Sunday, June 30, 2013

Lake Louise:wonder wanders in splendor

Lake Louise: wonder wanders in splendor

Wonder wanders in splendor
Thunder blows cold
Grandeur greets the lake
Humility dancing on its lips
Thou art Lake Louise.

Beauty in bounty waves its lily white hands
Smiling skies beckon thee
To the snow-clad mountains
Lush green meadows
And windy pines dance to your tunes
Thou art Lake Louise.

Life is lovely
Views are piety
Misty mountains
Green valley welcome
Thou art Lake Louise.

Wearing the white gowns
You Rocky Mountains
Marry the green meadow
Only to divorce on a shining Sun
Leaving waters high
Into the lakes to turn jade
Thou art Lake Louise.

As the day gets into dusk
Clouds gather to shower
Defining their joy with nature bounty
Thou art Lake Louise.

Returning to Calgary
 The memories of the Lake
Enchant the mind
Pristine glory unwinds
Thou art Lake Louise.

Snowy mountains shine
Sun feeling shy
Waters soft stunt the rocks on shore
Pines in heights in humble the flowing water
Waves’ silver streaks all in smiles
Thou art Lake Louise.

Greeting hands clasping with nature
Hills of Louise clad in while
Drill in shrill send no shivers
Waves’ silver streaks all in smiles
Thou art Lake Louise.

Shriya’s locks of hair
Down her lovely looks
Chintu on heights of joy
Hiding on smiling lips
Gunnu laughing wanting to mount the glaciers
Daunting and daring
Put on hold by loving mom and dad.

Drenching the feel in freezing waters
A joy forever
Lovely lake Louise waters in all its charms
Greeting hands clasping with nature
Hills of Lewis clad in white
Dancing kids jumping into waters
Put on hold by loving mom and dad.

Lo and behold!
From the bottom of the lush green farms
Raise the full scale rainbow
What a sight!
The lovely bow wanted to see unto itself
Mirrored in the sky a wider reflection
The sight you can never erase in life
Thou art the Lake Louise.






Monday, May 27, 2013

Governance in Banks is hollow

Corporate Governance in Banks?
Reserve Bank of India recently reiterated the Risk Based Supervision would be pursued vigorously in the backdrop of Basel III. All Bank Boards have put in place Risk management committee and Audit Committee as a regulatory compliance measure. Now most District Central Cooperative banks and the State Cooperative banks under the supervision of NABARD are also expected to fall in line with such regulatory compliance measures. Apparently it looks as though that the financial sector in India is way ahead of several emerging economies in Basel III implementation management.
Go deep into the functioning of Boards: one realizes that the measures are hollow. The seriousness of these measures fall flat when one realizes that the Supervisor who does annual audit, namely, NABARD sits on the Boards of the State Cooperative Banks and so does the RBI representative sits on the Boards of all public sector banks. In respect of one-time-settlements as out-of-the-court compromise settlements in respect of the non-performing loans, there would seem to be regulatory arbitrage.
The difference between the market value of realizable securities and the loan outstanding plus interest due till the date of settlement, could be negligible. But because of the delays in the judicial process, a series of discussions take place to compromise the loan amount taking into account the ability of the NPA account holder to pay up the amount immediately after considering all options, so that the bank’s balance sheet becomes cleaner and capital provisioning gets humbled. Here lies the catch: the assessment of the CEO in regard to the ability of the enterprise to honor the commitment after providing for all the guarantees and counter guarantees and other collaterals depends on the support that he or she gets from the Board and the willingness of the Board to write off the difference between the outstanding dues and the compromised amount. In several cases such gap runs into huge amount – millions of rupees.
Illustratively, the outstanding loan amount is INR40mn. The easily realizable market value of collaterals and guarantee is INR 110mn. But the CEO convinces the Board: the Court is likely to take a long time to settle this and therefore a compromise is desirable as it would save the bank the ordeal of delay, court expenses, advocate-briefings etc. etc. the compromise amount arrived at is INR6mn, meaning thereby that the Board has to write off INR 34mn. The Board signs off the proposal and accords approval for this write-off. The supervisor sitting on the Board is a party to this transaction. In several cases, the actual amount that the borrower settles is a few notches up over the six million rupees. The difference between the actual settled amount and that appearing in the books as long as it is far below the outstanding amount, the borrower is comfortable. The sharing of this booty between the CEO and the Board could be anybody’s guess. Such cases are more in cooperative banks and in respect of medium and large enterprises as well in corporate loans of commercial banks. It is not unlikely that somebody accuses me of a wild and senseless allegation against responsible Boards. But if one goes through the OTS settlements that were cleared by the State Cooperative Banks’ Boards, within a few months after the elections to the Boards are announced, the allegations have a chance to stand the test.
Since the supervisors/regulators are on the Boards, even if some intelligent auditors bring to light such losses the remarks have the chance of being either ignored or expunged lest the RBI or GoI can pull them up for being party to the resolution that resulted in the loss!!

The best way to arrest these types of transactions is to strengthen the corporate governance by the regulators/supervisors at once disassociating themselves from being on the Boards of all categories o f Banks. Will this ever happen? The non-executive directors abound in Indian Boards but they end up as spectators and rubberstamp signatories. 

Inflation - the index and the real

Inflation – the index and the real:
Chidambaram-Montek led inflation index came down to push for a rate cut from the RBI in its impending monetary policy. The inflation indexed bonds (IIB) making their corporate entry initially would ere long move to individual investments as well, to distract from investments in gold. But this IIB is linked to wholesale price index instead of Consumer price index.

Just this week when I went to buy my rice and vegetables I noticed that my valet emptied in no time and had to resort to my credit card. Fine rice is at Rs.50 a kg. Dals range from Rs.60 to 80 a kg. Oils range from Rs.80-220 for Til oil. Vegetables soared to the highest with just two vegetables in the range of Rs.25 a kilo and the rest are all at Rs.40 a kg. Small savings are getting eroded fast, more painfully for the retired.
Politicians take comfort either in jails or public meetings not withstanding the soaring day temperatures. They keep on making promises that can hardly be fulfilled. 

Middle class are fast moving into the lower stratum. This is the level playing field of the government. Governments that indulge in this luxurious game may have to pay a very heavy price in the days to come when elections would be round the corner.

Thursday, May 2, 2013

VITALINFO: Can the RBI innovate?

VITALINFO: Can the RBI innovate?It is not just in the area of credit risk assessment, measurement, management and the rising NPAs that require innovative and out-of-the-box thinking. sometimes it is better we go back to the basics and introduce new measures that would have relevance for future and the present. 
Even after the core banking solutions are across the board in all the banks, why should different accounts have different cheque books? One cheque book should be adequate that can be used against all the deposit accounts of the account holder. This would save a few millions of rupees of secured stationery apart from the customer having to face litigation for issuing a cheque in one account where the balance dried up  on account of application of a standing instruction or even some miscalculation but having adequate balance in other account. This is a very simple innovation that can be immediately introduced. 
There will be many more simple customer friendly innovations that existing technologies can bring forth saving costs for both the bank and the customer.

Saturday, April 13, 2013

Interest Rate debate begins


INTEREST RATES DEBATE BEGIN IN INDIA FOLLOWING ABENOMICS
B. Yerram Raju
Annual credit policy is due by May 13. The demand for easy money policy is on pressure zone following what Japan did. The Economist in its issue dated 6th April 2013 is emphatically unsupportive of the cheap money policy ushered in by the new governor of Bank of Japan. The lower interest rate regime in the post-recession period 2008-09 would appear the new normal. Bank of England and the European Central Bank also tweaked lower interest rate regime to last longer than expected. Does this justify the cry of corporate community in India to follow suit to give boost to the manufacturing sector and growth? Will the current inflation rate allow such intervention? What has been the result of the brief interest rate cuts that had already surfaced?

The lowest bank rate that Indian economy witnessed was 2.5% in 1936 – during war time. The target of rate cut was not growth of the economy but the sovereign balance in the British colony. Now Indian economy has come of age but the global integration left the so-called decoupling with the rest of the world a near impossibility.

Kenneth Rogoff, a Harvard University Professor says: “Like most economists, Bernanke believes that if policymakers try to keep interest rates at artificially low levels for too long, eventually demand will soar and inflation will jump. So, if inflation is low and stable, central banks cannot be blamed for low long-term rates.” But the Indian situation is different. We have inflation soaring. Growth is down and under. Current account deficit is raising its ugly head with 6.7% last month and a bourgeoning fiscal deficit that refuses to be reined in with General Elections less than a year away from now.

The so-called economic resurgence and effective regulatory interventions that kept India’s growth rate high in the Eleventh Plan period are now turning out to be only things of the past. Manufacturing growth is at just 2.5%. Agriculture and services sectors are not in any rescue mode.
The priority for the monetary authority is clear as has been repeatedly asserted by the Governor, Reserve Bank: reining in inflation for its impact on the poor is far more than any direct tax imposed on them. The rate cuts in the past though in small bouts of 0.25% every time, has not triggered credit growth in the areas most desired. The risk appetite is at the low end because of the high NPA levels in corporate and infrastructure credit. Even the corporate debt restructuring indulged in liberally and the capital refurbishing by the government to the public sector banks would not leave enough confidence in the regulator to resort to a rate cut as a panacea for the current imbroglio in growth.
What will the rate cut do anyway?
If the Banks were to respond positively, they should reduce their base rates and lending rates correspondingly. The rates on deposits of key segments will have to be lowered to ensure that the net margins do not erode. If the interest rates on deposits are lowered, propensity to save will take a backseat. Bond rates in this scenario despite being attractive,  are not safe bet for investors in the context of high debt-GDP ratio. There is need to increase the incentive to save as the domestic savings rates have been coming down during the last two years consecutively. Low interest rates are not certainly going to help the situation. If the inflation is at 9% and interest rates for term deposits are on average at 8.5% the negative return is 1.5% or the depositor paying this much for safety and security of his funds to the bank.
When the market rates of interest are not influenced by official rates even marginally credit is unlikely to spur production of goods and services. Further tighter regulation of lending standards and Basel III implementation deadlines also force banks to step up bank lending to the much starved SME sector increasingly difficult. This will give rise to the operation of a vicious cycle.
Monetarists strongly believe that a mere reduction in the quantity of money is a dangerous device to stop an inflationary development. Moderately used, as Hansen says: ‘it courts the failure of ineffectiveness; pushed to the needed fanatical extremes, it courts disaster.’
There should be a many-sided programme to control inflation:
1.      First hold down government expenditure to what is urgently necessary so that budgetary surplus can emerge.
2.      Resist the temptation of incentivizing FTAs through tax-cuts. There is a demand to reduce taxes on luxury goods like CKD SUVs to 30% and such demand should not be conceded.
3.      It is necessary to resist wage-inflation: periodic increases of DA at Central Government level triggers demand at State government levels and this spiral would lead to price-wage increases – both a symptom and a further cause of inflation.
4.      Inflation indexed bonds should be sold vigorously.
5.      There is no room for relaxed credit standards.  In the context of board-sanctioned credit triggering huge NPAs, all the proposals that go to the board should be scrutinized by risk management committee and credit committee separately and a balanced view on entertaining such proposals shall be taken. There is need for looking at Board accountability.
6.      Speculative areas of credit like the real-estate howsoever tempting should be avoided.

What can’t be cured must be endured. We must learn to live with existing rates of interest for some more time to come until the fiscal corrections come about and policy initiatives to secure more foreign investments bear fruit. Japan now is no guide for India’s future. 

Thursday, March 7, 2013

That is Mother


MY MOTHER
Yerram Raju (written in 1987 on her 60th birth day)
Thoughts of Mother lovely
Her acts affection in bounty
The recall makes me
Travel in thrills
Wonder how she made life
So sweat for all of use
Notwithstanding all the odds
She had to face
Well, that is Mother.

My boyhood friends surprisingly
Swamp on our house
Not because they love me
But my Mother's choicest recipes
Deliciously served for them
All of them recall their juicy taste
Yearning to reach after
Three decades again
Well, that is Mother.

My dad would invariably
Look angry - the anger
Of impatience for results from
His wards -
The anger of a tiresome and
Exacting Bank job in pre-seventies
The anger of affection
All the anger off-loaded
Day after day on the
Most indulgent lady
She absorbs and distributes
All smiles and love
Well, that is Mother.

A thoughtful prayer — her wont
An erudite Religious scholar
Unto herself the treasures
Of knowledge bequeath
Emits light in thoughts
Showers wisdom in words
Affection in Action
Who else can do it
Well, that is Mother.

Taught humility and forbearance
To twelve of her children
And the other twelve that joined their lives
To make life sweet and welcoming
Life is great and lovely
What else can it be with
She ruling the destiny of all of us
Well, that's Mother.

If patience is a vice, she has it in abundance
If love is a crime, she commits every minute
If prayer is bad, she does it every moment
If talking sweet is intolerable
We have to bear it
If service to neighbours is unsocial,
She is highly indulging
Seeing God all around her is of least of privileges,
She enjoys it
Who else can I think of
Well, That is my Mother.

Sunday, March 3, 2013

Post Budget Analysis 2013-14


Union Budget 2012-13-On Expected Lines and little to cheer.
B. Yerram Raju
Budget is generally viewed in the backdrop of the Economic Survey. The Economic survey presented yesterday did not hide the failings thus far in the economy and just fell short of telling that the governance deficit would something beyond the FM. It laid bare the retarding growth and rising inflation and also agreeing with  the CSO estimate of depressing 5% growth expectation during the current year. As at the quarter ending December 2012, actual growth figures ended at just 4.5%. It attributes the retardation to the declining contribution of services sector from 8.2% in 2011-12 to 6.6% in 2012-13 and in part from the fall in growth in agriculture and industries sectors. It complements the medium term fiscal consolidation effort that pegged the fiscal deficit at 5.3%. It expects that the growth would be in the range of 6.1%-6.7% in the coming year. It leaves us the hope that the downturn of the economy is ‘more or less over.’ ‘Economic slowdown is a wakeup call for stepping up reforms,’ the Survey mentioned.
It also predicts that the global economy is also likely to recover setting at rest that the shadow of continuing global failure would be a drag on the Indian economy. Core Inflation shown to be at 4.2% and wholesale price index at 7percent with food inflation at double digit figures leaves one in doubt regarding the inflation figures mentioned in the Budget speech of the FM .
This optimism left hope in the markets that the Budget would be in the direction of spurring investments and domestic savings, measures to increase the consumption to spur growth and fiscal prudence to contain inflation. But alas, the index fell by 1% and the currency fell equally after the presentation of the Budget.
It hoped that the fiscal targeting and the likely downtrend in inflation would help RBI to look at rationalizing the interest rate structure.
Agricultural growth declined from 2.7% last year to 1.8%. It called for appropriate policies in the farm sector to reach the 12th plan target of 4% per annum: for improved agricultural growth, the survey underlines the need for stable and consistent policies where markets play an appropriate role, private investment in infrastructure is stepped up, food prices, food stock management and food distribution improves, and a predictable trade policy is adopted for agriculture. The high dependence of employment in the backdrop of a declining share in GDP to 14.5% is a cause for worry and this requires consistent policy to develop alternate skill-sets in farm labour to migrate to rural livelihoods programmes on one side and increasing mechanization on the other. Its analysis of agricultural credit is however flawed: in the face of declining area and deficient monsoon, if the banks claimed achievement of credit targets for agriculture, something is seriously wrong and the Survey should have lent a word of caution instead of praising the banks for reaching the targets.
The FM had to provide for capital refurbishment to the Banks in the public sector at no less than INR 1.17crores to meet up with the Basel III norms from April 2013 and the drift in the composition of NPAs from the erstwhile priority sectors that anyway do not cross 40% of lending portfolio to the corporate debt hiding mostly in the power and infrastructure sectors is the biggest worry. He has to provide for the railway deficit of Rs.26000crores apart from the revenue deficit. Implementation challenges of Food Security Act would also leave no room for containing the deficit. Of this, he provided Rs.26000cr to PSB capital in the Budget. Moving up on the revenue front against an incremental 1 to 1.7% of growth is not going to be substantial. Therefore, containing the fiscal deficit at the expected 4.8%  would appear unattainable.
The supply side issues as were made out to be the key factors for food inflation at the current growth in agriculture but had little mention in the budget.
In this backdrop, it would be interesting but at the same time highly disappointing to see the Budget neither growth oriented nor towards containing fiscal deficit. There are also very few indications as to when and how the current account deficit would be brought down to a reasonable level of, say,3%.  Inflation anyway the economy has to reconcile with during the year, notwithstanding any interest rate cuts that the RBI may like to offer. Let us now look at the Budget figures as to why I have to come to such conclusion.
How the pie of rupee gets divided between revenues and expenditure gives us a clear picture. 27% of the Rupee in budget 13-14 comes from borrowings while it was 29% in 2012-13. The question that now confronts us is whether this marginal reduction in borrowings would contain the fiscal deficit? The straight answer would be a natural ‘no’. Let us see the other avenues vis-à-vis last year: There is no change in the corporate tax pie- at 21%. Income tax has a marginal rise of 12%. Revenue from customs has come down from 10 to 9 percent while the Union Excise duties are estimated to come down by another 1%. Service taxes and other taxes are expected to go up by 2% compared to last year at 9% in 13-14. Non-tax receipts remain at 9% while the non-debt capital receipts are up by a percentage. In so far as expenditures are concerned, non-plan assistance to State and Union Territories and Plan assistance remain at the same share of 4 and 7% respectively. Same is the story of State’s share of duties and taxes at 17%; other non-plan expenditure at 11% in the year just concluding and in 13-14. Defence expenditure comes down from 11% in 2012-13 to 10% and he spent ten minutes in his speech. Central Plan outlay has also come down by a percentage point from 22% in 12-13 to 21% in 13-14. Do these figures give any confidence that growth will be spurred? No way. At the same time, the growth projection is 6.4% - 1.4% more than the current year! He defended the lower growth rate as part of global phenomenon. China alone is credited with higher growth. How can fiscal deficit come down to 4.8 percent in the backdrop of such uncertain growth picture?
Yet, let me list out some of the best things that this Budget announced:
The FM assured higher employment for youth. Health sector has secured the highest attention. Integrated development of women got an allocation of Rs.91.134crores, the highest share in the recent years. He has even promised an exclusive Women Bank with Rs.1000cr in the public sector. He may have already identified the Woman CEO for the Bank!! It would work for the women and by the women.
Investment incentives have found their due share and the stock markets have everything to cheer up which they did just for a short while. The MNREGS got an allocation of Rs.80184crores. This allocation is not backed up by any specific direction. Actually the scheme objective specifies creating livelihood opportunities but has confined itself to providing wage distribution with no asset creation. This has led to serious imbalances in agricultural labour wages and the farmers have been demanding a mechanism by which the scheme gets dovetailed with the crop cultivation and horticulture in measurable terms. Rajiv Gandhi equity Scheme has been liberalized. Household savings have also found a new route. Interest deduction for investment in housing up to Rs.25lakhs is also on cards and is likely to be announced after discussing with the RBI. Rs.2000 tax credit at the lower end of the Income tax bracket would bring cheer to the wage earners. Inflation Index bonds and Inflation indexed National Savings certificates are the new instruments of savings for households are welcome features. On the infrastructure side two ports – one from West Bengal and another from Andhra Pradesh found mention. National waterways development for bulk cargo transport to ease the road transport burden has also been announced. MSMEs get a better deal in terms of allocation of higher refinance from the SIDBI and Micro Finance Equity Fund, credit guarantee fund  and Rs.2200crs for 15 additional technology centres and incubation centres as also waiving the IPO offering for getting listed on SME Exchange are worthy to note. KVI artisan clusters also received an allocation of Rs.800crores; handloom sector to get working capital and term loan at 6% covering 1lakh individual weavers and Rs.26crores interest subvention.
Another sector that got rich attention is Finance Sector: He proposed setting up a Standing Council of experts in the finance ministry to analyse the international competitiveness of the Indian Financial Sector.  He also proposed a Committee to provide clarity on the treatment of Investment as FDI or FII.
The most disappointing attention is for the farm sector that got an allocation of just 1.4-1.5% of the total budget outlay. Although growth of farm sector at 4%per annum on average for the 12th Plan is held imperative for attaining 8% growth, there are no indications to spur such growth in the budget. One can argue that agriculture being a State subject much depends upon what the States allocate. But the Economic Survey as we noticed above desired specific policy direction for food prices, food storage and food distribution. In the wake of 1.8% growth in the sector in 12-13, and with a drop in the area cultivated how he expects a lofty target of 275mn tons in 13-14 is a big question mark, On the top of it once the Food Security Bill is passed how he proposes to meet the nutritious food and grains at the promised level in the Act for the poor can at best be a wild guess.
It was not also clear as to how he presumed that the current year’s credit allocation for short term agriculture at Rs.5.75lakh crores when the area under cultivation has come down is not clear. On the top of it he proposed to raise such short term loans for crops that too at concessionary rates of interest to farmers to Rs.7lakh crores. In any case this does not come from the budget. There is no allocation for interest subvention for such huge outgoes to the Banks.  Continuing 4%interest scheme on farm credit and treating investment in cold storage as infrastructure funding may be welcome but he could have treated investment in cold storage transport also as infrastructure funding.  This would have made the movement of perishables and vegetables, meat etc easier and faster and would have stabilized their prices for the farmer. 
On the manufacturing front, the budget allows for deduction of investment allowance of 15% on investment of Rs.100cr or more in plant and machinery during the next two years 13-15. Incentives for semiconductor manufacturing facilities including zero customs duty for plant and machinery to promote domestic manufacturing of hardware much of which is currently imported.
He chose to announce recapitalization of the public sector banks to partially meet the requirements of Basel III. But when the required recapitalization is of the order of Rs.1.17lakh crores, Rs.26000cr allocation would be just a little less than one fourth of the requirement.  Another similar incentive that might be counter-intuitive is, increase in the rural infrastructure development fund.  The Expert Committee on Agriculture Indebtedness 2007 suggested de-linking of RIDF from the lending to priority sector. As long as this does not happen, there is a window of opportunity for the commercial banks to dress up their figures for lending to agriculture. Third, although cooperative credit structure, occupying a little over 12% of financial space, is in the hands of States, the FM would have done well to release recapitalization of such rural credit cooperatives who have moved forward in effective legal and structural reforms in that sector because it is they that are within the easy reach of the farmer and they are the best instruments of financial inclusion if shaped properly.  Excluding cooperatives in the effort of financial inclusion and dependence on the unwilling commercial banks would for sure delay the process by a decade more if not less.
The announcement that GST would find its entry in the midstream of the Budget year having covered good ground to get acceptance of States and an allocation of Rs.9000crores symbolically is a good push for this important reform measure. He kept to his word regarding the direct tax by conforming to the code and a marginal increase at the lower threshold has been noticed to be not upsetting his revenues on this count. He introduced voluntary disclosure and payment of service tax for filing a declaration of past dues for the past five years by waiving penalties and interest on the hope of a million tax payers joining the stream, enhancing the pass through privilege, providing for bringing jewelry up to Rs.50000 for men and Rs.1lakh for men as part of baggge that will be welcomed by the middle class. Similarly mobiles costing Rs.2000 and below would not get into additional tax levied. Other luxury goods have been taxed. But the rich have been let off. He is himself rich and would not like to tax himself. 

Thursday, February 14, 2013

Governance in Agriculture


GOVERNANCE IN AGRICULTURE:

Prof M.S. Swaminathan recalling the combat with Bengal famine observes rightly: ‘If agriculture goes wrong, nothing else will have a chance to go right in this country”.[1] Excepting the unleashing of a National Policy for Farmers in 2007[2] that still is crying for implementation, nothing seems to have gone right in agriculture sector. Farmers’ suicides continue still in agriculture-intensive States like Andhra Pradesh, Karnataka, Punjab etc. There are regions where the farmers declared a crop holiday to demonstrate their anger against poor governance. The purpose of this article is to address the issue of governance in this sector.

Ministries influencing the farm sector:
There is no other sector than agriculture in the country that is in the stranglehold of a number of inter-connected Ministries at the Centre: Union Ministries of Agriculture and Cooperation; Water resources; Food Processing Industries; Rural Development; Commerce (dealing with international trade) & Industry; Environment and Forests; Micro, Small and Medium Enterprises; Consumer affairs and Public Distribution; Science and Technology; Non-conventional Energy Sources; Finance and above all the Planning Commission. Agriculture being a concurrent subject in the Constitution of India, the States has as many corresponding Ministries that interact with the Central Government in governing this farm sector. I have not come across another country that governs the farm sector through such a web of governance. Each Ministry and each State Government has its own last word that rarely matches with the other. The farmer stood at a disadvantage finally.

It is politically infeasible to reduce the number of Ministries either at the State or Centre for the simple reason that each stratum of the fragmented democracy should get a berth in the seat of power. But after six and half decades of independence, having successfully combated the famine, having moved to impressive ranks in the world like milk, poultry, horticulture etc in production we are far away from providing food security. 40% of production is still wasted or rotting in the government warehouses that invited the wrath of the Supreme Court to correct the situation with expedition.
The Cabinet Sub-Committees at the Centre and States that constitute a coordinated mechanism for releasing the policies relating to agriculture or for that matter any other policy are the only coordination forums now functioning. The oversight mechanism for monitoring and concurrent evaluation of the functioning of regulatory institutions suffers from lack of such coordination. There is no regulatory impact assessment of any policy and regulation as an ongoing exercise like in the UK.

We are living in a fast changing and dynamic world requiring quick and correct responses. Land and water resources, the principal factors of production in the farm sector are scarce but the bourgeoning population adds pressure year after year on these scarce resources. Resources like water, soil, plants and animal life have the capacity to regenerate but the speed may not cope with the ever-increasing demand on them. Sub-division and fragmentation of holdings, riparian water resources and shrinking farm labour coupled with rising consumer expectations for quality food and water make the governance complex. If the farmer has one cow in his backyard, it will take care of his organic manure requirements of one acre of cultivable land. But the cow is with department of animal husbandry department; backyard is with panchayati raj department, manure is with department of agriculture and biodiversity; and land is with the revenue department. This is where governance matters as each department moves to regulate its own area according to what it thinks right and not what is right.

What do we mean by ‘governance’?
Wikipedia defines: “Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of decision-making or leadership processes.” Governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility. This stands on the four pillars of decentralization, accountability, transparency, and coordination. It embraces action by executive bodies, legislatures and Parliament and judicial bodies (from the local levels to the Supreme Court, the highest judiciary).

In the post-liberalisation era, governance has been the most discussed subject but is like the four blind men trying to defining elephant. It has resulted in assertion and acceptance of certain rights for good: the right to work; the right to information; the right to safety and security for every citizen. Some have already taken the effect of legal sanctity and yet trying to find space for functional existence. Since my focus is on governance in the farm sector, I would try to look at areas that need reform viewing from the interest of the farmer, the centre of attention.

The reform in governance in so far as the farm sector is concerned should start from understanding the complexity of farming, farmer and his family and the society in which he lives and to which he contributes most. Philosophically speaking, if I receive something, I should be in a position to return something to the giver. The farmer gives me food and makes me live and therefore, the least I can give him is to provide conditions that continue to enable him to live happily and continue to giving me all that I want to feed myself, my family and my dependents.

How does this happen in the diverse and complex of governance that we have today?  Implementation of multiple schemes and programmes by different departments and Ministries for the farmer has led to centralization. Decentralisaton of administration, the first principle of governance in the absence of the focused attention on the target led to maldistribution of scarce resources and the equity has become a casualty in the name of equality. Conceptual correction is required at the point of decentralization. How is the decentralization process involving the farmer at the lowest level of administration – the panchayat?

Accountability is the next principle demanding performance not just from the point of view of financial goal but from the point of view how this target of governance has improved – the lot of the small farmer, the marginal farmer, the landless labour, and the tenant in the overall framework of farming.

Transparency is the third principle of governance: How is this achieved? Has information technology been effectively used in communicating to the farmer all that he needs to produce, store and market and earn a cost plus to continue in production with dignity and honour? Mobile technology has made rapid strides in passing on information from the learned to the learning and also for effecting payments and receipts. How much of investment is required to take this technology within the operating convenience of the illiterate and semi-literate soiled palm of the farmer?  Responses to these questions have the potential to resolve the information asymmetry of the farmer in remunerative technology adoption.

Coordination is the fourth principle of governance, the real villain of the piece. How can this be achieved?
In all the States – that is, nearly about twelve that have preponderance of agriculture as the driving force of their growth and are also carrying the burden of growth of the rest of the economy and at the Centre, agriculture vision document should be prepared after a thorough inquest by the Agriculture, Animal Husbandry and Horticulture Universities in the State as a first step. This vision document should be shared with all the stakeholders and the scientists within a set timeframe. This document shall lay down the objectives and goals of farm policy and coordination mechanism.
Second, each of those States shall prepare annual agriculture sector survey with the farming related universities in the lead and this annual survey should be presented before the Legislative Assembly, a day ahead of the presentation of the Agriculture Budget that should also be presented every year ahead of the General Budget session. This Budget shall be subsumed in the General Budget. This process would make sure that the finances of the state move in tandem with the requirements of the farmers.[3]

Third, once in two months the Coordinating Forum on Agriculture (COFA) with the Minister of Agriculture ( could be designated as Deputy Chief Minister in such States) presiding should review the budget releases and ensure that the lowest level of delivery gets the physical resources to be in the reach of the farmers. This COFA shall be vested with the authority of vetoing any proposals and censuring any actions of those that run counter the effective implementation of the policy goals in agriculture.

Networking is the name of good governance. Technology should help taking innovations and research on the field to the lab for commercial assessment and the Indian Council of Agricultural Research and the farm extension wings in the States should spearhead this area and for backward integration.
Agriculture Marketing needs to move to farmers from the politicians. This would require change in the Agriculture Marketing Acts of the States and huge investments in technology at each market yard where the farmer finds comfort to unload his produce with the swiping of his SMART card and walk away with cash into his bank account. Improving governance in this area holds the key as, in all the other areas we have reached some milestones that can be moved forward more by miles than inches faster than a few decades ago. Let us resolve to make agriculture right to make sure that everything else in the country goes right. 




[1] M.S. Swaminathan: From Bengal Famine to Right to Food’, The Hindu 13th February , 2013
[2] M.S. Swaminathan: Agricultural Strategy, internal security & Sovereignty, The Hindu 1st January 2008
[3]B. Yerram Raju: Forthcoming publication: “ Getting the Perspective Right: Comprehensive History of Agriculture Banking”, Konark Publishers,p.27