How Piyush Goyal healed an ailing department and brought it back to its feet

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When Piyush Goyal took charge of coal, power and renewable energy in Modi Sarkar, the young and energetic minister of state was handling a very volatile ministry which was famous for not getting anything done, in the UPA era it was divided between three cabinet ministers. The ministry was a complete mess with an alleged 1. 8 lakh crore scam, stranded thermal power plants, Fuel shortages and mounting debt of state utilities were some of the problems Piyush Goyal inherited. Under his leadership, India saw its first coal allocation through the e-auction method and power generation grew to record 22,544 Mw.

The minister has an opinion that governments will be judged by their performance when they go back to people in next elections. The governments that perform well are voted back with renewed majorities, while the bad ones go out. The minister is looking at a billion tonne coal production, 100 Gw of solar power capacity and investments of about $50 billion in the transmission and distribution sector in the next five ye

The power ministry under the leadership of Piyush Goyal has approved the launch of Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for ensuring 24×7 power supply and Ujjwal Discom Assurance Yojana (UDAY).

Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), the Rs 43033-crore scheme would separate agriculture and non-agriculture feeders, facilitate judicious rostering of supply to agricultural and non-agricultural consumers in rural areas, and strengthen sub-transmission and distribution infrastructure in rural areas, including metering of distribution transformers/feeders/consumers.

Ujjwal Discom Assurance Yojana (UDAY) would focus more on State DISCOMs which have over the years accumulated a debt of waver Rs 3 lakh crore. Faced with acute financial stress, many of these are unable to buy power. States have been given strong incentives such as cheaper power and more coal if they adopt the UDAY scheme and take over 75% of the debt of ailing distribution companies (Discoms), half of it in the current fiscal year and 25% next year. UDAY will succeed in turning around DISCOMS because, it is an entirely bottom up scheme which has emerged out of the culmination of the engagements with bankers, Discoms, power producers, consumers bodies, state governments and all the other stakeholders over a long period of time. Union power minister Piyush Goyal has estimated UDAY will eventually lead to a saving of Rs 1. 8 lakh crore annually.

 

When NDA came to power, the situation of 100 power plants monitored by the Central Electricity Authority (CEA) was so dire that as many as 38 were left with only a week’s worth of coal to burn, while 20 have had as little as four or even zero days of coal stocks. The main reason of this situation was the stagnation in coal production, even as the demand for electricity grew manifold.

Within a year the situation has changed dramatically, in September a delightful Coal Secretary Anil Swarup tweeted “Coal imports down from 17. 3 MT in Sept 14 to 12. 6 MT in Sept 15. In value terms from Rs 8,598 crore to Rs 6027 crore, a reduction of 30 per cent”, in another tweet he said “With unprecedented increase in coal production by Coal India, import of coal comes down for third successive month”. The main reason for this surge in production is making the bureaucracy efficient, working closely with the states and increasing the transparency in this sector through E-Auction of coal mines.

According to him the transmission sector is going to be the next sunrise industry, he adds that transmission & distribution is a sector for which a country should have to plan for generations, and not only years. Under Goyal’s leadership planning has already begun for the medium and long terms. The transmission and distribution sector is expected to see investments of nearly ₹3 lakh crore over the next four years, this move will greatly help Power Equipment manufacturers such as ABB, Siemens, Alstom T&D, and KEC International and will lead to additional investments in Indian manufacturing. Speaking at the inauguration of the 5th International Exhibition and Conference Gridtech 2015, at Pragati Maidan, the minister said “The Prime Minister’s vision for 24/7 quality power for all depends on the transmission and distribution sector to reach the bottom of the pyramid. With the new technologies we are bringing in, we will now create an ambitious grid programme which will meet the country’s demand”. These efforts are already showing results, a record 20000 circuit km of transmission lines has been added in financial year 2014-15.

 

Another major achievement of his ministry has been revival of stalled power generation capacity in the last 18 months alone 30000 MW of stalled power generation capacity has been revived. These concentrated efforts have lead towards power deficit situation being improved across the country. At the all India level, the power deficit (difference between power available and power required) shrank 36 per cent to 23 billion units during January-October this year compared with the same period in 2014. As a percentage of power required, the deficit fell from -4 per cent to -2.5 per cent. India’s electricity generation also improved and was up almost 5 per cent this year (during January-October), according to the recent Index of Industrial Production.

A rare combination of a chartered accountant, lawyer and an investment banker, Piyush Goyal is the right choice to head such an important ministry. From Renewable energy to Transmission & Distribution to Coal output, every sector is witnessing unprecedented growth. Needless to say the vision for 24/7 quality power for all looks achievable.

India can learn from Taiwan’s HSR experience

maxresdefaultIt’s official Japan has won the multi-billion Indian HSR contract. India’s move to opt for Japanese bullet trains on the Mumbai-Ahmedabad route has raised some concerns in the neighborhood,especially China  which is vying for a greater share of Indian infrastructure.While conclusion of such a historic deal between the 2 strategic partners is a very good news,India should be careful and insure it’s HSR dream does not end up to become a national embarrassment  like that of Taiwan.

Taiwan’s rapid economic growth during the latter half of the twentieth century led to saturation of highways, conventional rail, and air traffic systems in the western transport corridor, which threatened to impede further growth. The idea of a new high-speed rail line arose in the 1970s,and informal planning began in 1980. In 1987 the executive branch of Taiwan’s government, the Executive Yuan, instructed the Ministry of Transportation to launch a feasibility study for a high-speed rail line in the western Taiwan corridor, which was completed in 1990. The study found that in a comparison of potential solutions to traffic problems in the corridor, a high-speed rail line would offer the highest transit volume, lowest land use, highest energy savings, and least pollution. In July 1990 the Preparation Office of High Speed Rail (POHSR) was established and a route was selected in 1991. Plans for the THSR were subsequently approved by the Executive Yuan in June 1992 and by Taiwan’s legislature, the Legislative Yuan, in 1993.

After a few delays,the Taiwan High Speed Rail (THSR) , which is the largest current Build-Operate-Transfer (BOT) Railway Project in the world, with eight stations on the line connecting the metropolises of Taipei and Kaohsiung, began its passenger service in January 2007. However, by February 2009, it became very clear that the Taiwan area government must take over the THSR Corporation (THSRC) in one way or another, because the latter had already mired in enormous debts, loosing roughly two thirds of its capitalization. The THSR was only able to break even once in April 2008.It should also be noted that the Taiwanese government choose Japanese suppliers after planning based on European high-speed technology was already well-advanced.This led significant cost overruns & damage payments to Eurotrain.

Before the reaching an agreement with lenders and the government which paves the way for a debt restructuring, the Taiwan High Speed Rail (THSR) ,was looking at defaulting on a NT$382bn ($12.05 billion) loan.The Taiwanese government is also planning to reduce ticket prices from NT$1,630 currently to the original price of NT$1,490 for a single journey from Taipei to Kaohsiung, with a view to encouraging more passengers to take the train.

The Taiwanese HSR is a successful project in terms of ridership and achieving many of its goals of shifting transportation modes from highways & airways to railways. The problem with Taiwan HSR is largely with the method used to finance it – heavy private sector borrowing. The 80% private funding method left Taiwan HSR financially vulnerable to poor construction decisions, cost overruns, and the global recession.

In other words, the Taiwan HSR system would be a very financially strong system were it not for the flawed method used to build it – which has left the system with heavy debt, even though they have been significantly eased by the massive government bailout. Aside from that, however, the system does not require operating subsidies thanks to very high ridership in Taiwan.

Had the Taiwanese government,like the Indian government, simply funded the HSR system itself as a piece of public infrastructure, without eventually having to bailout the private investors, then the system would almost certainly be a very successful venture . Having 80% of the construction costs coming from the private sector was a disastrous move, but the Taiwan HSR system has overcome those issues.

Modi Government has largely managed to avoid this problem,because the majority of the fiance for the ambitious Infrastructure project will come from Japanese government at very low interest rates,0.01% to be exact , compared to the 0.3% cap decided by India recently, with the tenure of the loan at 50 years, along with a 10-15 year moratorium.The Taiwanese experience with HSR should be thoroughly studied and it should be insured that India does not repeat the problems the Taiwanese committed when building their HSR.

Modi’s Visit to UK

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Prime Minister Narendra Modi’s visit to the United Kingdom from November 12 to 14 has once again reinstated India’s image as a business friendly destination.A massive defeat in Bihar and a massive assault on the government by the main stream media,on the grounds of growing intolerance in the country had created a perception abroad that perhaps India is not the rights place to do business.Prime Minister Modi’s visit to UK change all that.

By signing Deals worth over 9 billion pounds ($13.7 billion),Modi has managed to change the trajectory of a relationship which was seemingly headed nowhere before this visit.Joint statement by Modi and Cameron on Cyber Security and Terrorism is also a welcome sign.Negotiations have also been concluded over a civil nuclear deal that seeks to increase bilateral cooperation in the field of civil and military technology and nuclear research projects.Cooperation between the 2 countries has been increased in Health, Energy, Retail, finance, IT, education and energy sectors.The most important deals that were signed during this visit were

-Vodafone to invest £1.3 billion in upgrading and expanding its network in India; creating new tech centers in Pune and Hyderabad and creating new data centers and a new payment bank

-Light Source to invest £2 billion in India to design and manage 3GW of solar power over next five years which will lead to creating 300 jobs in India as well as 300 in Britain

-Intelligent Energy – signed a £1.2 billion contract to provide clean energy to 27,400 telecoms towers in India and towards the deployment of hydrogen fuel cell power

-King’s College Hospitals Foundation Trust and Indo-UK Healthcare to set up a hospital in Chandigarh. This will be the first of 11 new India-UK hospitals in India. Over a period the deal will be worth £1 billion investment into Indian healthcare

-Yes Bank and London Stock Exchange (LSE) signed a bond and equity issuance deal in green infrastructure finance and have future plans to issue a green bond to the tune of £300 million

David Cameron in his 1st term made serious efforts to upgrade Indo-UK ties and take the relationship to next level,India was a priority partner for Cameron’s government.The UPA ignorant attitude to the Indo-UK relationship has lead to UK paying more attention to upgrading it’s ties with more willing partners like China & Middle eastern countries,during the recent visit of Chinese leader Xi Jinping  deals worth 40 Billion pounds were signed including a pact to build Nuclear power plant in UK.UK is trying to position itself as the best European partner for the emerging economies of Asia.

Both David Cameron and Narendra Modi are trying to change the traditional approach they take towards each other.In Westminster the traditional view towards India has always been of a South Asian entity that was once a part of the British Empire & must be dealt while keeping Pakistan in Mind.India is also at fault here,while all big powers were given their due attention New Delhi never made any serious attempt to upgrade it’s ties with UK,in the corridors of power in New Delhi UK has often been regarded as the 51st state of USA,this may have been true in the era of Tony Blair but during the premiership  David Cameron’s UK has taken many major policy decisions which have been completely different from that of USA’s,the most important of them all,UK joining the Chinese lead AIIB(Asian Infrastructure Investment Bank).

David Cameron wants UK to be an active partner in the Indian success story.India should recognize that with British help and partnership programs like Make in India,Skill India,Digital India,Smart cities would truly be a success.India should partner with UK in sectors where British expertise is still unmatched Aerospace,Education,Infrastructure,High technology areas and not to forget the Britain’s millitary Industrial Complex which is still one of the most advanced in the world.India should keep these things in mind while forging a better partnership with Britain.Britain is very keen to build a vibrant partnership with New Delhi and New Delhi needs to be equally receptive of Britain’s efforts.

DMIC (Delhi Mumbai industrial corridor) – a game changer for the Indian economy?

Background

Delhi Mumbai industrial corridor better known as DMIC is a mega Indo-Japanese USD 90 billion dollar (Rs. 4, 23, 000 crore) Infrastructure project, which is being touted as a game changer for the Indian economy. DMIC would be the biggest infrastructure project India has ever attempted in its history. The project will see phenomenal expansion of Industrial capacity and Infrastructure. Road, rail, port, air connectivity will get a boost in states that fall under the corridor. Many smart cities would be developed alongside the corridor besides making the existing one’s smarter, such as the Dholera SIR(special investment region) in Gujarat, which is aims to be 6 times the size of Shanghai and 2 times the size of Delhi.

The backbone of the project would be the ambitious ‘Western Dedicated Freight Corridor’ that would help cut the logistical costs of manufactured goods, de-congest the existing network and help make Indian goods cheaper and competitive.

Is DMIC required?

India has traditionally been an Agriculture based economy which has just recently transitioned to become a Service based economy, however unlike the usual path that developed countries took to become developed (Agriculture to Manufacturing to Services) India jumped directly to Services from Agriculture, skipping the 2nd step(Manufacturing) all together. This lack of attention given to manufacturing sector has resulted in India not fully able to utilize its economic potential to become a great economic powerhouse that it should be. DMIC is the infrastructure project that it supposed to change all of this.

Not only DMIC will help solve the problem of lack of manufacturing in the country but it will also help solve the problem of India’s messy urbanisation. New cities being established along the corridor will help meet pressures of urbanisation and also lead India’s economic growth for next 20-30 years. The result will be a increased rate of urbanisation in the country & reduced burden on existing mega cities such as Delhi and Mumbai, bringing much needed relief to these cities. Urbanisation by the creation of new cities should be one of the top priorities of the government or else existing cities will turn into massive slums.

The problems

Given the stakes ‘you’ the reader will think that every sane minded Individual will support such a project, well you dear reader think wrong large sections of civil society and a number of intellectuals have declared a total war on this project vowing to do everything possible to prevent this project from successfully being implemented and achieving its goals

Some noted social activists like Medha Patkar have even declared the project ‘unconstitutional’, as she felt it would affect the future of inhabitants of areas in six states through which the project will pass. Patkar went on to say that “It is perverted. You can’t affect their living conditions and create a huge structure there”. She further added that ‘Insisting that the full impact of the project has not been assessed by the DMIC authorities, Patkar said that the project will have to pass legal scrutiny or else it would be entangled in unlawful activities.

Large sections of Farmer community have also opposed the idea of their land being acquired for the corridor. Farmers are furious even at the mention of the possibility of their land being acquired for the Delhi Mumbai Industrial Corridor (DMIC). Farmers present the argument that the land that is being acquired has fed them for generations and will feed the generations which are yet to come, many farmers also have a emotional attachment to their land which makes it even harder to achieve the land acquisition targets, set by bureaucrats in New Delhi.

There are stories of successful land acquisition too, for example the land acquisition process in Maharashtra, has been very smooth, with little to no opposition, over 3, 500 hectares of farm land near Aurangabad. One of the biggest since the arrival of the 2013 UPA land acquisition law came into effect. The reason: double the local land rates, apart from separate compensation for associated Farm infrastructure and re-skilling of the farmers so that they too can benefit from the Industrial corridor.

Conclusion

DMIC is hugely critical for India to achieve its true potential as a great economic power as it once was. The government must make an all-out effort to insure that this ambitious project is completed on time and on budget. Efforts should be made to deliver a world class bureaucracy and laws which promote business rather than discourage it. Indian planners must focus on rapid urbanisation and industrialization, if India is to achieve its true potential

DISCLAIMER

THIS BLOG claims no credit for any images posted on this site unless otherwise noted. Images on this blog are copyright to its respectful owners. If there is an image appearing on this blog that belongs to you and do not wish for it appear on this site, please E-mail with a link to said image and it will be promptly removed.

Indian Railways

Indian Railways can become the growth engine of the country, if utilized properly it can also help propel the Modi’s vision of make in India and India replacing China as the world’s factory. The government’s focus on reforming and developing the Indian Railways will help the national behemoth emerge as the next growth engine for India’s economy for the decades to come.
Government of India has been working day and night to ensure India is projected in the right light. Prime Minister Narendra Modi along with his various ministers is making concerted efforts to attract foreign capital and technology to fund India’s infrastructure ambitions. Initiatives such as Make in India, the Smart Cities Mission, Digital India and Skill India have captured significant global attention. For all of this to succeed a renewed attention to Indian Railways is needed, how Indian Railways can actively contribute to national development can be learned by the examples of China and Japan where both countries have used their Indian Railways to transform their countries into Economic behemoth.

Story till now

Indian Railways has been the victim of gross under investment and populist policies by successive governments, almost every single Railway minister has invested very less in capacity expansion of the Indian Railways, most are only interested in introducing new trains in & around their constituencies to appease the electorate. Over the past one decade, the government has spent only 0.3-0.5 per cent of its GDP as capital investments in the Indian Railways, while the roads have been getting the lion’s share of the allocations. This step motherly treatment of Indian Railways must end if we are to transform this giant behemoth into a National asset and not let it become another Air India.

Under investment is not the only problem of the Indian Rail, corruption, inefficiency and red-tapism are also plaguing the Indian Railways. According to a report by leading brokerage firm JM Financial titled ‘Indian Railways turning the corner’

During the last 3 decades, out of the 676 projects worth Rs 1,57,800 crore sanctioned, only 317 projects have been completed as of 2014. The remaining 359 projects, which currently require a investment of Rs 1,82,000 , are delayed due to various reasons such as land acquisition, cost overruns, insufficient funds, etc., it said.

Out of the 99 new lines sanctioned in the past decade worth Rs 60,000 crore, only one project is complete as of 2014, almost every single project of the Indian Railways has suffered from time or cost overruns. While the Road sector was in a far better shape (comparatively speaking) Indian Railways have not gotten their due share, this can be explained by a comparing the network expansion of Roads and Indian Railways. In the past 2 and a half decade, the Indian Railways has added a meagre 7 per cent to its network in terms of track length to 114,907 km, while the roads have more than doubled during the same period.

Over the decades, hundreds of expert committees have made suggestions and recommendations to improve the working of the Indian Rail, though most reports are gathering dust and getting eaten by termite Now, two main aspects have changed which finally offers a way out – 1st is the new found political will of the government which is determined to transform the Indian Railways and second is a steady pipeline of funds to help meet ambitions capital expenditure targets of the Rail. Both are vital, if Indian Railways ever wants to transform itself.

The way ahead

The new government’s renewed focus on Indian Railways is a step in the right direction. Indian Railways must focus on completing the existing projects before announcing new ones and here to the new Rail minister has set a precedent by announcing no new trains in his 1st rail budget .Progress on many projects like the dedicated freight corridors and the doubling of many crucial lines is not at all satisfactory.

Though, many initiatives of the honorable Rail minister like; getting 1.5 lakh crore investment from LIC (spread over a period of 5 years),forming SPVs(Special Purpose Vehicles) with various state governments for development of Rail infrastructure in the respective states, speed up campaign where the average speed of various trains is being increased, redevelopment of 400 rail stations through PPP(Public private partnership) mode, a ruthless campaign to weed out corruption in the rail ministry are appreciated a lot more is needed to be done to truly transform the Indian Railways to truly transform it into a engine of economic growth.

DISCLAIMER

THIS BLOG claims no credit for any images posted on this site unless otherwise noted. Images on this blog are copyright to its respectful owners. If there is an image appearing on this blog that belongs to you and do not wish for it appear on this site, please E-mail with a link to said image and it will be promptly removed.

An analysis of China-Pakistan Economic Corridor

Background

The China–Pakistan Economic Corridor (CPEC) is a ongoing development Infrastructure project which aims to transform the Pakistani economy by connecting Gwadar Port in southwestern Pakistan to China’s northwestern region of Xinjiang, via a network of Roads, railways and pipelines to transport oil,gas and other essential Natural resources.The economic corridor is considered to be the bedrock to further strengthen and expand  Sino–Pakistan ties and will run about 3,000 km(Approx)  from Gwadar to Kashgar.Total Chinese investment in this mammoth infrastructure project is around $46 billion , the entire project expected to be completed in few years time.The Corridor is an extension of China’s proposed 21st century Silk Road initiative and the one bed & belt initiative. Both governments see this as less as a Infrastructure project and more as a master stroke that will transform transform the Pakistani economy—and potentially China’s global standing.

The Asian Development Bank terms the project as “CPEC will connect economic agents along a defined geography. It will provide connection between economic nodes or hubs, centered on urban landscapes, in which large amount of economic resources and actors are concentrated. They link the supply and demand sides of markets.”

China

Blue line is the existing route and Red line is the new route proposed via Pakistan

For China the corridor bring unlimited benefits,when the construction of the corridor will be  completed, it will expand the number of trade routes between China,Africa and the middle east. Energy security is a prime concern for China, as it is the world’s biggest energy consumer and importer, and oil pipelines crisscrossing through Pakistan would reduce the travel time by a significant amount,not to forget it would also increase Chinese Energy security by bringing energy supplies directly from the middle east and Africa to China’s North west via a ally nation (Pakistan) bypassing the Indian ocean and South East Asia where Ships carrying Oil can be easily blockaded by the Americans or Indians.

More than half of the worlds proven oil reserves are located in the middle east.middle east is one of the top suppliers of crude to the Chinese,so much so that almost half of China’s daily consumption of oil is met by middle eastern imports.Until this very moment all of this volume was being moved by see borne oil tankers covering some 10,000 miles to reach the Chinese coast.The oil tankers in their journey to Chinese mainland have to go through vast oceanic territory ruled by hostile navies,not to forget the perilous choke point of the straight of Malacca which can be easily blocked by the Indian or US navies.This leaves Beijing in a very tough position on the energy security front,because more than half of Beijing’s crude is imported through sea and is still growing.US’s superior naval forces in the region can be used to shut this traffic down anytime & Beijing will not be able to do anything.

This is where Pakistan comes in,once the corridor is completed it will expand the number of trade routes between China, the Middle East and Africa. Energy security,which  is a primary concern for China will be addressed as oil pipelines through Pakistan would cut out ocean travel through Southeast Asia.The corridor will also provide China access to new markets for it’s goods in South Asia.

Pakistan

Pakistan today is starved for Foreign investment due to its security situation, there is a huge negative perception with regards to capability and ability as a sourcing destination of goods and services. Foreign companies might set up distribution networks in future to cater domestic demand but hopes for it being a export hub is little to none.
Govt of the day needs to change the perception and make a start somewhere however exorbitant the cost and CPEC is that start . If they manage to ope-rationalize it successfully then it will be a signal that Pakistan is truely open for business and its cheap labor and young educated demographic is an alternative to India/Bangladesh/ South East Asia and likes. CPEC thus is an entry ticket to get into the economic prosperity game and not about winning the wining the game.In addition CPEC is a useful tool to convince the domestic population of Pakistan that the Nawaz Sharif Government is not wasting time and is doing work for their benefit of the Pakistani people.

After withdrawal of  complete withdrawal of NATO forces from Afghanistan  no major power will have any stake in Pakistan.However  CPEC changes that not only it grantees a permanent Chinese presence in Pakistan,it also insures Pakistan’s stability.This massive Chinese investment in Pakistan will forge a strong China Pakistan nexus in addition of granting Beijing a way to insert themselves into the  Indo – Pakistan Equation which is a good thing for stability of Pakistan. China will also not want a weakened Pakistan as it does not want a Indian dominated South Asia threatening it’s interests in the region.

Conclusion

China-Pakistan Economic Corridor is a very Critical Infrastructure project for both the countries.The corridor is a mutually beneficial project which full fills the objectives of both the nations.For China it provides a alternate secure route to import Energy and find new markets for it’s goods and services.For Pakistan it helps counters Indian influence in the region,position itself as a major transit point connecting Eurasian region with South Asia and South East Asia & provide a much needed base to kick start it’s economic growth.

DISCLAIMER

THIS BLOG claims no credit for any images posted on this site unless otherwise noted. Images on this blog are copyright to its respectful owners. If there is an image appearing on this blog that belongs to you and do not wish for it appear on this site, please E-mail with a link to said image and it will be promptly removed.

Failing BRICs – Brazil and Russia

Background

Over a decade ago, world renowned  economist Jim O’Neill coined the term BRIC. The term was used to identify four fast growing economies that by 2050 would be bigger than the current richest economies in the world.

China and recently India has been living up to those expectations. But many have questioned whether Russia, Brazil deserve to be part of the group. So what exactly went wrong with the economies of Russia and Brazil which until few years ago were among the few bright spots in the global economy.

Brazil

Brazilian President dilma rousseff

Brazil has suffered repeated boom bust cycles and political instability for the better part of two centuries, since independence from the Portuguese in 1822.Half its 2014 exports were raw materials, meaning its prosperity is very sensitive to the stability and growth of  commodities markets. Commodity boom period  provided the necessary  cash to beef up the Brazilian government’s social welfare program that became an international model for poverty eradication. The new middle class went spending, boosting growth. Now, with commodity prices touching a record low and industry sputtering, that model appears to have run its course.

Brazil’s primary mistake was it’s reliance on commodities exports to China and other resource hungry nations to boost economic growth,the Chinese Investment led growth was the primary culprit in this whole affair because of the massive Chinese hunger for resources Brazil exported record amounts of resources to China subjugating the Brazilian economy to Dutch disease where “an greater focus on commodity-led growth,”  boosts wages and strengthens the currency which sets the stage for demise of the country’s manufacturing sector.

As if situation was not already bad, Petrobras which is considered as the bedrock of the Brazilian economy has been hit hard by a massive corruption scandal, the oil company which is considered as his the world’s sixth-biggest energy company by assets and is involved across the world in the exploration, production, refining and sale of oil and gas.Oil exports are considered as a significant contributor to the Brazilian economy.

No wonder when the prices of commodities  crashed so did the growth of Brazil.Brazil’s economic growth plunged from 7.5% in 2010, to 0.9% in 2012.

Russia

Russian president Vladimir Putin

Like Brazil, Russia suffers from the same dreadful Dutch Disease, experts have long argued that the country is far too dependent on its oil and gas sector,but this isn’t Moscow’s only problem systematic corruption,low labor productivity and too much reliance on Oil and Gas sector has wrecked havoc on Russian economy clearly showing that without strong oil prices Russia’s economic health will deteriorate even further.

Russian leaders have repeatedly emphasized on the need to diversify the economy away from its dependence on oil and gas sector and foster a high-technology sector. In 2012 oil and gas sector accounted for over 70% of total exports.This economic model appeared to show its limits, when after years of high oil prices the price of oil began to gradually decline in 2013 the economy grew by 1.3% and in subsequently went into recession in 2nd quarter of 2015.

Over reliance on Oil and Gas is not the only problem of the Russian economy systematic corruption and low labor productivity is another.Systematic corruption is rampant in Russia.Many of the inefficiencies in the government machinery can be attributed to high levels of corruption in all levels of government.Russia is more corrupt than other countries which have a similar level of development .Russians aren’t nearly as productive as they should be.According to Organization for economic,co-operation and development  “For each hour worked, the average Russian worker contributes $25.90 to Russia’s GDP. The average Greek worker adds $36.20 per hour of work”.

Conclusion

Brazil and Russia’s membership of the BRICs may expire by the end of this decade if they fail to revive their flagging economies, according to Jim O’Neill, the former Goldman Sachs Group Inc. chief economist who coined the term BRIC.Brazil and Russia need to up their game and implement much needed structural reforms to boost growth,reduce corruption in the economy and the government machinery and reduce the role of state in the economy.BRICs may soon become ICs (India and China) if Brazil and Russia don’t act fast.

DISCLAIMER

THIS BLOG claims no credit for any images posted on this site unless otherwise noted. Images on this blog are copyright to its respectful owners. If there is an image appearing on this blog that belongs to you and do not wish for it appear on this site, please E-mail with a link to said image and it will be promptly removed.

Inland Waterways in India

Background

India has an massive network of inland waterways in the form of canals, rivers, creeks. The total navigable length is 14,500 km. Freight transportation by waterways is heavily under-utilised in India compared to other large countries and geographic areas like the United States, China and the European Union. Freight transportation in an organised manner is confined to a few waterways in West Bengal, Goa, North East and Kerala. Headquartered in Noida,UP Inland Waterways Authority of India (IWAI) is the statutory authority in charge of the waterways in India.

Unlike many other countries where water transport fulfils more than 40% of their total transport requirement, its contribution in India is as low as 3.4%,there is a immense scope for development of water transport in the country.

Advantages of Waterways to India

As per an estimate of Ministry of Transport, Government of India, the length of nine inland waterways of India is 19,000 km, out of which 14,500 km long are of rivers and 4,000 km are of canals.That’s a lot of underutilized capacity which can be used to reduce stress on the existing transport infrastructure like Roadways(Highways,Expressways etc),waterways can also help reduce the cost of transportation thereby reducing the cost of Indian goods and services and making them much more competitive.According to Union Minister for Waterways, Road Transport, Highways and Shipping Nitin Gadkari “The total transportation cost through waterways comes to barely 30 paise per km against Re 1 per km through railway and Rs 1.5 per km through road. Unfortunately, this mode of transport is yet to be tapped in our country,”.

Making Rivers,Canals,Creeks etc into waterways costs very little when compared to laying down a new rail line or making a new highway or expressway.Waterways also need very little to no maintenance.Besides Low capital cost, operating costs, maintenance cost,waterways are highly fuel efficient mode of transport,infact vessels going downstream require very little to no fuel at all.Waterways is the preferred way to transport bulky goods like coal,ores,Steel etc over long distances,for more load and long journeys, transportation through waterways is cheaper than rail and road transport.From the point of Energy saving it is considered as the most useful method. One horse power can carry 4,000 kilogram load in water whereas, it can carry 150 kilogram and 500 kilogram load by road and rail respectively.

In north-eastern parts of  India, rail and road transport is blocked during rains. It is also difficult to lay rail lines or construct roads in these areas. Hence, water transport is the preferred way of transportation in such remote regions.Waterways also help to reduce pollution and carbon emissions overall as they consume very little fuel,as India is a net importer of oil promotion of waterways will also help to reduce the imports of the country.

What is Government of India doing to revive waterways ?

Union Minister for Waterways, Road Transport, Highways and Shipping Nitin Gadkari has emphasized how important the waterways really are and the NDA government has chalked out a realistic plan of converting 101 rivers with 82,000 km total length across the country into the waterways and a bill to this effect has already been moved in Parliament in the monsoon session.

Prime Minister Narendra Modi is stepping up efforts to realise a long-pending plan to link the nation’s rivers and get companies to move cargo from foodgrains, cement and fertiliser to cars using waterways. More than 400 billion rupees ($6 billion) will be needed to develop the new fairways and funding will come from the World Bank, Asian Development Bank and Japan International Co-operation Agency besides the federal budget.The Government has planned for establishing multi-modal hubs in Varanasi in Uttar Pradesh, Sahibganj, and Haldia in West Bengal.

The Inland Waterways Authority which is the primary agency for development and regulation of waterways in the country will also try to raise money from the debt markets and is exploring various models for public-private-partnerships,the organization is making all efforts to overcome human and financial constraints to take on the “very big challenge”.

Showing the way  NTPC, India’s biggest power producer, showed the Ganges can be used to transport coal.NTPC moves coal from the port of Sagar Island up the nation’s holiest river for about 560km to the Farakka thermal power plant in the eastern state of West Bengal.

Quoting NTPC’s director of operations “Our experiment has been a success and we’re considering replicating it to two other plants,”. “Ferrying coal through rivers eases congestion, is more friendly for the environment and comes without any additional cost burden.”Separately the Inland Waterways Authority of India (IWAI) is developing another 1620km waterway now being developed on the Ganges which will help NTPC and other companies in transporting materials for about 25 existing and future power plants on either side of the river. The World Bank-assisted 42 billion-rupee project from Allahabad in Uttar Pradesh to Haldia in West Bengal is scheduled to be completed over a period of six years.

The development of the waterways in country will bring numerous untold opportunities for the Indian Ship building industry.

Conclusion

Creation and upgradation of inland Waterways in the country will help make Indian Manufacturing and Services more competitive both in domestic as well as foreign markets.Inland waterways will not only offer cost effective transportation of passengers and bulk cargo between different regions of India but could also facilitate greater trade with neighbouring countries like Sri lanka and Bangladesh.Initiatives by the Government of India like Sagar Mala project and the effort to make 101 waterways in the country  will come a long way to realize the potential of Waterways in India.

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International North South Transport Corridor (INSTC)

Background

International North-South Transport Corridor (INSTC), is a multi modal transportation established on 12th September 2000 in the city St. Petersburg,Russia, by Iran, Russia and India for the purpose of promoting transportation cooperation among the Member States. This corridor connects India and other South Asian nations to the Caspian Sea,Central Asia,Afghanistan,Russia & Europe via Islamic republic of IRAN.

The primary objective of the NSTC project is to reduce costs in terms of time and money over the traditional route currently being used. Analysts predict by having improved transport connectivity between Russia, Central Asia, Iran and India their respective bilateral trade volumes will increase. A study conducted by the Federation of Freight Forwarders’ Associations in India found the route is, “30% cheaper and 40% shorter than the current traditional route”

What India aims to achieve with this mammoth project ?

Given India’s strategic interests in the Central and West Asian region, and  need for greater energy and economic cooperation between South, Central and the West Asian region,New Delhi would want some kind of route to directly connect these regions with the Indian mainland.This is where INSTC comes in,India wants to use INSTC to augment New Delhi’s ties with the Eurasian region, India had pronounced its ‘Connect Central Asia’ policy in 2012. These efforts got a further impetus during the eight-day visit of Prime Minister Narendra Modi to all the Central Asian states including the Russian city of Ufa for the SCO Summit in July 2015.

In addition, India is also looking forward to attaining full membership in the Shanghai Cooperation Organisation (SCO), which has emerged as an influential regional grouping in Eurasia.

Indian Prime minister Narendra Modi also understands this,that’s why at the recent Ulfa summit,he stated

“As we look forward, we would lend our support to improving transportation and communication networks in the region. We can create a vast network of physical and digital connectivity that extends from Eurasia’s northern corner to Asia’s southern shores. The International North South Transportation Corridor is a step in that direction.

Hurdles & Prospects

The strategic significance of INSTC for India’s future is immense. It offers many opportunities to enhance India’s connectivity with Iran, Afghanistan,Central Asia and European region and vice versa.

At present, India has to depend on the sea route via the Suez canal to St. Petersburg,Russia and then inland to transport goods to Russia and the rest of the European Mainland. To reach out to Central Asia region, goods have to be routed through China or Europe. The routes through China and Europe are time consuming,expensive and long. Therefore, need for a route that is relatively cheaper,shorter and, more importantly,safer and easily accessible. It is said that the INSTC can reduce time and cost of container delivery by a wide margin.

The potential of this corridor will be manifolds for India if it links the South East Asian countries with INSTC.As compared to the current sea route through the Suez Canal and the Mediterranean Sea, the INSTC is less costlier and less time consuming.  The Suez Canal route takes 45-60 days, whereas the INSTC would take 25-30 days. In fact, the INSTC is 40 per cent shorter and 30 per cent cheaper.

How India can solve 2 problems with 1 solution

From India’s point of view, this corridor would not only help India to transport goods at cheaper cost and lesser time to the European markets,which will enable Indian exports to become more competitive due to lower cost and less delivery time.But also it will help India to reduce Pakistani influence on Afghanistan & Central Asian states by providing them with an alternative route to trade with South Asia and South East Asia.

India can help the Iranian port of Chabahar successfully compete with the rival Gwadar port (which is part of the larger China Pakistan Economic corridor ) & stall Pakistani plans of legitimizing it’s claims on Pakistan Occupied Kashmir(POK) by laying down new highways,railways & oil pipelines in the region.It is critical to India’s interests to stop a Pakistani economic revival by any means possible,to prevent resurgence of terrorist activity in Indian Kashmir India needs a weak Pakistan.A stronger Pakistani economy will pour ever greater amounts into funding a Jihad in Indian Kashmir.

Conclusion

Since India is one of the major pillar of this ambitious project a larger share of responsibility falls on her. As the interest shown by other countries grows & clearly highlight the growing importance of the transnational corridor, regular enhanced cooperation among the 14 member states of the INSTC needs to be accelerated. Also, new members  from Central Asia & West Asia should be encouraged to join the INSTC to make it more effective.

India along with the rest of the member countries need to formulate strong long-term strategies both at the bilateral and regional level to address the bottlenecks and to realise the true potential of the corridor. Creation of high level working committees on transport cooperation among the regional countries, setting up of independent joint study groups and organising annual meeting of the technical committees to follow the developments in a consistent manner, particularly on transport projects which are more result oriented in nature, will go a long way in re-energising the INSTC.

The recent initiatives by Iran, India and Russia, supported by the countries of Central Asia and also Azerbaijan,Turkey and Armenia , provides a favourable atmosphere to realise the full potential of the INSTC. However, without sustained & Continuous efforts by the member states to address the bottlenecks, it will only remain an ambitious plan, an unfulfilled connectivity project.

INSTC draft approval: Big step forward on India-Iran-Russia corridor

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India-Russia relations Volume 2

Partnership between India & Russia 

Background

WITH the disintegration of the Soviet Union, an entire chapter of 20the century history came to an end, as did the Indo-Soviet relationship, as it was molded and evolved during the Communist era.Soviet-Indian relation went through a phase of drift and disorder during the last phase of the Gorbachev Government and the first few years of President Yelstin, after the disintegration of the Soviet Union. Russia became the recipient state on which the whole responsibility of carrying out all the treaty , agreements,obligations and contracts entered into by the Soviet Union with other countries, including India. In the early 1990s, the Russian economic,political and  foreign policy situation went through drastic, even traumatic transformation.Relations with the West specially the United states was given more importance than Russia’s traditional allies like India.

The Yeltsin era

Under president Boris Yeltsin relations with EU was also given prominence,so much so that Russia began to think of itself as a European power and believing it could now finally fulfill the long cherished dream of closer integration with Europe,which has been an enduring Russian dream coming down from the times of Peter the Great.In this period Russia almost forgot that vast tracts of its territory lay in Asia. Its relationship with Asian countries, including India, was thus relegated to the background.Things started to improve somewhat after President Yeltsin’s visit to India from January 27 to 29, 1993.

This visit was intended to restore the balance in the Russian foreign policy, which had moved too far away from East towards the West. President Yeltsin visited China and India in quick succession as they were considered as the most important targets in the attempt to restore the balance of the Russia foreign policy. The visit laid the foundation for a new relationship with India. During the visit, the problem of ensuring continues and assured supply of spare parts and other defense equipment for the Indian military machine was seriously addressed and the commitment to keep up the flow of supplies was reiterated.

Russia agreed to upgrade its relationship with India to a strategic level but there was not  going to be any special relationship that existed during the time of USSR, at least during the period of Yeltsin’s presidency.

The advent of Putin

The new Russian leadership under Vladimir Putin  reversed the Yeltsin-era lethargy in India-Russia bilateral relations, signed the first major political initiative, since the collapse of the Soviet Union, between India and Russia began with the Strategic Partnership signed between the two countries in 2000 and established the institution of annual summit meetings.Russia realized that as a Eurasian Economic powerhouse, an active Russian role and influence in dynamic Asia would be limited without a solid partnership with old friends like India.

India and Russia also agreed on establishing ,the Indo-Russian Inter-Governmental Commission (IRIGC) the main body that conducts the affairs at the governmental level between both countries.Some Diplomatic sources have described it as the steering committee of Indo-Russia relations. It is divided into two parts, the first covering Trade, Economic, Scientific, Technological and Cultural Co-operation. This is normally co-chaired by the Russian Deputy Prime Ministerand the Indian External Affairs Minister. The second part of the commission covers Military Technical Co-operation this is co-chaired by the two countries respective Defence Ministers. Both parts of IRIGC meet annually.

In addition, to the IRIGC many other bodies were also established to conduct economic relations between the two countries. These include, the India-Russia Business Council, the India-Russia Trade, Investment and Technology Promotion Council,the Indo-Russian Forum on Trade and Investment and the India-Russia Chamber of Commerce

Era of  Dmitry Medvedev

Relations with India have always been and I am sure will be one of the most important foreign policy priorities of our country. Our mutual ties of friendship are filled with sympathy, and trust, and openness. And we must say frankly that they were never overshadowed by disagreements or conflict. This understanding – this is indeed the common heritage of our peoples. It is valued and cherished in our country, in Russia, and in India. And we are rightfully proud of so close, so close relations between our countries.

— Dmitry Medvedev, about relations with India

During his 2010 visit to India President Dmitri Medevdev signed deals worth Billlions of dollars with his Indian counterpart Prime Minister Manmohan singh,which included 30 pacts in several key areas such as civil nuclear cooperation and defence, including development of Fifth Generation Fighter Aircraft (FGFA) to augment country’s military capabilities.

President Dmitri Medevdev along with his Indian counterpart Prime Minister Manmohan Singh took the Indo-Russian relations to new heights by breaking the Bureaucratic deadlock and signing many agreements which boosted the relations between both countries.

Return of Putin

The global image of Vladimir Putin may have taken a dent after his open backing of the Syrian President Bashar-Al-Assad and his baking of separatists in eastern Ukraine , but in India he is much esteemed for forging a privileged strategic partnership with New Delhi after the chaos and drift of the Yeltsin era.

As a result of the strong efforts made by President Putin the Bilateral trade between the 2 countries has grown from 1.5 billion US dollars in 2002 and has increased by over 7 times to 11 Billion US dollars and with both governments setting a bilateral trade target of $30 billion by 2025 the potential for Indo-Russian ties to grow is immense.

Russia has stated it will co-operate with India in its “Make in India” initiative by engagement in the development of “Smart Cites”, the Delhi Mumbai Industrial corridor, the aerospace sector, the commercial nuclear sector and enhancement in manufacturing of Russian military products through co-development and co-production. Russia agreed to participate in the vast Indian Infrastructure market.Russia has agreed to build more than 20 nuclear reactors over the next 20 year. Russian president stated in an interview, “It contains plans to build over 20 nuclear power units in India, as well as cooperation in building Russia-designed nuclear power stations in third countries, in the joint extraction of natural uranium, production of nuclear fuel and waste elimination.

Conclusion

Despite its improving relations with the USA, China and Europe, India also did not want to abandon its time-tested relationship with Russia. In a world dominated by a single superpower (the United States), both the Indian and Russian vision of a multi-polar world coincided. The issue of terrorism and Drugs has also brought the two countries together. Within South Asia, Russia has consistently supported India on the issue of Kashmir unconditionally over time,without any conditions and opposed its internationalization in global forums like the UN,

Prime minister Modi and President Vladimir Putin must ensure that Russia-India relation gain back the previous importance it had in the Soviet Times.Cooperation between the two countries on various forums like the Shanghai Cooperation organization,BRICS and AIIB forum is a step forward but a lot of work needs to be done.

DISCLAIMER

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