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Wednesday, 23 July 2014

7 Unconventional ideas for Narendra Modi

Elections are over, BJP has won and everything seems right with the world again. My most bullish projection of 269 seats for the Namo led BJP have been exceeded (my ‘normative’ projection of 215-217 made in October 2013 even more so).  The mandate is clearly not for ‘business as usual’ anymore. I remain an ardent admirer of Namo’s policies and style of functioning and think it my duty to suggest a few unconventional ideas to our new PM. Some of them are whacky and I haven’t done a detailed feasibility and cost-benefit on any of them yet. Maybe I do it if I have time and data, but I know Namo has people with both and might be able to do a study on their own if any idea here kindles their fancy. Anyway, without further ado, here goes:

Tax bonds vs. Direct Tax payment:

Why not introduce a scheme where an individual/ corporate/ both is given an option to deposit his tax liability plus a certain % (say 10%) into a tax bond instead of payment of tax? So if a tax payers self-assessed tax liability works out to Rs100, he has the option to pay Rs100 outright OR deposit Rs100+Rs10=Rs110 into the aforementioned tax bond.

The money paid into the tax bond can be locked in for say 15 years, with repayment being tax free. The interest rate can be the inflation rate + 100 bps. This interest rate structure will serve two purposes, a) The real value of the tax payer’s investment will remain protected and b) government will enjoy actual financial benefit of its successful efforts to curb inflation. Thus far if a government issued bonds with say a 9% coupon during high inflation regimes, the exchequer would have to bear the 9% coupon even if the inflation halved five years later. In the case of the tax bond, the government’s actual interest charge would reduce in-line with good governance.
Having such a bond would reduce propensity for tax evasion that is so rampant now. The tax payer would not want to break tax laws if he has the view that he is merely making a financial investment and not just paying it to the government i.e. the money is remaining with him only. Only about 1-3% of India’s population pays direct tax as per some reports. In absolute levels, tax collection is only around Rs5 lakh crore (FY12) with tax-to-GDP ratio flat at 5.5% levels (FY12, down from 6.67% in FY08). Such a bond will also encourage consumption as the populace will ‘feel’ rich and at the same time bolster savings. Notably, India’s savings rate has fallen to 30% of GDP in FY13 from 37% of GDP in FY08.
These factors will likely cause an increase in tax assessed and provide an annual 15 year locked in supply of perhaps even Rs10 lakh crore in perpetuity to the government for undertaking developmental works. Having to repay this money will also put some moral and financial pressure on the government to not squander away our hard earned taxes in ridiculous schemes as it is sometimes alleged as happening today. The corruption that arises due to IT department officials can also be curbed. If the IT inspector assess income tax at Rs100 and the assesse sees it as Rs50, the assesse can simply put the money into the bond instead of paying it. So the leverage that the IT official has over the assesse in demanding a bribe is destroyed!

Cold storage in cold regions:

Why cannot cold storage for produce (fruits/ vegetables/ grain) be setup in naturally cold regions in India?

 In the past, Namo has said in several speeches about how he is using the uninhabited desert regions in Gujarat and the top of water canals to establish wind/ solar energy possibilities. In other words, he is taking advantage of the natural environment versus fighting it in meeting his developmental goals. Why cannot the same logic be employed in food storage?
India is the second largest producer of fruits and vegetables in the world, with annual vegetable produce of around 85 million tons (9.1 per cent of global production) and annual fruit produce of around 45 million tons (8.4 per cent of global production). The agri sector is important not only in terms of the employment it provides but food also accounts for 31% of the average consumers expenditure mix. The almost periodic inflationary trends in select produce suggests at not only hoarding by some merchants but also in lack of cold storage facilities available with the government. Added to this is the problem of wastage of 20-40% across produce groups further highlighting the need for adequate storage facilities.
One of the key constraints of cold storage in India is the unreliable power supply. Most places get erratic supply for 8-10 hours a day, if that. This has left cold storage facilities dependent on diesel generators and thus the size of facilities is also restricted. This is reflected in some reports suggesting the average power cost for Indian cold storages being Rs80-90/ cubic feet, over twice the global cost. As per a project study I found on the internet, power accounts for 70% of the working capital requirements and 50-60% of the annual running expenses. Perhaps owing to the resultant small size of the projects, the type of cold storage facilities is lopsided. For example, as per some reports, almost 80% of the cold storages in India are used exclusively for storing potatoes and potato seeds. These facilities remain idle for six months of the year when storage is not required further vitiating the economics.
If large scale facilities were built in the coldest regions in India, the government could build immense facilities. Given the natural cold, it would result in massive savings in power costs. Generally if the cold region selected is less developed, then the establishment of such large facilities will also help in developing the surrounding areas. Acquisition of large tracts of land will also become much simpler versus doing the same in an already relatively well developed area. The large size of the facility and the constant low temperature allows for using differing levels of insulation in a modular fashion to help in storing different food stuffs in the same facility. If a good rail line is developed then why cant it be possible to transport food stuffs to different parts of India within 48 hours thus reducing inflationary pressures. Due to the low ambient temperature, food stuffs will remain preserved even during blackouts as storage is no longer dependent on electricity. Perhaps it makes sense for Namo to order a feasibility study on this?

Non GM Seed Storage:

Why not setup a non GM storage bank deep underground in the coldest region in India?

I am not aware as to how far the GM seed lobby has compromised influenced our government, but it makes sense for Namo to setup a GM seed storage on the lines of Svalbard Global Seed Vault established by Norway. I am not a scientist but I don’t think anyone can provide an assurance beyond doubt on how GM seeds will impact human growth, environment and any country’s food security 100 years hence. As such it make sense for India to build a secure vault perhaps deep underground in Leh/ Dras to prepare its future generations for such an eventuality. Note the wiki entry on the Svalbard facility suggests that the initial setup cost was only US$9m, it is certainly not something that India cannot do.

Formulate an enlightened solar energy policy:

Set up a coherent life-cycle policy for solar power, i.e. the environmentally safe manufacture of solar panels, their use and their safe recycling or disposal. Recognise the true environmental cost of solar and also ensure that solar hazardous waste is not imported from other countries into India.

Namo’s thrust for solar power is well known as are his innovative means of implementing the same. However, it is worth noting that Solar is not the cleanest fuel around. In fact based on the lifecycle CO2 emissions, solar is only marginally better than geothermal energy (see chart sourced from below). This is primarily because of the process of mining silicon to make photovoltaic cells that emits large quantities of CO2.

There is then also the problem of pollution that stems from toxic chemicals that are used to manufacture solar cells. The chemicals include Crystalline Silicon, Cadmium Telluride, Copper indium selenide etc that may potentially lead to irritation, respiratory diseases, heart diseases, cancer etc in workers and users of solar panels.

In addition to the above there is also the issue of hazardous solar waste. As per an article in Associated Press, 17 solar panel companies in California produced 46.5 million pounds of sludge in 3-3.5 years ending 2011. The use of hazardous materials in manufacturing of solar panels may also pose risk after the panel is carelessly disposed after several years of use. Namo will need to recognise the true cost of solar and frame policy from a place of enlightenment.

Concentrate on Thorium energy as a medium of national security:

Why not make Thorium based nuclear reactors the mainstay of Indian energy policy?

Personally, I am much in favour of nuclear reactors as primary energy source given that it is among the most carbon efficient. The sun will shine when it wants to, the rivers will ebb and flow periodically and the wind will blow when it wants to…only the nuclear reactor continues to churn out power day in and day out. India has huge Thorium reserves that were allegedly being illegally exported out of the country. So clearly the potential of Thorium has been well recognised by our neighbours.  Thorium has several safety and environmental advantages versus the traditional uranium reactors that are well documented and hence not being mentioned here. So why not go for broke here?
I saw a BARC presentation made in Geneva that appeared to me to talk of how large scale use of Thorium reactors is planned only after 2070. Why? Is it not possible to commercialise Th reactors in say 5 years from now? Is the reason technical or financial or a question of political will?
India has some of the most brilliant technical minds in the world. Figuratively speaking, if the top 100 physicists and engineers are locked in a room for a year with a reasonably generous budget, can they not come up with an innovative solution? It almost feels like India is waiting for some other country to patent the technology first and we can simply buy it from them. There is nothing sillier than that, if true. I may be wrong.
Apart from meeting the ideal of 24X7 a day, 365 days a year power requirement for Indians, self-sufficiency in energy requirements paves new avenues for India’s development. Why not be the first country that makes electric cars the mainstay of transport with fossil fuel powered vehicles a novelty or speciality purpose?
The anecdotal evidence of how rising oil prices appear to bolster the finances of terrorists is there for all to see. Countries are hamstrung by their dependence on oil. Due to vested industry interests they may be joined at the hip with oil interests, but India does not have to go down this path. The more we delay the inevitable transition to nuclear power the more painful it will be for industry and people.

Tax deductible transport expenses for salaried:

Why not make periodic travel pass on railways a tax deductible expense for individuals?

This idea was suggested to me by a friend @masala_chaas and while not macro in nature it is quite creative. There was a recent uproar in the Indian Parliament after rail fares were increased about 14%. But the fact remains that railways needed this fare increase and perhaps more in the coming months. But it is also true that the ordinary tax payer is penalised by these increases.  So why not make the cost incurred on the periodic pass an allowable deduction for computing tax liability for individuals? So every time the government raises rail fares it gives some amount of tax shield to the tax paying individual. This also increases the leeway that the government has in increasing fares.

Auction cities/towns/ village internal civic transport rights:

Why not get the private sector to provide vehicles for intra-city transport in exchange for advertising rights?

Providing great intra city travel systems goes a long way in reducing traffic, air and sound pollution. It is also the hall mark of a developed city where the rich prefer to use public transport for their regular needs. The sheer population of India, perhaps coupled with a slightly less than optimally efficient transport system has left a lot to be desired so far in this sector.

Why cannot the government consider auctioning public transportation rights for each city. In return the private sector bidder (or even a PSU company) will provide all the vehicles (buses) needed for the transport needs. The bidder will have complete advertising rights on all the buses. The full body of the bus can be covered in advertisements. The advertisements revenue will go to the company. The company can either use up all the space or even sell it to others. Imagine what a bill board that causes neck sprains to look at costs in metros and other class I cities and towns. Now imagine what a moving billboard at eye level will be worth in the same location. This is not a fixed bill board, mind you, that focusses on a few seconds attention at one location. Advertisers can use the bill board to target advertise, thus increasing their 'bang for the buck'. For example, a high end couture store located in the suburbs need not spend on TV or radio advertisements, the advertisement is useless for someone watching from another city or country. But they can simply advertise on the bus routes that are there in their target areas.

The daily operations, ie, bus drivers, conductors, cleaners, accountants etc. can remain on government payroll, with the option of switching to the private company's employment. Notably, the physical property will remain owned by the government only. only the operation rights, obligations and rewards will be with the winning bidder. The ticket revenues can be shared between he government and the bidder, with the government getting the majority. The auction revenues should be used by the government EXCLUSIVELY for putting up a public transportation system in villages and towns where there may be such a need but are not attractive enough for bidding yet. The existing buses from towns where the new system is employed can be moved for use in such places thus reducing overall cost.

In this way government puts in a high quality, well maintained transportation system at zero additional cost to it. The private sector gets a smart advertising model and the public gets good transport with low traffic and low pollution. In fact if the government puts in a comfortable and timely public transport system, then it can even charge a congestion area tax on private vehicles to reduce traffic.


Secure media independence by removing Award and Reward temptation:

Why not scrap all Padma awards, confer Bharat Ratna posthumously only and restrict expenditure on all government TV advertisements to only Doordarshan?

State awards such as the Padma series and the Bharat Ratna were typically intended to honour persons who made unequaled contribution to India and her people. However, it is not unimaginable that these awards may have be used as 'carrots' to influence opinions. In the past some people, especially on social media, have raised concerns for Padma awards being conferred on journalists and people from the performing arts as a reward or a bribe for services rendered to their alleged political masters. Whatever be the truth in these allegations, is it not worthwhile to consider scrapping the Padma-series awards altogether. I am sure that we do not require a Padma award to remember a Jaspal Rana nor do I think earning a Padma award is the motivation for the winner. Recognition can easily be given to the economically weaker deserving winner by a cash grant rather than a certificate and a title. This will automatically remove a soft temptation for social activists, journalists or film makers to play along whichever government is in power, if it is happening. In any case, most of the winners, if asked, will likely say that the award was not what they worked towards anyway.

Awards such as Bharat Ratna should be conferred only posthumously on the deserving. Lata Mangeshkar was always India's gem and not subject to her recognition as such by a politician. The deserving do not require an award but an award can be conferred upon the undeserving.

Another avenue for buying media is allegedly the use of public money to give advertisements to TV channels. It is no surprise to see farmer specific advertisements been shown on English news channels as elections approach. How many small farmers who need the basic information provided in these advertisements watch english news on a daily basis? Not a lot, I would think. So clearly it appears that these advertisements where given to buy independence of journalists perhaps. Why cant the government pass a law that all government ad spend for TV should be restricted to Doordarshan the national channel. DD is one of the most distributed channel and there is no reason why it will not give most exposure to government advertisements. The government should also not support any 'save the tiger' or 'save the horse' type environmental shows on private channels. You want to spread information? Then use your own channel, or have the guts to shut it down. This apparent indirect public funding of private news media to blackmail or compromise them should cease ASAP.

There were a few more ideas that were doing the rounds in my head, such as setting up a electronic transport exchange to curb the massive corruption in the road transport sector, make it more competitive and transparent and to bring down freight rates. However, someone appears to have beaten me to it with the setup of the IRTEX and I would urge Namo to study it and try and replicate it on a large scale in India. Some of the other out of the box whacky ideas in my head will be crystallised and blogged hopefully soon!

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