Tamil Nadu Assembly Election - Alliance Shaping

 Surprising to many, alliance and seat sharing is not finalized yet. Usually AIADMK will swiftly move ahead which is still struggling. Here is the status

AIADMK block - AIADMK,  MDMK, CPI, CPIM, PT,  MNMK and other small parties

DMK block - DMK, Congress, PMK, VCK and other small parties.

The biggest wild card is DMDK.  DMDK stance on DMK is very clear and DMK cannot give DMDK enough seats. This option is ruled out. The question is whether it will align with AIADMK or go alone in some form. There are contradicting statements on this. I still believe DMDK will contest with AIADMK. This is mutually beneficially and its clear from J.Jayalalithaa's  unusual patience.Going alone is suicidal for DMDK. 

It looks like AIADMK is not able to accommodate DMDK demands (at least that is the perception). Recently Vijaykanth brother-in-law (Sudeesh) visited Delhi and reportedly met Congress leaders. There are rumours that Congress is keeping the communication channel open with DMDK. The suggestions are Congress can go with DMDK dumping DMK. I do not believe this will happen for two reasons.

1. The Congress needs DMK's support in Central. Absence of DMK will weaken UPA possibly  bring down the UPA Government.

2. M.Karunanidhi understands that breaking away with Cong will bring CBI to his door steps and will reflect in election.

There are arguments Congress will benefit from Vijaykanth and develop alternatives to DMK/AIADMK. May be they are thinking him like Chiranjeevi.  Vijaykanth also benefit financially from this. It is interesting to note that Panruti S.Ramachandran has close association with Congress from MGR days. In my view, Congress is playing this to get more seats (possibly 60+ seats from DMK) and power sharing arrangement. In my view even if this happens, it will advantage for AIADMK block as they hold close to 40%. It will be miserable for DMK block. DMDK/Congress can do well in some congress strong holds.

My prognosis:

DMDK joining AIADMK - 75% chance

DMDK going alone - 15% (may be because of threat and money)

DMDK+Congress - 10%

Tamil Nadu Debt - Irresponsible answers

Tamil Nadu debt crossed one Lakh Core and it was reported by media. I blogged about it on 3 Feb 2011. As expected it was raised in Tamil Nadu Assembly opposition.

The  fact Tamil Nadu debt was doubled in last five years from about 50, 000 crores to one Lakh Crore. We need to understand 100% increase of 10,000 Crore is not same as 50,000 Crore. This is serious problem and we expected some responsible answers and action plan. However, the answers from the Ministers were irresponsible.

The Finance Minister told the Assembly that there was nothing wrong in going for loans to implement projects and welfare measures. In fact he was proud of what they have achieved. It was disapponting to hear this answer. He was also attributed the increased debt to global slow down. As usual they compare with other states like West Bengal, Maharashtra.

The Tamil Nadu Law Minister Durai Murugan joined the discussion saying no one will loan the money if it cannot be repayed. In my view, The question is not just on repayment. How the revenue is spent keeping the long term grwoth in mind.

The Deputy Chief Minister argued that even developed countries like USA borrows money so nothing wrong in borrowing money.

The reality is States debt is over 20% of GDP which is close the maximum allowed by Central Government which is 25%.  Any downward trend in state economy or additional borrowing will break the limit easily. At the current debt level it works out Rs15,000 per individual.

As my mentioned in the previous blog, the Government revenue is spent on welfare and other fixed costs such as salaries. The borrow money for all the development projects. This limits the number of projects and critical projects are moving slowly.  This is not a healthy trend. General practice is to make some investments from revenue and borrow the money for rest. It is also important to make sure the projects pays for itself from its revenue. Government may able to subsidize portion of the regular expense based on the project.  This Government wants to make money for their family and policies are framed around it. It is unfortunate.

The Welfare projects implemented by this Government are short sighted and questionable which I am planning to cover in coming week.

Ratan Tata Letter

Ratan Tata was leading business and highly respected person in India. When he mentioned about the alleged bribe asked by Union Minister for starting an airlines and  forced him to abandon the project made me proud of him. It all started changing when the  Nira Radia tapes was leaked.

Indian Express released the hand written letter by Ratan Tata to Tamil Nadu Chief Minister M.Karunanidhi.

The letter was written on November 13, 2007 about five months after Dayanidhi Maran was forced out. of cabinet. There were reports that Dayanidhi Maran wanted 30% stake from Tata Sky DTH service at par value for Sun TV. Obviously Tata was not happy with this demand and was being cornered. The Karunanidhi's internal family fight forced Dayanidhi Maran out of cabinet which came as relief to Tata.

A. Raja was appointed as Telecommunication Minister as successor to Maran. This was great relief to Tata. Ratan Tata wrote this letter praising Raja less than six months since Raja took over the new role in Sanchar Bhavan. Certainly this is a great relief to Tata and DMK internal family fight helped him as well. In this letter Tata praised Raja saying "rational", "fair", "action-oriented" leader. He went on to say, on most part Raja's policies on spectrum are "legally sound" and "rational". (We now know rational to whom and how much it is legal).

Ratan Tata also praised Karunanidhi by saying, the history praises the vision, creativity, high growth achieved by Karunanidhi and his party. (The Vision is to make money for themselves, Creativity  in investing the looted money, high growth in Kalignar TV). Tata mentioned that DMK possibly can take credit for the great achievement and significant contribution to the country (Certainly Rs 1760000000000 crore loss to exchequer is great achievement and reinvesting them in other sectors through back channel is significant contribution).

Ratan Tata praised  Karunanidhi for his great vision (may be Free TV which is expected to help Tata Sky) and great equity (may be refering to Dalit card to support A.Raja as Judicial fairness ).He also confirmed that Raja works under the direct instruction of Karunanidhi by saying "can be delivered under your leadership by Mr.Raja". He also requested Nira Radia to deliver this letter in person.

It is very clear that Ratan Tata is happy with Raja and do not want Dayanidhi to get back in Sanchar Bhavan. It is obvious that Tata lobbied for A.Raja since it benefited in 2G spectrum and want to keep it that way. Tata gifted Voltas land to Rajathi Ammal to achieve this goal. I hope CBI extends his investigation to Tata group as well.

Your comments and suggestion are most welcome.

Is PMK abandoned?

Pattali Makkal Katchi (PMK) is  (Vanniyar) caste based party from Tamil Nadu. Over decade they had the habit of switching side between AIADMK and DMK led fronts . They successfully negotiated more seats each time by switching sides. This increased seats helped them to show they have strong vote base contrary to eroding base particularly to DMDK.

In 2006 TN Assembly election, they won 18 seats by contesting 31 seats. In spite of strong campaign against DMDK president Vijaykanth, he won in PMK strong hold. In last parliamentary election, as usual they switched back to AIADMK front from DMK-Cong front and lost all the six constituency it contested in its strong hold. This is a major blow to PMK. The political pundits believed that DMK selectively targeted PMK to discredit them. Now in upcoming Tamil Nadu election, it wanted to contest with DMK. PMK sent his MLAs' and it leaders to meet Karunanidhi multiple times to seal the deal.

In Delhi, Karunanidhi wants to temper down Congress expectation. He announced PMK will contest with DMK front. Ramdoss wanted to get more seats in negotiation and said no decision was made yet and will be decided by General Council not expecting Congress reservation against PMK. During Meeting with Karunanidhi, Sonia was keen in keeping the PMK out of the alliance. DMK support did not received well by Sonia Gandhi. On return to Chennai, Karunanidhi said PMK chance of joining DMK is ruled out. This was shock to PMK.

PMK  was also kept the channel open with AIADMK to see whether it can get better deal. AIADMK is keen in bring Vijaykanth's DMDK into AIADMK front. For AIADMK, PMK is only fall back option. This was another shock to PMK Leader S.Ramdoss. He delegated his son to Delhi for a patch up with Congress. He could not meet Sonia Gandhi or Rahul Gandhi so far.

As expected Congrees goes with DMK front and DMDK goes with AIADMK front. He is pretty much stranded or go with other small parties. This is good omen for Tamil Nadu politics. If PMK can convince DMK and Congress to accept PMK in to UPA, he need to accept lesser number of seats.

The following are hypothetical scenario. Congress comes out DMK front (unlikely considering central situation), contest with DMDK. This will attract both DMK and AIADMK towards PMK. Another option, DMDK goes alone (Viajykanth indicated against this), PMK can get a good deal from AIADMK.

As of this writing, PMK is in limbo. I do not see more than single digit representation in new Tamil Nadu Assembly at the most (Likely ZERO if they go alone). I believe this is good for Tamil Nadu. May be fall of PMK (Dr. S. Ramadoss) opportunism starts now.

Kalaignar TV - Unanswered Questions?

A.Raja arrest has given a new dimension to 2G spectrum scam. Media reported 2G spectrum money invested in Kalaignar TV and CBI is investigating the money trail. In my view this goes much beyond this and proper investigation will bring them out. Here are some unanswered questions.

1. Kalaignar TV went live from concept (to live) in less than four months. Is it possible without misuse of power? (Note that Maran resigned from Cabinet on May 16, 2007 and Kalaignar TV inaugurated on Sep 15, 2007) It is also important to note that A.Raja was replaced as communication Minister after Maran's resignation.

2. The initial investment made to Kalaignar TV is mere one crore rupee with Dayalu 60%, Kanimozhi 20% and Sharad Kumar 20%. Is it sufficient capital? Where did they get the rest of the investment without equity interest? If they acquired non secured  loan and what the loaners got in return?

3. Nira Radia alleges that Maran brothers paid 600 Crores to Dayalu. Maran brothers haven't denied this yet. Is that money found the way into Kalaignar TV?

4. DB Realty funneled money to Kalaignar TV through three legged transactions of 294 Crores  for 30% stake which was latter converted to non secured Loan in 2009-10 which was paid back. Note that 294 Crores figures is reported by various media in wide range of 210 crores to 294 crores). DB Realty is beneficiary of 2G spectrum should be noted here. Why is this?

5. The 30% stake for 210 Crores (lowest number picked here) puts the Kalaignar TV value at 700 Crores in 2009-10. The deal fell through because they could not reach the agreeable price as per report. It may be because the valuation from Kalaignar TV side is much higher. This means one crore investment grown over 700 folds in two years time. Wow, how may of us will get this opportunity. In general, it takes few years to see any profit in high capital business like this.

6. Raj TV helped them to put together the infrastructure. They did not get any equity stake. What Raj TV got in return?

7. The Kalaignar TV bought the Rajinikanth movie "Sivaji" in May 2007 for 4 Crores even before TV was inaugurated.  They bought Kamal movie "Dasavatharam" in the same year for similar amount. This is again with One Crore initial investment.

8. Kalaignar claims he owns only the house in which he lives. Dayalu Ammal is a house wife. If Karunanidhi did not provide her money, where she got the money for investment?  Is it a Benami transaction? If so for whom?

9. Karunanidhi spent lot time defining the programs. If he is not having any vested interest, why should he do that. Chief Minister role is highly time consuming job and requires lot of time to administer. Is he investing time for his personal/family not focusing on public interest? Is it ethical even if it is legal?

Reforms for Corruption Free India

Corruption is the major issue facing India at present. This could potentially derail our growth and put us decades back. As stated by Dr. APJ Abdul Kalam, corruption engulfing India like cancer. This must be treated before it turns into terminal disease. I believe the following reforms are needed to treat this cancer as a starting point. I welcome any comments and suggestion to improve this proposal.

1.       The punishment in India for corruption (for that matter any criminal activities) are less in comparison with developed nations. The law must be strengthened to deter anyone from being corrupt.  The punishment should be in the range of 20 years to 35 years. Multiple counts should be sequential instead of parallel. This will pretty much lock them for life. Any ill earned asset should be recovered.

2.       The punishment should be progressive. Meaning that higher official such as police officers, judges, ministers will attract highest punishment in comparison with lower level employees.

3.       All the corruption cases should be completed within one year.

4.       The appointment of anti-corruption wing should be based on their service records. The individuals must be impeccable. They should be independent from any interference from political appointees or higher ups from external organization. Any such interference should able be reported to CVC for action. CVC should be empowered to take action.

5.       The appointment of constitutional positions such as CVC, Election Commissioner and others should be vetted thoroughly. The Committee should vet the list in open forum and recommend three names to Selection Committee (current setup). The appointment should be on consensus. In case of consensus not achievable, selection committee can recommend one name based on majority for up/down vote to parliament/assembly.

6.       The Prime Minister, Chief Minister, President, Vice-President and Governors terms should be limited to maximum of 10 years.

7.       The State and Central Ministers should also be limited to maximum of 15 years.

8.       There is no term limit on MP, MLA and MLC. However they must reside in their constituency. Ministers are exempted from residency requirements as they need to stay in capital.

9.       The MP, MLA and MLC should spend half of their time during non session period in their constituency.  Violation of this could lead to disqualification.

10.   Any corruption allegation against PM, CM and Ministers should be investigated by CVC. If CVC recommends filing a FIR and/or approved by Governor/President, the law should mandate the resignation of the individuals to face the charges.

11.   The Nepotism is one of the root causes for corruption. The law should prohibit immediate family members succeeding to current constitutional positions such as President, vice-President, PM and CM for next three years as minimum.

12.   The PM, CM, Ministers, Judges, MP, MLA and MLC should declare their assets every year. CVC should investigate if there is disproportionate increase.

13.   Appointments of High Court and Supreme Court judges should be vetted properly may be in an open forum.

14.    The PM, CM, Ministers, MLA/MP/MLC, Class 1 officers’ information should be available online particularly any information pertaining to assets, pending/past actions including favorable outcomes. This enables general public to know about the officials.

15.   The current suggestion/Complaint process does not work well. The new process should allow them to email/mail to higher officials at central location for action. In case of corruption should be referred to Anti-Corruption Wing.

16.   e-Governance should be implemented which should prevent subjective decision making.

17.   Typically corruption comes into picture to get a favorable decision for their cause. This can be minimized by reducing the burecracy and make the process simple. For example, stamp duty can be charged purely based on Government assessed value. These values should be adjusted annually based on market condition every year. The adjustment can be done based on previous year sale price, inflation and other factors as determined. This will reduce the corruption as the rates are fixed and people can use the original transaction amount as it will not impact their stamp duty.

18.   The above transactions must be through banking system eliminating /minimizing the cash payment.

19.   The similar approach in Regional Transport Office, Collectorate, etc should follow the same process.

20.   All police stations must be video monitored and record the video digitally in central location. This could clean lot of mess in Police stations.

21.   The President, Vice-President, PM, CM and Ministers should not be doing any other job which require significant effort even if it does not involve financial benefit. For example, Board of directors/trustee in Charity which demands few hours of work every week/month. The reason is the above position requires lot of effort apart from serving their constituents. In real world, it is not practical to perform multiple roles at same time. May be holding party position such as President/Secretary while being CM could also be another scenario.

22.   The age limit to serve in Assembly/Parliament should be set to 80 years.

23.   The CVC should advertise the downfall of corruption to educate the public.

24.   The Election commission should set realistic limits on election expenses for candidate (for Assembly 1 crore and Parliament 2 crores) and should be adjusted for inflation. Violations should be dealt seriously.  Election commission should ensure integrity of election by preventing distribution of money and freebies during election.

25.   Any report of Ministers’ Family/friends benefiting directly or indirectly should be investigated by CVC using appropriate resources. If proven Ministers’ must charged with misusing their power.

Why Karunanidhi (DMK) protect A.Raja?

The media speculated DMK to strip party positions from A.Raja. Instead DMK passed resolution praising and supporting A.Raja. Media started attributing this to Kanimozhi's support to A.Raja. I believe it goes much beyond that. I am sure Karunanidhi and his family does not want him to talk freely with CBI. This will be problem for them. He is not just close and trusted associate for Karunanidhi. He is much more than that and  helped them in many ways. Here are few key factors

1. Kalaignar TV was operational in 45 days. This was impossible without A.Raja particularly against Maran brothers. He was a Telecom minister and cleared all the paper work swiftly.

2. One of the 2G spectrum beneficiary SWAN is allegedly linked to Karunanidhi family particularly Kanmozhi and her Mom.

3. A.Raja was Environment Minister before he moved to Telecom Ministry. Every big project needs ministry approval. This is considered cash cow portfolio. If it is investigated more scams should come out. He was key figure in blocking any critical project from previous AIADMK Government such as desalination plant. Current DMK Government completed the same project. This is apart from money making machine and profit sharing.

4. CBI suspects 2G spectrum funds might have been invested in spiceJet through Maran.

5. It is also suspected Kalaignar TV might have funded by 2G Spectrum money.

6. CBI suspects Tamil Mayyam involved in this scam. Kanimozhi is one of the Board of Directors. CBI raided their premises.

CBI could offer him to talk about beneficiaries in return he can get reduced conviction and his family members can be spared. This is common practice by investigating agency across the world including India. These could be crucial in DMK backing in spite of additional baggage during upcoming assembly election. Stay tuned for updates!!

Tamil Nadu - Debt Load increasing

Tamil Daily Dinamalar reports that state debt reached One Lakh Crore. This is not larger than 2G spectrum loss but gets alarmingly closer 25% of state's GDP which is the maximum allowed by Central Government. The sad thing is DMK Government wastes its revenue for freebies and borrows heavily for any development. Growing debt will eventually increase borrowing cost and hinder the future growth. This could be painful.

Let us see  the debt load for past few years.

2009 debt -  74,858 crores

2010 debt -  89,149 crores

2011 debt - 1,01,628 crores

 The major revenue sources

Liquor tax - 7,508 crores

Petrol tax - 6,000 crores

Commercial tax - 26, 851 crores

Stamp duty - 4,096 crores

Motor vehicle Tax - 2,400 crores

Other Tax - 41,438 crores

Non Tax revenue -  4,101 crores

State share from Central - 10, 401 crores

 

The total revenue is about 1,02,795 crores.

The Government spends about 51% of its total revenue on salaries and pension alone. This is pretty much fixed cost and cannot back down on this. The rest of the money is spent on Free TV, Free Gas, One rupee rice, Pongal gift, Free electricity,etc.

The Government spends money on Karunanidhi dream projects such as new assembly building, Housing for cine workers (BTW, it is free),  World Classical Tamil Meet, etc. The Government heavily borrows for visionary projects such as Metro Rail, Oganakal Water Project, etc. This restricts Government ability to borrow further and current projects move slowly. This also impedes any new project which could be beneficial to state.

The unfortunate fact is current Government spends its revenue recklessly without any longtime vision. (There may  be  family financial goal to reach) If the  trend continues, the debt could easily double (2 lakh  crores) in next five years with a conservative estimate. This will happen without any significant growth. This will be disastrous to the state welfare. The only solution is fix the mismanagement of Government funds which will  include some painful decisions.

The current five year plan mandates the following

Overall GDP growth of 9%

Agricultural related growth 4%

Industrial growth 9.2%

Service sector growth 10.1%

20  lakh new jobs.

None of the above goal achieved towards the end of 4th year of current five year plan.

It may be interesting to compare how much Karunanidhi Family assets grown while Government is borrowing. We should also consider how much wealth is accumulated by those MLA/MP/Ministers during this period as well.

Can the public wake up and change the trend?

A.Raja arrested - What's next?

A.Raja was arrested today related to 2G scam along with his secretaries.  NDTV reports that he was arrested based on the facts collected so far. Raja is evasive on key matters. The question is why now? DMK and Congress tried to cover this up. Supreme Court intervened and condemned CBI and made Prime Minister to file an affidavit. He was untouched.Kapil Sibal recently said there is no loss.

The Central Government appointed one man commission submitted its reports. There are indications that officials and A.Raja indicted on this report. The CBI needs to submit his interim report to Supreme Court on Feb 10th. Tamil Nadu election around the corner. DMK and Congress alliance is sealed. Both need to offload the extra baggage. Parliament Budget session is next two weeks. Government needs to deal with opposition on JPC. Congress considered these factors and decided to take advantage by arresting A.Raja.

On Feb 10th, CBI is submitting its interim report to SC. Without concrete action, CBI may be condemned by SC.CBI and Government may want to  avoid embarrassment. Congress can use this to pressure DMK to get more seats and power sharing agreement. In return they can spare Kanimozhi and company, later continue weakening the case. It looks like DMK will yield as there is not many option for them. It is DMK turn to be at receiving end. Congress can argue now against JPC claiming case is pending in court and A.Raja is arrested.

We need to understand this 2G scam is much larger than A.Raja. The complete network must be exposed along with individuals and corporates. In my view, only JPC will be have enough power to investigate all aspects. Precisely this is the reason why JPC provision is added to our constitution. There are alleged involvements by corporates, Sonia Gandhi and her sisters, Karunanidhi and his family, etc. These aspects must be investigated as well. The best way we can find resolution for this is JPC investigation in an open forum.