Opinion

Inclusive growth, the CSR way

10 Mar 2010 |

Dr Leena Srivastava

| Financial Chronicle

Prime minister Manmohan Singh asserted a few years ago that inclusive economic development was a national goal. To his credit, a number of government programmes have since been initiated that imbibe the spirit of inclusiveness - the most popular among them being the National Rural Employment Guarantee Scheme. What is interesting, however, is to see the corporate social responsibility voluntary guidelines coming out of the ministry of corporate affairs in December 2009. To quote Salman Khurshid, minister of state for corporate affairs \"... the corporate sector is also standing in the midst of a sustainability crisis that poses a threat to the very existence of business. What we have before us is a crossroad where one path leads us to inclusive growth and the other may lead to an unsustainable future. ... the business sector also needs to take the responsibility of exhibiting socially responsible business practices that ensure the distribution of wealth and well-being of the communities in which the business operates.\" This is indeed a very commendable approach.

On the other hand, we have a rapidly evolving set of public-private partnership models wherein the government is assuming onto itself the responsibility of the vexed process of land acquisition and environmental clearances so as to attract large scale investments into a range of sectors. In the process, corporate entities have been provided with an escape route wherein they can wash their hands off the process of land acquisition and the resettlement and rehabilitation of people affected by these projects. Where does that leave the people affected by such projects? Can they ever be assured of a reasonable compensation? Mamta Banerjee has been credited with singlehandedly nixing the land acquisition bill objecting to even 30 per cent of the land acquisition needed for a project being facilitated by the government. Her stance is that private promoters should acquire 100 per cent of the land needed for a project.

The Posco project in Orissa is one of the high profile projects, which faces this responsibility trap. Posco, a South Korean company, is interested in setting up a large integrated steel plant that requires acquisition of 4,000 acres and involves displacement of an estimated 2,000 families. Irrespective of whose responsibility land acquisition was, or of the extent of encroachment that may exist on the land, the reality is that Posco has committed time and effort and some investments into the project. It is today five years behind schedule on the project. Given the project investment cost of Rs 55,000 crore, back-of-the-envelope calculations would yield an opportunity cost of a one year delay in project implementation, assuming a modest return on investment of 10 per cent, to be about

Rs 5,500 crore. This single year opportunity cost would be a few hundred times larger than the cost the company would have to incur for a one-time reasonable settlement with the affected families. What prevents companies from taking a longer-term holistic perspective on the issue?

What is also obvious from a review of such cases is the huge trust deficit that exists between project-affected people and companies and, unfortunately, also the local administration. What should be the role of the government, at its various levels, in the cases of land acquisition? Should the local government (district administration) be mandated to be primarily and exclusively responsible for the welfare of local communities, while the state and national governments push for investments so essential for development? Should the resettlement and rehabilitation policies of the various state governments be clearly recognised as the minimum guidelines to protect societal interests? Who, under the corporate affairs ministry’s CSR norms, would be responsible for ensuring that companies do \"not engage in business practices that are abusive, unfair, corrupt or anti-competitive\"?

While these tangles are being resolved, the voluntary CSR guidelines seem to apply largely to post-establishment activities of a company. CSR as it is practiced today defines our understanding of the concept. But why should resettlement and rehabilitation activities not form part of CSR? How do we coordinate across the various ministries dealing with these inter-linked subjects to get a coordinated approach to inclusive development as it revolves around the corporate sector?

Opt for integrated energy pricing

26 Feb 2010 |

Dr Leena Srivastava

| Financial Chronicle

The expert group report on pricing of petroleum products put out in early February 2010 called for a \"viable long-term strategy for pricing major petroleum products\". Recognising the fact that oil imports are increasing and that oil prices are \"generally expected to rise\" the group has recommended that \"domestic prices of petroleum products have to reflect the international prices\". This, they say, must be done to \"limit the fiscal burden on government and keep the domestic oil industry financially healthy and competitive\". The group then recommended that both diesel and petrol prices must be market determined both at the refinery gate and the retail level.

Cut now to the issue of bio-fuels - the vision and goals of the national policy on bio-fuels, put out towards the end of 2009, when paraphrased, are to reduce dependence on petrol and diesel thereby contributing to India\'s energy security while at the same time contributing to climate change mitigation and environmentally sustainable development.

This would obviously contribute to keeping ecosystems and populations healthy. The important proviso, of course, being that the \"accelerated development and promotion of the cultivation of bio-fuel\" plantations would be done in an environmentally sustainable manner. The policy calls for an indicative target of 20 per cent blending of bio-fuels - both by bio-diesel and bio-ethanol, by 2017, with bio-ethanol already being made mandatory.

The sugar industry has apparently quoted a price of Rs 27 per litre for ethanol to the oil marketing companies and they have asked for this price to be locked for a period of three years to remove uncertainties in revenue. However, it appears that this particular demand of the sugar industry would not be accepted by the government due to expectations that international ethanol prices may drop. Note that India allows duty-free imports of ethanol. The question that arises that while on the one hand, India is concerned about its oil import dependency and vulnerability relating to international oil markets, on the other hand, it is willing to expose itself to the vagaries of the international ethanol market. If the objective of bio-fuel blending with transport fuels is to reduce vulnerability to international oil prices in the short and long run, it would obviously make sense to peg the domestic price of ethanol and bio-diesel to the refinery gate prices of diesel and petrol and not to the movement of international ethanol prices. On the other hand, with more countries looking at the option of bio-fuel blending with petro-fuels, it can also be expected that international prices of ethanol will align themselves more closely with international oil prices. The refinery gate price of petrol is ~ 31 per litre at an international crude price of $75/bbl, which makes the ethanol price at Rs 27 attractive even if oil prices were to drop to about $70/bbl (which is unlikely).

The question also is - why should the price of bio-fuels not be market determined as in the case of petro-fuels? If the policy on bio-fuels is stable and has a long-term vision, as it seems to have, then the minimum demand for ethanol is established. What the regulatory system may then need to specify is a floor price for bio-fuels so as to lend some stability in price expectations to farmers but leave the cap to be determined by the demand-supply situation.

It is another matter that suspicions are high that the decision of ethanol blending was driven largely as a support measure for the sugar industry. And whether sugarcane production in India is environmentally sustainable in all the regions where it is grown or is it a function of the distortion in input prices of water and electricity and the support price provided to sugarcane are possibly matters of a separate debate. We would then be entering into the very tricky area of agricultural pricing. However, what the above factors highlight are the huge distortions that we have created in the pricing system in the energy sector and the challenges of sending the right signals for a sustainable development of this sector.

Will deregulation in oil sector benefit consumers? Impact on agriculture and the poor need to be considered

18 Feb 2010 |

Dr Leena Srivastava

| The Economic Times

The unsustainability of the pricing regime for petroleum products being followed in the country has been obvious to the decisionmakers for at least a couple of decades now. The Kirit Parikh Committee’s (KPC) recommendations on deregulating prices of the auto fuels, petrol and diesel, would lead to an increase in the prices these products by about Rs 7 and Rs 4 per litre respectively.

While recognising the inelastic demand for petrol and the relatively higher paying capacity of petrol users, the KPC virtually dismisses considerations of the impact of diesel price increase on agriculture by saying that the government can make good this higher cost through a higher minimum support price for agriculture.

IPCC plays safe, turns to governments: A rebuttal

18 Feb 2010 |

Ms Suruchi Bhadwal

| The Hindustan Times

Apropos your article in the Hindustan Times of February 15, 2010 of the above title, that results in a gross misrepresentation of facts.

As a lead author to the WGII Fourth Assessment Report, I can say that the procedures adopted by the IPCC have been very clear which begins with a transparent process of nomination of experts by country focal points in Ministries from each country to contribute to report writing. These have been in existence since 1990 and followed systematically from the time of the First Assessment Report.

Science of climate risks

16 Feb 2010 |

Dr R K Pachauri

| The Asian Age

The recent news about the decision on Bt brinjal has received a great deal of attention from the public and the media. Issues involving radical change often invoke radical reactions. That the use of genetically modified (GM) foods is a major departure from long-standing practice and belief is clearly a reason for the very diverse views being expressed by different sections of society. It is also a fact that major technological changes of this kind would need to be tested against a number of unknown and unseen impacts that could emerge only over a long period of time and with safeguards being fully established.

Scientific innovation and scientists today are accountable to society at a level that has not been seen before. It is also true that scientific innovation now invites deep concerns and suspicions that have not been seen in the past. Much of this, of course, is the result of unfortunate experiences that societies have had in the past, such as those that were brought to light by Rachel Carson, eloquently exposed in her book The Silent Spring. Indeed, Carson\'s work laid the foundation of widespread global concern on environmental damage caused by increasing use of chemicals of various kinds in our daily lives.

But in her lifetime Rachel Carson faced enormous resistance and dangers, because those responsible for the production of the chemicals and products that she had exposed clearly saw her as a major obstacle to continuing profits from business as usual in the future. But that resistance turned out to be short-lived because society in the developed countries, in particular, realised some of the perils associated with growing use of chemicals and other products which had very high potential for environmental damage and adverse effects on human health. Yet, today we know that with the population of this planet approaching seven billion people, and with incomes reaching higher levels, the adoption of lifestyles and consumption all across the globe are often a replica of what the developed countries did historically in the past. If we continue on present trends, the dangers of blindly emulating the developed nations would leave us with very few options to bring about timely change. If change is to be brought about, and we are to restore the balance and move human society towards a distinctly sustainable pattern of development, then some "disruptive" technologies would become essential and desirable.

Large-scale solar energy use would come from such disruptive technologies. How can scientists cope with the challenge of innovation that would bring into place radically different technologies from those employed today and yet be able to ensure acceptance from the point of view of human health, economic well-being and environmental protection? This would require a great deal of coordination between research organisations, industry as well as government. What would also be essential is a broad policy-driven approach to scientific innovation because, almost at the stage of conceptualising new technological innovation, its implications for society across the board would need to be understood with some degree of thoroughness. The elimination of risk would have to be an important part of technological innovation throughout the process by which it is produced.

While change may bring risks of a certain kind, society also has to look at the risks associated with no change. For instance, this is truly the case with human-induced climate change. The scientific community and the Intergovernmental Panel on Climate Change (IPCC) have provided overwhelming evidence of the manner in which human actions are affecting the earth\'s climate and a detailed account of the impacts that would be felt if nothing is done to alter the current system and to stabilise the concentration of greenhouse gases (GHGs). Business-asusual, in this case, would create risks, the probability of which in several instances have been estimated as significant.

Yet there is an inertia in the system which seems to be preventing the induction of technologies and processes that could make a difference in the right direction. Even in the case of, say, transportation technology, there are countries in the world which have advanced significantly while others are lagging behind, largely because of differences in the policy framework which in one case promote energy efficiency and low-emissions solutions while in the other there is an inert continuation of systems that have been largely responsible for the problem in the first place. The question is often asked whether anyone who has a rational basis for behaviour and action would ever get on a flight which has even a five per cent chance of a crash? In the case of mitigating the emissions of GHGs and thereby tackling the growing problem of climate change, several sectors of society are hesitant to take action even when the likelihood of adverse impacts are very much higher than five to 10 per cent. There is something disproportionate in the way that people perceive risk. For instance, continuation of practices that might result in risk appear to be discounted heavily as against those that might require change.

The biggest challenge in bringing about change within a democratic system lies in sensitising the public on choices that are explicitly to be exercised.

Unfortunately, there is a gap between the work of scientists and the public at large, which despite an increase in the speed of information flows has not been bridged. Often, therefore, misinformation or extreme shades of information fill in the existing gap. Rationality as a result becomes a casualty. In the absence of proper information we could have situations where the undesirable impacts of technological innovation would surface well after the decision has been made.

The same thing to a much larger degree would happen in the event of indecision which may be the result of political, attitudinal or other forms of inertia. In the case of climate change this clearly is the issue that the public must understand.

A delay in taking steps that would lead to higher levels of energy security, lower levels of air pollution and in general a sustainable energy future need to be taken with a sense of urgency. These, incidentally, would also stabilise the concentration of GHGs in the atmosphere.

India's energy price challenge

09 Feb 2010 |

Dr Leena Srivastava

| Financial Chronicle

The report of the expert group on pricing of petroleum products released a few days ago has made some extremely bold recommendations particularly in terms of increasing prices of LPG and kerosene and they need to be lauded for it. As pointed out by the committee, the benefits of subsidies on these petroleum products by and large do not reach the targeted populations at all. On the other hand, adulteration of diesel with kerosene has resulted in a significant worsening in urban air pollution apart from the huge financial losses on this kind of consumption.

S L Rao: Behind the attacks on Pachauri

04 Feb 2010 |

Prof S L Rao

| Business Standard

The anti-climate change lobby is using the flaw in the IPCC study to condemn not just the Teri chief but the idea of climate change itself.

For the first time, Indians are experiencing an organised, systematic and vicious attack by powerful and well-funded lobbies in the developed world. These lobbies are aiming to diminish the perception of the impact of global warming and climate change on our common future, and the consequent need to change our lifestyle. Such lifestyle changes will damage the future of many industries, so there are vast resources and stakes in continuing present consumption styles.

Challenge of climate change, post-Copenhagen

01 Feb 2010 |

Dr R K Pachauri

| The Hindu

Are the world and human society in general ready and willing to take action on critical issues that require a major change in the manner in which we produce and consume goods and services?

The science of climate change is now well established. This is the result of painstaking work of over two decades carried out by thousands of scientists drawn from across the globe to assess every aspect of climate change for the benefit of humanity. The Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC) was produced in the year 2007, and highlighted, on the basis of careful observations extending over a long period of time, that “warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global average sea level.” It was also stated clearly that most of the “observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic GHG concentrations. It is likely that there has been significant anthropogenic warming over the past 50 years averaged over each continent (except Antarctica).”

Understanding the climate row

26 Jan 2010 |

Dr Leena Srivastava

| Financial Chronicle

A lot has been said in the media recently, and on unaccountable blogs, about the error in the IPCC report on the melting of the Himalayan glaciers. The IPCC has put forward a statement to \"regret the poor application of well established procedures in this instance\" and have assured the world of their \"commitment\" to ensuring the level of performance required in the future. As a coordinating lead author in the Third Assessment Report, I can affirm that the IPCC’s processes and guidelines are very carefully drafted and followed. Beyond this, the element of \'human error\' always remains. Even the ministry of environment and forests in its State of Environment Report 2009 has said that the \"… Himalayan glaciers could disappear within 50 years because of climate change….\" The IPCC has an opportunity to update its statements on this issue as well as reflect new knowledge that has emerged, and will continue to do so, in its Fifth Assessment Report.

Gentle winds of change

19 Jan 2010 |

Dr R K Pachauri

| The Asian Age

Today is January 19, exactly a month since the conclusion of the 15th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Copenhagen. Beginning with the 13th COP, which was held in Bali in 2007, expectations had been raised that by the time the Copenhagen meeting was to take place, the world would have a firm and binding agreement on climate change — one that would effectively meet the global challenge being faced today — as it is an issue that will certainly get much more serious in the future.

However, with the slow pace of negotiations and the prospects of a binding agreement becoming increasingly elusive, this outcome seemed very distant a few months before Copenhagen.