Archive for June, 2015

Why marks do not matter — in the long run

A recent newspaper article by a highly successful author on why average marks in school need not imply the end of the road for a student set me thinking, especially at this time of the year, when the declaration of results leads to extreme despair in those who do not fare so well, leading even to the ultimate tragedy of taking one’s own life. The author advised his young, probably apprehensive readers to take it in their stride and realise that life was about far more than just getting great marks and a plum job. Fair enough advice, as it went, except that I want to present the perspective from the other side, of a so-called “high achiever” of whom a lot was always expected and what it meant for him as he dealt with the later years of his life. Yes sir, I am talking about yours truly, a product of an aspirational system where success was judged by your marks and by your visibility as a person who has made it, who is an object of envy for others.
I grew up in a middle class milieu in Delhi where the dream was to land a prized job in the civil services or qualify as a doctor or engineer, or move to academic pursuits in the USA/UK. Competition was tough even then for the best colleges and the most highly valued jobs. As it happened, I did more than well enough to land the college and the subject of my choice. I enjoyed my college life, participated in various extra-curricular activities and, apart from a hiccup or two, acquired two degrees in my five years in the university. That I had done well academically meant that there were great expectations about me, among family and friends, and everyone assumed that I would easily be able to enter the hallowed portals of India’s civil services. This too I managed rather comfortably, apparently to no one’s great surprise.
It was after I was posted to a rural district completely removed from my earlier Delhi life that the realisation hit home — buster, you are on your own! My performance in the civil services entrance examination initially got me some attention in the Indian Administrative Service circles in my state, but I very soon realised that you are in the position of the Indian bahu (daughter-in-law): after a very short honeymoon, you are landed with many duties, with very little sympathy for your plight. I struggled with that bugbear of bureaucratic functioning in India — the achievement of targets. Whatever I did, I was often not able to meet annual targets, whether for family planning cases (a euphemism for sterilisation), biogas plant construction, land revenue collection or small savings. Realising the meaninglessness of many of these achievements, I probably never really put my heart and soul into reaching these annual targets. Matters were not helped by the bright, ambitious young men and women who were my colleagues and who seemed so fired by the zest to not just reach, but surpass, the magic numbers set for their districts. I soon got inured to the pained look on my Commissioner’s face, when, after reviewing the success of four other districts, he had to handle under-performance in my district. Slowly, I reconciled myself to the apparent truth that I was not one of the dashing, dynamic officers that senior officers in the service would laud.
It was only after I moved to a Secretariat posting in Delhi that I finally found my métier. My above average abilities in drafting notes in the English language and my passion for the subject I was handling saw a lot of responsibilities being entrusted to me. The excellent annual assessments by my bosses stood me in good stead in subsequent postings; it was then that the realisation dawned on me that you are only as good as your last assignment. Added to that was my deliberate decision to keep as low a profile as I could, within the requirements of my job description. Over the next fifteen years, I was fortunate to get a number of interesting assignments and have a warm and supportive relationship with my political and bureaucratic bosses. But what I really value is the love and affection I got from a large cross-section of people: the public I interacted with, my peers and those I worked with in my different postings across a wide geographical area. These gave me a level of comfort and confidence that enabled me to withstand such criticism as came my way. When the failure to reach revenue targets in my administrative division led to reproachful remarks from my top boss (and even a mild rebuke from the then Chief Minister), I was secure in my belief that I was pursuing more important goals impacting the lives the lives of individuals rather than striving to achieve revenue targets.
Today, five years after I took early retirement from service, I realise that there are far more important things in life than just your academic performance or even your rise up the bureaucratic ladder. As you near the sixth decade of your life and look back on the last forty years or so of life, two things come to mind: firstly, you should try to excel in (and, more importantly, enjoy) whatever you do, without getting too tied up in planning where you want your career (or life) to take you and, secondly, the human relations you form in your years at work (including, most significantly, your family relationships) are far more important and rewarding than any material successes you may enjoy in your years on the job. Of course, those marks in school and college do matter, but only for a very limited period and to enable a climb up the next rung of the ladder. It is far more crucial to develop the awareness that one may be climbing up the wrong ladder, at the cost of relationships, contentment and one’s own integrity. Remember, Bill Gates and Steve Jobs never finished college. Equally, remember all those brilliant classmates of yours, with bright futures beckoning to them, who fizzled out in the University of Life and were never able to contribute meaningfully to the society of which they were a part and which had invested so much hope in them. So, by all means, participate in the marks race, but realise that it is ultimately a game where you win some and lose some. Winning over your own fears and insecurities is what will finally make you a complete human being.

India: Economic Illiteracy (or Economic Hypocrisy)?

There was a lot of congratulatory backslapping in the government and mass media recently when huge amounts were realised from the sale of telecom spectrum, auction of coal blocks and the divestment of government interest in the public sector. Lost in all this noise was the signal it conveyed: that, for government and, indeed, for large sections of the Indian intelligentsia, short-term material gains are far more important than the presence of investors in crucial infrastructure sectors over the long haul. No one tried to analyse the impact of the successful bids in terms of their implications for prices for the consumer or for the sustainability of the project for the investor. Public policy actions in India have almost always seemed to live up to my favourite lament, which has appeared in my blogs on more than one occasion: “don’t kill the goose that lays the golden eggs.” It is time, therefore, to analyse this revenue mania in the light of recent actions and decisions taken not just by government but by other institutions of the state as well and the approval these have received from the media and from what one would have thought were better-informed sections of the thinking classes.

The recent efforts by the Petroleum Ministry to tinker with a thirty-five year old revenue model for oil and gas extraction are but a continuation of its attempts to renege on the sanctity of negotiated, signed contracts once these contracts reach the stage where petroleum revenues start or are likely to commence flowing soon. Behind these moves are what I would term a paranoia related to short-term revenue accrual, long-term economic interests be damned. In the case of the acquisition of Cairn India by the Vedanta Group, the Government of India successfully extracted its pound of flesh in terms of imposing payments of royalty on oil and gas, from payment of which companies had been specifically exempted in the contracts of the early 1990s to encourage investment in risky exploration activities. This represented nothing less than a violation of a signed contract by a government. As if this was not bad enough, the Government of India reversed its policy on allowing private companies to market their share of gas produced under the New Exploration Licensing Policy, in breach of accepted contractual provisions. It played along, for reasons best known to it, with the Supreme Court view that, as the owner of the natural resource, government has the right to decide the end-consumers, when accepted international practice is that once the oil/gas reaches a particular delivery point, ownership of the resource devolves in the agreed percentages to the government and the contracting producing parties. Extend this logic to the mining of other natural resources like coal, bauxite and copper and you are back in the heyday of the license-permit raj of the 1960s and 1970s, when government decided who would produce and who would consume a particular resource. As the Government of India got sucked into the Ambani family war (of which more in a subsequent blog), it started to get more and more defensive about the exploration and production contracts signed by it over the years with private parties. Not to be outdone in adding its two bits to the management of petroleum contracts, the Comptroller & Auditor General (CAG), the audit watchdog of the government, weighed in with advice on how petroleum operations should be carried out and what constituted acceptable expenditure. Given the lack of knowledge in India’s legal and financial fraternity (especially in the government sector) about the economic and technical niceties of petroleum exploration and production, it is not surprising that private investors found themselves caught in a bind, with a harried government refusing to clear payments of company dues. The situation has come to a pass where the government is apprehensive of resorting to arbitration and obtaining expert opinion to resolve contractual issues: given the level of mistrust and suspicion about a subject that most of those taking decisions have very little understanding about, only a very brave person would stick her neck out to take bold decisions.

I am sorry for dragging you through a subject with which I have been connected for the past quarter century. But I am using this example from a crucial infrastructure sector to draw your attention to a serious lack of economic common sense in not only the government but other pillars of the establishment as well, which is fraught with grave consequences for the future economic development of India. Let us dwell for a moment on the disinvestment of government stakes in public sector gems like the Oil and Natural Gas Corporation, the Steel Authority of India Limited, Coal India Limited and Bharat Heavy Electricals Limited. The aim of any disinvestment should be to broaden the shareholder base and makes these companies more market-responsive. Instead, with government, and its captive institutions in the insurance and finance sectors, controlling over 70% of the shares, there is no change at all in the archaic decision making processes installed in these enterprises in the past, despite cosmetic changes in “granting autonomy” to these units that make no difference to their operational and managerial efficiency. Appointments to top managerial positions still go through a tortuous process, often taking months on end while prospective candidates lobby for posts. The fear of decision making in public sector enterprises arises from the dread of the big three C’s: the Comptroller and Auditor General, the Central Vigilance Commission and the Central Bureau of Investigation. As a manager, attract the attention of any of these three worthies and you can kiss your peace of mind goodbye for the next couple of decades. An example will suffice: the public sector National Thermal Power Corporation (NTPC) was to get gas for its power plants from the gas fields operated by Reliance and its partners in the offshore Krishna-Godavari basin. For various reasons, their gas sales agreement could not be concluded and is still to date embroiled in legal squabbles. Any sensible power producer would have recognised the time value of money; besides, NTPC was in a position to get liquefied natural gas on a 17-year term contract from Petronas, the Malaysian producer, for US$ 3.50 per million British Thermal Units (million BTU). But just imagine the furore if NTPC had opted for gas at US$ 3.50 per million BTU instead of the agreed effective price with Reliance of US$ 2.97 per million BTU; there would have been allegations of a sell-out and someone from NTPC would have lost his head. So NTPC played safe and continued its courtroom wrangles with Reliance. But power projects cannot wait for fuel indefinitely, so NTPC went in for spot market purchases, where it is today paying US$ 10-14 per million BTU. A greater criminal wastage of finances is difficult to imagine, but when tied up in the embrace of government, all is possible.

We need to analyse the reasons for this unspeakable economic illiteracy, not only wasting scarce investible resources but acting as a drag on the economic future of the country. Essentially, the post-Independence period has been characterised by the dominance of four interest groups: the landed elite, the rentier businessman/industrialist, the trade unions and the urban middle class. The 1991 reforms hardly dented the influence of these groups. The landed elite is interested in paying no taxes, having access to heavily subsidised water, power and fertilisers and an assured minimum support price for their produce, with suitable increases over time. The rentier businessman/industrialist has drawn on his “know-who” rather than his “know-how” to corner, in recent years, scarce natural resources like land and minerals. The less said about the trade union movement in India the better: they represent a fraction of India’s labour force and, through their stubborn opposition to labour law reform, have denied large swathes of Indians access to relatively secure, well-paid jobs in a growing industrial sector. The vocal Indian urban middle class is the two-faced Janus: while they seek aspirational lifestyles for themselves, their “bleeding heart” liberalism prevents them from allowing the extension of this privilege to their far less fortunate and far more numerous countrymen and women. Thus, whether it is a sensible land acquisition policy that gives manufacturing industry quick access to land, a labour law policy that gives far better employment opportunities to India’s growing unemployed and underemployed or a foreign direct investment retail policy that enables the farm producer to control the disposal of his produce besides adding value through the reduction of wastage, there is a shrill cacophony each time these issues are debated. Listening to the declamations of politicians and other self-styled experts can make you despair about the chances of any coherent economic policy.

It is then that the first doubt starts to set in: is all this posturing more to do with hypocrisy rather than illiteracy? In my years in government, I have seen politicians run successful businesses of their own, especially in the cooperative sector in Maharashtra. But put them in charge of the government and they successfully run it aground in the space of a few years. Clearly, private thrift does not extend to public prudence. Our search for the great leader who will lead us out of this morass is fated to be doomed. What we need is something more on the lines of the English Glorious Revolution of 1688, when the wealth-creating classes established their ascendancy over the wealth-preserving classes. What India needs today is a coalition of interest groups dedicated to the creation of wealth with, of course, the incorporation of social security measures that have evolved over the past two centuries. What it needs also are governments at both the national and state levels that steadfastly pursue this goal, unmindful of electoral consequences. Failure to do so can have very grim consequences. India is adding 13 million unemployed to its rolls every year. The consequences of this waste of human resources are beginning to be felt in the Maoist insurgencies in Central and Eastern India, which have access to a ready supply of disaffected and angry youth who have no connect with the Indian economic system. With growing urbanisation, this restlessness is spreading to major urban pockets. It is time India’s governing elite realised they are sitting on a series of time bombs which can go off at any time and any place. So my advice to them would be: stop this tinkering with welfare schemes and empower the people through bold reforms. The time for action is NOW.