Wednesday, June 23, 2010

Who is our PM to interfere between US and Pak?

Is this how our foreign policy is being driven? Manmohan has come up with such ridiculous statements on matters of serious national interest, it is astounding that we only hear of his honesty. You could make fun of Bush's IQ but where it mattered, he was upto the task. Manmohan is a doctorate and has a CV that looks very impressive. But look at some of his statements:
- Who am I to interfere with what goes on between the United States and
- Muslims have first right to India's resources
- We are harassing the poor Quattrochi
- Losing sleep over Mohd. Haneef, the Indian muslim doctor in Australia

Instead of ripping him apart, N.Ram uses Manmohan's incompetency to come up with a weak defence. This team of politicians and mediamen are taking India to the cleaners.
The Hindu : Today's Paper / OPINION : Don't lose sleep over Chashma
“Who am I to interfere with what goes on between the United States and Pakistan? That's a matter for these two countries to consider,” Prime Minister Manmohan Singh responded in April 2010. The same logic should now apply to reports that China is planning to supply two additional safeguarded nuclear reactors to Pakistan.

S.V. calls for making borders irrelevant

Siddharth Varadarajan seems to have dropped his inhibitions and stepped out of the closet -- he is nakedly espousing a position which has no logical justification and calls it the only option! Disingenuous, stupid, frustrated, conniving or whatever you call it, this is a preposterous position to take. I wonder if Varadarajan, being the American citizen, will ask for U.S. making borders irrelevant with Mexico.
The Hindu : Today's Paper / OPINION : Building trust, one step at a time
The truth is that there are no other cards. The ‘make borders irrelevant' approach is the only game in town and sooner or later all stakeholders in Pakistan will have to be reconciled to it.

The AIT wild ass

Asko Parpola is repaying his debt to the Dravidian party by coming up with more wild ass theories. Its the same old theories on wild asses, missing horses, the Aryans coming on the dot at 1600 BCE to drive the Dravidians down south, the seals, etc. The world has dropped the aryan invasion theory; the migration theorists say the aryans could not have come after 2500 bce and keep pushing the date even further into the past. But chindu keeps promoting such wild asses.
The Hindu : Today's Paper / OPINION : The Indus script and the wild ass
Bones or depictions of the domestic horse and the donkey are not found in South Asia before 1600 BCE. ...the term was transferred to the similar-looking donkey when this newcomer came to South Asia from the west through the Indus Valley.

Sunday, June 20, 2010

Putting Victims at the Centre of Liability Law: A Response to Siddharth Varadarajan

As a follow-up to his first op-ed, Siddharth Varadarajan wrote a second piece in The Hindu. Earlier, I raised some issues in my previous response and post here my thoughts on matters addressed in this later article.

His first point is that “[s]ince the government wants to accede to the IAEA's Convention on Supplementary Compensation (CSC), 300 million SDRs has been chosen as national cap so as to receive compensation from countries that are parties to the CSC beyond that.” My reading of the CSC is different. Art. III(1) of the convention states: “Compensation in respect of nuclear damage per nuclear incident shall be ensured by the following means: (a) the Installation State shall ensure the availability of 300 million SDRs or a greater amount that it may have specified to the Depositary at any time prior to the nuclear incident...” I understand this to mean that 300 million SDR is the minimum amount a state must ensure, not the maximum. The cap amount specified by the GoI in the bill cannot therefore be justified on this ground.

The maximum amount of 300 million SDR available through the CSC (assuming every member of the IAEA joins the convention) probably comes from Ben McRae (Reform of Civil Nuclear Liability, p.176). However, if you use the IAEA calculator and add all IAEA member states, you come up with a figure of ~375 million SDR. I am not sure how he got the figure of 50 million SDR as “the best a member state can hope to receive” but if you add Japan and India to the existing list of member states that have ratified the CSC, you land up with the amount of ~94.2 million SDR. Still it is not a lot which also argues for a higher total cap or no cap at all. I am also unable to see a connection between prohibiting discrimination (between national and cross-border victims of a nuclear accident) in distributing compensation and capping total liability for an incident.

He wants the operator cap to be raised and limited only to public sector operators. Under-provisioning of safety and the prospect of over-optimal share of nuclear power in India’s energy mix are the reasons given in support of this contention. The first has been dealt with before and my explanation in the following paragraph also relates to it. As for the second, the government’s authority to authorize (or deny authorization for) the construction of plants is not in doubt. A low cap as an incentive to build more plants can and surely will be countered by activists highlighting possible hazards and the final outcome will ultimately be guided by political judgment (rather than purely on economic grounds) as to the impact of its pursuit on public support.

He points out that insurance costs only amount to a small percentage of the total cost of the plant and third party liability in any case costs several times less than property insurance which is routinely purchased by nuclear plants around the world without hurting the viability of nuclear power. The issue, as I understand it, has primarily to do with availability. If insurance is not available up to the limit laid down by law, the company would have to make up the difference by setting it aside in bulk which will increase the operating cost. For example, if someone were legally obligated to purchase liability insurance for car accidents for a minimum amount of 1 crore but insurance carriers are only willing to offer coverage up to 10 lakhs, the only way to fulfill the requirement would be by setting aside the sum of 1 crore – 10 lakhs = 90 lakhs of his/her own money which is where it gets expensive (Insurance does not generate assets; it only protects what exists. So, it makes good sense for any business to attempt to keep the expense low). It was primarily this concern of availability that prompted the US Congress to mandate that plants maintain as financial protection “the maximum amount available at reasonable cost and on reasonable terms from private sources” and additionally provide for the state to indemnify them when the Price-Anderson Act was first enacted in 1957.

Insurance carriers are willing to underwrite plant property for amounts much higher than third party liability. Inferring the possibility of raising operators’ cap from the former would therefore be erroneous. The reason for this disparity is not so clear but a general explanation of how the business works would help to understand what factors might contribute to it. Insurance plays a role in a zone which lies between having no knowledge of the probability of an accident and having perfect knowledge of it. In the former instance, any protection offered would entail an unjustifiably high risk; on the contrary, if there was absolute certainty of its occurrence, there would be no point in insuring against it. Operating between these two extremes, insurers utilize various models to estimate the risk involved. These models are usually based on a mix of theoretical and real world data. The more actual data there is, the greater is the confidence with which predictions can be made and vice versa. The maximum amount an insurer is willing to underwrite depends on how much confidence it has in its model. For things like cars and aero planes which crash not infrequently, a fair amount of accident related data is available which gives insurers greater confidence in protecting against such risks and they are willing to cover higher amounts (relatively speaking). Nuclear property damage involves both routine property related risks and those specific to nuclear plants. The former are, likewise, more easily measurable and for the latter, they rely on reports of engineers and experts on the risks associated with particular equipment. Small safety incidents at nuclear plants are not uncommon (often involving non-nuclear damage) and that provides a significant wealth of data enhancing reliability of their predictions. Large nuclear disasters entailing third party liability, on the contrary, have only occurred on a few occasions and a major part of calculations is based on theoretical simulation which leaves them with less confidence about how far such estimates mirror reality. I suppose it is this difference that makes insurers much more wary about underwriting very high amounts for third party liability, a sentiment which would ring stronger in a new market where a priori experience is lacking.

When the Price-Anderson Act was first introduced in the US, private insurers only covered a fairly limited amount of $60 million and the state, in return for a mandatory payment of $30/1000kW from any facility, offered indemnity for an additional $500 million. The amount privately covered grew gradually over time as safety measures ensured that payouts were few and allowed the state to gradually withdraw its own role completely replacing it with a secondary layer of coverage financed entirely by the operators’ themselves, a system that exists to this day (the only differences are in the amount which comes to ~$12.6 billion including both first and second layer of coverage and a third layer was recently added to meet the international obligation under the CSC financed now by suppliers).

Regarding cl.17(b), I have already discussed that the key question is what impact retaining it will have on the willingness of suppliers to participate in the Indian market. Increasing that limit will also likely have a greater adverse effect on smaller suppliers who may prefer to stay away as they would have much more to lose than larger ones who may be able to internalize costs better. Domestic companies may also lose out to their foreign counterparts who, being less readily accessible to Indian law enforcement agencies, may be willing to risk more. If suppliers are made liable for total damages whilst keeping the limit much lower for operators, that too would lead to a moral hazard with operators (rather than suppliers) having a lower incentive to undertake adequate safety measures. This may be more so for state-owned entities owing to the fact that in the event of a disaster, the state, anxious to both deflect blame from itself and to pursue the prospect of obtaining large scale damages from the supplier, may be predisposed to use its control over the investigative machinery to downplay the role of the operator in the incident.

As he says, if India retains cl.17(b), it would have a choice to join the CSC with a reservation or choose to stay out of it. Comparison of this provision with article 4(1) of the South Korean law is not entirely appropriate. Article 4(1) of the South Korean act provides for the operator’s right to recourse “only insofar as there has been a willful act or gross negligence by the supplier of the materials concerned or by his employees” but this is overridden by article 4(2) which states that “If, in the circumstances described in Paragraph 1 of this Article, a special agreement has been made regarding rights of recourse, such agreement shall govern.” Cl.17(b), on the other hand, is distinct and applicable regardless of the operator’s agreement with the supplier under cl.17(a). Thus, the Indian bill is stricter but also, as a consequence, less flexible. Whether that is a good thing or not will depend on how strong the negotiating position of Indian operators will be vis-à-vis suppliers. For example, if the plant operator badly wants something from a supplier who is unwilling to provide it for fear of liability, the Korean law would allow its acquisition by providing a waiver but not its Indian counterpart.

Varadarajan calls for extending the filing period for compensation to 30 years from the present limit of 10 years. The main issue in other countries has been the unwillingness of insurers to offer coverage beyond 10 years. Mark Tetley cites three reasons to explain this reluctance: unwillingness of shareholders to commit to long term risk and uncertain exposure, wariness of second guessing future societal problems in an increasingly litigious climate and uncertainty of the security and solvency of the concerned insurer over such a long period of time. Extending the period is meaningful provided that a way is found to ensure reliability of payout possibly through state support either for all claims beyond an initial 10 year period or perhaps only as a backup.

Involvement of health and environmental experts is not specifically mentioned but the Claims commissioner can seek their assistance under cl.12(2) while holding an inquiry; a similar provision is missing for the commission which is only entitled to the assistance of officers and employees the Center provides as it may deem fit under cl.30(1). This suggestion needs to be considered though the main role of such experts will be in conducting studies and publishing reports in the aftermath of a disaster.

As mentioned in the last post, I cannot see any justification for allowing victims to file civil tort claims in addition to the recourse available under this Act as it duplicates the effort without offering any additional advantages to any concerned party (other than lawyers). I believe the proper answer is to amend cl.46 to preclude this possibility. Providing for judicial review may also be a pragmatic step to take as discussed in an earlier post.

Saturday, June 19, 2010

Propagating a separate Dravidian identity

Chindu has shown more than a fair interest in propagating a separate Dravidian identity, which is in line with the politics of the dominant dravidian parties in Tamilnadu.
The citadels of Aryan invasion have been demolished to rubble. So these eminent Dravidian researchers have come up with Aryan immigration and established it as a "fact". Just like Karunanidhi asked for Ram's engineering degree, we should stand up and ask these Dravidian researchers to show us the immigration visas of these Aryans.
The Hindu : Opinion / Op-Ed : Parpola and the Indus script
He has published a long series of brilliant papers to establish the fact of Aryan immigration into South Asia after the decline of the Indus Civilisation.

Tuesday, June 15, 2010

Turning the Nuclear Bill from Liability to Asset: A Response to Siddharth Varadarajan

Siddharth Varadarajan’s op-ed today in The Hindu about why the nuclear liability bill is flawed is a familiar theme. I have addressed most of these points in an earlier post and will not repeat them again here. It suffices to mention that I explained there why legal channeling makes more sense than economic channeling, what the basis for operators’ liability cap amount is (or at the very least, ought to be assuming the GoI is doing it according to the rationale) and what the issues with the operators’ right to recourse under section 17(b) are. What follows is a short follow-up to that post.

It is true that the entire nuclear liability regime began as an attempt to protect the American nuclear manufacturers from foreign liability. The regime, however, does not distinguish between Americans and others and as it stands today, protects suppliers from all countries with membership in any of the liability conventions. That includes India’s own domestic industry which is expected to play an important role in building nuclear power plants. It is not surprising then that this group is strongly supportive of the bill and efforts to exclude suppliers from liability.

It is obvious that section 17(b) does not alter the rights of victims of the disaster; there are several reasons to doubt whether it will offer any benefit to consumers/tax payers either despite the explicit provision to collect for damages from the supplier. Firstly, in the event of such a provision being passed by parliament, it is extremely doubtful that any supplier will venture into the business without insurance cover at the risk of losing all of its assets. So, if we assume that arrangements are worked out amongst suppliers and possibly including operators, the next question is whether such an arrangement will add assets which would not be available were operators alone to purchase it (otherwise, there is no advantage at all: operators pay for the insurance instead of suppliers or both do so having entered into a mutual arrangement but regardless of who purchases it, the assets remain the same, total amount up to the cap is covered and will be paid out to third parties in the event of an incident). The answer to that is probably in the negative given how insurance systems work. Nuclear insurance pools are mostly regional or countrywide, not global (barring very limited global coverage offered in some instances such as the $50 million by ANI). Also, even if some Indian company specialized in a different line of business such as making automobile parts and insured against tort damages decides to venture into supplying parts for nuclear plants, the much higher damages involved will entail a much greater risk which will likely prevent coverage from being extended to its nuclear manufacturing arm. Thus, the insurance asset pool is not going to expand merely by bringing suppliers within the ambit of the law – in fact, the heightened risk may very well serve to incentivize the opposite - which begs the question why it is needed at all.

Varadarajan wants section 17(b) to stay along with the removal of the operators’ cap which means full liability or at least up to 300 million SDR for operators. As explicated in the previous post, the question is what that will do to the operating cost of the plant and in consequence, to the consumer/tax payer who has to bear the burden of the increased cost of electricity/subsidy. My guess: it will be beyond the ability of the consumer or the state government to purchase it and the enterprise might well turn into another Enron type of disaster. The article is silent on this question.

As mentioned in the previous post, capping liability to operators and suppliers does distort the true cost of running the plant but not doing so, it is feared, will render the effort prohibitively expensive and impractical. Properly enforced regulations are partly the answer but critics would argue that this is not adequate. Besides rhetoric, the author offers no solution to this conundrum. The optimal solution I can think of is a compromise where liability limits are capped at low levels initially but are gradually raised as the industry grows out of its infancy and its capacity is increased. History of the US Price Anderson Act and nuclear liability legislation in several other countries suggests that this may be a feasible course for India to follow as well.

Lastly, the whole point of strict liability and the separate mechanism for adjudicating claims is to allow victims to obtain compensation without having to meet the higher standard of tort law. If victims are free to pursue tort remedies in addition to this, it raises the question whether the caps and channeling requirements laid down by this law are meaningful at all. If extended litigation in courts is not preempted and the prospect of unspecified damages having to be paid looms large over the heads of operators and suppliers, it is entirely possible that the purpose of this law will stand completely defeated. This is an important concern and a strong case therefore exists to amend this provision to preclude such a possibility if the GoI is intent on creating a workable arrangement to develop the nuclear industry.

The bottom line is that the purpose of this legislation will not be fulfilled unless hard compromises are made. The question is whether the government has the courage to do so or would rather give in to populist impulses and end up passing a version too diluted to make meaningful change possible.

N.Ram sees inflationary threat in free trade

Whereas UPA's handouts and ill-designed schemes are causing inflation, N.Ram thinks free market caused it and socialism is the solution to inflation. Given a chance, N.Ram would push India back to the Nehruvian-Stalinist era of government control over every aspect of our lives. While advocating socialism to the others, he clings on dearly to his position in chindu, standing up for capitalism in his personal life. There are no better hypocrites than the darn communists.
The Hindu : Opinion / Editorials : Double-digit inflation
Finally, inflation is high and persistent, despite expectations of a normal or good monsoon, because the decision to give private trade a greater role in the markets for essentials has provided the basis for a new bout of speculation

Friday, June 11, 2010

US/NATO exit from Afghanistan Spells Danger for India

The Hindu editorialized a few days ago that the only answer in Afghanistan is for the US and other NATO troops to leave. The paper has been pushing the line that a conference must be held where all parties will promise not to interfere in Afghanistan's internal affairs and peace will thus be restored. Most readers will probably realize that this is just another pacifist pipedream. It needs no repetition that Pakistan's promises cannot be taken seriously particularly when proxies are in abundant supply to faithfully carry out its wishes. Pakistan's willingness to utilize them is also not in doubt and with foreign troops gone and no one to enforce such promises, it should be obvious that the altered political scenario will quickly render such conference pronouncements worthless. The US may have less to fear from such an eventuality given that Pakistan has long been willing to extend guarantees to use its influence with the Taliban to prevent any attack upon it but India of course will receive no such guarantee and with a resurgent Taliban under Pakistani influence, it has much cause for concern. By blindly echoing American liberals, The Hindu's views thus dovetail very well with Pakistani strategy but offer little succour for Indian interests in the region.

Today the NYT reports that Karzai is losing faith in the ability of foreign troops to sustain his government and doubts their resolve and willingness to stay. India has to take note of it in deciding how to hedge its bets as the situation evolves. Though Obama has proclaimed that a withdrawal will begin in 2011, the seriousness of this proposal is in some doubt given previous pronouncements of officials of his cabinet. One thing is however quite clear: India's difficulties will multiply very quickly were the US/NATO troops to leave precipitously. Pakistan's jihadi network has had an important role in protecting and aiding the senior Taliban leadership during their most difficult years in the political wilderness. Whatever else may be said of the senior Taliban leadership, there is little doubt that these are men of honor who value loyalty and camaraderie more than anything else and any carrots that India may be belatedly able to offer them in terms of financial aid or expert assistance to counteract it may not hold much appetite for them. American withdrawal may thus be expected to quickly restore the pre-9/11 situation which means a renewed and resurgent terrorist onslaught against not just Kashmir but all of India. The difference will be that this time, apart from a fresh crop of battle hardened fighters to train and guide insurgents, there will also be the added motivation that having overcome the world's mightiest nation, defeating India would not be an impossible task.

India has much at stake and a lot of reasons to persuade the US and its alllies not to leave Afghanistan any time soon. If India's left has its way, we may be inviting trouble more quickly than we realize.

Sunday, June 06, 2010

UPA's reckless spending

Sadly, UPA, under the "eminent economist and honest PM", is creating havoc with disastrous fiscal policies. High fiscal deficit is pegging interest rates at uncomfortable levels. Unlike manufacturing and services, agriculture is unlikely to experience blistering growth rates. But what really hurt the agriculture sector is government intervention by way of populist schemes. Through doles via schemes like NREGS, UPA created artificial wage inflation in rural areas. It peeled peoples off the land and clung them onto the mammaries of the state.

UPA's fiscal policies are not creating assets or building infrastructure. Government allocation is creating and feeding inefficiencies
within the system, while increasing income disparities. UPA-1 has already pushed 100 million Indians into poverty. All indications are that UPA-2 is accelerating the pace of perpetrating penury.

The Pioneer > Online Edition : >> Growth for some handout for many
The total fiscal deficit (the Central Government plus the states) is nearly 10 per cent of the GDP.
... manufacturing grew by 9.3 per cent last year and services by 8.5 per cent. By contrast, agriculture, which still sustains some 60 per cent of the population, struggled to experience a 0.2 per cent growth.

Thursday, June 03, 2010

Varadarajan burdened by journalistic debt

This journalistic debt that he talks about, Siddharth Varadarajan feels only when it comes to muslims. Varadarajan is faking a sense of morality by claiming to be burdened by this journalistic debt.  Why doesn't he put some effort to write a few stories on Kashmiri
pandits. He is probably afraid of the enormity of the secular debt that it will accumulate. That is not kosher, is it.
The Hindu : Opinion / Leader Page Articles : This is not zero tolerance, Mr. Prime Minister
My question to Dr. Singh, then, was really Raja Begum's, the partial discharge of a debt journalists accumulate as they run from story to story.

Wednesday, June 02, 2010

The enemy within

The kind of strategic intent that America is displaying to protect its interests and the safety of its citizens is precisely what India should be emulating. Instead, N.Ram suggests that America should follow the miserably failed policies of New Delhi although it has not yielded any results over the past few decades. It is N.Ram who needs to clear his vision and stop jumping to conclusions based on blind love for islamists and hatred for capitalists.
The Hindu : Opinion / Editorials : The enemy within
A military strike by the U.S. on Pakistan, reported to be under contemplation should a terrorist attack on American soil succeed, is no solution. Any such action would be extremely foolhardy, and New Delhi should oppose it.

N.Ram enraged at Israel

The Hindu : Opinion / Editorials : Israel's rogue behaviour
Gaza: unarmed, humanitarian flotilla of activists, relief supplies, a Gandhian act of solidarity, besieged and blockaded people of Gaza, suffers all the evils of occupation, blockade of Gaza and its people, collective punishment of civilians, subjecting an entire civilian population to an economic blockade

Israel: rogue behaviour, lawless, outlaw nature, used grossly disproportionate force, criminal Israeli response, illegal and immoral blockade of Gaza, a pretext for the blockade (of Gaza), a full-scale war on the people of the territory(Gaza), Israeli invasion of 2008-09 led to the commission of war crimes
N.Ram clearly draws the battle lines and uses imagery to conjure up an image of an illegal occupier tormenting a hapless victim. Such vivid description is more apt for Tibet under Chinese occupation.

For a different perspective on the matter, have a look at Kanchan Gupta's blog post or B.Raman's take on this. Bulk of international response opposed Israel's methods but recognized the provocation. Even ardent supporters of Israel thought the matter could have been resolved differently. But N.Ram's depiction seems to be overboard. Or may be he is just singing for his supper.