ONGC: Whose Money Is It Anyway?
by Anshuman Goenka
During the last week that I have not put up a post, one has been observing the dwindling growth statistics for GDP broadly (5.3%) and agriculture more specifically (-2.2%) Q3 FY 2009, the falling exports (16% lower last month). One has been shocked to see that Naveen Chawla has been made the CEC even after there have been detailed reports of his unspeakable misdemeanors. There is a lot to write about.
But this morning, we were presented with a SHOCK!
Goldman Sachs has published a report on ONGC, a Nav Ratna PSU. The research note dated 5-March-2009 by authors, Nilesh Banerjee, Karthik Bhat and Durga Dath make revelations which have been the biggest items on CNBC this morning. On page 18, it reads:
Issues with corporate governance at ONGC are among the more serious for companies in our coverage universe, in our view. Since FY04, the promoter (Government of India which owns a 74% stake) has taken away cash from the company on a quarterly basis for subsidizing loss-making state-owned downstream companies.
So far ONGC’s promoters have taken cash of almost US$20bn from the company without consulting the minority shareholders. Despite repeated objections raised by investors and more recently by independent directors on ONGC’s board, there has not been headway on this issue.
The market appears to have got used to this practice by ONGC promoters, while similar issues in privately run companies would likely cause serious concern. We believe minority shareholders are likely to suffer in a situation where their interests are poorly protected. Moreover, such ad-hoc cash withdrawals hurt ONGC even more since it has a poor production profile and revenues are effectively a function of their oil realization.
Now, this is India, after Satyam I & II, when the spotlight is on India’s corporate governance. When this Government is acting in public interest to clean up the mess of Rs 7,000cr in a private company, they take away Rs 100,000 cr from a company which they manage.
Not many who read this blog may own shares of ONGC. I don’t. But I own a few mutual funds. And I can’t think of any AMC which runs an equity fund which will not have an ONGC exposure.
Besides hurting us directly, this is a securities law scam, right on the eve of elections, that both underscores my pet peeve of de-institutionalizing India, and is too brazen to be ignored.
To Be Fair…
by Anshuman Goenka
A friend remarked yesterday that my posts were getting more charged, and seemed more tilted in favor of the BJP. Apart from the fact that the insiders of the BJP may think that I am not toeing the party line enough, this remark actually underscores our message. We are not the BJP, but we are Friends of BJP, and not Friends of Neutrality.
Even so, as I promised in my initial post I am beholden to acknowledge what I see as good in the opposite camp.
To start with, the current government is led by a Prime Minister whose scholarship is not only unsurpassed among anybody who has held that office before but should be the pride of any Indian. More importantly, throughout his long and illustrious he has been known to be for the highest levels of probity. And most importantly, in a pleasant departure from the predecessors within his party, we do not see a fawning coterie around him that has been an irritant earlier. But as I mentioned earlier, all of these virtues, indeed great virtues do not adequately credit his tenure as Prime Minister, because the Prime Minister’s Office is first and foremost a political office. While Rajya Sabha members have run the PMO earlier, they always were the most important political authorities in their cabinet, which clearly is not true now.
There must be a clear, universally accepted legacy of a Prime Minister who has served five years in office. I will say that about the last three Congress Prime Ministers, none of whom I would have voted for - Indira Gandhi led the Bangladesh War & the Green Revolution, Rajiv Gandhi introduced IT and Narasimha Rao supported the 1991 reforms. But in the last five years, I see really nothing that I can count as the universally accepted meaningful legacy of this government.
There are a few things which are often cited as achievements.
First, the RTI, which best appeals to the middle-class sensibilities among Friends of BJP. This is a noble idea, very shabbily implemented. Unless pursued by one with clout within the government or one who has no other occupation but chase an application, this is a complete failure. The recent issue of Outlook shows how ineffective the systems have been in enforcing RTI and punishing those who violate its spirit.
Second, there was the very contentious nuclear deal with the US, which split the UPA and led to the rather unsavory Cash-for-Votes scam. Besides the indelible taint on the outgoing Lok Sabha, we are unsure of how robust this achievement will be in any event where we develop a difference of foreign policy opinion with our new ally.
Third, in some sections there is a support around farm loan waivers and NREGS. These are policies I believe have not only taken us away from the path of sensible fiscal prudence but actually have big gaping holes in implementation.
As a counterpoint, what could have been done, and indeed what should the next government do? Instead of levying an opaque additional tax, involve the private sector in the delivery of our #1 social priority that is education - using vouchers at the primary level and opening up the ground for legitimate private universities. Develop an education funding system that enables everybody to participate in the market. Use India’s latent growth potential and diminishing investment opportunities worldwide to bring fresh investment into sectors currently locked up, which can take us back to 8%+ growth in immediate term. But most importantly, work to reinstate the credibility of a participative, representative government free from the clutches of cronies of one family. Should any alternative other than the BJP be credibly promise to take us in that direction, to be fair, they too will have my support.
Jai Ho (2)
by Anshuman Goenka
Although not my favorite film of 2008, I was happy that Slumdog Millionaire brought recognition to a film set in, acted in and given music to by Indians (my pet peeve: I thought Dev Patel’s accent was a little jarring, and the graphic a little too rich).
The same day however, something more interesting began to make rounds of email boxes. The Congress spokesperson Abhishek Singhvi has claimed credit for the film’s success and how they have provided for a “conducive atmosphere with emphasis on good governance contributing to an achieving India.”
I first thought this was a joke till there was a joke began to go around that the Congress should indeed claim credit for Slumdog Millionaire because they are responsible for slums in the first place. Those more familiar with how slums have been regularized repeatedly may see some dark humour.
Then, a colleague added that the title was doubly appropriate. Not only has the Congress made many slums, they have also made a few millionaires among their friends!
But jokes apart, the story of Jamal Malik is about the indomitable spirit of the ordinary and disenfranchised Indian, who probably does not browse the Friends of BJP site every day. However, notice how Jamal shares his hope of the better life with each of those who do browse this site. Also see just how angry and frustrated each of us feels when we encounter any organ of the state - whether at the passport or income-tax office, whether at the police station or a state-run educational institution. It is imperative to unshackle our hopes from the dependence of state doles, and to provide an environment more conducive than the slum of the films for these hopes to nurture.
PS: Outlook also has a quote from AM Singhvi suggesting that George W Bush be given a Bharat Ratna. I thought this was absolutely in line with our PM telling the former President that he was “dearly loved.” But maybe, just maybe, this was a tad undiplomatic coming soon after Bush’s politics has been voted out.
Positive Ideas: Simple and Clear
by Anshuman Goenka
A few friends and correspondents to this blog have asked us to write something clear, definite and positive that the BJP or the NDA would do when voted to power.
As an avid supporter, but yet an unregistered member, I or other Friends of BJP can make no commitments. But I know one trustworthy senior politician somebody who can: LK Advani. There are five personal promises he makes to each of us. In five simple bullets these are:
- Education for all, increased capacity with opening up of higher education, more vocational education and financial aid to complete education
- Enhanced employment opportunities in new sectors and work in public life to improve policies and institutions, esp with a focus on non-farm employment in rural India
- Security to pursue our lives and ambitions: no compromise, tougher laws, firm implementation
- A green and clean India: Accountable, clear plans on environment and conservation
- Rural prosperity & urban renewal, more cities, beautiful cities, enforced property rights, better municipal governance
When I saw this, I thought this was minimalist. Surely, this did not include many other things that I am sure the BJP would talk about in its manifesto, say on foreign policy or other aspects of India’s economy. Indeed any Government or PM will attend to many other matters and both the party manifesto and the NDA’s common program will make references to these areas. In fact, we are soliciting ideas & inputs from Friends of BJP, including specific recommendations and measurable outcomes.
But this is what I think is also commendable. It brings out real priorities, suggests that the government will focus on things that are feasible. It will not be everything nice to everybody, and probably it should not be. The move from traditional comprehensive platitudes to a clearer focus and sincerity is commendable. I also find a personal promise from the aspirant to the highest office of government quite unique and laudable.
In a career as a management consultant, investment banker and PE professional, one has met impressive individuals who one knows will stop at nothing to deliver on the commitments they have conviction on. Last week, two Friends of the BJP were invited by Mr Advani to his home. As one of them, I can assure you in my personal or professional life I have anybody whose sincerity or determination I would trust more.
Bharat Nirman: Rain-check!
by Anshuman Goenka
Rajesh Sinha publishes some interesting statistics in today’s DNA on UPA’s performance record:
- Rural electrification: 13.8% of rural households provided connections. For BPL category alone, 19.3% target achieved
- Irrigation: Against a target of creating 10 million hectares (MHA), 5 MHA achieved
- Rural roads: 34% of targeted 66,802 habitations connected till December 2008. 1.63 lakh km of new & upgraded rural roads built against a target of 3.40 lakh km
- Rural water supply: Out of a total of 6.04 lakh habitations, about 4.64 lakh habitations covered
Of Discovering India and Doublespeak
by Anshuman Goenka
Written during 1942-46 from the Ahmednagar Fort as a series of letters, Jawaharlal Nehru’s The Discovery of India is a modern classic that I admire all then more because its author left India for early schooling but later returned to be a hugely popular Prime Minister. His majestic prose is matched only by his impeccable integrity, albeit his romanticism sometimes got the better of our national policy. Three generations and six decades later, an attempt is being made to discover India again. In an age, where one grows up in Indian society and history, and has constant access documented scholarship, an MP’s attempt to make a first-hand discovery of it strikes me as commendably sincere but perhaps a shade naive. His poverty tourism would be his own business, were it not linked to a diplomatic debacle (here is a a good comment).
In the same vein though, more surprising were his reported comments on the Nano investment in Gujarat, the main news on Sunday night. The MP from Amethi pulled up the Gujarat Chief Minister about providing this project large incentives while ignoring the plight of the poor diamond workers in Surat.
Now, ignore for a moment the 10,000 jobs expected from the Nano project. Overlook the benefit to the economy not only of Gujarat but the country as this investment takes off smoothly after years of wrangling. Perhaps, India in 20009 is better discovered not through the promises in its few islands of growth but a spotlight on its failures.
Let us roll-back to the headlines of October 2008 when the project had to find a new home after being ousted from West Bengal. Who were the states pitching to woo Tata Motors, each with its own basket of incentives to seduce this 250,000 car pa project? Among others, Uttarakhand, Karnataka, Andhra Pradesh, Maharashtra. Now, think which party rules the last two states!
What strikes me is not the concern over diamond workers, which is not a problem unique to a state (see my earlier post: Need for a Growth Constituency) but a wrong reason to run down a genuine achievement of the one state government that is performing at its best. I find the sheer hypocrisy and insincerity of speech appalling, esp since it was never questioned when that sound-bite was played on an on. If it was a naïve lapse, let us move on. But if not, then see in it what we should expect from one who is heralded as the icon of Indian youth and the future of its once glorious leading political party. In either a comparison with Barack Obama, the young statesman we all hope we produced in India, or a break from the conventional doublespeak of politics, I think the contrast could not be more striking.
The Costs of Bad Governance: What You Are Paying For
by Anshuman Goenka
Rs 51,000 crore of waste in one year alone, says the CAG, and arm of the Government itself. As reported in today’s Times of India. The report elaborates that this money has been disbursed to autonomous bodies and NGOs but is unaccounted for.
What does this really mean? Rs 51,000 crore is a little over 1% of India’s 2007-08 GDP. If this was in one year alone, and this government is about to complete its five year tenure, I will leave you to do the math.
Could this money have been better spent by individual citizens? And instead of adding more cess every year, should this administration have focused just a bit more on administrative reform? Its own leader talked of 85% leakage of public money over two decades ago. The Prime Minister mentioned administrative reform as a priority in his inaugural year. But somewhere along the way, this did not happen. And why? Simply because the tax-payers are today not a constituency for this government to answer to. The Friends of BJP is one attempt to change that.
Equally stunning in today’s Hindustan Times is an article by Rajeev Chandrashekhar, the outgoing President of the FICCI, on how the government repeatedly refused to recognize the alarm sounded by the captains of Indian industry, how given the buoyancy in the economy and tax revenues till March-2008 much could have been done to prevent India from being sucked into the global slowdown, as we indeed have been. This shows again that we have yet to build a constituency for economic growth, that stands out as prominently as any caste or religious identity. Again, as people with jobs and careers interested in economic growth, this is the endeavor of the Friends of the BJP.
On the Menu of Choice, and the Clarity of Thought
by Anshuman Goenka
If you vote for the Congress, you will be voting for Dr Manmohan Singh, anointed Prime Minister by a young General Secretary of that Party. It is curious then that every few days, we have among its allies a new, imaginative name. There are regional leaders in UP and Maharashtra who have long nurtured Prime Ministerial ambitions. In fact, the Railway Minister has displayed uncommon honesty in admitting his own ambition on public record. But then all these aspirants are the allies of the Congress in the UPA. Maybe they will all fall in line to fight the menace of Right Wing Communalists, as they did five years ago. But CP Bhambri in an article in yesterday’s Economic Times, lays out quite nicely the likely scenarios and the implications of the likely multi-cornered contest.
Curious also that the party with a young face just had a re-organization, also reported in the same Economic Times by Urmi Goswami, where the young exuberant have been culled in favor of the tried and tested. So, let us mind the gap between lip-service and real priority.
We, in the Friends of BJP, believe that the country needs clarity, more than ever before. We have the specter of a deep economic slowdown. And our neighborhood is in unprecedented instability in Colombo and in Swat.
Nuclear Deal: Lofty Ideas, Lax Work and Real Motives
by Anshuman Goenka
“The glorious end of nuclear apartheid that would herald a new era an energy-starved India - that was India’s Nuclear Treaty with India. If we were to test weapons again, the fuel supplies would stop - but at least till then we would make progress. Perhaps we really should stop thinking about more tests and get on with the more pressing imperative of Bharat Nirman. After all, nothing in the deal compromised India’s sovereignty - we really chose to act against Iran out of our own conviction. And George W Bush is ‘dearly loved’ by the people of India. After all, it was ratified by a vote of confidence on this topic alone in the Lok Sabha! This deal marks the greatest triumph of the Manmohan Singh-led UPA government.”
This, I imagine, what a chroniclers on the rolls of the state would write.
What a surprise then that Hindustan Times punctures this loft ideal in today’s headline: N-Power could have lit up 40 million homes. Auditor confirms HT story: Didn’t need deal to power N-plant.
Pause to ask what really was happening. Is this not a case when a national issue was created, opinions rallied and politics polarized when simple application of real good governance would have been more effective?
Think again, whether this is an isolated example. We have paid increased cess to fund the noble goals on universal education. But was it really the absence of money which should be blamed for the shameful state of India’s education? Does more spending mean better outcomes? Or, do you think the current HRD Minister has done anything at all in the implementation of system reforms in education, to take the same taxpayer money a little further in terms of impact? When government schools have failed in delivery, and the voucher systems has worked across countries, what, except for the fear of the private sector, kept this government from doing anything imaginative? Our literacy, according to the National Literacy Mission (last 2001 census), was 61%, which is behind Egypt (71%), Brazil (89%), Indonesia (90%) and of course, China (91%). Before and after the education cess, the growth in literacy has been about 1.5-2%. So, we should be catching up with China by about 2016!
Finally ask, what really has been the real motive? Often, the task of good government is to focus on implementation, to do things in its domain well rather than over-reach itself with one eye on the next election.
Need for a Growth Constituency
by Anshuman Goenka
A month back Business World published a quick read on the slowdown in infrastructure over 2004-09, which shows just how neglected all sectors have been in spite of the lip service. As taxpayers and ordinary citizens impacted by the slowdown, is it not surprising that there has been no remedial action. To my mind, the best explanation for this is the absence of a clear growth constituency which no political party has ever felt the need to service.
Recently, a young and rather prominent Member of Parliament visited Surat and loudly told TV channels that he found the diamond workers in that city unattended to at this time of distress, and that he, a member from Uttar Pradesh, wanted to work for these diamond workers, left unheeded by the local state government. It was noble thought well-articulated, and rather reminiscent of the 1971 slogan Garibi Hatao, which just cannot be debated against. Because the plight of the Surat diamond worker is no different from the IT employee in Hyderabad or the garment-maker in Coimbatore. I do not know what can be done to revive these export-serving cities in the face of an economic slowdown. What we get is a fresh face, when we actually need a fresh idea. The difference that we must seek of our MPs and the government is whether they have a vision, an attention to detail and an ability to make difficult choices.
2009 can be the one time when we make this change. If we, and people like us, stand up to be counted, to not accept a 4-6% real GDP growth when McKinsey tells us that our potential is north of 10%, if we do not want our taxpayer dollars to be wasted on meaningless expenditure, if we believe that private enterprise has the potential to create a vibrant India, and that the agenda of policy reform is nowhere complete, if we believe that privatization should not be held hostage to Left parties, 2009 is a pivotal election for India.