Vivan Sharan on "No Country for Start-Ups Yet", BusinessWorld, 06 February 2016

http://businessworld.in/article/No-Country-For-Start-Ups-Yet-/06-02-2016-90917/

The Government of India's "Action Plan" for catalysing a start-up ecosystem feels incomplete and somewhat amorphous. PM Modi's commendable vision of "starting-up" India is premised on the ability of start-ups to capitalise on the so-called "demographic dividend" and also leverage the large domestic markets for their services and products. Of course the PM's thrust for creating this ecosystem must also derive from a desire to reduce the state's own disproportionate burden of job creation. With one million people joining the workforce every month and only a handful of formal jobs to go around, start-ups are seen as a panacea for all that ails the Indian economy.

There is much scope for improvement in the approach taken thus far starting with how the Government procures services from the private sector. In order to promote a start-up ecosystem the Government must first fundamentally reorganise its procurement policies (admittedly there is some lip service to this effect in the Action Plan). In doing so it would recognise two facts - that start-ups have the potential to disrupt existing service providers through new technology, processes and dynamism, and that government departments are among the largest potential clients and beneficiaries of an emerging start-up ecosystem.

There are limited avenues for start-ups to engage directly with government, and all of them are circumscribed by an anachronistic set of regulations called the General Financial Rules (GFR). A voluminous set of regulations, the GFR has limited provisions that allow for purely merit based selection of service providers. The Ministry of Finance wields the rules on any hint of deviation, even if some procurement may actually be in the larger public interest (something it may not itself be optimally set-up to assess).

Some state governments have taken progressive steps to overcome the limitations of the GFR variety. States like Rajasthan have a procurement process called "Swiss Challenge" to promote innovative interventions in service delivery and infrastructure creation. Rajasthan's Swiss Challenge Guidelines are laid down in an amendment made to the Rajasthan Transparency in Public Procurement Rules, 2012. This method of procurement allows for the private sector to suggest innovative projects to the State, which in turn can form the basis for a public tender on which the propositional entity has first right of refusal. This method exists in a few advanced economies and the objective is generally to allow for non-government stakeholders to address service delivery and infrastructure creation/maintenance challenges through innovative means and viable economics.

However, the Swiss Challenge method also has its inherent biases. For a state like Rajasthan, small businesses are the backbone of the economy. Yet, the rules do not allow for firms with less than three years of audited balance sheets and less than Rs 50 crores in value, to take part. The rules show a clear bias towards infrastructure projects rather than service delivery. In fact this logic of attempting to harness the private sector for picking up the slack for the public sector's ability to create infrastructure is ubiquitous. A few years ago, the erstwhile Planning Commission estimated that India needs $1 trillion every five years, in the medium to long run, to invest in infrastructure creation; about half of this would have to come from the private sector. Perhaps the preponderance on public-private partnerships as a development model stems from the hope that the private sector can somehow plug all the fiscal holes in government planning. It does not seem emanate from some inherent appreciation of the private sector's delivery styles or efficiencies.

A central proposition that the state and central governments must begin to contend with is that unless the bureaucracy can begin to cultivate a modicum of empathy for private sector stakeholders, hoping for start-ups to invigorate job creation is unreasonable. The legacy of colonial rule has unfortunately not left government thinking - and while some would contest this, the continued resistance to allowing lateral entry of experts in decision making roles is indicative of this systemic challenge. Perhaps it is time for democracy to play its role and for the parliament to legislate its way out of the imminent impasse that limited governance capacity will result in.

Hard pressed for expertise in all spheres - ranging from diplomacy to technology and defence, government processes must now allow for the strategic involvement of domain experts and private sector professionals and firms. Of course this is easier said than done with an underlying trust deficit in engagement with partners outside the conventional government fold.

Raghav Priyadarshi and Vivan Sharan meet with His Holiness the Gyalwang Drukpa to discuss development initiatives in the Northern Gangetic Plains, January 2016

Raghav Priyadarshi and Vivan Sharan in a discussion with 'Global Youth India" on "Youth Social Service and Crowdfunding", February 2016

Vivan Sharan on "AN ODD PLAN WITH EVEN FAILINGS", The Pioneer, 08 December

http://www.dailypioneer.com/columnists/oped/an-odd-plan-with-even-failings.html

The Arvind Kejriwal Government should have given a more serious thought to the ‘odd-even’ plan of having private vehicles on Delhi’s roads before announcing its implementation. The idea suffers from structural deficiencies

Delhi’s air pollution has once again hit record levels this winter. On Friday December 4, Chief Minister Arvind Kejriwal decided to announce that vehicles with odd and even number plates will only be allowed to ply on alternative days, starting January next year. While Mr Kejriwal has conceded that this measure may need to be re-looked at, once implemented over a short duration, policymakers like him must begin to develop a habit of carefully assessing the robustness of their policies lest the city suffers another Bus Rapid Transit type of disaster. 

According to a 2015 Environment Pollution (Prevention and Control) Authority for NCR report, pollution in the city is at its peak when trucks are allowed in. Heavy-duty trucks (three axle and above) account for 61 per cent of the particulate matter load and 58 per cent of the nitrogen oxide load of all commercial vehicles entering the city. An official survey of such vehicles entering the city found that “40-60 per cent of heavy trucks were not destined for Delhi”. Yet the report draws the strange conclusion, which has since been accepted and implemented without a pre-feasibility check — that an additional MCD tax should be levied on trucks.

Let’s examine this by principles first. An additional tax on trucks equals stressing an already over-taxed industry. Indian businesses are trying to remain competitive despite poor connectivity and infrastructure. The journey between Beijing and Shanghai on an average takes half of what it takes to travel between Delhi to Mumbai by road, even though the distances are similar. Is the lack of infrastructure not a heavy enough price for businesses to pay? Instead of expediting arterial infrastructure, successive Governments have made hollow promises. Prime Minister Narendra Modi has at least managed to lay the foundation stone this November for the Western Expressway (Kundli, Manesar and Palwal,) that in conjunction with the Eastern Expressway (work yet to begin) will help re-route heavy vehicles. Of course, it remains to be seen how the pot-holes in planning and execution will be covered.

Another example is the directive to curb burning of garbage in Delhi. What is ironic about this curb is that the massive landfills across the city are ground zero for such activity — even though the Government itself is not accountable, it expects homeless people on the streets to be. Whether in the form of waste to energy or otherwise, technological solutions for large-scale waste management exist, but are currently too expensive to implement. Indians get paid for waste disposal by their local kabadiwalas. In stark contrast, waste disposal is a service which accounts for a meaningful share of household expenses in the West. This does not mean that policymakers should further increase the service tax cess for Swachch Bharat Abhiyan— a tax that does not even accrue to municipal authorities such as the bankrupt Municipal Corporation of Delhi! Rather, a systematic financial strategy to raise money  has to be devised.

In its latest regulation on private vehicles, the Delhi Government seems to have once again favoured a tactical and probabilistic approach. India’s is a story of growing middle class consumption. This is what it boasts of when brandishing its ‘emerging country’ avatar. Yet, the Delhi Government has decided to tax the aspirations of its middle class — the very drivers of the country’s growth. To be clear, the imposition of the policy will not curb the consumption patterns of the upper middle class or the elite — or for that matter most of whom read this paper. It will however, delay a ‘better life’ for most of the young legions of workers that aspire to travel in some comfort. It is such aspirations that they derive motivation from. They will now continue to endure an over-crowded and non-dependable public transportation and the dangerous summer heat.

And, it must be pointed out that comparisons on the utilisation of public transport with cities like New York or London, do not make sense. These cities have relatively stable populations and near seamless point-to-point connectivity. Where is the long-term thinking in Delhi’s planning?

There are some additional questions that should be plaguing us, but do not. Has anyone from the Delhi Government actually studied the success of similar prohibitions in places like Beijing and Paris? Where is the synthesis report if such an analysis was indeed carried out? Delhi Metro is already overcrowded in peak hours. What will happen when the millions of Indians who are currently unemployed, begin to find jobs in cities like Delhi? Or is there some viable plan to create economic hubs outside of the NCR with abundant skilled talent and infrastructure?

Who will compensate businesses for the inevitable inefficiencies arising out of the logistical nightmare that is point-to-point connectivity? Should not the State regime have consulted the lead implementation agency, Delhi Police, before announcing the odd-even “trial run”?

Vivan Sharan's co-authored article for the European Council on Foreign Relations on "The False Debate on India's Energy Consumption", November 2015

For the original page, please click here: http://www.ecfr.eu/what_does_india_think/analysis/the_false_debate_on_indias_energy_consumption

The false debate on India's energy consumption

Economy & Society

Samir Saran & Vivan Sharan

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Despite having among the largest coal reserves in the world, India lags far behind in consumption, at less than a fifth of China’s levels.^[1]  The average Indian’s coal consumption is around 20 percent that of the average US citizen, and 34 percent that of the average OECD citizen. And yet, in international negotiations, India finds itself caught in a shrill and binary debate pitching growth against climate. This is a false debate, which stems from the inability of the current mercantilist system to grant all actors a fair share of the “carbon space” – the amount of carbon dioxide-equivalent emissions that can be released into the Earth's atmosphere without triggering dangerous climate change.

In international negotiations, India finds itself caught in a shrill and binary debate pitching growth against climate

India’s position in climate negotiations is based on the importance of access to energy for human development. This is supported by data, including the positive correlation between energy access and the Human Development Index (HDI).^[2]  Estimates vary on how much energy is needed to meet basic human needs (hereafter referred to as “lifeline energy”). The methodologies vary depending on whether these basic needs are considered through the prism of GDP growth targets, HDI levels, or calculations of the energy needed to meet a predetermined set of development goals.^[3]

This essay will argue that, if the climate debates have allowed even a nominally equitable level of coal consumption towards meeting lifeline energy needs, India currently has immense room for manoeuvre. The analysis relies on a benchmark metric: that 2,000 watts (W) per capita is a basic level of lifeline energy, covering housing, transport, food, consumption (of manufactured goods), and infrastructure. This is based on a study by Novatlantis, which demonstrates that this level of consumption could power daily life in Western Europe.^[4]  Therefore, lifeline energy is defined liberally in this study, as being high enough to cover the minimum lifestyle needs of citizens in developed countries.

Consumption after the financial crisis

While developed countries such as OECD and EU member states have reduced per capita coal consumption since the financial crisis, developing countries such as India have increased consumption over the same period. This reduction by developed countries does not necessarily reflect a greater degree of climate “responsibility”, and, conversely, the increase in consumption by India does not reflect “irresponsibility”, as this analysis will demonstrate. Table 1 shows the total per capita consumption of key regions and countries that are shaping the climate change discourse.

TABLE 1: TOTAL PER CAPITA COAL CONSUMPTION (W)

Countries/Regions	2005	2009	2014
US	2,580.8	2,147.5	1,887.6
China	1,324.4	1,674.4	1,909.6
Germany	1,308.9	1,162.7	1,269.7
Japan	1,260.2	1,127.9	1,321.5
India	217.2	279.3	377.3
World	640.9	675.7	717.3
of which:   OECD	1,316.0	1,143.0	1,100.6
Non-OECD	484.7	571.9	635.1
EU	846.8	705.6	704.8

Source: BP Statistical Review of World Energy, 2015; The World Bank; author’s calculations

Taking a closer look at coal consumption before and after the financial crisis, it is apparent that the trends are nuanced. Two key sub-trends are visible in Table 2, which tracks coal consumption against total primary energy consumption. The first is that, while developed countries have been cutting total energy consumption, developing countries have been increasing it, albeit at a gradually declining pace since the crisis. Second, while developed countries have cut coal consumption faster than total primary energy consumption, developing countries have increased coal consumption faster than total primary energy consumption. Clearly, then, coal consumption is very much part of the lifeline consumption matrix for developing countries since they require base load generation for industrial-driven economic growth (which is a prerequisite in countries such as India for improving the HDI and generating employment).

TABLE 2: CHANGE IN COAL CONSUMPTION VS. TOTAL PRIMARY ENERGY CONSUMPTION

Regions	Category	2006	2009	2010	2011	2012	2013	2014
OECD	TOTAL	0%	-5%	3%	-2%	-1%	0%	-2%
	COAL	0%	-11%	6%	-2%	-5%	0%	-2%
Non-OECD	TOTAL	4%	0%	4%	4%	2%	1%	1%
	COAL	6%	2%	2%	6%	1%	1%	0%
EU	TOTAL	0%	-6%	4%	-4%	0%	-1%	-4%
	COAL	3%	-12%	5%	2%	3%	-3%	-7%

Source: BP Statistical Review of World Energy, 2015; The World Bank; author’s calculations

Finally, Table 3 shows that the average citizen of the US and of China both consume nearly the entire 2,000W lifeline energy benchmark in the form of coal. Conversely, in India’s case, only about 19 percent of the 2,000W benchmark is consumed in the form of coal. In fact, citizens of OECD countries get a much larger proportion of their energy needs from coal than citizens of non-OECD countries. This is also a function of the disparity in per capita energy consumption as a whole between developed and developing countries – while coal consumption as a percentage of lifeline energy in developed countries is decreasing, the gap between the per capita coal consumption of developing and developed countries remains vast.

TABLE 3: PERCENTAGE OF LIFELINE ENERGY DELIVERED BY COAL, WITH A PER CAPITA NEED OF 2,000W

Countries/Regions	2005	2009	2014
US	129%	107%	94%
China	67%	84%	95%
Germany	65%	58%	63%
Japan	63%	56%	66%
India	11%	14%	19%
World	32%	34%	36%
of which:   OECD	66%	57%	55%
Non-OECD	24%	29%	32%
EU	42%	35%	35%

Source: BP Statistical Review of World Energy, 2015; The World Bank; author’s calculations

India’s twin imperatives

The World Bank’s Special Envoy on Climate Change recently stated that “clean energy is the solution to poverty, not coal”.^[5]  This is a view that resonates within a number of development-financing institutions based in OECD countries. For instance, the US Export-Import Bank stopped funding greenfield coal power generation projects worldwide in 2013. The World Bank also seems to be moving in this direction, even though coal consumption has been increasing in developing countries and coal-based energy remains the most practical option at a large scale.^[6]  This narrative isolates economic growth from lifeline energy and skirts over the role of growth in development.

The preceding analysis attempts to address some myths related to coal consumption. First, in per capita terms, developed countries in fact consume much more coal than developing countries: The average OECD citizen consumes about double the coal of the average non-OECD citizen. China is a notable exception. And if Chinese per capita coal consumption is a benchmark, the debate on India’s consumption is clearly redundant.

The average Indian already spends much more on renewable energy (as a proportion of income) than counterparts in China and the US

The per capita trends show that India will supply a larger proportion of its 2,000W benchmark through clean(er) fuels than developed countries. There is enough room for India to increase its coal consumption while continuing to accelerate its renewable-energy thrust. India has set a target renewable-energy capacity of 175 gigawatts by 2022. This means that it will be among a handful of countries to source a large proportion of its lifeline energy needs from non-conventional sources. The average Indian already spends much more on renewable energy (as a proportion of income) than counterparts in China and the US.^[7]  To spend even more, purchasing power will need to grow, and so, in turn, will lifeline consumption.

This has clear implications for India, and for other similarly placed developing countries. Unlike developed countries, which have already seen peaks in their energy consumption, India must respond to two imperatives. First, to increase its lifeline energy as well as clean energy. This means that the country will have to ensure financial flows towards lifeline energy, make coal consumption more efficient, and engage with the international financial system to ensure that regulations do not make clean energy investments more costly than they already are. Second, and at the same time, lifestyle emissions need to start adhering to or approximating the Swiss model, which shows that “daily life in Western Europe could be powered by less than one-third of the energy consumed today&rd^[8]  The estimated 20 million people at the top of India’s socio-economic pyramid, and large companies that consume as much energy as counterparts in developed countries, must be included within the paradigm of “climate responsibility”.

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^[1]   In 2014, China accounted for more than half the world’s coal energy consumption, at around 3.9 billion tonnes of oil equivalent, while Organisation for Economic Cooperation and Development (OECD) countries consumed just over half this figure. China’s target of capping coal consumption at 4.2 billion tonnes by 2020 was welcomed by OECD countries. See data from the BP Statistical Review of World Energy, June 2015, available athttp://www.bp.com/content/dam/bp-country/de_de/PDFs/brochures/bp-statistical-review-of-world-energy-2015-full-report.pdf; “China seeks to cap coal use at 4.2 billion tonnes by 2020”, Agence France-Presse, 19 November 2014, available athttp://economictimes.indiatimes.com/news/international/business/china-seeks-to-cap-coal-use-at-4-2-billion-tonnes-by-2020/articleshow/45205271.cms.↩

^[2]   UNDP, 2013; The World Bank, n.d.↩

^[3]   Shripad Dharmadhikary and Rutuja Bhalerao, “How Much Energy Do We Need?”, Prayas Energy Group, May 2015, available athttp://www.prayaspune.org/peg/publications/item/298-how-much-energy-do-we-need-towards-end-use-based-estimation-for-decent-living.html(hereafter, Dharmadhikary and Bhalerao, “How Much Energy Do We Need?”)↩

^[4]   Novatlantis, “The 2,000-Watt Society”, 2007.↩

^[5]   Rachel Kyte, “World Bank: clean energy is the solution to poverty, not coal”, theGuardian, 10 August 2015, available at http://www.theguardian.com/sustainable-business/2015/aug/07/world-bank-clean-energy-is-the-solution-to-poverty-not-coal.↩

^[6]   Sunjoy Joshi and Vivan Sharan (eds), “The Future of Energy”, Observer Research Foundation, 2015, available at https://www.economic-policy-forum.org/wp-content/uploads/2015/02/ORF-EPF-Final-Report-The-Future-of-Energy.pdf.↩

^[7]   Samir Saran and Vivan Sharan, “Indian leadership on climate change: Punching above its weight”, Planet Policy blog, The Brookings Institution, 6 May 2015, available athttp://www.brookings.edu/blogs/planetpolicy/posts/2015/05/05-indian-leadership-climate-change-saran-sharan.↩

^[8]   Dharmadhikary, Shripad and Bhalerao, Rutuja, “How Much Energy Do We Need?”, Prayas (Energy Group), May 2015.↩

Vivan Sharan's article on "Start up India" in November Issue (#675), Seminar Magazine

Please click on the link to access the article:
https://drive.google.com/file/d/0B5rwSwNqnwrFaGp4U0hvSnAwcXM/view?usp=sharing 



Access the Table of Contents here: http://www.india-seminar.com/semframe.html

Koan Advisory Note on the Bihar Elections (Circulated on 08 Nov, 2015)

The Bihar elections have widely been seen as a referendum on the Modi-Shah brand of high pitched politics. While this may be overstating the value of the brand (and understating at the same time, the disruptive influence of the so called ‘fringe’ within the NDA fold), there is no doubt that the elections will lead to deep introspection within the alliance. While some would say it may be too early to tell, there are at least five areas where the Bihar elections will have a lasting impact. These are outlined below:

1. Rethink on the Youth Factor: Many within the NDA thought that the support of the youth, going into the Bihar elections, would be the clinching factor in victory. However, the election results have shown to some extent, a reversion to the mean by the Bihari voter. It would be too narrow an interpretation to attribute this reversion to the comfort zone to the caste arithmetic. Indeed the BJP has not done too badly in terms of the number of seats contested, while the rest of its partners have seen abysmal results. The BJP’s key ally, the Lok Janshakti Party (LJP) in particular was hoping that Chiraag Paswan’s supposed appeal within the youth would lead to many more seats. Conversely, the youth pivot has not managed to sway the tide in the LJP’s favour. And perhaps further deconstruction of the polling numbers would show that the high turnout of women voters in future state elections, could moderate a simplistic youth binary. And of course youth candidates may be able to leverage the youth vote in future elections. A prerequisite for this may be that youth candidates are seen to have a strong connection with local politics.

2. Impact on UP Elections: Having discussed the results with many within the political fold in UP, it is evident that the tide is no longer in the favour of a BJP led victory in 2017. This is owing to a few key factors that will also hold relevance in other elections. While the upper castes will continue to favour the BJP, the Muslim vote is likely to be cornered by the Samajwadi Party (SP). The Bahujan Samaj Party (BSP) is also likely to make a comeback the way things stand. This is owing to an anti-incumbency vote in favour of Mayawati, and the simultaneous lack of a credible alternative. The BJP was hoping that a Bihar victory would cement their party as this alternative. In addition, the BSP has shown that it is capable of a comeback in the recent Zila Parishad elections. The BJP will have to play its cards right in UP – it will have to begin to address some of the popular perceptions against it that are only to take firmer hold in the days ahead. These include the rise of food prices, particularly in ‘daal’. The new slogan doing the rounds in UP and Bihar is “no longer har-har Modi, it is now arhar Modi”. Ironically, sloganeering has been used by BJP to good effect in the past. And in case the BJP is unable to cement a place for itself in UP, Amit Shah’s stellar reputation will take a nose dive, and anti – Shah forces within the BJP are likely to eventually prevail leading to his return to Gujarat.

3. Political Consensus and Economic Reform: Many have feared that an NDA loss in Bihar will slow down the pace of economic reform. However a conciliatory tone adopted by many within the NDA fold, recognizing the Achilles Heel of the NDA Government as being a fundamental inability to navigate egos within parliament (the first failure was the infamous land bill followed up with a slowdown in the GST process) may indicate positive momentum for more inclusive politics. What will this inclusive politics look like? Perhaps the BJP will now be inclined to take the views of both alliance partners and the opposition and follow a more patient, and calculated approach towards its reform agenda.

4. The Role of the RSS: The role of the RSS in this election must be highlighted since it will also have bearing on the future of Indian politics. Mohan Bhagwat issued statements in the run up to the elections that have clearly led to a consolidation of an anti-BJP vote. The greatest beneficiary of this has been Lalu Yadav and his Rashtriya Janata Dal (RJD). There can only be two possible explanations for Mohan Bhagwat’s anti-reservation remarks. The first is that the RSS got its caste arithmetic terribly wrong (and Lalu Yadav got it right). The second less tenuous explanation is that the RSS leader knew in advance, the effect his words would have on the Bihar elections. There is no doubt that Lalu Yadav was able to use the RSS leader’s statements as a plank of his election campaign. The relationship between the existing top brass within the NDA, and the RSS, has been exposed. There has been a lack of coordination in either case.

5. Lalu vs. Nitish: Given that the RJD has outdone itself, questions are now being asked about whether Lalu will begin to jostle for political weight with Nitish Kumar’s Janata Dal United (JDU). While a lot will be up to the way the cabinet formation process takes place, it may not be off the mark to assume that Lalu Yadav will play his cards very carefully, at least in the initial days. He would not want to expose chinks in his coalition’s armour too early and his first priority should be to put people close to him in positions of power. It may also be wise for Lalu Yadav not to select his progeny for the role of a Deputy Chief Minister. While the Yadavs managed to stay together for this election, it is clear that the projection of Lalu’s sons as Yadav leaders was questioned within their closely knit community. Moreover, Lalu Yadav will also be acutely aware that he cannot be seen to bring ‘Jungle Raj’ back to the state. While rent seeking under his stewardship is not likely to abate, he will not want to be seen as an obstruction to broad based socio-economic development of a state that had become the butt of all development jokes under his reign in the nineteen nineties. Lalu will have to evolve if he has not already.