Thursday, April 21, 2016

West Bengal - mat poochh ke kya haal hai mera tere peechhe

An NRI friend recently asked a question on a social media group about relative backwardness of West Bengal. In order to address that, I am paraphrasing the question from a rather colloquial one to a formal one.

The question is, “If all Indian politicians are similarly culpable for bad governance and corruption, then how some states are ahead and why some states, especially WB are behind?”

The answer to this, as understandable, is not a simple one and interpretations of historical events and overall perspective will vary across the board. Thus I do not proclaim, that what I write here is the only veritable truth. It is just an attempt of an afternoon to explore some answers in a rather objective but perfunctory manner.

In my opinion, the reasons are in three categories: 1) Post independence political and economic history, 2) Regional Political Culture 3) Socio Cultural construct.

Firstly, resource rich eastern states, like Bihar and Odisha and even parts of Bengal, suffered from the early policy of freight equalisation scheme - a policy, for which I dock some serious points from my favourite PM, much hated Mr. J L Nehru. This policy, stemming from some warped sense of fairness, took away the competitive advantage of the zone, which could have helped it steal a march ahead of others, or at least be on the same step. This set the zone back easily by two decades of lost gross state product. The scenario was then exacerbated by bad politics.

The political culture of much of the North and WB was about politics and not economics. Most leaders, CMs and other leaders, have been busy about political ideology, to a small extent, and about perpetuating and concentrating political power, to the larger extent. But to what avail, has never been clear to them. Lot of people talk of Laloo Yadav’s corruption. From my personal understanding, Laloo Yadav, corrupt and megalomaniac that he is, made far less money than even a small fry like Suresh Kalmadi or a ‘cleaner’ politician Nitin Gadkari, leave alone biggies like the king of corruption Sharad Pawar or Amma or Yeddyurappa. Reason is that, be it Laloo Yadav, or Gautam Deb (creator of syndicate raaj in the Rajarhat area), they did not have a clear understanding of economics, its global trends nor a large economic vision. For them, the corruption was just a small political action, and not a large economic vision. Pawar, did yeoman’s job in his constituency of Baramati and Pune, and parts of Maharashtra where his writ ran large. But how did it run? - By economic largesse; not through the sly brainwashing (CPM type) or blatant violence or threat (Anubrata or Shahabuddin type; although CPM was no less in this). Pawar was like a private equity investor. He took cuts in every economic activity, saw to it that it reached fruition and with the enormous wealth (ginormous, actually) that he created from that, he ensured a trickle of economics to his loyalists. This is a culture and model which has been adopted by politicians in the West (NCP, Congress, BJP, Shiv Sena in Maharashtra) and South (Bangarappa and Yeddy in Karnataka, Amma, Karuna, Marans etc. in TN, YSR – Jagan, Chandra Babu, and KCR in AP and Telangana). Not all of them are getting it fully right, because all of them don’t have same level of intellect or people focus. Take Jayalalitha, who is a success in this. She is an amazingly competent woman. Had a traumatic childhood. Did not go have proper uninterrupted education. Didd not go to college. Was exploited as a child star by many people, perhaps including MGR. But have you heard her speaking?!! I know people who have been in closed door business/policy meetings with her, and she dazzles in her brilliance, understanding and articulation. Of course she is bitter, ruthless, insecure, corrupt and power hungry. But she knows that sustainable political power can come from sustainable and growing economy. This, unfortunately has been absent in the East. Nabin and Nitish did a great job. Nitish reduced the emphasis on monopolizing the political power through surrogate (CPM type) or violent (CPM/TMC type) means and thereby improved law and order scenario in Bihar. And Nabin, focused on development policy, while managing his party well, so that everyone understands what is the golden goose - economic welfare of people. However, I am not sure if this can be sustained in Bihar and Odisha. It is not doing well in Jharkhand. And I am coming to the reason of this. It is the people and their culture.

This brings me to the great man – Modi, who gets a lot of credit for doing good stuff in Gujarat. Part of this credit is due. For, like Amma, he has come from the bottom and evolved a lot. He has visions and he articulates them well.  He has some execution focus, which now, is getting diluted unfortunately, as all he is doing is, launching un-thought-through policies and playing to the gallery. But let me keep that aside. While part of the credit, especially for turning around ailing state companies, or for building infrastructure, was due to him, one has to keep in mind that Gujarat has always had a robust business, economic and industrial culture, and had successful enterprises in petrochemicals, textiles, pharmaceuticals etc. Gujaratis (some castes, not all) are world famous for their entrepreneurship. One may ask why Rajasthan has not benefitted from the Marwaris. Not an easy question, but my guess is that the reasons are, Rajasthan is a resource poor desert state, and not entirely run by Marwaris but a host of other communities as well. Moving on to the cultural context of entrepreneurship and understanding of business, this entrepreneurial attitude is also present in another community, that is the coastal Andhra Telugus. Ethically a bit wobbly, Coastal Andhra people are big dreamers and risk takers and thus always trying to build big, which propelled state ahead on the road of development.  The case of Tamil Nadu, Karnataka and Maharashtra is about a work ethic, based on diligence and not so much of personal discretion and debate. Unfortunately, the eastern states, especially WB, for various reasons, have had a very bad work ethic, which has been largely fostered by the Left Front. It does not respect hard work and customer’s interest. It believes in entitlement (i.e. “center/ management/ party/ other people are responsible for my well-being”). The people are opinionated, without the knowledge base or diligence, and thus quarrelsome, and prone to violent volatility. Individuals lack the courage to stand up for anything. But the underclass, thanks to three decades of union type training by the Marxists, and present continuing dispensation, quickly organises itself into a mob and tries to derive collective benefit, which are thoroughly undue and unfair, and at times extortionist. [By the way, did anyone see the intimidating pronouncements of the families of the accused of the Sourav Gupta murder case in front of the local court?!! This was a criminal mob, consisting of the female members of the criminal family.] Thus East, particularly WB, suffers from a vitiating social culture not conducive to economic development but for volatile politics only. The people of West Bengal has inherited and fostered a culture that is not conducive to development and growth, but regression and insularity. And nobody is telling them so.

Thus, IMHO, my friends, the problems of WB and some parts of east are very deep rooted. The issue is a multi-headed hydra, which will not go away just by lambasting the non-bhodrolok mohila, to whom most of your main resistance comes from your class consciousness. And it came even before she came to power as most of you are ashamed to be represented by her. Best part is, the Marxist bhodroloks turned out to be the most class conscious, sniggering their upturned nose at this representative of the lumpenproletariat, a class, they only taught to disrupt and pull back an entire state for three decades. The solution to this issue will not come through denial, but through painful acceptance and catharsis. The solution will not come soon. Before that, there will be some more anarchy.

The above analysis, if I am allowed to call it so, is a very simplistic take on a very complex question of political and economic history. I have not talked much of the Congress sin, nor about the fact of the communal problem, that has been raising its ugly head of late. But I have tried to provide my take on what I think are among the main reasons for the backwardness of West Bengal, given that lack of clean and good political leadership is not unique to this state only.


All disagreements and comments are welcome. What is not, is hatred.

Saturday, April 2, 2016

Angry about Anger - Thoughts on Kolkata Flyover collapse



The immensely tragic collapse of the under-construction flyover in Kolkata, has predictably opened up a huge vent for the emotionally and politically hyper people of West Bengal, most of whom also possess poetic and literary aspirations and illusions, which are divorced from their sub-mediocre reality. (The amount of bad, actually fecal, poetry I have received on WhatsApp on this incident is not funny at all!!)

Juxtaposed with the coming election, the sensational and bottom of the barrel media personnel, and disgustingly opportunistic political posturing, the noise has become unbearable. I have been following the stuff on media and a bit on social media. And I'm seriously disturbed by the discourse - public, political and media. Fault finding, blame game, political mudslinging. This, is a very regrettable condition! The politicians and politically unbiased people have their own vested interest in the coming elections. Media has its own commercial interest. None of these justify the din.

But, educated public? Why are they so gullible? Why do they seek simplistic answers when there's none? Why do they add to the noise and clutter? Why are they in a hurry to fix a quick blame and do some hanging? Why have the people of WB become the lynch mob of the country in last 4-5 decades?

Anyway, in the face of the public hunger for a simpler narrative of getting justice and closure, by finding and hanging some people, I supposed that I will put my thoughts on paper to explain the complexities of the issue. And I decided to do that in a dry corporate-legal style, thereby shunning emotions and biases and sticking to experience and rationality and theses based on that. The objective is to make ‘educated common people’ who are caught up in this frenzy, get to know and understand the issues, in, not simple, but not also complicated terms.

1.       IVRCL – Let me start with the contractor itself.
a.       IVRCL was a leading infrastructure player (EPC contractor and BOT project owner) in the country, till the financial crisis started hitting the sector very hard
b.      So, I guess there was nothing grossly wrong in CPM/ left front awarding the contract to them through a competitive bidding
c.       IVRCL, is not alone to suffer humongous financial setback since global financial crisis.  Yes, IVRCL was one of the most aggressive players, with political contacts with Maha and AP politicians, and thus had a very leveraged balance sheet. But barring the likes of L&T and Mahindras and probably Simplex, nobody can claim clean sleeves in this sector and leverage as hurt some of the best real asset players in the world.
d.      Some of you would know the issue of non-performing assets in the banking sector.  You should also know that this is part of large business/ economic cycle that takes place. At the time of growth and inflation, companies incur capital expenditures or inventory buildup expecting demand growth. And when that does not happen or slows down, the debt trap happens.
e.      Moreover, contrary to the less-informed Mallya narrative of mass media, it is the infrastructure and capital goods sector which has suffered most. The names are innumerable, but Jaiprakash, Gammon India, HCC, Patel Engineering, GVK, GMR are to name a handful few. And yes, IVRCL is one of the worst affected among the lot.
f.        IVRCL’s bankruptcy is post 2009, and is not a reflection of its technical competence. I do not have the details of the railway issue that got highlighted, but it suffices to state that government departments, from time to time, take punitive measures against contractors, for correct and contractual reasons but not always meriting this kind of stigma.

2.       Now, about the project delay
a.       Public construction projects get delayed for various reasons and they get delayed all over the country and all the time.
b.      The reasons mostly come from the issues of land acquisition, regulatory clearances and timely fund release by the government. 
c.       And in case of very rare contractors, there may be sheer technical incompetence, which is not the case of most like IVRCL.
d.      Occasionally, the contractor is culpable of diverting the money to other projects and then not being able to bring it back and thus suffering liquidity crisis. Or having liquidity crisis because of over extending itself over many projects. This may be the case of IVRCL.
e.      In Mumbai, the Santa Cruz Chembur Link road and the Chembur overpass remained half built for many many years. And Bandra Sea Link is epic in the annals of project delay.
(The last one had angles of political corruption as well, as the project cost got inflated by a large multiple over all those years – this is a model reportedly designed and used by a former Maharashtra CM in many public projects, to amass enormous wealth, to the tunes of twenty/ thirty thousands of crores. Bengalis and Bengali politicians are thankfully not up to this level of sleight.)

3.       Cancelling the contract
a.       This is a very tricky issue. Having seen and having indirect knowledge of funding both the large contractors and their customers (public and private), I realise that cancelling an EPC contract in the midst of the project is close to impossible, and some of the key reasons are:
                                                               i.      As mentioned, most of the time, the delay is because of reasons beyond the control of the contractor and rather that of government or the contracting customer
                                                             ii.      A contract is generally terminated on “non-performance” (this phrase, like the “act of god” is a legal term and has deeper connotation than what normal understanding supposes). And it is extremely difficult to prove non-performance in any court of law.
                                                            iii.      Lastly, a cancellation of a project in the middle, especially by a government, means almost shelving the project, as most of the design and technology has been provided by the contractor and governments (especially backward states like WB) do not have the wherewithal to carry it through with another contractor in a reasonable time frame.

4.       About corruption and its implications
The usual refrain under such circumstances, is that corruption is responsible for these incidents. Possible. But not mandatory.
a.       First, be aware, that the award of public projects has been fraught with the risk of corruption by public officials for a very very long time. There are plenty of stories of British officers making a fortune during pre and during war construction boom in India.
b.      Question is, why corruption and what is the impact of this corruption, if any?
                                                               i.     Reason for corruption Most people who are allowed to bid for these projects have to be pre-qualified by various track record and experience. The driving force behind corruption is unfair advantage in the face of equal competition and NOT to construct something below par.
                                                             ii.      Lowering of the quality of the construction – this used to be and still is the case for simple road repair, or even open sewerage, where the downside risk is minimal. However, for critical stuff like bridges and power plants, such is almost never the case. The risk to the companies and the officials and legislators are too high. So, what happens….?
                                                            iii.    Increase in cost – So, to cover the cost of the corruption, contractors do cost escalations, which are approved by the people who have been on the take. That does not seem to be the case of Vivekananda Flyover. It must also be kept in mind that all cost escalations are not because of corruption. If a project gets delayed by many years, then one has to keep in mind the effect of inflation as well.

5.       Hurrying up the project
a.       Firstly, it is important to ask, if it is mala fide to expect and ask for a quicker completion of a project which has been stuck for a long period of time?
b.      Secondly, it is needed to examine if such requests/ or instructions were made, and on account of that if some act of negligence took place
(More later on reasons for the accident)

6.       So what should be done now? - 
a.      Of course the first thing to do is to take care of (treat, rehabilitate and compensate) the affected parties, to the best of the ability of the government and even greater public
(In fact it is rather bemusing to note that a normal and usual action of announcing monetary compensation has been met with such bitter and (bad) poetic vehemence, in this case.)
b.      Then a neutral and objective investigation should be done to find the reasons behind the collapse
c.       And take prompt appropriate punitive and/ or corrective action

7.       Now, what could be the possible reasons for such incidents.
a.       Well, I am neither an expert nor chronicler of such incidents. But by some experience and method of abstraction, my guess that the reasons generally would fall among the following:
                                                               i.      Act of God
First a good definition – “In common law, an overwhelming event caused exclusively by natural forces whose effects could not possibly be prevented (e.g., flood, earthquake, tornado).  In modern jurisdictions, "act of God" is often broadened by statute to include all natural phenomena whose effects could not be prevented by the exercise of reasonable care and foresight.”
Now it is also important to differentiate accident and Act of God. Accident is the event, Act of God is one of the many reasons leading to such event.
                                                             ii.      Human Error
Human error is easy to understand. “Human error means that something has been done that was not intended by the actor; not desired by a set of rules or an external observer; or that led the task or system outside its acceptable limits."
Anecdotally, one junior and very efficient person in my investor relations department, had, by mistake sent an investor bulletin and put all e-mail ids in cc: instead of bcc:, leading to some commotion. (My CEO twisted herself about it and made me fire the person against my vehement opposition, because she saw spectre of sabotage). Now this was a human error.
                                                            iii.      Negligence
is “unintentional failure to exercise the care toward others, which a reasonable or prudent person would do in the circumstances, or taking action which such a reasonable person would not without any intention to harm. Negligence is accidental as distinguished from "intentional torts" (assault or trespass, for example) or from crimes…”
Now, in the above anecdote, if there was a checklist or an SOP (standard operating procedure) which that person had ignored, possibly in hurry, then it would be a case of negligence.
                                                           iv.      Criminal/ wilful negligence
Criminal negligence is negligence where there is an intention involved and/ or the ramifications of negligence is huge, like drunk driving. But there has to be a ‘mens rea’ to prove criminal negligence. “Mens rea is a legal phrase used to describe the mental state a person must be in while committing a crime for it to be intentional. It can refer to a general intent to break the law or a specific, premeditated plan to commit a particular offense.”
                                                             v.      Malafide action, including sabotage or subversion
This does not need much elaboration.
This angle needs to be checked as the company has raised an insinuation. But my guess is that it is a desperate ploy by a legal counsel to divert such unpleasant attention on an already troubled company.
b.      In most cases, the real reason falls between human error and negligence. The corrective actions thereafter are about strengthening the process by all parties to avoid such events in future.
c.       In case of criminal negligence, or even corruption with knowledge of impending risks, if proved, strong punitive measures, as per the law of the land, should be taken.

This is not a comprehensive and full researched article and thus carries its own risks of simplification and generalisation. And I will be grateful to engage with anyone who would like to enrich the content towards the goal of objectivity and not of media and public trial and vengeance.

I also know that this is a futile exercise. The ethos of West Bengal, the immense unawareness of its educated public of economic governance, volatile nature of its politics, the irrationally passionate character of the people and its penchant for violence and vengeance has made WB a basket case. And for them, emotionless facts, information and issues, which cannot be converted into poetry (good or bad) or films (sleek, lush, ad-like, like the new generation hits), do not make any sense. For them, if you cannot blame and lynch someone, then it is a non-issue. I am not sure how many of my friends and acquaintances, coming from the lineage of "famously voracious Bengali readers", will even read this full article, especially as soon as they realise that I am not going to hang their chosen political adversary, whoever that is.

This does not give me any pleasure, because wherever I am and whatever I do, I cannot and do not intend to deny my identity of a Bengali and that West Bengal is my home. But a home I am very terrified to return to.