progressive Alliance (UPA) government, praised the country’s 1969 bank nationalisation at a conference in Delhi last November, there were gasps of surprise and horror from businessmen in her audience.

D-1890Today, the same remark has been made by Pranab Mukherjee, the finance minister (right), in his Budget speech but, by the time I am writing this post (four hours after the speech ended) I have not heard any murmurs of horror from commentators on television programmes.

Maybe that is because this is what one should expect from the 73-year old minister who, I remember, gave me a distinctly frosty and uninspiring interview when I first arrived in India as the FT correspondent in 1983 and he was serving his first term as finance minister.

Mukherjee has no track record as an economic reformer, and today’s speech does nothing to show that he is one, beyond nudging forward distant plans for a general sales tax. But he is the government’s most able political tactician, so one would expect him to at least balance the politics, the books and the personalities, even if he couldn’t rise to the occasion with a reform agenda for India’s new government in the way that his predecessor, Palaniappan Chidambaram, would have done.

Mukherjee has done the politics by looking after farmers with loan concessions, plus more help for the rural poor and other social and infrastructure spending, and he has also handled the personalities (Sonia Gandhi, daughter-in-law of Indira Gandhi who nationalised the banks, was sitting next to him in parliament, and he also quoted the revered Mahatma Gandhi).

But he hasn’t balanced the books, which is probably why the stock markets have fallen sharply, and why no-one has so far found it very easy to say whether it was a really good or really bad budget. The government’s total expenditure has been increased by 36% (including defence by about the same proportion and highway building by 23%). And the central government’s forecast fiscal deficit (excluding the states’ individual deficits) is up substantially at a record 6.8% of gdp, compared with 3.2% in 2007-08, because of measures taken to fend off the international economic crisis.

Both the 36% increase and 6.8% deficit are seen by many experts as too high, especially when there is no guide as to how Mukherjee expects to bring down  the deficit, apart from aiming to get the country back to 9% economic growth from its current 6%-7%. There has also been dismay that he is relying on government expenditure to boost the economy, rather than providing more of a stimulus for the private sector.

Mukherjee also said virtually nothing on divesting minority stakes in public sector companies, and only put a target of Rs1100 crore ($240m) on what might be raised by 2010. Here he was being sensible because I don’t think any Indian finance minister has ever reached his dis-investment target, and Mukherjee knows that it is a highly controversial programme and he might only be able to sell off 10% stakes in two or three corporations by the end of next year.

But it’s worth quoting what he said because it shows the basic strongly mixed-economy approach – not only his, but also that of Manmohan Singh, the prime minister who has never been a keen public sector reformer, and Sonia Gandhi, with her soft leftward-leaning liberalism. He said:

  • “The Public Sector Undertakings are the wealth of the nation, and part of this wealth should rest in the hands of the people. While retaining at least 51% Government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme. Here, I must state clearly that public sector enterprises such as banks and insurance companies will remain in the public sector and will be given all support, including capital infusion, to grow and remain competitive.”

And on Indira Gandhi’s bank nationalisation he said (ignoring the fact that Gandhi did it more for short-term political than long-term socio-economic reasons):

  • “Never before has Indira Gandhi’s bold decision to nationalise our banking system exactly 40 years ago – on 14th of July, 1969 – appeared as wise and visionary as it has over the past few months. Her approach continues to be our inspiration even as we introduce competition and new technology in this sector.“

The fault here of course is that he seemed to be closing the door on urgently need financial sector reform, and said nothing about the need to make public sector businesses more efficient, shedding surplus labour and management. Nor was there any discussion of the benefits (albeit very limited) of selling off public sector minority strakes – but that is par for the course because there is, as I have argued before, little real discussion of the pros and cons of policy in India.

One final omission – he said nothing on foreign direct investment (I have checked with a word search in the speech for those words and FDI), which might seem surprising. But it isn’t because the government’s FDI policy is in a mess, thanks to Mukherjee endorsing confusing and controversial changes introduced before the election by Kamal Nath, then industry minister, but opposed by Chidambaram. More on that soon………

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Posted in India, India defence industry, India economic reforms, India economy, India FDI, India general election, Manmohan Singh | Tags: , , , , , , , , , , , , , , , , , ,

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