Gold Management Reform

Gold Management Reform: A Strategic Approach for India The Government of India and the Reserve Bank of India (RBI) should establish a strategic arrangement to handle seized gold more efficiently. Currently, gold seized during smuggling, raids, or other investigations becomes the absolute property of the government. Instead of letting it remain idle, this gold could be converted into bars and sold in the market to help redeem gold bonds, thereby unlocking its value. In line with this, the government should make a firm decision, via the Cabinet, to stop issuing any new gold bonds permanently, distancing itself from such financial instruments for the future. Gold Price Standardization and Market Integration India’s approach to gold management should include a mechanism to announce gold prices up to ten times a day, reflecting both domestic inputs and global market conversions. This would align with international trends, where many nations are once again using gold as a foundational standard. The Financial Benchmarks India Limited (FBIL) could oversee this process by using an open and cryptic formula that would serve as a reference rate—not a traded rate—helping maintain transparency. Such price announcements should also be reviewed by the Competition Commission of India, the Government of India, and the RBI to ensure market ethics are maintained. Learning from History: Gold as an Economic Asset Gold has been a key asset for over 5,000 years, and despite the development of democratic institutions, it remains a unique commodity in India. Many Indians privately own gold, and gold loans have become widely marketed by banks for refinancing. With a significant demand for gold across various sectors, including: – A. Investment – B. Industrial, commercial, or other uses – C. Input for export-related businesses, it’s crucial that citizens have access to gold through regulated, institutional channels. To facilitate this, the government could apply the same standards used for authorized foreign currency dealers to the bullion market. This could be managed by creating an All-India Bullion Dealers Association under the framework of commercial banks, rather than leaving it to the jewelers’ associations. Sovereign Gold Bonds and Government Policy Gold bonds were originally a source of revenue for the government through taxes and duties. However, losses from such schemes need to be permanently addressed. The government should negotiate a swap arrangement with the RBI, allowing the central bank to redeem the bonds on the government’s behalf. This can be done by issuing Treasury Bills in short durations (46 days, 181 days, and 364 days) at the prevailing repo rate, with the RBI assuming responsibility for any profit or loss due to gold price fluctuations. The RBI has proven its capability by managing India’s official reserves effectively, even earning surpluses. A clear distinction must be made between the roles of the RBI, an entity created by Parliament, and the Government of India, which represents the State. By doing so, the public will better understand that all assets are held on behalf of the President of India, not just symbolically, but legally in every agreement. Securing Gold Reserves and Custody Gold held by the government must be protected securely. By enhancing the symbolism of the President’s role as the custodian of the nation’s wealth, gold reserves should be guarded by the President’s bodyguards and secured by multiple layers of protection, including Customs officers, the Central Industrial Security Force (CISF), and police. The government should establish a formal mechanism where five wholly-owned and three partially-owned entities monitor the movement of physical gold. These entities will act as Authorized Custodial Dealers of Gold. Furthermore, Bharat Gold Mines Ltd should take on a new role as the custodian of precious metals on behalf of Indian citizens, managing both trade and personal accounts. Gold as Part of India’s Currency Reserves The government and the RBI should recognize gold as an integral part of India’s foreign currency reserves. Weekly announcements by the RBI will provide transparency, showing the amount of gold held officially. In addition, India’s thriving bullion industry must have access to legitimate channels, as the lack of availability often fuels smuggling and parallel markets. Gold Policy and Authorized Dealers To maintain order in the gold market, all commercial banks authorized to deal in gold should have designated branches with Customs Protected Safe Rooms to store gold for their clients. These banks should also be permitted to act as agents for global mining companies, ensuring sovereign protection and easy convertibility between gold and Indian rupees. The International Monetary Fund (IMF) should also be offered a secure facility to hold gold in India, symbolizing the high level of protection afforded to bullion, akin to the safeguards given to the Head of State. Innovative Approaches to Gold Selling For effective gold bond redemption, the RBI could establish a system where gold is handled directly through selected banks. For instance, if Indian Bank is chosen, a tripartite agreement between the government, RBI, and Indian Bank would facilitate the process. The RBI would deliver the physical gold to a customs-bonded warehouse in Chennai, exempt from duties and taxes. Pricing would be set in Indian rupees based on agreed Indian parameters rather than international rates. National Gold Policy and Precious Metals Security The Cabinet should create a National Gold Policy, evolving into a National Precious Metals Policy, to ensure that all precious metals are held securely in state-owned banks. Gold, silver, and other precious metals should be safeguarded in visible and transparent ways, with protection provided by the President’s bodyguard and the CISF. To make the gold policy effective, recycling efforts must be institutionalized, involving both state-owned commercial banks and other government corporations like Kolar Gold Fields Ltd. This would help establish a sustainable system for recycling gold and other precious metals. Strategic Use of Gold Reserves India’s gold reserves, particularly those managed by the RBI, should be used strategically. Instead of relying on international market prices, the government can introduce a special arrangement where the RBI holds bonds at 0% interest, similar to Japan’s low-interest-rate policy. This would minimize government interest payments and utilize reserves effectively when needed, ensuring that the nation’s wealth is put to optimal use. Conclusion: A Symbol of National Prosperity and Order The Government of India, in collaboration with the RBI, must take immediate steps to secure and utilize the nation’s gold reserves in a transparent and orderly manner. Through reducing duties, preventing smuggling, and maintaining visible control over gold assets, India can create a stable and prosperous future. As a symbol of national wealth, the management of gold will reflect India’s commitment to both its citizens and the global economy.
Posted by G Giridhar Prabhu

Establishment of the Indian Council for Applied Agricultural Research in Madhya Pradesh

There should be an Indian Council for Applied Agricultural Research, located in Madhya Pradesh. This choice is strategic due to its central location in India, facilitating accessibility for stakeholders and making it an ideal hub for agricultural engagement. Central Location: Madhya Pradesh’s central position makes it convenient for all stakeholders to visit, ensuring broad participation and collaboration. The state’s diverse agricultural landscape and strategic location offer a unique advantage. Stakeholder Engagement: It is ideal for engaging farmers, farmer families, villagers, retired government officials, scientists, military personnel, and other stakeholders interested in various aspects of food, including nutrition, taste, and efficient food production. Food Processing Capabilities: Madhya Pradesh is pivotal in India’s food processing sector. It aligns with the national agenda for reducing food wastage and maximizing the utility of agricultural produce, making it an ideal location for the Council. The research conducted will involve a diverse range of participants to address key issues in agricultural practices, ensuring sustainable and efficient food production. The principle of Annam Brahma, which underscores the importance of food in Vedanta, will guide the Council’s initiatives. By-products from agricultural processes can be recycled into the soil, promoting sustainability without harmful chemicals. Current Gaps and Future Needs: The Indian Council of Agricultural Research currently operates centrally, while state universities handle agricultural sciences. However, there is a need for improved coordination and expansion to ensure advancements are well-documented and disseminated. Expanding the Central Food Technology Research Institute into 30 regional centres will enhance research and application. These centres will focus on:- – Minimizing processing time – Improving communication of developments – Ensuring food safety, thereby promoting consumer awareness and compliance with international standards. The Council will align with international standards, such as ISO and HACCP, to meet global food production and safety requirements. It will also address phytosanitary measures to ensure agricultural products meet industrial use standards. The proposal includes acquiring 2 million specialized food containers for global shipping, ensuring food safety and compliance with international traceability and standards. Employment and Income Growth: The initiative is expected to engage about 2 crore people part-time and 5 crore families full-time in food production, leading to increased employment and incomes. By focusing on food design and development, it aims to eradicate hunger and ensure everyone has access to food from 6:00 AM to 7:00 PM. Waste Recycling and Job Creation: A movement to control and recycle household bio-waste will not only improve urban cleanliness but also create approximately 5 million jobs. Recycling initiatives will further enhance employment opportunities and improve livelihoods for at least 2 crore people already involved in these activities. The immediate establishment of the following institutions is needed to support these objectives:- – Indian Council for Applied Agriculture Research: This council will focus on applied research and its practical implementation in agriculture. – Indian Agriculture Products Recycling Agency: This agency will oversee the recycling of agricultural products to minimize waste and promote sustainability. – Centre for Communications, Logistics and Transportation of Food Products: This centre will improve the logistics of food products across railways, roads, and other transportation forms. – Centre for International Relations in Agriculture and Foods: This centre will facilitate collaboration with international bodies, including the Bharat – United Nations Food Programme (UNFP). Additionally, the creation of the South Agricultural Organization will enhance agricultural activities in southern nations, with headquarters in Brazil. It will support countries like New Zealand, Australia, Kenya, and others to combat hunger and improve agricultural productivity. This organization will work at a fraction of the current UN operations’ cost, complementing the UN’s efforts to eliminate hunger globally by leveraging surplus production from the South. India’s surplus agricultural production, currently around 40 million tons, should be used to address global hunger. By integrating global surpluses, the Council aims to meet the needs of one billion people, ensuring prosperity in Africa, South America, and the Asia Pacific regions. The industry that converts in the best possible way will require to be ‘S.M.A.R.T.’: S – Specific M – Measurable A – Achievable R – Realistic T – Time-bound In conclusion, the establishment of the Indian Council for Applied Agricultural Research in Madhya Pradesh is a strategic move to enhance agricultural research, promote sustainability, and address global food security. The proposed institutions and initiatives will foster collaboration, improve food production efficiency, and create significant employment opportunities, contributing to India’s agricultural growth and global food security.
Posted by G Giridhar Prabhu

Bamboo Reeds & Tribals

Bharat is host to a huge variety of bamboos and reeds. These plants are often seen in the border areas of forests and water bodies, and sometimes appear randomly in other locations. Different species of bamboo can be prolific, growing rapidly and symbolizing the concept of managing one’s own growth. Young bamboo shoots are edible and are considered food for the soul. Tribals and inhabitants in these border areas have a deep understanding of bamboo. Bamboo cultivation is not just a topic—bamboo management is the future. Whether dealing with bamboo seeds or handling, they need to be integrated into barren lands. However, this cannot be done in isolation; it requires attention to ecology and biodiversity. Bamboo needs water or its equivalents and will naturally support various bird species. Additionally, it provides a natural habitat for snakes, which help control the population of rats. To achieve this, bamboo cultivation should be promoted uniformly in semi-urban areas, but in moderation. India has vast tracts of land that are either uncultivated or only marginally cultivated. Tribals and farmers can be encouraged to work together to supply bamboo abundantly, which can be harvested for the paper industry, viscose, newsprint, and other equivalents. Some species can be harvested for day-to-day use, including the making of furniture for the masses. Mass production of bamboo products can create employment opportunities in self-help groups, especially in areas with skilled handicrafts people who can convert bamboo into valuable items for urban environments. Bamboo is an easier, faster, and more replaceable and reclaimable resource. Many volunteer organizations and individuals in India are passionate about bamboo and have made it their life mission. The state and central governments must make bamboo conservation a priority, working alongside state or central agencies. The industry can participate through the CSR mechanism, and the Government of India should incentivize the cultivation of bamboo in various forms, including crushed bamboo for railway tracks. Specially prepared sidings or what are called third-line loops should be developed around railway stations, with bamboo cultivation encouraged within a few kilometers by tribals and local farmers. This would create a perpetual and systemic harvesting process over time. India would then benefit from an abundance of greenery and a higher density of carbon dioxide absorption than currently exists. This can be a mission-oriented approach with animal bureaucracy, enhancing education, communication, and handling. The current trend among the younger generation is to serve the nation voluntarily for certain hours, weeks, or months, taking time off from their busy lives to contribute to organizational effectiveness. Therefore, tribals and bamboo should be part of our national agenda and pursued urgently.
Posted by G Giridhar Prabhu

A Trillion Rupee Package for Sri Lanka

A Trillion Rupee Package for Sri Lanka Sri Lanka, our neighbour, is in a serious crisis. It has come from a series of both internal actions as well as external activities in political, economic, and social dimensions. As on date, the Central Bank of Sri Lanka has taken some decisive economic steps for the near-term, medium-term, and long-term. A collective effort and expertise of India  and Sri Lanka will have an impact on both nations. Economic dimensions need to be tackled effectively, certainly, and as quickly as possible. The political and social spinoffs will come in due course.   India needs to extend a One Trillion Rupee package as a measure of political understanding and as a neighbour. It is in India’s interest to have a prosperous neighbour with positive effects on Indian citizens as well. The components of the package need to be as follows: 1.     It needs to be a 3-year package to provide assurance to Indian, Sri Lankan and Global Communities based on mutual trust and written agreements and International covenants and collaborations. 2.     In this year, for next 12 months, India and Sri Lanka agree that  Sri Lanka’s short-term obligations in Foreign Currency be converted to 3-year, 5-year and 7-year obligations with agreed timelines. 3.     For next 12 weeks, Indian and Sri Lankan business entities are given working capital in Indian Rupees and Sri Lankan Rupees at an agreed fixed currency conversion and agreed interest rates of both nations. 4.     Indian and Sri Lankan banks need to be enabled to transact in respective currencies.  5.     Convertibility in India to Foreign Currency can be enabled through Indian currency and foreign exchange channels in concurrence with branches of Indian banks in Sri Lanka monitored by Sri Lankan Central Bank and the Reserve Bank of India. India needs to strengthen itself further in an arrangement that can benefit our people. We  have surpluses which can be channelled with respective Sovereign guarantees. It needs to be “Trade, Not Aid”, which will win. A currency agreement will generate a win, win, win situation. The idea is to make the Indian rupee and Sri Lankan rupee integrated for all transactions – –        current account –        capital account –        and as a medium to invest mutually, so that Indian and Sri  Lankan people benefit to the maximum extent both in the near-term and the long-term. Currently, India’s economy has the surpluses which the Sri Lankans need, to meet their  immediate requirements and we are not far away from each other – hardly 8 hours by ship and  45 minutes by flight from the southern half of India. It is therefore important to establish an Indo-Sri Lankan mechanism to engage in an activity  to supply medicines, requirements of urgent nature, which India can fulfil for health, for senior citizens, for children and for the community which deserves it most. India’s foreign exchange resources are above that it can have at the moment as a necessity. India has already taken some steps as per the Foreign Ministry release. It is therefore important to take the following further steps: 1) The Government of India should resolve that the Indian people, the State Governments,  and the Central Government can engage with the crisis and turn it into an opportunity for  Indian people without any exploitation or denigration. 2) The past is the past. View the present with only one week at a time and supply the  essentials that they need, that they can pay for in Sri Lankan rupees or Indian rupees. 3) The Government of India and Reserve Bank of India can engage in an immediate  swap of Rs 10,000 crores equivalent into Sri Lankan currency at an agreed exchange  rate frozen for 14 days to 28 days for specific emergency purposes – food, medicines, fuel and essentials. With this, the Sri Lankan Central Government can create an equivalent of Rs 10,000 crores in Sri Lankan currency at an agreed fixed rate and make it available to the Reserve  Bank of India and Rs 10,000 crores of Indian currency needs to be with the Central Bank  of Sri Lanka. This needs to be exercised as convertibility on trade accounts for goods and services. This can be immediately made available to banks in respective nations and in turn,  Sri Lankan businesses can be allowed to have rupee accounts in India as well as  Sri Lankan rupees and Sri Lankan banks can have accounts of Indian businessmen, both in Sri Lankan rupees as well as Indian rupees. ·        “What Is a Currency Peg?A currency peg is a policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or basket of currencies.A realistic currency peg can reduce uncertainty, promote trade, and boost incomes.An overly low currency peg keeps domestic living standards low, hurts foreign businesses, and creates trade tensions with other countries.An artificially high currency peg contributes to the overconsumption of imports, cannot be sustained in the long run, and often causes inflation when it collapses.The United States has exchange rate arrangements with 38 countries, with 14 pegging their currencies to the USD.”·        “What is a Floating/Crawling Peg?A crawling peg is a band of rates that a fixed-rate exchange rate currency is allowed to fluctuate.  It’s a coordinated buying or selling of currency to keep the currency within range. Crawling pegs help control currency moves, usually during threats of devaluation. The purpose of crawling pegs is to provide stability.”Source: www.investopedia.com 4) The Indian refineries can sell petrol, diesel and other fuels in Sri Lankan rupees  and they can convert it into Indian rupees in India and each Sri Lankan entity can be  trading in Indian rupees with Sri Lankan rupees over a period of 6 to 10 weeks,  preferably at an agreed fixed rate so that there are no conversion costs other than bank  fees till the crisis is mitigated. India and the Indian Government and its institutions should treat exports in Sri Lankan  Rupees equivalent to international convertible currencies. 5) The Government of India and the Sri Lankan government can enter into a  Memorandum of Understanding that Sri Lankan foreign exchange requirements to  meet international obligations are met comfortably so that it will generate swap to US  Dollars, Euros, Yen and Dirhams for both Sri Lankan and Indian rupees. 6) Further, arrangements can be made that India can use Sri Lankan rupees for  current account transactions which include that Indians can have Sri Lankan rupees deposited with themselves for future usage – for visits to the island for official,  diplomatic, and business purposes, and also encourage Sri Lanka to be back in the  tourism business with Indian tourists visiting Sri Lanka and spending in Sri Lanka. 7) The Government of India can also exercise that Sri Lankan nationals can come,  visit and stay in India and spend Sri Lankan rupees in India as well as buy Indian and  take it back with them. 8) Broadly, India needs to mobilise shipments at the earliest by air or by sea, of most  essential from its port, with payments guaranteed by each other and an Indian  businessmen can buy what Sri Lanka has now by paying in Indian rupees, so that Sri  Lanka can pay back in Sri Lankan rupees. 9) The resolution in terms of banking and finance is more important to be cool and calm with the situation on the island . There are surplus capacities in India which  can be utilised for supplies over a period of time and this requires a continuous  engagement.   10) Increase in the number of flights where Indian airlines and Sri Lankan airlines can  increase the regularity of flights from airports convenient where people can come into  India and move forward.   11) It can also be a temporary situation, where based on the affordability Sri Lankans can  enjoy Indian hospitality in all the states, till the crisis is over and they can get back to  normalcy. 12) Relationships extended in social terms can also mean integration of communities within Sri Lanka into communities in India, where we have surplus capacities in  accommodation for welcoming improvement in relationships. 13) India and Sri Lanka need to invest immediately in ferries from the nearest points  of North East Sri Lanka to South East India. 14) A temporary arrangement, which can mean that India gives certain material free of  duty can also mean that personal essentials can be carried and allowed to trade in the  nation to mitigate the requirements of food items or inputs to establish a supply chain  into Sri Lankan SMEs. Fruits and vegetables can move more freely over ferries as  well as from special consignments arranged from the ports of South India, like  Krishnapatnam, New Mangalore port, or from any part of India that can get mobilised in  warehouses, so that trade can get established near term, middle term and forward. 15) The swap that India can arrange is that the Indian government can direct Reserve  Bank of India and banks to hold Sri Lankan long term debt from established  companies of Sri Lanka, who engage in the economy of the island and this can get  mitigated over a period of 10 years, or 5 to 15 years, so that Sri Lanka can pay back in  Indian rupees.   This will establish the Indian rupee as a convertible in the South Asian nation but it can also extend to all South Asian Nations.
Posted by G Giridhar Prabhu

Redemption of External Debt Outstanding of the Government of India

Redemption of External Debt Outstanding of the Government of India 1.   The Government of India, Parliament, and the Reserve Bank of India need to work together to recognise the difference between the external debt converted to the Indian rupees at book value and the current rates. 2.   Table 1 reveals the external debt outstanding as on September 2021 taken from RBI bulletin. TABLE 1 * Source: Values extracted from Reserve Bank of India bulletin * Converted USD: INR @ 75. 3542 at 1:30 pm on 11/02/2022. Source: Financial Benchmarks India Pvt Ltd 3.  The Indian government owes Multilateral, Bilateral and IMF organizations a debt to the extent of USD 125.6 billion, that is, Rs 9,46,448 crores, which requires to be repaid on due dates. These are loans at concessional rates or otherwise. The Government of India needs to create an International Debt Redemption Fund 4.   The Government needs to be free of debt to any Multilateral and Bilateral institutions or the IMF. 5.   Parliament needs to decide that the Government of India needs to create an International Debt Redemption Fund. It can decide to allocate a nominal amount of Rs. 2500 Crores for this financial year 2022-23. 6.   One of the sources for the international debt redemption fund that can be decided by Government and Parliament is the annual surpluses from the Reserve Bank of India, entirely or a portion. 6.1. It is also clearly required to be stated that the profits of the Reserve Bank of India as determined annually is a surplus allocated to the Government of India. 6.2. For the next 10 years, it needs to be solely used for economic purposes as it is solely an earning from economic activity. 6.3. The Reserve Bank of India is in a position to share this and the Government can utilize it better. 7.   The liabilities of the Government of India clearly state as follows: TABLE 2 *Balance according to book value Source: Value extracted from statement of liability of Central Government from union budget India. 8.   The unnoticed contingent liability of Government of India. 8.1.  The Government of India does not “hedge its foreign currency borrowings in foreign currency”. 8.2.    As on the date say, 31st December 2021, the Government has “contingent liability of Rs. 4,77,413.48”. This is arrived explicitly in the Table 3 below. TABLE 3 9.  Parliament needs to examine the Pros & Cons of prematurely retiring sovereign foreign currency debt of India. Questions:    To what extent will the Reserve Bank of India and the Government of India with Parliament work together on the redemption of the Government’s Foreign Borrowings?     Is an early retirement or prepayment of the Government’s Bilateral, Multilateral and IMF loans appropriate for India, given the Foreign Exchange Reserves at Record levels?    Can the Government of India and the RBI enable current surpluses in the Global economy to create assets in India through the Financial System without risk?    If any nation in the world is condescending on India, the need for introspection is, do we need any loans or grants from any nation?    Is halting future sovereign loans a good policy? Henceforth, this needs to be a decision in principle. Remedies 10.    Parliament should address the contingent liability of the foreign exchange fluctuation risk. 10.1.  It should be expressly stated to the Parliament in budget papers or in the Committee, and the Reserve bank of India should confirm it in its monthly statement. 10.2.  The Reserve Bank of India and the Government of India should work together in narrowing these contingencies by introducing special measures. 11.     When the pre-payment is decided: 11.1.  It can be done by a Debt Swap equivalent in Rupees by issue of 364 days Treasury Bills. 11.2.  On exercise of this Swap, the Government can deposit it in foreign currency with State owned banks in India till it arranges to repatriate the money in consultation with lenders. 11.3.  All the lenders must agree to take back the loans before the due dates. 11.4.  The repayment of dues to the International Monetary Fund should be the first one initiated by the Central Government. 11.4.1.  The Reserve Bank of India is a contributory to the International Monetary Fund in its International Investments Program. 11.4.2.  The Government of India can easily repay this loan and need not rely on any borrowings of IMF under a managed Foreign Exchange Reserves Program by the Reserve Bank of India, which has been carried out in an accomplished manner. 11.4.3.  Indian citizens in India or internationally also need to be allowed to participate in international holdings in the form of capital account convertibility gradually developed in the next 10 years. 11.4.4.  This would be a great moment for India if the Parliament and Government with Reserve Bank of India decides that IMF borrowings to the extent of Rs 1,75,575 crores be repaid with immediate effect. 11.4.5.  This can be done with swap of Treasury Bills raised from the market and supported by the Reserve Bank of India in a short period. 11.5.   In the case of bilateral loans, these would have been taken for a long period of 20 or 30 years with durations of 20 or 30 or 40 years. It is time that these loans be repaid or provisions made for repayment in the ensuing months. 11.5.1.  Since bilateral arrangements have to be addressed diplomatically and arrangements need to be made by communications, Parliament can resolve that the bilateral loans can be prepaid. 11.5.2.  It would also be a grand moment if Parliament decides with Reserve Bank of India and Government that we are at a confident level that we do not request, ask or take any loan from a sovereign government for the purposes intended. 11.6.   In the case of multilateral loans, India need not resort to any loan from IBRD, ADB or World Bank or any other bank. It can rely on its own rupee sources and its savings. In order to achieve all of this, a conscious creation of an External Debt Redemption Fund will induce and motivate public finance actions as well as recognition of this debt by the public of India to bring in a spirit of sovereignty. 12.   The Government of India in forthcoming sessions of Parliament budget can create two funds –   Redemption of External Debt Fund   Defence Assets Acquisition in Foreign Currency Fund 13. Credits to these funds can be channeled through appropriate Budgetary mechanisms of the Central Government. One of the options is that Reserve Bank of India’s annual surplus can be a source of credit. 14.     The Government of India should halt all sovereign borrowings in foreign currency. India should become investors in Multilateral institutions. 15.   An internal debate in the Ministry of Finance needs to be initiated and if necessary, in the public domain, inviting public views. 16.   The Government of India can decide on merits and convey the decision in principle to Parliament and the Institutions and subject itself to scrutiny in the realm of public finance. 17.     The parliament Panel can convey to Government of India at the views of public. CONCLUSION •   The Reserve Bank of India and the Government should agree to swaps that enable RBI to hold securities equal to the rupee equivalent of Government Debts and the RBI can provide the needful forex to prepay loans. •  It is therefore wise to halt all sovereign borrowings in foreign currency – multilateral or bilateral. On the other hand, the current situation in India can contribute to global development of all nations as it is meant to be. • This will increase returns of capital in India and generate employment.
Posted by G Giridhar Prabhu

Creation of Strategic Petroleum Product Reserve – 20 percent Ethanol Blended

Creation of Strategic Petroleum Product Reserve – 20 percent Ethanol Blended India has a Strategic Reserve for Crude Oil. There is a need for having a Strategic Petroleum Product Reserve at Points and Proximity of Consumption in the Indian Union. An aggressive stance on blending ethanol with petroleum products can give rise to the new series of tactical investment, physical and working capital. Citizen’s participation will also be called for as it is in the interest of the consumer and the economy that vital fuels are always accessible. This demands a policy that these reserves are part of the locales, so that at any given time, the Products Reserve is sufficient to meet the requirements for 30 days and beyond. The possible locations can be: a)     Strategic Locations at Junctions of Indian Railways and NHAI b)     Rural Stations at a distance of 25 kms to 50 kms from cities and towns  c)     Proximity to producers – within 25 kms to 50 kms d)     Suitable for Blending, Stock and Flow with Ethanol 20 percent. e)   Blending with refined products needs to be separated from refineries with tanks, approved blending technology and ready delivery for routine sales as well as defined national or international calamities. f)      The total ” floating ” stock of blended products can be mandated to be available to all Marketing Companies.  g)  Marketing companies need to be offered pooled facilities at nominal national cost, where all Departments – Central and State Government Activities converge. h)     National Interest defined and mandatory connectivity to National Users  ·     Normal Conditions ·     Disruptions in commercial activities –  § notified and sudden refinery or logistics related mishaps § localised calamities  § national calamity related stoppages and shutdowns as determined by Authority Nodal National Agency For Example: o       Projects and Equipments Corporation Limited – Can be the National Agency and can be an Equity Partner with all other agencies as a Catalyst up to 26 percent of Equity. o       All Petroleum Marketing Companies with written agreements on supply and demand matching at respective locations. NHAI –        Needs to float a Subsidiary with commercial viability offering Right of Way and annexed facilities for tanks and pipelines and extended support to Highway Transport. Indian Railways # Needs to nominate an existing subsidiary like RITES or IRCTC or both that can use railway infrastructure in rural areas. # These facilities with strategic and tactical inputs also meet # Defence  # State Government nominated uses. International agencies and Government subsidiaries with interest in Petroleum sector can be invited based on their interest in the Indian markets if, –        they have expressed interest, as India is a dominant importer, –         they also have sovereign funds.    –       Example – Norway, Abu Dhabi, who can provide, Capital International Specialisation Innovation Systems Stakeholders Protecting their interests Safety of Capital Return on Investment Strategic interest Commercial Interests in finding neutral markets  Green Funds Agriculture and Employment Generating Agencies can be participating Example: Milk Unions Poultry organisations State Road Corporations Private Transporters who will value lower costs Indian Railways  PROMOTE –        Own Your Wagons –        Rakes For specific delivery points to long distance consumers.  For example, Kerala, North East, heavy consumption zones outside Major Cities.  METRICS –        One Month Equivalent to Stocks required in each District –        Two Months Equivalent for Defence and National Interests Stock and flow Principle This implies that the petroleum products stores remain fresh and regular commercial sales will be done from the same tank farm. The Base Stock – Diesel and Petrol Pooled Stock Working Notes  1.     There is a need to focus on the supply of products in proximity. 2.     In a market economy, producers will strive to reduce costs and maximise profits. They will not be “greedy” but work in “self-interest”. 3.     National interest has to be paid for by the Central Government and State Government.  4.     In the scenario described, both capital assets and running costs will be paid for by better efficiencies. 5.     Digital management to reduce costs. 6.     Public participation in Equity and Bonds where and when feasible for higher returns. 7.     50 percent utilisation concurrently for flow purposes will pay for the cost of the Product Reserves. 8.     There need not be heavy investment by the Central Government – participation can be restricted to 26 percent. 9.     State Governments will be benefited by infrastructure creations. 10.   Magisterial function in crisis will be with least disturbance to the public. 11.    Any world calamity can be resolved in 60 days with alternative supply. 12.    Public needs to be educated and participative not to waste petroleum products. 13.   Pollution needs to be penalised. 14.  Railway Rakes can be “floating” stocks and can be turned around at will, parking at midway points in loop lines or rural terminals.  15.  All Defence installations can have 8 point strategic storage surrounding the installation or camps and cantonments. Defence buying should specify compulsorily 20 percent blended under stringent quality specifications, which will in turn help civilian supply quality in surrounding areas. 16. Considering the Experience of SPPR – SPPR can be a minority but strategic equity partner at 26 to 35 percent with at least 35 entities to implement this nationally over next 5 years, with Mangalore as Headquarters due to convenience and congruence. Green Energy Promotion should be a win win win win win for the Indian economy
Posted by G Giridhar Prabhu

CASHEW – A TOUGH NUT TO CRACK

Cashew (Anacardium occidentale) is a tree nut of growing importance in the global trade of horticulture produce. Of late, many issues have cropped up and problems have surfaced on dealing with the harvesting and post harvesting stages and further treatment in the commercial value chain. The ratio of kernels to raw cashews is 1: 4 or below, depending on various factors that reduce yield. As it is a very expensive product, processing of cashew kernels must result in least possible destruction or damage or depreciation. Technology has not been a driver in cashew processing and the record of failures is higher than successes over a period of time. The conflict has been between the conventional processes and the newer developments. The evolution of cashew processing followed the course of demand. The higher demand for kernels led to the linear expansion of cashew processing, where the availability of labour was abundant. The increase in the economic cost of labour led to the concept of division of labour and evolution of the small version of the cutting machine. The history of mechanization of cashew is since late 1950s. The advent of mechanization began as supply of equipment trade by UK, Japan and Italy. Probably other nations chipped into help the producers and consumers. Mechanization took root in Brazil and evolved, but the industry could not deliver the volumes required for world markets from their own production. Non-availability of labour led to the innovation, which automated a part of the shelling cycle. Peeling was the most laborious part and machines were developed to remove the outer peel to the extent of 70 to 80 percent. Grading by hand evolved to small graders, which automated the process slightly to the optically sorted grades, almost simulating hand grading for sizing purposes. The Brazilian industry got protection from increases in global raw cashew prices, which indirectly gave compensation to some of the destructive aspects of mechanization on the process and the product. A precondition for good preservation of raw cashew is ideal to perfect sun drying to bring the equilibrium in moisture content. A fully well dried raw cashew has slightly below 9 percent moisture content. The biochemical actions turn for the worse if raw cashews are not well dried. This causes irreversible destruction and hence universal education of producer and traders is essential for making them aware of the value lost when raw cashews are not dried well. The pre-requisite is to complete the post-harvest. Drying process and process raw cashew fit for any type of manufacture. In Africa, a combination of state policy and practices, control and regulations and market practices globally contributed to the installation and failure of mechanised practices. It ran the cashew economy to the ground and revived with market practices and resulted in the massive growth globally when market prices generated market driven policy and practices which we see today. The challenge for cashew is that the means of producing kernels and technology for production needs to be defined.The cashew kernel extraction follows the processes of proper post-harvest care, further processing of raw cashews, conditioning of raw cashews and then roasting, shelling, oven treatments, conditioning of heated shelled kernels, peeling, sorting, elimination of testa and non-conforming degraded kernels and final grading as per commercial standards. The Raw Cashew Is A Tough Nut To Crack. The Following Table Reveals The Process: The peculiarity of raw cashews is that it cannot be compared to other nuts or agricultural processes. The evolution of processes to develop the kernels have been ad hoc and handed over as skills and sub processes to suit manufacture and delivery of kernels. Cashew manufacture requires a systemic study of all processes and sub processes and this need to be in situ in factories. It would be a huge challenge to have a central laboratory and development centre for cashew. Study and research of cashew manufacture is to be preceded by intense studies of the raw cashew for physical, chemical, biological, microbiology, biochemistry and water activity characteristics and behavior under different conditions and parameters. Thus, it is clearly a case for partly manual and partly mechanical process for extracting the full or potential value of a raw cashew. The raw cashew nut is the only tree with a hard shell which has a phenolic substance. The acid which the shell can release in process and how the shell can be separated without any contamination has been satisfactorily done with manual or partly manual and mechanical processes. Optical sorters with RBG technology evolved over sensors, which could sort to requirement. In all, the requirement of 60 employees per metric tonne produced got reduced to 10 employees in this year. The industry now comprises of a large number of heterogeneous processes. Cashew has also a kidney shape with an indent. The other characteristic or shape issue is that it has length, width and depth which vary. The thickness of the shells varies not just from nut to nut but within a single nut at the points where the shelling would take place. Any shelling that happens has to be at a particular point with a shape that has half a kidney characteristic with a sharp centre. This leads to issues when the nut slips and various types of damages can occur if this is done devoid of skill and when done mechanically there is no uniformity. Without shelling no further activity happens. This brings to us the sensitivity of parts of raw cashews when exposed to the process. Cashew manufacture involves heat transfer in multiple stages that can be applied, which are critical for extraction from the outer shell and further for the gentle removal of inner testa. Cashew kernels are covered by an inedible outer skin with a predominant component of tannin. The intricate processes for cashew kernels extraction once simple in the manual process has led to a series of complication when there are automated or mechanical processes. In mechanised processes the prerequisites go higher than in the manual process and the output or yields have qualitative, quantitative impacts as well as it alters the characteristics in a significant way that can affect the final product or the way consumer requires it. Packaging is special to cashew due to its delicate nature. Cashew kernels have another characteristic compared to other tree nuts. It is “meaty” and has good doses of fat and carbohydrates. This requires cashew kernels to be preserved well. Cashew requires an “inert” atmosphere which requires it to have specialised packaging. It is therefore desirable that cashew conversion is subject to severe tests after a series of observations. The objective is to magnify the value from each gram of raw cashew. Cashew as a tree produce will defy uniformity. It is a regrettable fact that there is no established or recognised industrial research on cashew manufacture. The nature and volume of the industry now requires it to be a national or international effort, preferably backed by United Nations or an internationally recognised and backed agency. Cashew manufacture and technology anywhere in the world will be standardized and a success only on the following criteria when set into a pre-requisite programme: Complete and thorough post-harvest drying of raw cashews practices by producers and traders or intermediaries e.g. cooperatives and handlers Protocols for storing and transportation of raw material that is raw cashew Complete understanding of biochemistry in process once raw cashews are submitted to process Suppliers and customers of cashew kernels understanding the cashew value chain Participation of the entire value chain as stakeholders in the study, research and development Any process technology will have to completely be the result of in depth study of the material. It is time for a World Conference on Science and Technology on cashew to establish thoroughly, the agenda and priorities for industrial research, to consolidate and explore new frontiers for cashew.
Posted by G Giridhar Prabhu

Legacy Issues: Pay-out of Interest of Government of India

The Reserve Bank of India must act speedily in making special efforts to undo legacy issues. The Government of India has borrowed heavily over the last 15 years. In the process, dealing with inflation at certain periods, the Reserve Bank of India independently took steps to increase the interest rates and established a higher interest rate regime for the whole nation. It certainly made an impact on the markets; it made an impact on borrowing by the public. In fact, a re-examination of its impact must be done internally by the Reserve Bank as well as the Government of India. In the period of four years, India had extremely high real interest rates as well as nominal interest rates compared to the rest of the world. It is therefore an opportunity to correct this. The Government of India has been the worst hit victim and on behalf of people of India, it cannot be burdened by legacy issues even though it cannot manage it. Reserve Bank of India has now within its means and tools, the capability of redressing these wrongs without hurting markets or its autonomy or position. The table below reveals a substantial amount to Outgo of Interest by the Government of India. a) Due to the increase in borrowings b) Increase in rate of Interest Source: budget.gov.in The Government of India needs to reduce the interest outgo from Rs 809,000 crores per year to Rs 350,000 crores for financial year 2022-23 and need not wait for prolonged periods. The table below shows the flexibility of savings on interest payment. Source: Prepared by G Giridhar Prabhu RBI can take the following steps: 1) The total holdings of government securities that it has on its inventory, which is to the extent of Rs. 11,00,000 crores can be converted into Treasury Bills at a nominal interest rate of 0.25%. This can be proscribed as a national measure in an emergent situation. This is equal to the interest rate in the global situation and India’s position within 10 large economies. This can be for a tenor of 364 days and the Government of India will save instantly the total amount of interest pay-out this year and forever. 2) It is recommended that the Reserve Bank of India can buy back the outstanding oil bonds and convert it into normal securities like Treasury Bills at 3.35 percent. This can be done immediately in order to ensure the goal of reducing interest costs of the Government of India. The saving over the period of the Bonds is Rs 17,788 Crores. 3) The Government and Reserve Bank can work together so that Reserve Bank of India buys to the extent of Rs. 33,00,000 crores of securities. These can be converted into – o 182 days Treasury Bills @ 3.35% o 91 days Treasury Bills @ 1.75% o 46 days Treasury Bills @ 1% o 14 days Treasury Bills @ .25% The table on list of Government of India securities outstanding as on 6th September 2021 is enclosed with this document. The list has been modified by making a table and the total outstanding in each of the interest rates is summarised here below. Total Outstanding Securities at different interest rate slabs (Rs. Crore): 4) Reserve Bank of India within its purview can structure as a response to current global Indian factors as follows in the next 4 months as a borrowing structure: • Treasury Bills Reverse Repo Rate less than 14 days Maturity 0.25% • Treasury Bills Reverse Repo Rate less than 46 days 0.50% • Less than 182 days 0.75% • Less than 364 days 1.00% 5) The RBI Governor in a recent interview conveyed that interest rate on Reverse Repo is within its purview and not within the MPC. Therefore, Reverse Repo auctions can be restricted to Treasury Bills at the respective rates. 6) The Government of India and Reserve Bank of India can create the additional liquidity temporarily so that Government of India can manage to raise these resources for the current year at a low cost. To this end, for at least next 18 months it need not raise any long-term loans beyond 10 years. 7) When Government of India can turn at least 75 percent of its current outstanding, it can save Rs.4,00,000 crores of interest annually for the next 10 years. The Government of India and RBI together should cognise that saving interest outgo is an exercise of convergence. It will help reduce revenue deficit and hence the fiscal deficit. When the Government of India is affected, the whole nation gets affected. RBI’s mission and mandate are for the people of India. The Reserve Bank of India and Government of India need to act to reduce the outgo of interest from the Government of India. This needs to be acted on expeditiously and the exercises and action needs to be in the current year. Government of India will save Rs. 4,59,000 Crores when action is initiated within 4 to 6 weeks now without waiting for Budget 2022-23. European nations are at negative interest rates and rest of OECD are at marginally positive interest rates at .25 to .75 percent. It is therefore India’s moment to capture Rs 33,00,000 Crores equivalent of Rupee Debt at a cost between .25 to 3.35 percent for Treasury Bills by integrating the Forex Markets with the Bond Markets. The balance of Rs. 40,00,000 crores also needs to be brought within the 4 to 4.75 percent range. India will grow at 8 to 10 percent CAGR only when – • Government expenditure comes down. • Public consumption goes up. • Capital goods for long-term can be accessed for future returns. • High-cost debt as legacy is replaced by low-cost debt for all entities. • Growth needs to be in middle class housing. • Infrastructure and long-term finance are priced around 6.1 percent to 7.5 percent or lower, and stable for 10 to 30 years. • Savers interests are protected by secured long-term debt. • Inflation needs to have a balanced view. These are some among the steps that are required to be taken and need to get collaborated with the real economy. India will grow into a Rs 400 trillion economy when a series of actions are initiated for the medium and long-term.
Posted by G Giridhar Prabhu

Sand Extraction at Coal Mines

It is a welcome news that Coal India has converted waste into wealth. Sand is going to be in perpetual requirement for a dynamic and growing building economy. This is acute in urban areas where people use sand for construction of commercial and residential buildings. Sand is also consumed in large quantities in making of concrete roads and concrete structures. There is a shortage of sand in the cities of Bangalore, in the whole state of Kerala, in Goa, where there is a pricing issue as well as a quality issue. It is earnestly requested that Coal India Ltd make trial consignments in southern parts of Maharashtra, Kolhapur district, Hubli-Dharwad and Belgaum, the State of Goa, Kasaragod district in Kerala and up to Calicut. There is a larger demand than supply, hence it puts pressure on available sand suppliers and is leading to “smuggling of sand”, “sand mafia”, “difficult to handle situations” and “when interstate issues are involved”. Coal India Ltd has no presence in Karnataka, Kerala and Goa. If sand is made available to these places it would be definitely a national endeavour. Details can be worked out based on the supply side and it is also very important that Indian Railways is involved in this exercise. Sand selling depots can be organised in smaller railway stations, where access from the road to the rail head can be managed successfully by the users. Even where sand is made available to the contractors of NHAI or Railways, it will mitigate the demand to a certain extent. But at least 40% of the sand can also be marketed to individual households who build their dream homes. The presence of Coal India will then be on all India basis, wherever sand can be made available. It is also important that if river sand is available in other parts of the world, break bulk carriers can bring it to ports – major ports where it can be then made available to consumers as well as in smaller quantities. Sand and aggregates form a very important role in building a Rs.400 trillion economy that is aspired for Government of India.
Posted by G Giridhar Prabhu

Karnataka – An Anchor State for Container Handling

India should be a container manufacturer and a lessor nation. As a maritime nation, India has a commanding position on the water routes that go through the World. The recent attention to containers and its movement was highlighted by the blockage of the Suez Canal by a giant container vessel. India needs to specialise on “small is beautiful”. Ships across the world have grown in size and this has been engineered at shipyards based on the growing demand for the Eastern nations and the Western nations. Eastern nations have ramped up their manufacturing capacities of all the basic requirements as well as the enhanced requirements of Europe, USA, and OECD countries. The advent of marine containers started in the early 80s. Containers were basically well-designed to accommodate a fixed quantity. Now, different kinds of marine containers are easily available globally and the shipment costs by containers have reduced to some extent; the costs associated with transportation of smaller items. This has supported small and medium enterprises around the world – the ability to do, manufacture, fabricate and send across the world. The shipping companies of the world have evolved to accepting and delivering containers and this has become a major world innovation of reckoning. It would be appropriate to celebrate over 50 years of this basic change that happened in shipping. The basic change, it was an innovation that improved and expanded Commerce like never before. There are an estimated 30 million marine containers in the world. Some of these containers are owned by the shipping companies but most of it is leased from lessors. The lessors are companies around the world who specialise in this activity. The manufacture and assembly of containers require special attention as they are having rigid specifications which cannot be compromised. The steel, which goes into fabrication of containers is complex at its base but simple in its structure. The estimated cost of a container would be in the region of USD 3000, approximately Rs 219,000. 1.1) The Government of India and State Governments must get together to promote container utilisation within the nation. It brings in simplicity to operation that a container is unloaded for de-stuffing and it is available for stuffing at the same location or any other location using trailers or special lorries. A container basically is a unit which can be safely locked and kept separately and stacked. It acts like a warehouse inside and that is the speciality. 1.2) India has many Special Economic Zones where there is sufficient place for encouraging the manufacture and assembly of marine containers of all description. 1.3) This can be done by encouraging FDI or Indian manufacturers to take it up. India is not new to container manufacturing. A public sector company called Balmer Lawrie in Kolkata and others have manufactured and delivered them. 1.4) China’s engineering dominance is a reason why India has not emerged as a container assembling nation. 1.5) The container manufacture and assembling sector can be encouraged with at least 7 major manufacturers. Each of them could be given an objective target that collectively 1 million containers must be fabricated within the next three or four years. The testing facilities and the required conformity requirements will then get addressed as a cluster. Once the containers are manufactured and fabricated, they will have to be leased out. 1(i) India has developed a great NBFC sector. Among the twenty major NBFCs, at least seven of them can be encouraged to establish subsidiaries in the Special Economic Zones. 1(ii) They should be allowed capital account convertibility and associate themselves with the shipping companies of the world. 1(iii) These NBFCs can be owning the operating companies that will be leasing these containers annually or for a period of three or five years. 1(iv) Engineering majors like L&T can be invited and encouraged to make special containers. The advantage of the marine containers remaining in India is that it will be the operating base for these containers. Ultimately, they will get repositioned back to India. There is a shortage of containers currently in the world due to various factors. Eventually they will be made up. But Indian owned container ships require to be grown especially in the small and medium category. India then becomes a maritime connection to all the nations in the world, at smaller ports, and not necessarily the bigger ports of the world as these are adequately taken care of by the giants. India should advocate “small is beautiful” in the process of shipments and encourage shipping companies by registering them in the India registry; but these ships can be owned and managed from Special Economic Zones of the nation. Dollar based or Euro based financing can then be available to all these categories. It is not difficult to attract capital in India when there is regular income and profitability. India has had a very good inflow of Foreign Direct Investment and Portfolio Investment. The world is hungry for positive returns; which India can provide. It is a known fact that the lease income exceeds the investment costs. In the sense that the return on investment is higher, it is only the negotiating skills and strengths that can make a difference. With India’s vast domestic economy, another million containers will get fungible, meaning they can be deployed in India as well as in overseas nations. 1 (A)The issue about internationally leased containers getting into India is that the containers are required to be given a bond that they are to be shipped back. If they are Indian owned containers from Special Economic Zones and a blanket permit is given, these containers can be taken to any part of India and taken back to the overseas markets under the registry. 1. (B) Government of India, Ministry of Commerce and Ministry of Shipping should give the best of resources to the concept and make it implemented as early as possible since Indian exports and imports are getting uncompetitive. 1. (C) An objective support document is also ready to be made and in this regard the Federation of Indian Chambers of Commerce and Industry, Karnataka should take the lead in encouraging this concept to be established as a pioneer industry in Karnataka. The North Karnataka region is highly suitable for the handling of the activity for container assembling. 1. (D) The ArcelorMittal group has chosen Karnataka as an investment destination for its steel plant. It has already secured the land and all the citing has been done for a steel plant. A sector specific SEZ can be declared to house all the container manufacturers in one location. The demand for steel from this location will be considered as a deemed export from other steel plants of India. The ArcelorMittal group can make available the required quantity of steel overseas into the Special Economic Zone by allocating itself the Mangalore SEZ available land into both an SEZ specific activity, which is where the leasing will happen in international currency. 1. (E) The Mangalore SEZ Ltd also has surplus land in the DTA area where the domestic leasing or sales can happen. The employment generation can also happen if the global container surpluses can be brought into Karnataka, where it can be reconditioned and refurbished or sold as scrap. All these activities are a combination between the Special Economic Zone and Domestic Tariff Area. The Mangalore SEZ is well connected to the Indian railway network. Therefore, the evacuation of the containers or bringing in the containers in the Indian context can be done both by National Highways as well as by Indian Railways. The CONCOR is intended to be a special purpose vehicle. The CONCOR can be encouraged to be the first pioneer investor of having the first 125,000 containers fabricated and owned as a pioneer and at least seven other nations’ companies can be encouraged to do this. This activity must be done with effortless ease as it is highly conducive for the Indian economy to grow to a Rs 400 Trillion economy. The movement of goods in containers and pallets must be an organised activity in which India can catch up with the developed nations in the quality and ease of doing business.
Posted by G Giridhar Prabhu