A tax hell on earth

A few weeks ago, Prime Minister Narendra Modi expressed his displeasure with India’s tax administration and asked the Central Board of Direct Taxes to deal with public grievances. Later, the finance minister spoke strongly in support of the income tax (IT) department and stated, surprisingly, that India’s tax regime was not confrontational. It is indeed difficult to reconcile these contradictory statements.
The finance minister went on to state that India was not a “tax haven” and reminded corporate India that “legitimate tax demands” could not be termed as tax terrorism. Nobody, anywhere in the world, can indeed complain against a legitimate tax demand. But what has made India a tax hell is outrageous tax demands, which have made this country a laughing stock in international tax circles.
The retrospective amendments after Vodafone and the persistent abuse of transfer pricing provisions seriously reduced the inflow of foreign direct investment (FDI). And the recent onslaught against foreign institutional investors (FIIs) will seriously cripple the inflow of funds from these institutions. The erstwhile finance minister (and current president) thought that by retrospectively nullifying Vodafone, it would collect more than Rs10,000 crore by taxing overseas’ transfer of shares. Three years later, it has collected nothing, but simultaneously lost perhaps thrice that amount in FDI.

The latest demand of more than Rs 40,000 crore from the FIIs is seriously flawed and will have disastrous consequences. These demands will certainly get embroiled in litigation for years, with negligible tax collection. Once again, our tax department will admirably succeed in repelling foreign investment and making India as unattractive as possible.The impact of Vodafone was evident on the FIIs as well. Net investments of Rs 1,68,000 crore dropped to Rs 51,000 crore after the Vodafone retrospective amendment. In the financial year 2014-15, thanks to the Modi wave, FIIs have made a net investment of Rs 2,80,000 crore, which is the highest ever this country has seen.
Without question, the gargantuan demand of minimum alternate tax (MAT) against FIIs is yet another example of Indian tax terrorism. In the first place, it is impossible to believe that the IT department would have allowed “legitimate” tax dues of Rs 40,000 crore from FIIs to have escaped assessment for almost two decades. In the same breath, it is equally absurd to suggest that, despite tax audits, FIIs merrily evaded taxes of this magnitude for several years.
Now, MAT is intended to apply to domestic companies that pay little or no tax because of the special incentives that the Income Tax Act itself grants. Indeed, MAT is itself a mild form of tax terrorism as this example illustrates: investments of thousands of crores were made into special economic zones (SEZs) on the promise that profits would be tax-free. SEZs were actually meant to be “tax havens” because all taxes were exempt. But because SEZ units pay zero-tax, the government asked them to pay MAT at 18.5 per cent. A promised tax haven was “legitimately” converted into a mini tax hell.
Most of the FIIs are not Indian companies. They are, however, governed by the Sebi (Foreign Institutional Investors) Regulations, 1995, which require an FII to have a bank account and a custodian. Most FIIs do not have any branch or office in India. Also, from 1995, FIIs have never been treated as domestic companies or as companies governed by the Companies Act, 1956. So, what happened in 2015?
Welcome to the wonderland of the Indian IT department. As the Sebi regulations of 1995 require certain statutory compliances like opening a bank account in India, the tax department now contends that all FIIs are deemed to have a “place of business” in India under Section 591 of the Companies Act, 1956. Consequently, the FIIs are treated on par with domestic companies and liable to pay MAT.
If Infosys or Tata Motors opens a bank account or even has an agent in London, will it be treated as a British company? If an Indian investment company is required to operate a bank account in London because of the UK’s securities regulations, will it become an English company? The entire MAT demand of Rs 40,000 crore is being made by reopening assessments on the foundation of the laughable legal premise that complying with Sebi regulations results in FIIs having a place of business in India. If this was the correct legal position, what was the IT department doing for the last two decades? Indeed, FIIs have paid taxes on their long-term/ short-term capital gains, dividends and interest income — and India has never been a tax haven for the FIIs.
The finance minister and revenue secretary have justified these demands on the ground that a decision of the Authority for Advance Ruling (AAR) was in favour of the Revenue. Therefore, while the FIIs are protected for the future, nothing can be done for the past years.
This is simply not true. In three decisions of the AAR, it was held that the foreign companies are not liable to pay income tax unless they have a permanent establishment in India (Timken, Fidelity and Royal Bank of Canada). In Fidelity, it was also specifically held that an FII, appointing a custodian in compliance with Sebi regulations, did not attract MAT. The two cases in favour of the Revenue are Castleton Investments and ZD, which simply gave a contrary ruling in total disregard for the earlier decisions. What is even worse is that in both Castleton and ZD, the Revenue actually agreed that MAT did not apply to foreign companies. Despite this concession, the AAR strangely went on to hold that foreign companies are liable to MAT in these two cases. Further, the demand against FIIs is not on the basis of the two erroneous AAR rulings but on the ground that FIIs have a “place of business” in India — a point on which the law is decidedly against the Revenue.
If these absurd demands are sought to be justified, India’s financial future is fraught with danger. After a decade, we have a PM who wants to dream big. But all his dreams are guaranteed to be shattered by our tax administration that makes our investment climate highly toxic. Our tax laws and administration destroyed FDI a few years ago. Unrepentant, they will now wreck FIIs too. It requires a steep and arduous climb to make India a haven for investments. But the descent into hell only requires a few absurdly aggressive tax demands

What’s Left?

The story we heard back in the late 1950s was that Gamal Abdel Nasser, legendary president of Egypt, was visiting India, and Jawaharlal Nehru held a reception for him. Nehru was personally introducing Nasser to several invitees, Hiren Mukherjee among them. Nehru introduced him too, as the communist MP. He saw the unasked question in Nasser’s eyes — “Communist MP?” — and answered it: “Mr President, you have put your communists in prison, I have put them in Parliament.” Implied in the answer was that there are different ways of making communists irrelevant to a functioning democracy.
Not quite, though. Both Indian democracy and Indian communists have shown remarkable resilience to survive and flourish, with all the ups and downs inherent in the process. Their adaptability to the conditions of what the communists still classify almost derisively as bourgeois democracy is testimony enough, even for those not quite their sympathisers. Yet, the fact that a crisis of existence stares them in the face is one of the most important and honest admissions of the CPM’s just-concluded party congress. The party is seeking a way out in the leadership of one of its most promising leaders, Sitaram Yechury.
As president of the JNUSU in 1977-78, Yechury was quite a terror for members of the university’s Academic Council (AC). He never raised his voice, never uttered one word that could be objected to and was, in fact, polite to a fault. The terror was the AC meetings in which he raised and argued on issues relating to students for 10 hours; all other issues of would be disposed of in a half-hour!

Is this mere rhetoric, or is there substance to the assertions? It remains an open question, even though Yechury does have a vision. His emphasis on countering neoliberal economic policies, rather than taking on capitalism itself, the threat of social cleavages being followed as a well-thought-out strategy by the Narendra Modi government, and his concern for the declining support for his party and its ideals, especially among the youth, underline his vision. He is aware that on one hand, the world today lives under the supreme dominance of capitalism with its alternative decimated; on the other, the world is in ferment as seldom before. If the neoliberal economic regime is increasingly spiralling all wealth to the top 1 per cent around the world, theoretical as well as political challenges to it are also growing in all corners. Besides the basic questions being raised by Noam Chomsky, Thomas Piketty, Slavoj Zizek and others, and the massive protests staged in the Western world over the years, alternative regimes have been experimented with in Iceland, Venezuela, Uruguay and more recently in Greece, with Spain threatening to follow.The ability to present his argument with cogency, clarity and force has served him and his party well. Once in a while when one gets to hear him intervene in the Rajya Sabha debates, the affection and admiration for him comes back. It came back when he opened his acceptance of the general secretary’s post with the statement: “This [party] congress is the congress of the future.” He has also assured the audience of the party’s turnaround.
Clearly, ever evolving modes of thought, strategies and forms of mobilisation to gain political space in India is the chief challenge before the new team in the party’s politburo. The AAP has demonstrated that staging huge rallies at the Ramlila Ground in Delhi is not always the best way of mobilisation; dedicated volunteers’ close and constant contact with the people is a more telling form. In some ways, the BJP also invented, under Modi’s leadership, massive mobilisation through a deluge of publicity never seen before. Two alternatives to the existing practices of political parties, both extremely successful, because some different thinking was invoked. The situation calls for new modes of thought and planning.
But the CPM’s target is not and should not merely be mobilisation to win elections; much more is at stake, for itself and for the nation. Yechury has rightly laid equal stress on keeping the social fabric of India alive, which is being ripped apart by the present regime. Ask a school child what characterised the British colonial regime and pat would come the answer, “divide and rule”. Thinking back, the colonialists seemed to have been utter novices in this arena; the real masters are the Sangh Parivar, with diverse roles assigned to all its constituents in the government and outside. The communists have the great advantage over other parties in that caste or religious identities are not central to their mode of thinking and social and political operations. They can and do operate outside of either the “Hindu-Muslim bhai bhai” or “Hindu-Muslim enemies” syndrome.
There seems to be promise in Yechury’s early response to his election that the time has come to go beyond making intelligent statements and passing resolutions on issues of grave importance to the nation. It is time to truly connect with the people who matter to it. The AAP has shown that it is possible to do so within an amazingly short period of time and practically without organisational backing. The CPM would be ill-advised to imitate the AAP mode. But it must realise that the future Yechury talked about demands hard rethinking and even harder ground work. We, sitting on the fences, can only hope for the best — a hope that is not untouched by some apprehension.

The great Game Folio: China in Bandung

If Chinese President Xi Jinping’s two-day visit to Pakistan was about celebrating Beijing’s all-weather friendship, his presence at Bandung, Indonesia this week is likely to see a definitive assertion of the Chinese claim to leadership in Asia. From Pakistan, Xi heads to Indonesia to commemorate the 60th anniversary of the Bandung conference of Asian and African nations.

At Bandung in April 1955, China’s prime minister, Zhou Enlai, made an enormous impression on Asia that was deeply suspicious of the new communist rulers in Beijing. Zhou, who set out to win new friends in the region, certainly succeeded with Pakistan. Bandung was also where the Hindi-Chini Bhai-Bhai began to fade, as Zhou ran rings around Prime Minister Jawaharlal Nehru, who was viewed as overbearing and condescending by the Chinese leader.

The personality clash was only part of the problem. Nehru presumed he was speaking for the whole of Asia and denounced the US-led military blocs that many Asian nations had joined voluntarily. Zhou, in contrast, refused to talk down to the rest of Asia and focused on probing the weaknesses ofAmerican alliances in the region, including that between the US and Pakistan. Zhou told the Bandung conference that communist China posed no threat to the region and was eager to develop good relations with its Asian neighbours. Pakistan seized the moment at Bandung to lay the foundation for a practical partnership with Beijing in two very productive meetings between Zhou and Pakistan’s PM, Mohammad Ali Bogra.

Bogra assured Zhou that Pakistan’s membership of US alliances — the Southeast Asia Treaty Organisation (Seato) and the Central Treaty Organisation (Cento) was about securing its interests vis-a-vis India, and not directed against China. Addressing the political committee of the Bandung conference, Zhou said he had reached an understanding with Pakistan on matters of “collective peace and cooperation”. He also said Bogra had assured him that Pakistan would not support any aggressiveAmerican action against Beijing.

As Sino-Pak relations entered a positive phase, New Delhi and Beijing began to drift apart at Bandung. Trouble broke out in Tibet soon after and culminated in the 1962 war between India and China. The unresolved political and territorial contradictions between India and China could no longer be obfuscated with the rhetoric of Asian solidarity. By the early 1960s, Indian diplomats had to work hard to scuttle the second Afro-Asian summit that China and Pakistan sought to convene in 1964.

Asia for Asians?

China has come a long way in Asia since 1955. At Bandung, Zhou was the charming underdog. Xi will arrive in Bandung 60 years later as the top dog of Asia — the continent’s largest economy and biggest military power. But Xi shares an important objective with Zhou: to undermine the US alliances in Asia and prevent the emergence of any regional coalition against China.

Xi has begun to appropriate the anti-colonial rhetoric inherited from Bandung and turn it into an appealing new framework for the construction of a China-centred Asian order. Under Xi, China has promised to invest billions of dollars to accelerateeconomic growth in the region, under his Silk Road initiative. He has established the Asian Infrastructure Investment Bank and has also called for a comprehensive freetrade agreement across the Asia-Pacific. Xi’s main political slogan is “Asia for Asians”. He makes no attempt to hide the implication that outside powers like America have no business meddling in the region. At Bandung, Xi is likely to make the case that Asian nations must develop a “community of common destiny” under Chineseleadership.

But as in Bandung 60 years ago, there is little consensus in Asia on how to build anew regional order. Prickly nationalism and persistent territorial disputes are making Asia into a geopolitical tinderbox. China’s growing power has made it an attractive economic partner as well as the prospective political hegemon. Many of its frightened neighbours, including communist Vietnam, are seeking closer militaryties with America and Japan.

Indian Romance

Over the decades, Bandung has acquired an ideological resonance in Delhi that has little connection to reality. In fact, Bandung marked the end of Nehru’s hopes for leading Asia. India soon turned its back on Asia to focus on the non-aligned movement. It took nearly another four decades before India returned to Asia with its “Look East” policy of the early 1990s. Prime Minister Narendra Modi has promised to inject a new momentum into India’s Asian relations with an “Act East” policy.

External Affairs Minister Sushma Swaraj, who will represent India at Bandung this week, will hopefully cut the ringing rhetoric and focus, like Zhou did 60 years ago, on understanding the multiple contradictions that are unfolding today in Asia. Swaraj also needs to convince her regional interlocutors that the Modi government can bridge the continuing gap between India’s promise and performance in Asia.

World of business

There’s little doubt that Prime Minister Narendra Modi has brought a distinctive newaesthetic to Indian diplomacy. Less noticed, though, is that he could also be bringing in a new purposefulness and focus. His global outreach isn’t about showmanship alone. In the course of his eight-day tour of Germany, France and Canada, the prime minister played the role of advocate of Indian business — pushing globalcorporations to make the investments needed to realise his vision of a manufacturingeconomy. Even Prime Minister Manmohan Singh, pro-business as he was, had been squeamish about putting his personal reputation behind promises to potential investors. Indeed, foreign investors frequently complained the UPA government was sometimes hostile, and often indifferent. Modi, who has had to play hardscrabble to draw industry to Gujarat in the past, appears to understand what business is lookingfor, even if it still remains to be seen whether and how much he can deliver on it.

The prime minister’s commitment, at a technology trade fair in Hanover, that he would ensure a way is found to cut through regulatory snarls and corruption, is justthe message potential investors have been waiting to hear. Modi made it clear that he sees global business as an integral part of India’s march forward — a message that Indian leaders have, in recent years, been reluctant to articulate aloud. “For me”, he said, “‘Make in India’ is not a brand, nor is it simply a slogan… It is a newnational movement.” The objective, he underlined, was to create “a stable economicenvironment that inspires confidence at home and abroad”.

It’s this stated vision, not the purchase of Rafale combat jets from France or uranium from Canada, that promises to mark Modi’s foreign policy: those, after all, are part of well-developed traditions. Modi’s outreach to the Indian diaspora, unprecedented in scale — and, some might carp, bling — draws from the same sets of concerns. Indian-origin businesspeople in the US and Europe are significant not only because of thewealth they may bring home, but because their actions will be a barometer forglobal firms’ own investment decisions. The prime minister’s success will eventually lie in his ability to deliver, at home, on the promises he has made investors abroad. But the long-overdue realisation that India’s domestic progress is linked to how it conducts its foreign policy marks an important moment in an evolving strategic vision.

Great Chinese diversion

Recently, China announced the opening of the “central route” of the South-North Water Diversion Project, which is to transfer water from the Yellow River to the country’s arid north. The project, costing $33 billion, is supposed to carry 9.5 billion cubic metres of water (BCM) annually to meet the demands of Beijing and other areas. The “eastern route” of the project was opened last year to transport water north from the Yangtze River to Shandong province. According to Chinese officials, the entire project, which is slated to have three routes, namely, the eastern, centraland western, would be able to address the chronic water shortage in the northern states.

China has uneven spatial distribution of water. As a result, for decades, the country has grappled with water and power shortages. During the 1970s, a Chinese general, Guo Kai, is even reported to have proposed that 200 nuclear warheads belaunched at the Himalayas to blast a two kilometre-wide air tunnel that would divert theIndian monsoon and meet China’s water needs. Subsequently, he had even toyed with the idea of using Tibet’s waters, particularly from the Brahmaputra. The planwas to divert water from the “Great Bend” of the river.
With its burgeoning population, increased industrial development, higher demand from agriculture and pollution in the rivers aggravating its woes, the country turned its attention to exploiting the huge potential of the water-rich Tibetan region to overcome the looming crisis.

The proposal to divert waters from the south to the dry north was borne out of these compulsions and studies that grew out of them.

Of the three links envisaged by the the South-North Water Diversion Project, thecentral and eastern routes have already started functioning. At the moment, China is contemplating taking up the western route. This last route is a modified version of Guo’s dream project, which involved the construction of a mega structure at theGreat Bend and a tunnel through the Himalayas to divert water and generatepower, which could also be used to pump water. In 2003, the official Chinese newsagency, Xinhua, had detailed plans for the Tsangpo (which is the Brahmaputra in Tibet) Water Diversion Project. These plans had two components — first, a powerplant with an installed capacity of more than 40,000 MW in the Medok area of the Nyingchi Prefecture to use the potential of the river at the Great Bend, where it takes a sharp u-turn before entering India, and second, diversion of water to the provinces of Xingjiang and Gansu.

Also, according to recent reports, China has constructed a highway, stretching 141 kilometres and linking Bome to Medok city, to facilitate the movement of heavy construction machinery and materials. It has also completed an airstrip in this prefecture, at an altitude of 2,949 metres. Though China has denied, all along, anyplans for the diversion of the Brahmaputra, the fact that the South-North DiversionProject is slated to ultimately have three routes, with a total estimated cost of $81 billion, is indicative of the Chinese intention to take up the western route next. The State Grid Corporation of China’s map for 2020 also shows the Great Bend area connected to the rest of the country’s power supply.

Though our neighbour had been assuring us that its projects will not have any impact on Indian projects downstream, we should not rest easy with these assurances. India has to act fast to ensure that its riparian rights and other interests are protected.

Unfortunately, in spite of experts recommending the construction of a high dam across the Siang (or Brahmaputra) downstream to contain the impact of Chineseprojects on our habitats and our development schemes, Indian authorities have been going slow on implementing this project. They cite the objections raised by a newbreed of activists and environmental groups, which wage a relentless war against the project to protect their interests. But we should not lose sight of the strategic importance and disaster mitigation aspects of the Siang project just to appease these groups. We have to complete the project on a war footing in order to be prepared to meet any situation that arises from China’s plan to divert the Brahmaputra.

Death boats

The feared drowning of almost 700 people, asylum-seekers from mostly sub-Saharan Africa, 100-odd kilometres off the coast of Libya, may turn out to be the single worst migrant tragedy in the Mediterranean Sea. More than 900 migrants have reportedly died in the Mediterranean already this year. According to the UNHCR, approximately 2,19,000 migrants, including refugees, crossed the Mediterranean last year, with a loss of at least 3,500 lives. The latest disaster has called attention, once more, to the need for an effective migrant policy from the European Union.

The EU hasn’t managed to get its 28 member states to agree on a common programme to take on thehuman trafficking gangs that profit from charging exorbitantly for ferrying people illegally to southern Europe. This has left matters in the hands of individual states, such as Italy and Greece, which are usually the first destinations for asylum-seekers, given traffickers’ preference for the central and eastern Mediterranean routes. Italy’s Mare Nostrum search-and-rescue programme saved almost 1,60,000 lives in a year, before it was discontinued last November due to budgetary cuts and complaints from other EU states that it was encouraging migrants to make the perilous journey. It was replaced by Triton,launched by the EU’s border control agency, Frontex, but on a third of the budget, without its own vessels and surveillance.

To the EU’s credit, it recognises the need to punish the traffickers and not their victims. However, it’s doubtful whether the EU has the capacity or inclination to undertake a naval blockade of the north African coast to stop these “death boats” before they set sail. Of late, the largest number of refugees have been fleeing conflict in Syria and Iraq, while Libyans are escaping their strife-torn, ungovernable country. Ultimately, what Maltese Prime Minister Joseph Muscat dramatically referred to as a “genocide” in the seas will not abate till conflicts across the African continent and West Asia are resolved.

A new Kind of Babu

Politics in India has changed forever. Now, it’s the turn of the civil services to change. But can the services heal themselves or will change have to be forced by politicians under siege from exploding expectations? I’d like to make the case that change will be most enduring if it comes from within and

the only criterion for choosing the new Union cabinet secretary should be willingness and ability to reform the civil services. This is particularly important because the window between the cabinet secretary’s appointment and the Seventh Pay Commission recommendations in October is critical.

Politics is experiencing an exciting churn — the generational change in the BJP and the impact of its crazy fringe on the Delhi assembly elections, a potential change or regicide in the Congress party, the magnificent resurgence of the AAP after its goofy resignation and now its internal conflicts, looming expiry dates for regional parties that don’t deliver prosperity or plumbing, campaigns innovating at the speed of Moore’s law, and more money for state governments — all have consequences that are impossible to predict. Expectations morphing from garibi hatao to ameeri banao mean that voters care more about jobs, roads and power than about the envy of income inequality. This makes the notion that bureaucrats must protect India from its politicians and create continuity by defending the status quo dated, patronising and inappropriate. And the notion that politicians can fulfil voter expectations without civil service reform is delusional.
The cabinet secretary of India does not have the same trust, access or convening power that the chief of staff of an American president has. Not only is he stationed far away from the prime minister’s office — in Rashtrapati Bhawan, because the viceroy was once head of government — but his ability to impose his will on secretaries who are close to retirement and who report to independent ministers is at best suspect and at worst absent. But the cabinet secretary is the government’s chief people officer even though his power over empanelment, promotion, postings etc has been unimaginatively or uncourageously exercised so far. The government and the next cabinet secretary need to do three things each in order to modernise the civil services.
First, the government must shift the cabinet secretary to the PMO. Second, it must choose the next occupant of the office based purely on his hunger for civil services reform and make sure that his brain is connected to his backbone. Third, it must empower him to work closely with the pay commission till October and then use the rest of his tenure to deliver to us a civil services that can bear outcomes. Policy outcomes are a complex cocktail of people, processes and technology but the meta-variable is the selection and reward/ punishment system for people. The next cabinet secretary must avoid the infinite activity loop that his role has traditionally been and do three things.
First, he must improve performance and career management. Seniority is an objective basis for promotion but often an ineffective one.
We must move away from a mathematically impossible system in which everybody is above-average, tighten empanelment (currently, the pyramid looks like a cylinder because 75 per cent of officers become joint secretaries and 40 per cent reach the level of additional secretary) and put the best people, irrespective of age, in the right positions. Restoring the confidentiality of the process is critical to reinstating its honesty. And establishing objectivity and trust is critical to restoring its effectiveness.
Second, the new cabinet secretary must formalise lateral entry and political appointments. Any effective organisation has to balance specialists with generalists as well as insiders with outsiders. India’s policy problems are not insurmountable but many of them require specialist input that only lateral entry could provide. This could be done by introducing a new point of entry at the joint secretary level; designating 25 per cent of the top jobs as posts that can be filled through direct political appointments which are coterminous with the government’s term (for instance, 4,500 people resign when a new American president takes over, while, in Delhi, only 10 people do); and easing out civil servants who are not shortlisted to move up beyond a point (similar to the lieutenant colonel level cut-off in the army that avoids top-heaviness).
Third, the pay commission must be reimagined as a performance commission. Pay commissions have never received the “accepted-in-totality” honour that finance commissions get because they end up being “compensation commissions” and mostly formulate implementation plans that lack political economy considerations. The Seventh Pay Commission has a chance to make history by initiating a bold rupture with the past, like the 14th Finance Commission had done. The next cabinet secretary must work with the pay commission and the NITI Aayog to synthesise the useful recommendations of past administrative reform commissions into a plan that can help accelerate the changing of Delhi’s role in ruling India, started by the 14th Finance Commission. The 900 IAS officers who live in Delhi must be reduced to 500. Civil servants must be moved to a cost-to-government compensation structure through the monetisation of all benefits. A mechanism that separates the compensation review for the bottom 90 per cent of civil servants must also be devised for the future.
Politicians and bureaucrats who are talented and ambitious are frustrated with the current system. Chief ministers struggle with the paradox that political priorities like water, school education, labour and health are currently considered as painful postings by the permanent, generalist civil service. Bureaucrats — particularly the talented and idealistic ones — are tired of a system in which you get the top job only two years before retirement. It is a system that does not distinguish between fraud, incompetence and bad luck when things go wrong, has no room for career-planning, and often grants postings based on deafness and blindness rather than competence. The most recent cabinet secretaries have never missed an opportunity to miss an opportunity. The next one is being engaged at a time when we have made a new appointment for our tryst with destiny. He must do his bit by boldly demolishing his cradle. The government should start by vacating some space in the PMO.

Explained: A Cool Shift (Montreal Protocol ,Climate change

India on Thursday submitted its proposal for amending the Montreal Protocol to bring HFCs within its ambit. It was seen as a major climbdown for India, which till recently had been opposing the push for including HFCs in the Montreal Protocol.
What are HFCs?
HFCs, or hydrofluorocarbons, compounds of hydrogen, fluorine and carbon, are gases that are commonly used as refrigerants and coolants in refrigerators and air-conditioners, in fire extinguishers, furniture making, as solvents for cleaning, and other purposes. Nineteen of these HFCs are used in different kinds of appliances.
What is the Montreal Protocol?
Montreal Protocol, which came into being in 1987, seeks to eliminate production and use of ozone-depleting
substances, mainly CFCs (chlorofluorocarbons) and HCFCs (hydrochlorofluorocarbons). CFCs and later HCFCs were being used for everything that HFCs are used now for, but it was found that these were depleting the ozone layer, which protects life on earth from the sun’s harmful ultraviolet radiation. As CFCs and HCFCs started being phased out, HFCs, which are harmless to the ozone layer, started replacing them.
So what is the problem with HFCs now?
HFCs have a greenhouse gas effect, just like carbon dioxide (CO2) and methane (CH4), and contribute to global warming. In fact, the global warming potential of some HFCs are thousands of times more than carbon dioxide, the most common greenhouse gas. One particular HFC, called HFC-23 (chemically CHF3), which is used in very low temperature refrigeration and fire control, is known to have about 12,000 times more global warming potential than CO2. So while the HFCs solved one problem, they created another.
How does the world want to deal with this problem?
There is a general agreement that HFCs must be phased out, just like CFCs and HCFCs. Some countries, like India, wanted it to happen through the international climate change regime, under Kyoto Protocol, as is the case for other greenhouse gases. However, developed countries wanted HFCs to be put under the Montreal Protocol, considering the urgency of the problem. Montreal Protocol is considered to be a highly successful mechanism, having already eliminated the most dangerous of CFCs in just about two decades. But the Montreal Protocol would need to be amended because currently its specific mandate is to phase out “ozone-depleting” substances which HFCs are not.
Why didn’t India want to put HFCs under Montreal Protocol?
On the face of it, India’s objection was procedural. Montreal Protocol deals with ozone-depleting substances, which HFCs are not. These are greenhouse gases and are already listed amongst those that need to be progressively reduced under the Kyoto Protocol that seeks to control emissions of greenhouse gases. India’s argument was that there was no need to change this arrangement. Behind this argument, however, were practical considerations. The Montreal Protocol is legally binding on all its signatories. That means each of the 190-plus countries would have to mandatorily phase
out HFCs if the amendment is carried through. The Kyoto Protocol, on the other hand, puts “differentiated responsibility” on developed and developing countries to cut down greenhouse gas emissions. If HFCs continue to remain under the Kyoto Protocol, only the rich and industrialised countries, a group of about 40 nations in the current climate change regime, would be legally bound to phase them out. The others, including India and China, are not mandated to reduce their emissions, but if they do cut down on HFCs, they can claim ‘carbon credits’ and sell them in the carbon market to earn revenues.
So, what explains India’s change of mind?
The turnaround has been been in the making for at least two years now. The declaration that emerged out of the St Petersburg G-20 summit in September 2013, talked about “using the expertise and the institutions of the Montreal Protocol to phase down the production and consumption of hydrofluorocarbons (HFCs)”. India was party to that declaration. A year later, almost the exact language was used in the joint statement after the meeting between Prime Minister Narendra Modi and US President Barack Obama in Washington. When Obama came visiting in January, the joint statement said the “President and Prime Minister reaffirmed their prior understanding from September 2014 concerning the phase-down of HFCs and agreed to cooperate on making concrete progress in the Montreal Protocol this year”.
Instead of just agreeing to the amendment, India has tried to be proactive by putting forward its own proposal. India has not spelt out the reasons for changing its stand, but some things are obvious. Carbon markets are no longer lucrative and the global architecture on climate change is slated to be significantly altered later this year. India has also demanded establishment of a finance mechanism wherein the developing countries can claim compensation for the costs of converting chemical plants to adopt new technologies.
What else is in India’s proposal?
India has asked for a 15-year grace period for developing countries to phase out HFCs and shift to newer technologies. That means whatever deadline is fixed for developed countries (the likely year is 2035 to reach 15 per cent of the current levels), developing countries should get another 15 years. Most countries are agreeable to this demand.
Do alternatives to HFCs exist?
Yes, though there are no single set of compounds that can replace the HFCs. The European Union is already said to have been using cleaner alternatives in almost 90 per cent of its refrigerators and 25 per cent of its industrial air
conditioners.

India disappointed over non-implementation of IMF reforms: Arun Jaitley

India has expressed deep disappointment over the non-implementation of IMF quota and governance reforms that would give it a greater say in the global crisis lender, matching the country’s growing economic might.
“We are greatly disappointed that the 2010 Quota and Governance Reforms have not become effective in spite of the strong support of the global community for the reform,” Finance Minister Arun Jaitley said yesterday in his address to the International Monetary and Financial Committee.
“We are also concerned that we have not made any headway in the forward looking elements of the 15th Review, including the review of the quota formula and the initiation of the discussions on the Review,” he said.
Arun Jaitley said governance reforms are required to ensure the International Monetary Fund’s credibility, legitimacy and effectiveness.
“They are also most imperative to maintain its relevance. They, therefore, should not be deferred indefinitely,” the Minister said, urging the members who have not yet ratified the 2010 Quota and Governance Reforms to do so at the earliest.
The IMF quota reforms seek to provide greater say to emerging economies like India and China at the Fund, where the US and large European countries command high influence.
The 2010 reforms were originally propelled by Washington, and the President Barack Obama’s White House has repeatedly endorsed them. But the US Congress has refused to sign off on the deal, with some legislators not wanting to contribute more money to the IMF and others concerned about any erosion to the dominant US role at the fund.
In the interregnum, the IMF Executive Board should work expeditiously to complete its work to make meaningful progress in the key areas covered by the 2010 Quota and Governance Reforms pending their full implementation, Jaitley said.
“Among the options being considered, we believe that the delinking option remains the most desirable option since it is the nearest in form and substance to the 2010 reform package,” he said.
The ad hoc option would reduce the incentive to implement the reforms in full, he said, adding it is important to begin work in earnest on the 15th Review so that it can be completed by December 15, 2015.
“The continuance of such momentum in the IMF governance and quota reforms is essential to maintain the effectiveness, credibility and relevance of the IMF as a multilateral quota based institution, which reflects adequately changes in the global economy in a dynamic framework,” he said.
In his address Jaitley said many emerging market economies have benefited from the sharp decline in oil prices, saying it provides a window to implement energy reforms, phase out subsidies and build fiscal buffers wherever macroeconomic conditions permit.
“A major challenge for emerging market economies is to raise growth by implementing growth critical structural reforms. The focus, in general, should be on encouraging infrastructure investment, strengthening the investment climate and improving human resource skills through education and training,” Jaitley said.
The Finance Minister said despite being supported by a sharp decline in commodity prices, especially oil, and continuing accommodative monetary policy by central banks in the major advanced economies, global growth remains modest.
Among the major advanced economies, recovery seems to have taken a firm hold in the US. The economic activity in the US is stronger than expected, and indicators point to robust growth in the short term, he said.
“The global recovery continues to be weak. Although recovery in the US has taken a firm hold, weak growth in the euro area and Japan and slowdown in growth in most major emerging market economies have impacted the overall global growth prospects,” he said.
The Finance Minister said that at this juncture the global economy is facing some major challenges.
“First, potential growth has declined in both the advanced and emerging market economies and needs to be raised. Second, uncertainty continues about the smooth exit from the unconventional monetary policies (UMPs) by central banks in the major advanced economies,” he said.
“As a consequence, global financial stability risks have exacerbated in the wake of prolonged period of low interest rates,” he said.
“It is in this context that we need to review the evolving global macroeconomic situation and financial market conditions so that appropriate policy responses could be initiated by the policymakers in both the advanced economies and emerging market economies,” Jaitley said.

Make the cut

Not many seriously track the wholesale price index (WPI) numbers these days. The main reason, of course, is that the RBI, ever since the submission of the Urjit Patel committee report in January 2014, has made consumer price index (CPI) inflation the nominal anchor for the conduct of its monetary policy. The central bank’s logic here derives from the fact that people’s inflation expectations are reflected not in the WPI, but the CPI. Since a primary goal of monetary policy is to anchor inflation expectations — so that they don’t foment wage-price spirals — the RBI’s focus is on targeting retail-level inflation. It also does not help that the WPI is a hotchpotch of all commodities, from rice and tomatoes to hydrogen peroxide and ferromanganese, whose prices may not really contribute to the formation of the aam aadmi’s inflation expectations.

But nobody, the RBI included, can afford to ignore WPI inflation when it has plunged to an all-time low of minus 2.33 per cent in March and has been in negative territory for five consecutive months. This, even as CPI inflation for March was 5.17 per cent. The negative WPI inflation is not solely due to fuel (mineral oils) prices falling 18.1 per cent year-on-year. Even core WPI inflation — which strips out volatile fuel and food prices — was minus 0.36 per cent in March. What this indicates is deflationary pressures and loss of pricing power at the producer’s end. The fact that even WPI food inflation is ruling at a not-so-high 6.31 per cent (6.2 per cent based on CPI), despite a poor kharif and rabi crop and the damage from recent unseasonal rains, shows the absence of any real upward price pressures from the ground.

Bearish global markets in agri-commodities, unlike even a year ago, have helped keep a lid on sticky food inflation as well.

Negative WPI inflation, indicative of slack economic activity, is also reinforced by evidence of deceleration in employment generation.

Labour Bureau data, based on a survey of eight major employment-intensive sectors and reported by this paper, shows only 1.17 lakh new jobs were created during October-December, as against 1.58 lakh and 1.82 lakh in the preceding two quarters. If firms are hiring less because of low demand and poor pricing power, it makes WPI numbers impossible to ignore. A scenario where companies have to borrow at 10 per cent or more, even while facing declining price realisations on their products, is simply not sustainable. The economy desperately needs lower interest rates now.

Overtaking China

It’s a no-brainer that an economy growing by an average of 9.8 per cent a year since 1980 has to slow down. No less plausible is a scenario of its growth rates falling below those of an economy that has been expanding annually by an average of 6.2 per cent during this period and by over 7 per cent since 2000. Both the IMF and World Bankthink this is a real possibility this year: 2015 could well see India’s growth rate, at 7.5 per cent, finally surpass China’s 6.8-7.1 per cent projected range. This gap could widen in the next five years, as China’s growth settles to 6-6.5 per cent and India’s rises closer to 8 per cent.

These plain growth forecasts would, however, yield greater meaning if viewed in the backdrop of how the two Asian giants were placed at different points in time. Even in 1990, India’s GDP of $327 billion wasn’t really far behind China’s $404 billion; its annual per capita GDP at $385 was actually more than the $354 of the latter. But in 2014, China was a $10.4 trillion economy, five times India’s slightly over $2 trillion GDP. In per capita GDP terms, too, China had left India far behind at $7,589 and $1,627, respectively. It only shows what sustained growth over a period can do. China’s growth engine was primarily driven by exports and investments. A strong yuan and rising labour costs, amid an overall global trade slowdown, have fundamentally undermined an export-led growth strategy. Nor can China rely any longer on building new expressways, airports, high-speed rail networks, aluminiumsmelters or steel mills. If anything, it is today faced with a crisis of over-investment and a rebalancing of the economy towards domestic consumption is the only feasible growth-stimulating option before the country’s planners.

It is quite the opposite for India, which is short of everything from power, railwaysand roads to irrigation canals, schools and hospitals. Investments in creation ofphysical and social infrastructure can be a huge source of growth — both through raising productivity levels in the economy and stimulating demand for steel, cementor various construction-related services — for the next 20 years or more. The challenge is in mobilising the resources for these investments. Some of this will have to come from the government itself, through a redirection of its expenditures fromcurrent consumption to investment. Even with regard to attracting privateinvestment — especially from global insurance companies or pension and sovereignwealth funds — the government’s policymaking and facilitating role holds the key.

The Bose files

In recent weeks, reports that the government spied on Subhas Chandra Bose’s family until 20 years after his death have led to conspiracy theories worthy of a John Le Carre novel. But the real scandal is this: nearly 70 years after Bose disappeared, the government refuses to declassify 39 of the 41 files created between 1953 and 2000, containing information on the life and death of the iconic leader. It is heartening that fresh demands to make them public have prompted the government to set up a panel to review the colonial-era Official Secrets Act (OSA), 1923.

State secrecy is an increasingly anachronistic notion in modern democracies. The US “state secrets privilege” takes inspiration from provisions of the British “Crown Privilege”, which sets the sovereign above the courts and parliament, gives the ruler the right to withhold information from subjects. In the US, this power was transferred to the executive. It is a privilege based on the quaint assumption that the state will act in the best interests of its subjects, and that secrecy is needed for better governance. Many have questioned it, starting with 19th century philosopher Jeremy Bentham, who felt the state drew its power from a reservoir of secrets, which it used in its own “sinister interests”.

The UK has attempted reform, with provisions to release classified files over 30 years old. But the Indian state has not broken the habit of nursing its secrets. The Bose files keep company with many others like the Henderson-Brookes report and documents on the 1965 Pakistan war: much of independent India’s history is really mystery. But the OSA seems jarring in the age of the RTI and in a democratic culture that has come to prioritise transparency. It’s time the government showed more wisdom on which secrets to keep.

The wild card

In India, funding for wildlife and nature conservation has been driven largely by public money. Now, a new model of conservation on public land using private funding is being promoted by the government. Funds are being solicited from private and government business establishments to manage certain species and their habitats. At present, few such small-scale experiments exist and most are on private land.

The Central government had initially constituted the programme, “Assistance for Development of National Parks and Sanctuaries”, to support activities within protected areas (PAs). Later, in 2009, this was extended to back wildlife conservation efforts outside PAs and the scheme was rechristened as the “Integrated Development of Wildlife Habitats (IDWH)”. This was considered necessary as some wildlife species such as the sarus crane, the endangered snow leopard and the grey wolf are predominantly found outside PAs, while others like the leopard and the sloth bear are found in significant numbers outside such areas. Similarly, some of the habitats in which these species survive, such as grasslands, river systems and lakes, are situated largely within human-dominated landscapes. The goal of the IDWH is to recover critically endangered species and habitats outside PAs and areas of high biodiversity value as well as to protect corridors and areas adjoining PAs. Thus, for over a decade and a half, the Centre has supported various conservation activities outside PAs.

IDWH funds have, so far, been spent mostly on habitat-improvement activities and in developing measures to reduce human-wildlife conflict. A scientific, ecological assessment of these activities is the need of the hour as spending has, at times, been unfavourable to the species or habitats that it was intended to conserve. For instance, the conversion of grasslands to plantations or the development of water resources in areas that are inhabited by species that are facultative drinkers, such as the chinkara or the blackbuck, are not in tune with the ecological needs of the species.

The initial response to the current call for funding the IDWH seems to be from public-sector businesses — there has been little or no response from private business houses. In India, corporate social responsibility spending is usually channelled towards health and education initiatives. Large-scale wildlife conservation in partnership with the government has not yet been attempted. Some states, like Karnataka, have tried to raise funds for specific activities from corporations but have had limited success. This is the first time that requests for comprehensive funding for species-specific conservation have been initiated.

Though this model is a first for India, it is prevalent in other parts of the world. Conservation projects run privately (by individuals, foundations or corporations) and by civil society on both public and private lands exist in some countries. Conservation organisations and foundations as well as interested individuals have bought land for wildlife conservation in Latin America, North America and Africa. In some instances, thousands of hectares of such privately held conservation land have been donated to the government to be declared as PAs. Some of these philanthropic initiatives even include the development of land for a variety of uses such as socially beneficial agricultural restoration, organic farming and nature-based recreation. They include the development of public-access infrastructure to provide immediate benefits to society.

In South Africa, many areas which hold large mammals such as elephants, lions and hippos have been declared private reserves. Some of them are so large that they surpass some of our medium-sized PAs, such as Ranthambore and Nagarahole National Park in area. Several of these private reserves are contiguous with other larger PAs, such as the Kruger National Park. They are not separated by physical barriers like fences or moats, allowing wildlife to move freely between government and privately owned PAs.

The current proposal includes addressing species-specific conservation issues through a landscape approach, capacity building, research and other activities. As an important part of this initiative, corporations should insist on frontline staff (including temporary personnel) welfare, since they have been a neglected group in wildlife conservation in India.

It will also be important to ensure that certain broad, but critical, safeguards are in place in this funding process. In order to avoid any distrust or suspicion, it should be ensured that there are no conflicts of interest between funding agencies and the species and habitats that their funds support. There should be no compromise in giving wildlife, forest and/ or environmental clearances, if and when any of the supporting agencies need them for the areas they support or elsewhere in the country.

Public resources for wildlife conservation, particularly on public lands, should continue to be a priority for the government, just like public health or primary education. These sectors cannot demonstrate immediate, direct economic benefits — as in the case of commercially extractive industries — but have large-scale intangible benefits for society. Private funding could be a supporting mechanism, but a gradual, conservative approach is warranted. Scientifically evaluated ecological and social impacts should be the firm basis for its expansion.

Modi and the middle powers

Prime Minister Narendra Modi’s visit to France, Germany and Canada beginning Thursday should help New Delhi consolidate three of India’s very special relationships. France was the first Western power to become a strategic partner for India and can now turbocharge India’s high technology sectors. Germany is an economic powerhouse with growing political clout in Europe and beyond. Canada and India are colonial cousins, with a shared Anglo-Saxon political heritage and massive economic synergies. Canada is also home to one of our most important overseas communities.

Until now, Modi has been preoccupied with rejuvenating ties with America and China. He has had two quick summits with US President Barack Obama and is preparing for the second round with Chinese President Xi Jinping next month in Beijing. The Modi government has also sought to improve relations with neighbours in the subcontinent and reconnect with the extended neighbourhood in Asia and the Indian Ocean.

Under Modi’s “Act East Policy”, India has intensified engagement with key regional powers like Japan, South Korea, Vietnam and Australia. More recently, Modi had a successful “Sagar Yatra” to Seychelles, Mauritius and Sri Lanka. The same, however, cannot be said about other regions of the world, including Europe, the Middle East, Africa and the Americas beyond the US.




Modi’s visit to Europe and Canada should help restore some balance to India’s international engagement. India is preparing to host the Africa Summit later this year and raise its game in the Middle East, where political turbulence is shaking up the old regional order. If geographic regions are one way of organising foreign policy, there is no substitute for boosting bilateral ties to a few pivotal countries around the world, three of which are on Modi’s itinerary this week.

All three are Western middle powers. Despite their longstanding alliances with America, all three of them have their own national interests and have often pursued policies independent of Washington. Acutely aware of this reality, China has invested significant amount of time and energy in cultivating the middle powers of the West, despite many differences over ideology and policy. The recent European stampede to join China’s Asian Infrastructure Investment Bank, despite American opposition, reflects the depth of realpolitik among the Western middle powers.

If the Indian strategic community tends to think of the multipolar world as an anti-Western platform, China has rightly seen the idea as an instrument to explore the strategic possibilities within the West and build separate partnerships with each of the middle powers. India’s first prime minister, Jawaharlal Nehru, did not view the world in anti-Western terms despite his invention of non-alignment. Nehru argued against postwar Germany being treated like


an enemy state at the United Nations. French Gallicism helped create space for India amidst an all-encompassing rivalry between America and Russia. Genuine commitment to liberal internationalism brought Nehru close to the Canadian prime minister, Lester Pearson, and together they sought to strengthen the UN and international norms at the height of the Cold War.

The end of the Cold War and India’s economic globalization created a lot more room for India’s engagement with the Western middle powers, especially in the last decade. But the UPA government was unable to seize the moment and turn new opportunities into tangible outcomes.

Despite the fact that Canadian Prime Minister Stephen Harper has traveled twice to India in the last few years and invested much political capital in transforming the bilateral relationship, Canada hardly figured on India’s political radar. That resource-rich Canada would be a natural partner for mineral-hungry India seemed to make no difference to Delhi’s political approach to Ottawa.

Harper had overruled the strong nuclear nonproliferation community in Canada to put an end to the prolonged atomic dispute with India that began after Delhi’s lone nuclear test in 1974 and cast a shadow over political ties. Harper’s Ottawa also became one of the first countries to sign a civil nuclear cooperation agreement with India. He also agreed to reasonable terms on monitoring the uranium bought from Canada.

As the first Indian prime minister to visit Canada on bilateral business in more than four decades, Modi has much catching up to do. The PM’s decision to travel to Canada in the very first year of his tenure signals the recognition that India must not only value its friends but also show its political appreciation. Modi’s now standard outreach to the diaspora during his travels abroad will have an additional dimension in Canada — to end the alienation of the Canadian Sikh community from India.

The problem with France and Germany has not been a lack of high-level interaction over the last decade. Both Paris and Berlin have relentlessly pursued cooperation — strategic, economic and political — with India. But the UPA government smothered the possibilities with Paris and Berlin with its lack of political coherence and ceding of strategic decision-making to the bureaucracy.

India is not going to get the best terms from France on the long-pending nuclear and defense deals by letting its accountants run riot. For, the mega deals at hand are not just about buying equipment at the lowest price. They are about leveraging Delhi’s purchasing power to expand the defense industrial base, build a modern nuclear industry, strengthen the aerospace sector, and gain access to advanced technologies.

Paris, Berlin and Ottawa can each contribute substantially to the realization of India’s new national goals — from ensuring energy security to creating jobs in the manufacturing sector and addressing climate change to building smart cities. Modi can only unlock the multiple possibilities with these middle powers in the West by injecting a strategic perspective into the talks with the three nations. The writer is a distinguished fellow at the Observer Research Foundation and a contributing editor for ‘The Indian Express’.

A good deal

Prime Minister Narendra Modi’s request last week to Paris to provide 36 Rafale fighter aircraft was a highlight of his bilateral visit to France. India had already chosen the Rafale fighter for the Indian Air Force, following a stringent technical evaluation process after a multi-billion dollar tender for 126 medium multi-role combat aircraft. In the deal being negotiated by the defence ministry with Dasault Aviation, 108 of those aircraft were to be made in India under a transfer of technology clause. That deal has been held up over procurement procedures and pricing negotiations, putting pressure on the IAF’s depleting combat power. Modi’s decision will meet the IAF’s immediate operational needs. India will get the fighters on a much tighter timeline than under the original tender.

But there is a downside to the deal. During his overseas tours, the PM has made a strong pitch to foreign manufacturers under his signature Make in India campaign. Defence manufacturing is one of the key areas for Make in India. Buying 36 fighters without any provision to manufacture them in India goes against the PM’s major thrust area. There is thus a danger of this deal — sans a Make in India component — setting a precedent for future defence procurements. The government should be careful to not go down that road. It should, instead, identify the reasons for India’s long-winded defence procurement process, where foreign suppliers either end up getting blacklisted or get entangled in protracted negotiations. Defence Minister Manohar Parrikar has already promised a streamlining of the defence procurement process in line with the Make in India programme. The earlier he does it, the better.

The future of the 126 fighter deal is mired in uncertainty and a decision needs to be taken quickly. Whether India chooses to go with the original deal with Dasault or signs a follow-up inter-government order with France, it must include a clause for transfer of technology and manufacturing in India. In this current 36 aircraft deal, there is still an opportunity to promote defence manufacturing, particularly in the private sector. Under the provisions of the Defence Procurement Procedure (2013 revised), the maintenance transfer of technology contract for these 36 Rafale fighters must be given to a private-sector vendor instead of the public-sector HAL. Dealing with a modern fighter will expose the chosen vendor to R&D and advanced technology. The infrastructure, training, processes and equipment developed by the vendor will generate bigger spin-offs in the future for India’s defence manufacturing sector.

Web of freedom

If Telecom Minister Ravi Shankar Prasad’s statement is any indication, the NDA government has taken a heartening position on net neutrality: the principle that internet service providers (ISPs) should not be allowed to discriminate between packets of data. Prasad noted, rightly, that the internet should be linked to “the common man” in a “non-discriminatory manner”. He was responding to criticism stirred up by a consultation paper issued by Trai. The paper is vaguely worded and seems tilted in favour of ISPs and telecom companies like Airtel and Vodafone, which, like their counterparts elsewhere, would prefer to junk the concept.

Given the intricate nature of modern telecommunications law, it is unsurprising that an issue so central to the networked economy has evaded mainstream consideration. But concerted social media activism after the US regulator moved to classify the internet as a utility in February, thus adopting net neutrality, and Airtel launched a platform called Airtel Zero that would exempt certain services from data charges on the network, has driven the conversation on the need for Indian policymakers to enshrine it in law. Nearly four lakh emails have been sent in three days, imploring Trai to safeguard net neutrality. Without legal protection, deep-pocketed companies like Google and Amazon would be able to pay ISPs for privileged “fast lanes” or cut deals allowing consumers to access their services for free. This would create a tiered internet where such companies would be able to protect their dominant positions from challenges by less flush start-ups, stifling innovation and harming the level playing field so integral to the emergence of one-time upstarts like Facebook.

Some have suggested that for India, with its low internet penetration rates, net neutrality is a luxury. The government’s imperative, the argument goes, should be to bridge the digital divide and expand access by any means necessary. There is some merit to this, especially when seen with efforts like Facebook’s internet.org initiative, which attempt to provide the web services many of us have come to take for granted, such as WhatsApp, for free or at concessional data rates. And telecom companies , the primary ISPs in India, have a point when they claim to operate in a highly competitive market where they make little profit from voice calls or texts and need incentives to invest in building infrastructure, particularly in rural areas. But on the whole, this argument is disingenuous. Brazil, an emerging market peer where internet penetration is around 50 per cent last year passed an “internet bill of rights” that makes net neutrality law. Trading an open internet for an imagined gain in penetration is a Faustian bargain, hurting the very attributes that make the internet the disruptive marketplace of ideas it is today.