India's Monsoon and Kashmir

Beyond rhetoric

India’s poor monsoon has some message for Omar govt

Arjimand Hussain Talib

Chief Minister Omar Abdullah spoke a language dressed up in logic and reason in his 110 minute speech in the Assembly on Thursday. He complemented his arguments and the direct diatribe against the PDP with statistics, showing his government had done better, and that under him we would be better off.

His speech had a lot in it, but let us here focus on his hydro power ‘vision’ for the state – which many see little more than rhetoric.

Omar sought the cooperation from all the MLAs and the central government in realising his dream of generating another 4000 MW of hydro power in the State. But he had a rider attached to his argument: that we better not fancy getting everything out of our hydro power resources because, in his view, we had ‘deficient investment potential’. Since we do not have the resources, we have two choices – either get 100 percent of ‘zero’ or 50 percent of something (in addition to the 12 percent royalty’, he reasoned.

In a rare show of solidarity, members in the State Assembly on the same day cut across party lines and demanded that the State government should impress upon the central government to increase the 12 per cent power royalty we get from the power projects that NHPC controls in J&K.

In his replies, Tourism Minister, Rigzin Jora, informed the assembly that the state’s hydro electric policy was being revised. He also said that the NHPC had agreed to enhance one percent power quota for local area development, in addition to the 12 percent power our State gets as royalty.

In other words, if Kishen Ganga Hydro Power Project is built in Gurez, the NHPC will invest one percent of the project cost on the development of local roads and other infrastructure there. Such infrastructure is an NHPC necessity as much as that of the local people. So what new does this offer to J&K State?

J&K’s hydro power politics has to be understood from the prism of India’s own energy scenario in the longer term. In the shorter term it has to be understood from the prism of India’s deficient monsoon and lower economic growth.

Central Electricity Authority Chairman, Rakesh Nath, earlier this month said that hydro power generation had already fallen by 10 percent from last year. Hydro electric power accounts for about 25 percent of India’s overall power generation. Lower rainfall has already resulted in shallow water reservoirs in the country, which will obviously hit power generation in the days to come. As such, J&K’s hydro power projects controlled by the NHPC will come even greater strain of demand in the days to come. In other words, the NHPC will have even lesser inclination to part with greater power share to J&K.

A decreased power generation and a lower economic growth for India would mean lesser financial resources for J&K’s financial needs which are normally presented as ‘special needs’. India’s lower growth and lesser tax revenues would naturally translate into its stronger reluctance in New Delhi in providing special assistance for J&K’s ‘special needs’ like the 5^th Pay Commission-recommended salary hike and grants for overcoming the power revenue deficit. Both present two most significant challenges to the State’s financial management and overall governance. And this whole scenario leaves very little scope for optimism.

Then there is the economic meltdown being triggered by deficient monsoon rains. So far, India’s monsoon rains have been 29 percent below normal. This shortfall has hurt crops like rice and sugarcane, triggering a price rise. There will be a clear shortage of water for irrigating winter sown crops like wheat and rapeseed. Gujarat has already put a slab on the quantity of pulses and sugar that farmers can hold.

Apart from driving many other thousands of farmers to extreme steps like suicide, this situation is likely to impact India’s macro economics in some profound ways.

India’s economic growth in 2008-09 was 6.7 percent, in comparison to at least 9 percent it has been experiencing for three consecutive years before the last year. During this current fiscal, owing to a poor monsoon, India’s growth is already projected to be around 5.8 percent. Some economists have even projected the growth going down by even 2 percent from 6.8 percent.

Agriculture constitutes 17 per cent of the Indian economy but rural consumption makes up more than half of the domestic demand. This means that India’s overall consumer demand is highly dependent on its rural areas.

A problematic monsoon automatically means lower purchasing power in rural India and a resultant slump in demand. That in turn would mean slower growth and lesser tax revenues for the coming years.

This will have a direct impact on Omar government’s efforts to seek more grants from New Delhi to pay for our enormous power deficit and special needs like salary hike of the government employees.

Since the last few weeks prices of food grains have gone up considerably. Traders have already resorted to hoarding of food grains. The upward trend of food prices is likely to raise India’s inflation rate to six percent at the end of the current fiscal year, Citigroup analysts revealed in a recent report.

Another related issue are the prices of Kashmir’s fruits this year. A general inflationary trend in food grains could mean that their prices would not go down drastically or may even remain static. However, fruit prices could even be influenced by the demand in India and elsewhere. A slack demand would mean prices might even come down. Courtesy cell phones, last year traders from various parts of India visited Kashmir’s orchards themselves and made payments on the spot for various fruits. That was, however, a time when India’s demand was booming. The current condition might work the other way as well.

This whole situation precipitated by a poor monsoon will have a ripple effect on J&K, and the Omar administration’s plans for the future. Prudence demands anticipating future scenarios and coming up with ideas which could provide us alternatives. Putting all our eggs in the one basket is bad politics as well as bad economics.

Feedback at Arjimand@greaterkashmir.com