What is India’s 117th constitutional amendment bill really about ? Promotion quotas

A constitutional amendment bill was passed yesterday in the Rajya Sabha. This is the 117th Amendment bill which I had discussed in depth in May 2012 in “Constitutional amendment around the corner“

The sheer misinformation, under coverage, and smokescreens in the media on this crucial issue is mind numbing.  Here is todays editorial in The Indian Express.

Have parties considered that a quota in promotions may not be the best way to address the problem?

later in the evening, the Rajya Sabha passed the Constitution (117th Amendment) Bill, 2012, to extend the benefits of quota in promotions to all Scheduled Castes and Scheduled Tribes, and to override Article 335, which requires their claims to be balanced by concern for the efficiency of government.

Source : Indian Express

But here is the thing.

The promotion quota already exists. It has for decades.  The question of whether or not there is a better alternative isn’t even in front of us.  It is completely irrelevant to the events of the day and this editorial is clearly a distraction from the main issues.  I anticipated exactly this media  misinformation campaign, which is why I preemptively wrote the May 2012 post.  Can they miss it  ? I think not, it is on the top of Google for this topic.  This amendment is about removal of the last remaining constraints on preferential treatment of a class of citizens.  Lets jump in.

The thorn : Nagaraj vs Union of India (2006)

I wont repeat all points made in the previous blog on the topic, but a quick recap is in order. M  Nagaraj vs India (2006) was a case challenging the whole burst of constitutional amendments related to promotion quota which themselves were passed to obliterate earlier SC judgments in Ajit Singh 1 & 2, Sabharwal, and a slew of other cases. Nagaraj upheld ALL  the challenged amendments (77,81,82,85th) with the following rider.

• It was going to uphold all of them because it believed it would not result in excesses due to the data requirements.
• The state had to collect data for a) backwardness of the class and b) inadequacy of representation.

This stands till today.  The UP Promotion Quota was struck down because of the failure of the government to provide such data.

The communal roster

I bet if you watched the media or read the papers you would’nt know that all recruitment and promotions in government jobs are controlled by device called a communal roster. This device is at the root cause of the problem. A quick summary again of how this works.

• Say you have 100 positions at Level A
• The individual positions are marked like so SC, ST, OBC, GC, GC, GC, SC, ST. . etc.  (like DNA sequences)
• The sequence is called the roster points notified by central and state govts. They are called 100-Pt/200-Pt rosters.
• Similarly you have roster points for the  50 positions at Level B
• There is something called a replacement rule – if you are a roster point reserved officer  vacating your position due to a promotion,  exit, or retirement – your position can only be taken by another officer of the same category (SC/ST).
• If you are a general category vacating your roster point, your position can be taken by anyone including an SC/ST/General.

This roster system works very well if  all you wanted to do was a pure communal quota. IE  – if x% of seats are also reserved for general category only.  But this isnt allowed by the courts.  There is one more part, an important part, of the puzzle. Its called consequential seniority.  This is the source of endless litigation and the main reason behind the 82,83,85th amendments and the 117th bill (this one).  As you have seen , the roster system accelerates those with a quota and slows down those who dont have one.  How does it work along with consequential seniority.

Imagine your job promotions are controlled by a turnstile that alternates between green and blue positions. Green allows anyone to pass through and blue only allows some class of people. Now imagine another turnstile to the next level where those who passed the previous turnstile in the express route are now deemed ahead of you for passing through the next green.  Imagine 6 levels of such turnstiles at every step of your career.  This is the state of government employment today. This is why those on the outside are protesting to such an extent.

Narrow tailoring

Lets borrow this phrase from the US rulings on affirmative action to illustrate what is happening as a result of this roster system.  Here is a story

For example in Bihar, all 19 posts of chief engineer in irrigation department are occupied by officers of the SC category. Likewise, all 14 chief engineers in PWD are from the SC/ST category. Similarly, in Karnataka, all 31 posts of chief engineers in Karnataka Power Corporation are occupied by the officers of the SC/ST category. “Why the issue was not taken up in Parliament before the general elections of 2009 or the UP assembly elections? It is nothing but a conspiracy by Congress and the BJP,” Dubey said

Source :TOI

So what the roster system has done is concentrate reserved candidates at higher levels. Recall that anyone can go through the ‘green’ turnstile.  But zooming out to overall levels, due to the late impact of consequential seniority and other factors like direct recruitment the numbers are on the low side 11% against 18% for SC.  The key point is that given enough time the roster + consequential seniority will concentrate almost exclusively the reserved candidate at the top.

How does Nagaraj help here ?

If you were an general category Asst Engineer in Bihar Irrigation Department you would find it extremely cruel that your career has effectively ended because even though at the next level 90% of seats are occupied by SC officers, you are shut out citing an overall deficiency across the department, state, even country.   Thus the policy isnt narrowly tailored, rather adhoc with respect to the width of its application.  The Nagaraj judgment sort of puts a spanner in the works here. Once such anomalies are brought to light by parties with some standing the court can intervene and halt the roster.  That is the last and only check available. The 117th amendment removes that check.

Will this pass muster

Looks like the Winter session ends in a couple of days, so the Lok Sabha might only take it up in the next session.  This amendment is almost certain to be challenged immediately.  What will the court do ? I think it would be a monumental task for any bench to square this amendment with any conception of equality however wild it is.  In Nagaraj, the bench heavily relied on the  adequacy requirement to set aside fears of the 4 amendments violating the basic structure.   Even in the UP Power Corp case the court hinted that an amendment to remove all checks will be a violation of basic structure.  Ultimately, the court which quotes Amartya Sen in its opinions (see Nagaraj) will be confronted with the strict scrutiny doctrine. The more you deviate from well understood equality to fuzzy concepts like proportional equality or substantive equality the tougher it will be to escape the hard work of strict scrutiny.

Zee vs Jindal – is it really extortion ?

I just read a news article in DNA about the Zee News executives in judicial custody.

Here is a short post about why this disturbs me.

Quick Facts :

• Zee News executives allegedly offered to cut back on Coalgate coverage if Jindal would pay 100 Cr in the form of advertising revenue.
• Jindal representatives pretended to bargain while secretly taping these meetings.
• They took all the tapes to the police.

There are two aspects to this. First as something that must be addressed by the media fraternity in their own self interest. Second as a legal matter which calls for punishment or cancellation of license. The legal case particularly about the extortion charge  isnt clear to me at all.

It is crucial to distinguish between extortion and blackmail.  There is a vast volume of literature on this topic, but here is a really good article on the matter by US Federal Judge Richard Posner (PDF).

• Extortion : Demand money – otherwise I commit an illegal action like hit you over the head, criminally intimidate you, defame you,  and so forth.
• Blackmail : Demand money – otherwise I exercise my right to free speech. In effect, this is an offer to waive my right to free speech in a particular instance in exchange for money.

Everyone seems to agree Zee News were not forcing Jindal in any way. At any time, Jindal could have simply walked away. Their fear that subsequent to the failure of the deal,  Zee News would commence broadcasting lies is unfounded because there is enough protection in existing laws against  criminal defamation.   Prima facie this isnt extortion at all. This is blackmail – an offer by Zee News to cut back on its right to free speech and arguably professional duty.  Extortion also has a dimension of power, a goonda is able to extort from a push cart vendor because when the latter toys with the idea of resistance, he factors in his costs.

The media better sort this one out amongst themselves.

 

Direct Transfer of Subsidies – the visibility problem

Everyone sees who gets what – a social dampener

The UPA government is going to roll out the Direct Cash Transfer scheme for Kerosene, Cooking gas, and fertilizer in the next few months. There is plenty of material in the media already so I wont bore you with a recap.  There is one major piece of the puzzle no one is talking about – it is easy to miss it if you aren’t as obsessed with monitoring of benefits as I am. So what’s the big hole ?

The Interim Task Force report that I base this blog post on itself isnt very interesting. It is like a giant IT Solutions Provider sales pitch trying to upsell everything from Biometrics, ERP systems, Call centre software, cloud solutions, POS, mini ATM, all kinds of modules interfacing with outside systems, etc.  I want to focus on the most basic stuff. Consider this.

In the three sectors above (kerosene, LPG and fertilizer), the State is the provider of the subsidized goods, directly or indirectly, to the intended beneficiary. The Task Force does not recommend substitution of public provisioning by the State. Instead it recommends a solution whereby the subsidies that are being provided by the State now can be more efficiently provided to the intended beneficiaries directly. It complements public provisioning by the State, rather than supplanting it.

Interim Task Report DTS Page 5 – Link

For a moment ignore the administrative costs of this system and also the absence of pilferage data.  If the proposed cash transfer only complements what is available, then you can have no complaint. All the good is carried over to the new system and none of the bad is made worse.   Is that really the case ? No. The proposed system destroys one fundamental check and does not replace it with anything remotely comparable. The built-in feedback that flows from a visible benefit platform.  Let me explain this.

Lets not lose sight of the main problem with any welfare program – the identification of beneficiaries and continuous monitoring of them.  This is a monumental problem that turns intractable in the Indian context when politicians introduce all kinds of eligibility criteria.  Given this, I assert that the current scheme of subsidy works better.

Take ration rice for example (I know PDS isnt rolled out in this round, but easier to illustrate)

1. Today : You pick up your bag, your BPL (green) ration card, and stand in line along with everyone else. In full view of your locality. When your turn comes, the vendor weighs 10Kg rice . You put it in your bag, pay the subsidized price,  leave the line and go home.
2. Post Cash Transfer : You go to Reliance Fresh, buy 10Kg of rice, pay and go home. No on sees you. Even if they did, they have no idea if you are about to use DTS cash for this purchase. You later check your bank account and find new cash.

The second has no visibility whatsoever. It is a private deal between you and the government.  You can walk into a room full of people and have no idea who is getting what.  Today, a social disincentive is baked into the scheme. You are really going to think twice before driving over in your car in full view of your immediate society and partake in the welfare program. This is simply not done or if you do it people who observe will react appropriately and increase your cost in other ways such as rent seeking.

At this point, many of you might say – “You are wrong, people send their servants all the time to stand in line“.  That just reinforces my point. People are able to send their servants to the ration shop because they have illegally obtained a BPL card.  Once again, the servant knows,  her friends know, the vendor knows, and this knowledge acts as a check on the system. There is nothing in the Direct Transfer that has this feature. Can they catch the the illegal BPL card ? Grand analytics is touted as the answer.  At best, analytics may catch the extreme cases at a terrifying cost of privacy.  An example cited to me was :  If you buy a lot of air tickets using your credit card, that is linked to the Aadhar via your cards bank, that in turn feeds back  and can cancel out your entitlement.  In this scenario the deep state knows what you are up to. What is even more terrifying is : You dont get to choose what analytics they run or dont run, they do.

Blocking a rich man like Nandan Nilekani from taking a 5 Kg rice ration is the insignificant boundary case. The real story is  the masses who are spread around the entitlement line. Today they watch each other and even co-operate  – everyone’s entitlement is known in advance and the delivery happens in full view.

Algorithmic benefit tweaking

Remember India is all about adhoc benefits, so this scheme will be used to that end.  Since the cash transfers are private, to the extent that someone isn’t motivated enough to look you up specifically or use RTI, a lot of things can happen that are not possible with the current system.

• Late payment – you need rice today but payment hasnt happened yet.
• Scaled payment – you got less than last time because someone tweaked something.
• Suspicion of others – you have no idea if your neighbours got their payment. They just bought rice from Reliance yesterday.
• The govt rolls out an algorithmic increase or decrease for your state, district, tribe, caste, religion.
• You got more, but you wonder if others got even more.You got less and wonder if others stayed the same.

I have also read some material about the programs as they have been deployed in Mexico and Brazil. To me they appear to have limited utility in our Indian context. Their classifications are very simple and they are wealthier countries than us.

Attacks on CAG on 2G spectrum scam

Tonight I watched a show on NDTV  featuring former auditor RP Singh.  In the wake of the failed 2G auction questions are being raised about the motives and competence of the CAG Vinod Rai. Various Congress politicians have even launched a broad-spectrum attack on the institution itself.  In parallel, some sections in the media are seeking to exhume the zero loss theory that was given a state burial.

2G scam simplified  - it is the low price or the arbitrary allocation ?

The basic issue is one of  allocation. Here is the question : If there are 500 applicants for 122 licenses, how would you go about selecting who should have it ? Economics demands that the applicants who are most efficient should win. You can find out who the most efficient ones are by

1. an entrance exam or a powerpoint interview – aka beauty contest (such as  Coalgate)
2. who applied first
3. who pays the most upfront yet is confident enough of its business abilities to compete in a market which already has powerful incumbents.

The option with the least possibility of intrigue and highest possibility of social benefit is the auction.  Be that as it may,  selecting the alternatives such as  FCFS or a beauty contest is a policy decision.  But this decision has a cost,  these two methods increase the likelihood  you have left money on the table due to the act of not following a market methodology.

The question then is, “Well how much did you leave on the table ?” The Congress and the media channel in question promote that argument that “We didnt leave anything on the table, because there is no table”  We didnt want to maximize revenue at all. Enter the social argument.

Social welfare argument

The argument here is that FCFS winners will offer low prices and do rural telephony in line with the benign government vision. This conveniently omits the fact that all aspirants have to meet strict rollout obligations as per the UASL license conditions.  That being the case, it is counter intuitive to suggest that FCFS winners possess some kind of altruistic gene that will make them go over and above their license obligations. Such policy making is dangerous because you are indirectly mandating some kind of virtuous behaviour at the expense of legitimate profit seeking.

What about what Raja did ?

Lets be honest here, if there was any loss at all to the exchequer A Raja of the DMK didnt cause it. He just rearranged the beneficiaries in some non-random, capricious way. This is of course illegal – for which he will probably pay a price. But lets say, he stayed with the first come first served criteria as date of receipt, and it so happened that the same companies miraculously  won. Would we then say that there was no 2G scam and no loss ?  Absolutely not.

3G auction figures for 2G, etc, etc

On the NDTV show Mr RP Singh said that since the 3G auction concluded in May 2010, it fell in Fiscal 2011 which was outside the timeframe of the CAG. Such technical talk is important but betray the lack of confidence of  Mr RP Singh.  Is he saying that if the audit window were to be extended by 2 months to May 2010, then the 1.76 Lakh Crore figure would make perfect sense ? If yes, then he has destroyed his own argument on a technicality.  The other arguments about 3G (Basmati rice) numbers (2100Mhz) and 2G (Ration rice) numbers (1800Mhz) have been analyzed threadbare many times over we are not going into it.  Also at this point, it is well understood by the public that winners who won the 2008 licenses then conducted private auctions to select a foreign partner and discovered a price on their own.

What about the failed 2012 Auctions

The real disaster is the UPA’s handling of the biggest 2G fallout – the cancellation of all 122 licenses by the Supreme Court.  They always seemed to adopt a thinly disguised passive-aggressive resistance to the court ordered auction.  Were the auction to succeed, maybe not to the 1.76L Crore extent, but to a lower number, t hat would totally vindicate the CAG. Show the Congress and DMK ministers in very poor light.

The  2008 allocation was not without its positives. A key one was that incumbents could not participate –  this was designed to shake off any cartel. Unfortunately this condition was removed in 2012.  This leads us to the two basic goals of an auction.

1. Prevent collusion
2. Increase participation

Both these goals  were adversely impacted by various policy decisions  a) a one time charge at winning price applied to all holding over  6.4Mhz  b) refarming (vacating the 900Mhz band) at the winning price c) pegging the starting bid for CDMA (800Mhz) at 1.3x the winning price d) no clarity on when the 700Mhz band will be available – this is where 4G LTE is most efficient e) no clarity on whether enough spectrum will be available in 800Mhz for data services like Photon+, Reliance, MTS  (say 5Mhz or 10Mhz). Into this quagmire , you add a curious tendency to honour any and all “level playing field” arguments brought forth by various players. You never know what you are getting into. In short the policy climate is messy.

Do you want to sell ?

A common tip to  newcomers on  eBay is  ”Do you really want to sell your stuff?”

Say you had a guitar which you dont mind keeping, but for Rs10,000+ you will sell it. So you go on eBay and set the starting bid at Rs10,000.  If the participants find your starting bid too high they will simply assume you are too greedy and walk away. There are millions of such items on eBay with no bids at all. You dont care because you are in no hurry to get rid of the guitar and are not in immediate need of money.  This is the exact effect a stupendously high starting bid of Rs 14,000 Cr for a pan India license has had.  Telecom Minister Mr Kapil Sibal boasts that he got down TRAI’s recommendation of an even more ridiculous Rs 18,000 Cr figure.

So in effect, a high starting price combined with all the other factors decreased competition. Did it increase collusion ? We dont know, but obviously if one of the Big 3 (Idea, Vodafone, Airtel) bid and won high, it would rebound and impact all of them via the one-time levy. It would also impact the CDMA holders by setting their staring bids at 1.3x and so forth.  There is no way this auction could have succeeded.

Increasing competition by injecting disruptive players is key, not just for the auction, but for growth of the sector.  China has AT&T why cant India ? What are the policies that hinder their participation ? You need players from the west  like AT&T, Verizon, T-Mobile, Telefonica to participate. That would certainly make collusion that much harder among the incumbents because it is hard to buyout the big dogs at advanced rounds in an auction. If the meaningless 74% FDI cap on Telecom has to go, so be it.

As the auctions fail to generate any enthusiasm; nationwide  a total of 500+ Mhz lies unused. This is causing real loss in spectrum usage charges. Perhaps Mr Vinod Rai can take a look at this next.

An analysis of Kapil Sibals all-in-one essay on 2G and auctions

Shri Kapil Sibal, the Union Minister for Telecom and Information Technology as well as Human Resource Development has written an article in the Times of India “On 2G, the policy dilemma remains“. Even though the country has moved on post the 2G judgment, Shri Sibal seems inconsolable. The points he makes in his article are nothing new and have been addressed by various people including myself in “Arbitrary and Capricious” and “2G Spectrum and TRAI ” . But this is the first time Shri Sibal is laying down his talking points in a single place. So we get to address them all at once.

Suppose you were to hold on to an irrational belief that you refused to surrender to contrary evidence, you get really really upset when it is rejected. In this case, we have a double cabinet minister who refuses to see the light even after the CAG report on 2G as well as an emphatic decision by the Supreme Court. In this article, he turns on the CAG and even takes a swing at the Supreme Court questioning their respective boundaries.  While doing so, he hits on so many little issues because there isn’t a single ‘winner’. But it is easy to  play whack-a-mole and they are all out in the open here.

1. It was a nascent sector, we didnt know how to deal with it.

Did those who cried foul fully understand the complexity of a sector that was nascent? We were traversing virgin territory. There were no examples to learn from. Other nations were also learning from their mistakes.

Source : TOI (Sibal – On 2G the policy dilemma remains)

It was certainly a nascent sector in 2001, but it was far from a virgin in 2008 having been around the block for 8 years. Other nations had long established an auction regime, even those who entered India had bid and won auctions in countries from Egpyt to USA to Slovakia. In India, newcomers would have the benefit of having a decade of balance sheets of leading players, tried and tested business models centered around outsourcing operations to the likes of Nokia Siemens and Ericsson.

2. Bundling license + spectrum

This is a technicality that is almost meaningless. The license is not a resource you can roll out service on, it is just a piece of paper that artificially restricts operators in a service area for mobile and unrestricted for other service types such as broadband.  The spectrum whether bundled or paid for separately is the key issue.  We wont spend any time belaboring this point.

3. But new guys will go to court and we might be prosecuted

By far the most stunning part of his essay is this :

I don’t know. Had that been done, the resultant resentment between telecom operators would have resulted in court wrangles. The new ones would have argued that government, by introducing a non-level playing field, was throttling competition. Allegations of undue favours being bestowed on existing players would have been made. After all, how can one have two regimes in the same 1800 mega hertz band with the new players paying for spectrum through their nose and established players having got it for free? For doing that, an overenthusiastic court could have ordered an investigation, and consequent thereupon, prosecution. The facts would have been irrefutable. Prosecution of the policymaker was inevitable.

What he says is. Had we opted for a price discovery for 2008, the new ones who purchased those licenses at the higher prices would go to court and allege undue favours to operators who had set up shop 7 years earlier !!  Not only is he sure that the court would have found the case of the new operators compelling – but also irrefutable.

This flies against all commonsense because it ignores ‘time‘. After all, the court would never find the current situation that new entrepreneurs cannot get a 19 Acre plot that Infosys got  in Electronics City in 1990 for the same price outrageous enough to be illegal.  The only compelling  fact is that the new entrants shared none of the risks the incumbents did when they started out in late 90s. They had the market scoped, sized, sourced, and ready.  Once again see how the only arguments being made are on the level playing field, while the touted social benefits find no research or backing.

4. No one talked about it until CAG report

Between January 10, 2008, when the new players were granted licences under the old regime, and August 2010, not much happened except for a dubious single petitioner in court, whose antecedents were allegedly suspect. The petition failed. Then came the report of the CAG, who calculated presumptive loss to the exchequer of the order of Rs 1,76,000 crore. All hell broke loose.

What he means is very few in the national media, the likes of NDTV and CNN-IBN talked about it. He is right, but the internet, the vile medium of unchecked commentary, was always abuzz.  The Daily Pioneer carried a persistent account of the 2G allocation. In any case, that can hardly be a mitigating factor because then that would only encourage a clampdown of airing contrary facts that challenge your irrational position. Wait ! That is exactly what they tried by blocking outstanding commentators like Barbarindian and Kanchan Gupta.

5. Look at the mess now, cancelled licenses, BIPA, arbitration, we are sweating

These are repercussions that our unfortunate country is having to bear for the capricious acts of those in power. The Supreme Court has cancelled the licenses not on a whim but  because the govt could not pass the ‘test of arbitrariness’. Then and now the agencies involved have not been able to  produce records that show a linkage between the 2001 prices and the purported social benefits. Instead the nation found new entrants to the Forbes Billionaires (the USD version) list on one hand and mere personal assertions on the other saying how such enrichment was good for the social fabric of the country.

He then proceeds to lament that they have set the reserve price too high fearing some judge ‘might think we are favouring the telcos’. This is a sad state of affairs. The my way or the highway strategy.  First they set about a dubious prejudice of what the court might do, much like the level playing field (see 3). Then citing an imaginary safe harbour, they set  a sky high reserve price. The reality is a much more reasonable reserve price can be set and argued effectively in court.

 

6. Court better to look at criminal cases

He goes on to say that the court cannot step in and scrutinize administrative action on the basis of arbitrariness. Clearly in this case, the TRAI and DOT did not consider all facts on record but only those that suited their position. His position, possibly shared by a large swathe of our ruling class is the following :   Short of criminality, such as a bribe, every policy no matter how egregious, random, or with disregard for national property has to be exempt from judicial and audit scrutiny.  What he means is there should be no institutional checks on administrative action, and the only acceptable punishment should be at the polls. This is hardly the blueprint for a modern democracy where institutions are the key.

 

7. Can you auction land or school

This is a theme the government is recycling for the coal block allocation too. The thought experiment goes like this:

Say the govt had 10 acres to spare and wanted a private party to set up a school on that land. How would you go about allocating it if a dozen parties wanted in ? If you chose an auction route, the price of the land would be bid up and the winner would have no option but to hike the fees to make up the investment, thereby placing the school out of reach for poor kids. So the thought experiment fails miserably if auction were the route.

Unfortunately, Arun Shourie too thinks along these lines. He says can you auction a city’s water supply which would lead to the winner pricing drinking water our of reach of the poor.  As a matter of fact, Chennai  Municipality actually auctions Metrowater tankers and there has been no extortion.  Farmland owners  conduct private auctions for drawing water from their wells by water tankers. These tankers supply 90% of requirements of IT companies and star hotels. This isn’t ideal but the bigger problem here is not auction but cartelization. Across the country, auction is the method for cutting down a tamarind tree, right to fish in a pond, granite, riversand, etc. Why then does the thought experiment fail ?

The thought experiment fails because it ignores there are TERMS and CONDITIONS against which the resource is allocated via the auction route.  The bidders are fully aware of the terms while making a business decision whether to bid up or exit at any stage.  In the school example, if the terms built around social objectives required setting aside 50% of free seats,  then obviously the winner cannot ignore that and indeed the auction might work.  The alternatives aren’t pretty, out of the dozen contenders you cannot always run a beauty contest as in the case of coal blocks. The politically connected will always win because they can always call foul citing this or that reason when losing based purely on perception.

The academic drawbacks of auction route cited by the government of course is insincere and intended to tire you out. The argument falls apart  because both in the case of 2G and Coal Blocks they announced ahead of time that the  method (FCFS for 2G and Beauty Contest for Coal) was a one time sop and all future allocations would be strictly via the auction route.  Yes, the same auction route that denies poor kids education and hospital care.

 

8. An accountant should remain an accountant

To charge the government with not preferring auction for allocating a public asset is not just ignoring the unpredictability of the market but arrogating to yourself a role you are not necessarily equipped to perform. An accountant should remain an accountant and calculate all losses that accountancy permits.

Obviously the CAG is equipped to perform that role, the question is whether the constitution authorizes the auditor to quantify the impact of procurement and allocation options. Lets try this from the procurement side, you would certainly want the auditor to compute the losses of buying a lightbulb from me for 1Cr while the same can be procured via a tender (another form of auction) for much less. Why is it so jarring if the audit covers the allocation side too.

Unfortunately, the government far from being wiser due to the CAG and Supreme Court intervention in the 2G case is appearing to be brazen and lashing out these democratic institutions. The patchwork arguments put forth by the honourable minister are unconvincing and do not align with common sense wisdom.

Deep down it betrays a political body that is deeply hurt and one that  yearns to be free of the only remaining institutional checks against total arbitrariness.

Targeting in Kasturba Gandhi Balika Vidyalaya

It is truly mind boggling how the UPA finds ways of introducing adhoc division and discrimination even in areas where the easiest approach is to create common goods.

Dont let them discriminate between hungry stomachs (Img courtesy PravasiToday.com)

Girl education

There is little doubt that improving education among girls is of paramount importance. They are especially vulnerable around elementary school level where poverty, custom, and other factors make them drop out.  To address this, right after getting elected in 2004, the UPA government announced all-girls residential schools in remote and backward areas. These schools were called Kasturbha Gandhi Balika Vidyalayas.   Remote areas are rather easy to identify – it includes scattered habitations in hills, deserts, etc. Backward areas are a bit harder  but includes all the areas where the rural female literacy rate is below the national average. So far, we have what sounds like a good program – setup residential schools in areas where girls traditionally drop out. You can monitor its effectiveness by observing the rural female literate rate. How awesome !

Now watch how this scheme is framed by the  UPA.  ( I uploaded the latest rules here (PDF))

A : Targeting

First, this program is targeted at SC/ST/OBC/Minority girls. There is simply no reason for such a targeting ; religious or otherwise.

The Kasturba Gandhi Balika Vidyalaya (KGBV) scheme was launched by the Government of India  in August, 2004 for setting up residential schools  at upper primary level for girls belonging predominantly  to the SC, ST, OBC and minorities in difficult areas.

If you live in a difficult or backward area with a high drop out rate your life as a girl probably sucks. What is the rationale then of denying equality to a Hindu girl who is not from one of the reserved classes ?

B : Minority concentration district

A clause is added to say that :

Towns/cities having minority concentration (as per  the list identified by Ministry of Minority Affairs) with female literacy rate below the national average (53.67%: Census 2001).

Now what is the rationale for introducing religion in a totally arbitrary manner into a scheme that includes girls from all religions. Put another way : What is the reason for preferential treatment for districts with > 20% minority population. The objective of the program is to seek an uptick in a secular metric such as female literacy rate.

C : 75% quota for SC/ST/OBC/Minority – 25% for BPL

UPA is totally sold on the idea that poverty is something more than the act of not having economic means. I have warned about this in the past in “Below poverty level“.  So we have another quota  :

In view of the targeted nature of the scheme, 75% girls from SC, ST, OBC or minority communities would be accorded priority for enrolment in such residential schools and only thereafter, 25% girls from families below poverty line. (Sec 5.8)

This is simply outrageous considering how low the poverty line in India is.   It goes without saying that all the communities are eligible for the 25% poverty quota.  So these schools prefer caste/religion over the poor.

So in effect, the UPA instead of creating common goods which every poor girl in every backward block can access, has subjected it into arbitrary communalism. Down we slide.

Jai Hind !

Introducing : Communal regulatory bodies

The Prime Minister chaired a cabinet meeting yesterday and approved a bill which should stun all students of political science.  This bill threatens to subjugate all institutions to the same set of people who are now ruling the country.

NARA – National Accreditation Regulatory Authority

The bill paves the way for mandatory accreditation of all higher educational institutes (except Agriculture !).  The idea is there will be a number of government accreditation agencies – both at the state and central level. Every college and university must obtain a certificate from the relevant agency within a particular timeframe or face a slew of penalties including closure. The full text of the original draft bill is here. The apex regulator NARA would be responsible for registering and monitoring the functioning of the various bodies. It is also the place for dispute resolution,  setting fee structures for the agencies,  imposing various penalties and so forth.

Until this point there is hardly any room for quarrel against this bill. The only major point on which one might be opposed to this bill is that in one stroke the Central govt subjects all state level educational agencies.   Other than that, this seems to be an attempt at driving some uniformity to the accreditation process.

What is stunning is : Yesterday 29th August 2012, the Prime Minister Manmohan Singh chaired a cabinet meeting. In this meeting, the 9 members in the regulator were brought under a quota system for SC/ST/OBC/Minority and Women.

The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010 paved way for representation of OBCs, SC, STs, women and minority as members in the authority. While tabling the Bill in the Lok Sabha on August 9, Sibal had said the amendment would also include a member of the minority community in the regulatory authority. The Bill seeks to set up the authority to register and monitor accreditation agencies.

Pioneer/ Deccan Herald

Now the members of the NARA are selected much like the ridiculed Jan Lok Pal :

Sec 7 (3)  of NARA Act – which only had 4 persons + chair, presumably the amended bill simply increases the membership to 8.

• 1 Professor from Medical field
• 1 Professor from Science & Tech
• 1 Professor from Humanities
• 1 Legal scholar

(One of the above must be a woman)

Now there is absolutely no national interest served by having a communal quota in this regulatory body.   This isnt even harmless, what such a communal quota implies is that even in normal economic activity – persons of one community cannot be relied upon to adjudicate issues involving others.  Actually not even adjudicate,  persons of one community cant even apply well written regulations no matter how accomplished that person is while being selected for the regulatory position.

The practical absurdity of this will come out soon enough.

1. 5 / 9 seats (SC ST OBC Minority Women) does not mean the remaining 4 seats are reserved for upper caste Hindu males. The other seats are fair game. This means the only way to resolve this is by a roster system.  We are entering a bizarre world where appointees are selected not from the best available but from the best available within the community that has a roster opening.
2. The professors have to reveal their community for selection.  Even if they revealed it, a woman professor can be counted against women quota, against OBC , or against the open category. The whole scheme is a pile of anomalies waiting to hit the Supreme Court.
3. If you accept this quota, you have nothing when other regulators and constitutional bodies are brought under the quota too. Why not have the TRAI and SEBI have quotas ?

This is a first, but not the last.

I have been saying this on Twitter. There is little parallel to this arbitrary communal quota in democracy.  Such adhoc quotas in institutions are especially devious because they will be brought under the spell of the same political-benefit-protector from whom such regulators are supposed to act.   Thank you. Jai Hind !

Is your religion “approved” for running a training institute ?

Art 30 confers no extra rights

First, lets look at a news item I have been wanting to blog about for a while.  I had to put it off due to the Indian government’s crackdown on online opinion critical of it under the guise of a national emergency.  My ISP, presumably scared of the state apparatus blocked the entire wordpress.com domain (verified by over 20 people across India) when the government only wanted them to ban a couple of posts.

71 institutes in Kerala granted minority status in one sitting

NEW DELHI: The grant of minority status to 71 educational institutions of Kerala by the National Commission for Minority Educational Institutions (NCMEI) in a single sitting has raised hackles within the panel as well as the HRD ministry for doling out of minority certificates without due diligence.

In January, when NCMEI granted minority status to 71 institutions, two of its members — Mohinder Singh and Cyriac Thomas — wrote to chairperson M S A Siddiqui pointing out that the files of many institutions were not in order. In fact, in few cases the vakalatnama by the advocate did not bear his signature. Even required affidavits were not in the files. The two members asked Siddqui as to how the secretary of NCMEI cleared 71 applications and told members that these cases were in order. The duo requested Siddiqui to review minority status to the 71 institutions by the full bench of the commission.

Source : TOI

The fundamental question is not whether the minority applicants – non Hindu for the most part,  had their applications in order. The question is whether a modern democracy can feature

• a statutory body like NCMEI whose composition is based on religion (Sep 2004 Notification Sec 5. “All members should be chosen as far as possible from minority communities”)
• exclusive benefits available to members of one religion even in non religious fields
• such a body can scrutinize and grant their own communities these benefits

Teacher shortage

There is a large demand for teachers in India today, as per some estimates about 20 Lakh new teachers are to be hired in next two years. This is also one of the few areas where the government is still hiring in significant numbers. Naturally, quite a few private teachers training institutes mushroomed to cater to this demand.  In order to regulate this,  a statutory government body called NCTE (National Council for Teacher Education) stepped in. In July 2011, it announced that since there is oversupply of teacher training – no new colleges (for B.Ed etc) shall be allowed to be opened in 15 states.  Also no extra seats will be allowed even in existing colleges.  I located the official public notification from the NCTE and have uploaded it here.

The NCTE, with a view to achieve planned and coordinated development of teacher education system and in order to regulate the growth of teacher education at all levels, has decided, on the basis of state-wise study conducted on ‘Demand and Supply’ of teachers and also in consultation with the State Govts. / UTs, not to accept applications for recognition of teacher training courses including additional intake / increase in seats to the existing recognized courses for the academic session 2012-13 in the following states / UT(s) for the course(s) specified against each :

(lists disallowed 15 states and courses like B.Ed, D.Ed. B.Ped, Shiskha Shastri etc )

What comes next is most invidious.

The above restrictions will not apply in case of Minority Educational Institutions established under Article 30 of the Constitution

But to people on the ground what this meant was :

• If you are a Hindu you cant start a new teacher training college nor can you increase seats in a college you already run. In all the 15 states listed in the notification Hindus are synonymous with majority community. It is not clear if linguistic minority (non native speakers) are exempt,  in any case the overwhelming majority of approved institutes on the NCMEI website are religious. So Hindu is a precise term. Kerala for example has 3009 minority institutes almost all religious.
• If you are from other religions – you get to completely ignore this order. You can not only apply for new colleges but that your application will be scrutinized and granted by the NCMEI (Minority body).

The upshot of this order by the NCTE  is simply this :

• Non minorities are prevented by the state from even participating in the MARKET of spiraling demand for teacher training.

All interpretations of Art 29/30 agree that the provisions do not confer rights to  minorities that  the majority community does not have.  This case is a clear transgression of that doctrine. Now, look at the sorry spectacle educationists present to work around this.

He cited the instance of an institute that had sought minority status on the ground that the promoter was a Sikh by birth, who had removed his hair and turban. When complaints and counter-complaints came about the institute, he said, all records were verified. “Even UP government’s minority affairs department said promoters were minority,” he said. However, NCMEI sources point out that ever since National Council for Teacher Education banned opening of new institutions imparting B.Ed courses except by minorities, many promoters are claiming they belong to minority community and have even produced certificate to back their claims. In some cases from Uttar Pradesh it was noticed that the promoters said they have converted to Christianity and in few other cases even to Buddhism. “

Source: TOI

The so called secular state has used its coercive powers to make people of one religion fall over each other pretending to be of another religion and groveling before a statutory body drawn from selected religions.

Every phrase in the above sentence has no place in a modern liberal democracy.

Jai Hind !!

Will the minority quota in the Supreme Court pass scrutiny ?

You may have been following the journey of the 4.5% minority quota in Central Educational Institutions (IIT/AIIMS/etc)  announced by the UPA Government.  To quickly recap, the quota was scrapped by the AP High Court and on appeal the apex court refused to stay the judgment. The matter has now been posted before a constitution bench of the Supreme Court.  Lets take a look at the substantial issues involved in the case.

Why was the quota denied by the AP High Court

The government appears to have been hasty in implementation of this quota. The quota was struck down on three major grounds.

• No legislative authorization. The quota was announced by an executive order (an office memo) instead of by law.
• No homogeneity except on religious basis. The quota clubbed together widely disparate communities like Muslims and Christians. Which was a clear indicator to the judges that the quota was implemented on religious grounds only.
• No data.  Before tinkering with the quota, the government did not consult the NCBC (National Comm for Backward Classes). This procedural flaw seems to have sealed the fate of the case.

For further reading, I recommend this excellent interview with K. Vivek Reddy who represented the petitioners in the case.  Make sure you also listen to the podcast.

Where are we now ?

First of all, it is important to note that this is a sub-quota.  This means that minority communities already in the list of backward classes are sought to be plucked out and allocated an exclusive quota. This happens by reducing the quota for those groups remaining by 4.5% so the overall quota does not exceed the 50%  ceiling.  Once again the point to keep in mind is these minority communities already have access to a quota.  The whole issue is about rearrangement.

Sadhanand Dhume had an article in the Wall Street Journal, which was a bit light in my opinion.  I want to highlight this piece because  it demonstrates a common fallacy.

On all these occasions, the political class blundered by viewing the community through the prism of faith rather than nationality. Muslims are Indians and the best way for India to integrate them is to strive to treat them as individuals, not members of a group. Indians disregard this commonsense notion at their own peril. This means stressing equality of opportunity rather than equality of outcomes. Better schools in Muslim-majority districts, along with privately endowed fellowships for bright students from Muslim-dominated schools (but open to all), are a start.

Source : WSJ

Well this is against Justice 101.  The reality is that the quota system exists and the stakes are huge. Talk to any government employee about the roster system.  So  turning a blind eye to dominant communities in the OBC list while exhorting the muslims to settle for scholarships is unjust.   In fact, in Krishnaiah Vs Govt of India (2012)   the National Commission of Minorities argues that the entire quota system is anomalous and assuming the reality of such a system, their group interests need to be safeguarded. This is a pretty strong argument as we shall see, one that cannot be quenched easily.

…………..The Commission was of the view that ideally the criteria for reservation should be socio-economic backwardness and not religion or caste. Further, Article 16(4) should be the basis for providing reservation benefits to minority groups who are socially and economically backward.  Reservation should be provided only as a short term, time-bound measure for enabling greater participation, both in education and employment. As we have mentioned earlier, the lists of SC/ST and OBC have not been scientifically prepared  ither on the basis of a proper survey or reliable data on socio-economic status of a particular caste or class. Therefore, the entire system of reservation, including that for SCs/STs and OBCs needs to be overhauled.  Reservation as available to SCs and STs is open-ended as it is available to all belonging to the category irrespective of income, educational and economic status. OBCs enjoy 27 percent reservation in employment, though creamy layer is excluded.  The norms and methodology adopted, as pointed out in Chapter-VIII is full of anomalies and hence amenable to large-scale abuse. For this reason, the better off among the groups take advantage of reservation at the cost of socially and economically backward and deprived.  It is, therefore, necessary to limit benefits of reservation to the socially and economically backward only.

It is important to note that the NCBC has not revised its list nor is any public data available regarding the progress made by various communities in the OBC list. This leads people like Owaisi to make impenetrable arguments.

Owaisi’s challenge

Soon after the AP High Court judgment, an enraged Asaduddin Owaisi asked Muslims to challenge the basis of the entire OBC quota.

“The Centre provided reservation to minority community on the basis of empirical data prepared by a panel headed by ex-Chief Justice of India Ranganath Misra, which was constituted by the government to look into the issues of linguistic and religious minorities. But, basing on which empirical data did the OBCs get the 27 per cent reservation? Is it fair?” Owaisi asked.

..

Describing the High Court judgment as erroneous, he said the court said there was no homogeneity between any two minority groups. “In such case, what homogeneity could one find between any two castes among the 93 castes included in the OBC list like say, Yadav and Kurma or Gouda and Munnuru Kapu?” he asked. There was discrimination on the part of the court while questioning the homogeneity between two minority groups.

Source : IBN

From a legal perspective I find Owaisi’s arguments very persuasive.  If they are weak, I havent heard a substantial rebuttal of what he is saying.   Look at this way : If the undivided quota which contains Muslims and Christian groups can be homogeneous, it is difficult to sustain an argument that these groups lose their homogeneity out of the group.  In other words, the undivided list does not confer homogeneity to its constituents.

The most critical case

I strongly believe this quota issue is one of the most critical cases to hit our country.  The court has the unenvious task of adjudicating this claim within the walls of a  broken system made permanent by habit. In any case, the UPA government seems to be better prepared this time. Here is the data they seem to have collected.

• Former CJI Ranganath Mishra’s report (interalia recommended 8.4% sub quota)
• Former Delhi HC CJ Rajindher Sachar’s report (concluded Muslims are worse off)
• representation data for Sikhs, Christians, Muslims in recent admissions 2009,10,11 from IIT/AIIMS/JNU/DU etc

 

Here is the crux of the matter. All these surveys fall afoul of equal protection guaranteed under Article 14 of the constitution. This alone should be sufficient to throw out the minority quota.

Equal protection

Think about what these surveys (Mishra, Sachar, Representation) measure.  They take a target group (Muslims/ Christians) and measure them against the rest of the population. For the moment assume that the measurement is robust and it isnt.  Based on this comparison they draw certain conclusions and recommend exclusive reservation as an antidote for whatever ill they find.

The problem is that there are 2159 classes in the central OBC list. Out of this, 52 (Muslim) + 22 (Christian)  + 2 (Sikh) are singled out for measurement with a view to providing them relief.  There is no reason for this singling out other than the fact that they are distinguished by their religion.  Theoretically you could pull out an alternate group of 55 (Gounders,Dhivar,Kahar,Bhoi,..) + 22 (Keer,Mallah,..) + 2 (Mehra,..) and you could arrive at the same conclusions and make a similarly strong case for a special 4.5% quota for this group.  So the very act of measuring a select group while denying the same measurement to other groups is ultra vires to the constitution because it denies equal protection of law to all these groups that are left out. If the Supreme Court glosses over this; then floodgates are open for any random combination of communities to form alliances and demand measurement only for their group on their terms.

See the irony here.  Owaisi is now the reasonable man because he seeks accommodation for his community within a platform widely acknowledged to be broken.  To allow that would compromise the constitution and cause injustice to those who were not similarly measured, to deny him would be unjust because he atleast has some data, the others have none.

What can be done ?  Essentially we have arrived at a fork in the road. The only way out is to comprehensively measure every community, not on the basis of census surveys but on representation in services and education.  Because imbalance in  representation is the purported aim of this whole social justice exercise.  Once all communities in the OBC List are tabulated, the group can be split into two or three. Minorities would automatically get into the group which makes it easier for them to access the benefits. But others would have the chance too.

Will the court stand up and deliver ?
 

 

RTE meets creamy layer in TN

An interesting judgment was delivered last week in the Madras High Court by Justice K Chandru in Priyanka Rajkumar vs Rajaji Vidyashram. While disposing of this particular case, the judgment brings into focus glaring anomalies with the quota system.

The brief

A professional couple earning about Rupees 30Lakhs per year approached Bharatiya Vidya Bhavan’s Rajaji Vidyashram located in Kilpauk Chennai. They were seeking admission for their 5 year old son in LKG class.  They had applied under the “disadvantaged” group stating that they were members of a Mudaliar community which is currently classified as SEBC (OBC) in the state of Tamilnadu.  They were claiming benefits against Sec 12 (1) (c) of the RTE Act. The school conducted a lottery in the presence of two members of the School Management Committee and AIADMK MLA  Mr P Vetrivel. The couples child did not win the lottery, so they approached the court questioning the basis of selection.  The court did not allow their petition and also made a crucial comment on Tamilnadu’s notification of RTE. You can read the entire judgment here. Times of India story here.

The fact that weaker section was defined by the State as the annual income of parents or guardians is less than Rs.2 lakhs, in the absence of the State prescribing any creamy layer under the list of social economical backward classes, the same income ceiling should also apply to SEBC categories. Of course, such an income limit cannot be prescribed for SC and ST as noted already by the judgment of the Supreme Court. It is left to the State to specify the creamy layer under which certain members belonging to SEBC categories will be excluded from getting the benefit provided for the said class.

Judgment: Pp 26

What about the poor ?

As I have blogged in the past, critical clauses in the RTE Act were papered over by the media and almost the entire pool of columnists.  It was portrayed as a program only on economic grounds.

But as we watched the quota policy get horrendously trapped in competitive politics, didn’t we say we would rather have an economic criterion for reservations than it being caste-driven? Well here, for the first time there is such a basis.

NDTV Journo writing in HT “Writes of passage”

Now the facts tumble out of cases like this :

The number of vacancies for LKG was only 216 for the academic year 2012-2013. Out of 216 seats, 54 seats were assigned for admission under 25% category under Section 12(1)(c). There were 91 applications under the RCE Act category, of which 5 belonged to Scheduled caste, 2 from the economically weaker section and 84 applications were received under the backward class and most backward class category. They have allotted two seats for economically weaker section and 5 seats for SC and ST. In respect of 47 seats meant for BC and MBC, there were 84 applications and that lots were held

So out of 54 reserved seats a grand total of TWO were allotted on the basis of poverty. 52 seats were allotted purely on the basis of caste.

Fallout of case

One should keep in mind that the couple approached the court only because they failed to secure an admission under RTE.  If they had won the lottery, we would never had heard about this case. So it can be surmised that there must be others of similar wealth who did win the lottery and are enjoying free tuition.

While analyzing this case it is important to keep a calm head. The reality is that Tamilnadu does not exclude the creamy layer  from seeking benefits under its various reservation programs.  So the couple can be said to have nursed a legitimate expectation with respect to RTE. The text of the central government act as well as Tamilnadu’s notification did not exclude the creamy layer.

The judge has now said that both the “disadvantaged group” (vertical quota) as well as “weaker section” (horizontal quota) now have the same income limit of 2L/yr.  If you look a bit closer this isnt a very robust position.  In the absence of a sub quota, it just means all communities earning below 2L /yr qualify. It just merges the two categories together with the exception of SC.

It is also a moral hazard to provide free tuition for wealthy SC and ST students. The cross subsidy will be borne by students of far lesser means from other communities. This give them an economic boost which isnt even the original basis for readdress. A simple quota without free tuition is a better option for SCs.

 

Conclusion

This case brings out the grand anomalies which fall out of poorly thought out or deliberately divisive laws like RTE.   It is easy to outrage over the couple but since we are going back to the era of controls and socialist shortages they did what was in the best interests of their child. Once the child is in, will we not forget and forgive this little maneuver ?  Arent children and grandchildren of doctors taking advantage of medical college admissions ? Does the fact they pushed over a more meritorious child get in their way once they start their practice ? Do you ask your doctor how much they paid as donation ?  Winners of socialist policies, in this case literally sweepstakes  wink at these trifles but will not even acknowledge the presence of  heartbroken  losers.

We cant have anything other than a low grade democracy pulling us deeper into third world squalor.  Unless the whole of social justice is placed under a doctrine of strict scrutiny.