📰 The voice that is great within us
The crises in Indian democracy and in global politics send one immediately to consult Gandhi
•Truth, Satya, was the central axis of the Gandhian system of thought and practice. For Mohandas Karamchand Gandhi, everything turned on Truth — satyagraha, swaraj, ahimsa, ashram, brahmacharya, yajna, charkha, khadi, and finally, moksha itself. In a fine introduction to a new critical edition of the Mahatma’s An Autobiography or The Story of My Experiments with Truth, Tridip Suhrud, closest to Gandhi among all contemporary scholars, lays out the intricate web of ideas arranged around the axial principle of Truth: “Truth is not merely that which we are expected to speak and follow. It is that which alone is, it is that of which all things are made, it is that which subsists by its own power, which alone is eternal.”
•In a recent interview, Mr. Suhrud points out that Indians today continue to have “the need that he should always be available to us. When there is a crisis in our collective life, we expect Gandhi to provide an answer.” Both of Mr. Suhrud’s insights — that Truth is the key to Gandhi’s philosophy, and that we rely on Gandhi even decades after his death and long after his supposed lapse into political irrelevance — are essentially correct. I started making a note of the crises in Indian democracy and in global politics that sent one immediately to consult Gandhi.
Truth alone triumphs?
•The ongoing controversy in the United States about the proposed appointment of Federal Judge Brett Kavanaugh to the U.S. Supreme Court as the nominee of the Republican Party, even as he stands accused of sexually assaulting Christine Blasey Ford, in 1982, when they were both teenagers, hinges exactly on the truth of her testimony versus his defence. Only one can be true. As became clear in the Senate hearings on September 27, the palpable veracity of Professor Ford’s account over Judge Kavanaugh’s denial would likely still not change the Republican Party’s nomination of him (the outcome of the proceedings, including an FBI investigation, is pending as this article goes to press).
•Effectively, the U.S. appears on the verge of replacing Truth with perjury as an acceptable value, even in the apex court of the criminal-justice system, shaking the very bedrock of American constitutionalism. When Truth is rendered negotiable and dispensable, the balance of justice — in this case, between genders and between political parties — is disastrously upset. The scales tip wildly without any kind of mechanism to orient men and women or Democrats and Republicans back into an equitable relationship with one another within a shared political context that ought to be egalitarian and fair.
•Like other democratic institutions in the Donald Trump presidency, the U.S. Supreme Court seems poised on the verge of destruction. Arguably Americans, too, could have recourse to Gandhi, though perhaps not in the way that we in India might. Mr. Suhrud describes how Gandhi strained to hear the “small, still voice” within himself, the voice belonging to one he called “antaryami”, “atma” or “God” — an inner prompt, the self as a guide and a compass – so that he could keep moving ever closer to Truth.
•It was this voice that he followed, sometimes to the bafflement of others who could not hear it. This was the voice that made him undertake life-threatening fasts his health wouldn’t permit; withdraw from active politics at the most crucial junctures of India’s anti-colonial struggle; leave factual errors and narrative inconsistencies in texts he wrote after readers had pointed out obvious mistakes; and, most difficult to understand, embark on life-long ordeals of a sexual nature, involving not just his own celibacy and asceticism, but also that of his wife Kasturba, his fellow Ashramites, and his sons and their families.
•Even close and loyal associates like Jawaharlal Nehru and Vallabhbhai Patel were often confounded by Gandhi’s actions and decisions; more sceptical and antagonistic peers like M.A. Jinnah and B.R. Ambedkar couldn’t make sense of his motivations at all. In his monumental new history, Gandhi: The Years that Changed the World, 1914-1948, Ramachandra Guha delves deep into these knotty episodes, where the voice of the Mahatma’s interior conscience and the compulsions of nationalist politics pull in opposite directions, and no power on earth is able to steer Gandhi away from his self-charted path towards Truth.
•Mr. Guha calls Gandhi’s move to have his young grand-niece Manu sleep next to him, as he travelled through ravaged Hindu and Muslim settlements in Bihar and Bengal during the height of communal violence on the eve of Partition, “the strangest experiment”. No matter what the reactions of his colleagues, for Gandhi it was not strange, precisely because it was one of his ‘experiments with truth’ (in Gujarati, satya na prayogo).
Home and the world
•Of late, many musicians in south India have faced vicious attacks from rightwing Hindutva groups for singing hymns and psalms, thereby allegedly hijacking “Hindu” Carnatic music for “Christian” evangelical aims. This despite the fact that the violin, central to the Carnatic system in modern times, is a European gift to Indian music, and both Christian and Muslim religious lyrics and poetry have been a constitutive part of the Carnatic repertoire throughout the 20th century, if not before.
•Gandhi made great use of the Bible in his prayers, teachings, writings and Ashram liturgies. He was often accused of being a crypto-Christian. However, he flatly refused to give preference to the Vedas over the Bible. Mr. Suhrud quotes from Vol. 31 of the Collected Works: “He is no Sanatani Hindu who is narrow, bigoted and considers evil to be good if it has the sanction of antiquity and is to be found supported in any Sanskrit book.”
•Outside India but not far from it, Indologist David Shulman has been reporting consistently on the brutal violence of hardline Zionist settlers as well as the Israeli army against unarmed Arab shepherds and villagers in the Jordan Valley. Mr. Guha delves into Gandhi’s difficult correspondence with philosopher Martin Buber and the intellectual J.L. Magnes in 1938-1939, just before the Kristallnacht. Gandhi advised European Jews to relocate to Palestine and make it their homeland only with the cooperation and goodwill of native Arabs, and not otherwise. This appalled even sympathetic Jews like Buber and Magnes, who had admired and supported Gandhi at the time of the Salt March in 1930, before the Nazi takeover of Germany.
•How could Gandhi oppose the Zionist project, with Jews being sent to death camps in Hitler’s murderous regime? But now the tables are turned, and a rightwing Israeli state under Benjamin Netanyahu seems hell-bent on exterminating the Palestinians. Gandhi’s counter-intuitive Truth informs the civil disobedience, passive resistance and non-violent protest of both Arab and Jewish activists who oppose the continuing occupation and takeover of dwindling and defenceless Palestinian territories by bellicose Israeli forces.
•The multilingual translator, editor and interpreter Suhrud (who works in all three of Gandhi’s languages, Gujarati, English and Hindustani, and has earlier produced a critical edition of Hind Swaraj), and the historian and biographer Guha (who has already written two other massive books in the past decade, about Gandhi in the first phase of his life, and about postcolonial India, “after Gandhi”), have together provided ample materials this year — leading up to the 150th anniversary of Gandhi’s birth in October 1869, and the 70th anniversary of his assassination in January 1948 — that we can continue to consult Gandhi on all manner of issues that may trouble our individual or collective conscience. It might have been “small” and “still” in his own perception, but even today, Gandhi’s is the voice that is great within us.
📰 The algebra of dissent
To heed the conscience of the court, and hence the nation, we must honour dissenting judgments
•Over the past few days in the Supreme Court we have seen some remarkable dissents: Justices Indu Malhotra in Sabarimala, D.Y. Chandrachud in the Activists case and Aadhaar, S. Abdul Nazeer in the Babri reference. Applying the logic of arithmetic, the majority won, the dissenters lost. The media and populist trains soon left the platform. But applying algebra will provide many more insights into both the concurring and dissenting judgments.
Reading a judgment
•Some concurring judgments (for example, those of Justice Ashok Bhushan in the AAP v. Delhi LG case and Live Broadcasting case (Swapnil Tripathi v. Supreme Court) tend to repeat the majority, but most judgments, on either side, redeem themselves in some way or the other. Of course, we have to read them, sometimes with difficulty. The Basic Structure judgments (Kesavananda, 1973) were huge. The Aadhaar judgments offer competition. Our judges should write shorter and more pointed judgments.
•Of course, in my view, at least two Chief Justices did not write their own judgments. One Chief Justice of India simply repeated arguments of the counsel for most of the judgment and then gave his reasoning in cursory paragraphs. Judgments have to be written with application of mind and reasoning. This is what I call both processual (to listen with care) and value (appreciate and reason with rigour) accountability. It is on this basis that the judiciary has a hallowed place in our democratic Constitution as a custodian of the rule of law and justice.
A history of dissent
•In A.K. Gopalan v. State of Madras (1950), Justice Fazl Ali dissented, denying that ‘procedure established by law’ in the life and liberty provisions meant just any ‘law’, not due process. He ruled that fundamental rights cannot be put in isolated compartments but must be seen as a whole. Years later, it is Justice Ali’s view that prevails today. In State of Bombay v. Atma Ram (1951), Justices M. Patanjali Sastri and Sudhi Ranjan Das dissented but abandoned their dissent. Justice K. Subba Rao’s dissents in various cases were exemplary in many areas of law. But he sustained his dissents to convert them into law. It was his majority view in Golaknath (1967) that eventually paved the way for the Basic Structureor Kesavananda case (1973) on the misuse of power. H.M. Seervai said that it was Justice J.L. Kapur’s dissent in the K.M. Nanavati case on the Governor’s pardoning power which caused him to write his magnum opus on the Constitution. Justice A.K. Sarkar was a great dissenter, indeed also Justice S.N. Sinha, but in most trajectories to no avail. Between 1950 and 1970, I have counted 243 two-judgment dissents in addition to 63 multi-judgment dissents, with percentages varying for each year. The very fact that they are dissents justifies the petition in the Activists (Romila Thapar v. Union of India) case.
•Chief Justice Dipak Misra invariably wrote the lead judgment in most of the legally cataclysmic judgments in the past few days. He wanted to be the lead voice with his penchant for self-expression in English inspiring him. But in three matters he did not write a judgment. In the reservations case (M. Nagaraj) he had to carry Justices Kurian Joseph and Rohinton Nariman – the latter wrote the judgment. This was court management. But in two cases, he became the swing vote. In the Activists case, he subscribed to Justice A.M. Khanwilkar’s majority judgment. Media reports that Justice Khanwilkar was not slated to write a judgment are really irrelevant. A swing vote without judgment can be strong or evasive. We will never know and can only hazard an unintelligent, and much too speculative, guess, without insulting anyone.
•Justice M. Hidayatullah could have hidden behind two judgments on acquisition and detention because he had genuinely made a mistake. It is a tribute to his candour that he added a short opinion to say that he had made a mistake to change his view. This was commendable.
What happens after dissent?
•Judges who make significant dissents should not give up their stance unless they are convinced that they were wrong. The fact that arithmetic stands in their way in the future is not enough. Justice P.N. Bhagwati was of the view that High Court judges should not be transferred without consent. He sustained his dissent. We know that these transfers are often punitive or because of a spurious policy that arbitrary transfers are necessary for national integration. Arithmetic has prevented re-examination of this view.
•In the Basic Structure (Kesavananda) case, four dissenters (A.N. Ray, M.H. Beg, S.N. Dwivedi, Y.V. Chandrachud) eventually agreed with the basic structure doctrine. Was this because they gave up or that they were converted to the new view? If it is a change of heart and mind, and blessed are those who are courageous enough, in such cases judges should frankly say so with a ‘Hidayatullah candour’ to help people understand.
Is politics involved?
•There is judicial politics about majorities, concurring and dissenting views. It shows richness of discourse. But sometimes there is an allegation that some judges take partisan political views. The then Law Minister Mohan Kumaramangalam’s view of having committed judges is saddled with the suspicion that ‘commitment’ in Indira Gandhi’s context was not due to a constitutionally sustained ideology but commitment to the regime.
•To adapt Justice K. Jagannatha Shetty’s words: “All judges are not expected to sing the same song.” (In America, we can identify political judges who support regime politics. For instance, Justice Brett Kavanaugh is regime-committed. Before retiring, Justice Sandra Day O’Connor became a perceptive swing vote. Fali Nariman’s phrase, “God help the Supreme Court,” certainly applies to the American Supreme Court now.)
•During the hearing in some cases, it was “tolerably clear” (a loaded phrase I owe to Upendra Baxi) which way the two sides may divide. That judges may disclose themselves during hearing is not a bad thing as long as their mind is open till the end of the hearing. Some judges don’t do so. But while we cannot but accept these judgments, this should not mean respectful disagreements cannot be made.
•What is involved are two discourses: the discourse of the judges which helps us to understand the law including the Constitution, the discourse of the public on the judgment without which neither democracy nor the rule of law can survive. Justice Lord Atkins, in a judgment, rightly pointed out that justice is not a cloistered virtue but should withstand the respectful scrutiny of people. What is disturbing is the reaction to some dissents, especially to Justice Indu Malhotra’s plausible dissent in Sabarimala. We must honour bona fide dissents which may rewrite the past for the future.
📰 Govt. puts Uday Kotak in charge to stem IL&FS crisis
Orders investigation by Serious Fraud Investigation Office following complaints
•The government finally intervened in the IL&FS crisis on Monday, superseding its board and appointing new members, with banker Uday Kotak as chairman.
•After a report from the Ministry of Corporate Affairs concluded that the affairs of the IL&FS holding company and its group companies were being conducted in a manner that was prejudicial to public interest, the government moved the National Company Law Tribunal(NCLT) for superseding the Board, which was granted with immediate effect.
•The NCLT also approved the induction of six directors recommended by the government. “The new Board shall take up its responsibility with immediate effect, after following due procedures,” the Finance Ministry said in a statement.
•A probe by Serious Fraud Investigation office has also been ordered into IL&FS and its subsidiaries following complaints.
•“The government stands fully committed to ensure that needed liquidity is arranged for the ILFS from the financial system so that no more defaults take place and the infrastructure projects are implemented smoothly,” the Finance Ministry said.
•Headed by Uday Kotak, MD & CEO of Kotak Mahindra Bank as non-executive chairman, the other members of the revamped IL&FS Board are Vineet Nayyar, IAS (retired); G.N. Bajpai, former Chairman, SEBI; G.C. Chaturvedi, non-executive chairperson, ICICI Bank; Dr. Malini Shankar, IAS; and Nand Kishore, former IA&AS officer.
•The crisis in IL&FS started with a series of loan defaults in August and September by the company and some of its subsidiaries as it faced a severe liquidity crunch.
•The IL&FS Group has infrastructure and financial assets of over ₹1,15,000 crore but is facing tremendous debt pressure and struggling to service around ₹91,000 crore — the outcome of its mismanaged borrowings in the past.
•“The government stands fully committed to ensure that needed liquidity is arranged for the ILFS from the financial system so that no more defaults take place and the infrastructure projects are implemented smoothly,” the Finance Ministry said.
•While justifying the move to appoint a new board, the government noted the fact that the company continued to pay dividends and huge managerial payouts regardless of the looming liquidity crisis shows that the management had lost total credibility.
📰 Centre initiates probe into type-2 polio virus contamination
The last case due to type-2 wild poliovirus globally was reported from Aligarh in India in 1999.
•The Union Health Ministry has ordered an inquiry into the type-2 polio virus contamination detected in the vials used for immunisation in Uttar Pradesh, Maharashtra and Telangana, and has ordered additional immunisation in three States.
•The government, which has stepped-up surveillance after the breach, has said, “That all possible precautions have been put in place to ensure that polio doesn’t resurface.’’
•The last case due to type-2 wild poliovirus globally was reported from Aligarh in India in 1999.
•India was declared polio free in 2014 and the last case was reported on 13 January 2011, when Rukhsar from Howrah was infected with type-1 polio virus.
•India eliminated the type-2 strain in 2016, and the type-2 containing poliovirus vaccine (ToPV) was phased out in April 2016. Children born after April 2016 in India have no immunity to type-2 polio virus.
•There are three serotypes of poliovirus, each of which causes poliomyelitis. The vaccine used by the World Health Organisation (WHO) in the global eradication effort is a trivalent preparation comprising all three serotypes.
Virus strain
•Traces of polio type-2 virus were found in some batches of oral polio vaccine (OPV) manufactured by a Ghaziabad-based pharmaceutical company, even as the firm’s Managing Director (MD) was arrested this past week.
•The MD of Biomed Private Limited, which was supplying polio vaccines for only government-run immunisation programmes, was arrested after the Central Drug Regulator filed an FIRin the case. Four of its Directors are absconding and the Drugs Controller General has issued it a showcause notice, asking it to stop manufacturing the vaccine.
📰 Rescuing IL&FS
Bailing it out is one thing, but how did the debt pile-up go unnoticed for so long?
•The Centre’s move to supersede the Board of Directors of the troubled Infrastructure Leasing & Financial Services (IL&FS) has come not a day too soon. By explicitly stating its intent to “ensure that needed liquidity is arranged for IL&FS from the financial system”, the Centre has sent out an unambiguous message to the markets that it will not allow the company to fail. In fact, a lot of the turbulence witnessed in the debt and stock markets last week could have been avoided had the government acted earlier. Any rescue plan for the beleaguered company obviously had to begin with replacing the existing management that was responsible for mismanaging its affairs. The annual general meeting of shareholders of IL&FS on September 29 had approved a rights issue of ₹4,500 crore and a debenture issue of ₹15,000 crore. But which lender or shareholder would commit to extending support to the company when it was defaulting regularly and the same set of people responsible for the mismanagement continued to be in charge? Against this backdrop, a change in management and the appointment of experienced people — such as Uday Kotak, who has rich experience in the finance sector; G.C. Chaturvedi, former bureaucrat and non-executive chairman of ICICI Bank; and G.N. Bajpai, former chairman of the Securities and Exchange Board of India and the Life Insurance Corporation — should lend confidence to lenders and investors.
•The company is listed as “systemically important” by the Reserve Bank of India, and with over ₹1,15,000 crore of assets and ₹91,000 crore of debt, it is too big to fail. The interlinkages between IL&FS and other financial sector entities such as banks, mutual funds and infrastructure players are too strong and the company would have taken them all down with it if it were allowed to fail. At this point, the problem appears to be one of liquidity and not solvency — it is a classic case of over-leveraging, and an asset-liability mismatch caused by funding projects of 20-25 years payback period with relatively short-term funds of 8-10 years. There is a felt need here for long-term finance sources for infrastructure projects. The LIC and some insurance companies are the only domestic sources and they too do not lend beyond 10 to 12 years. The Centre and the RBI should look at ways to deepen the debt markets where infrastructure players can borrow long-term. It also needs to be analysed how a company listed as “systemically important” managed to fly under the radar with misgovernance. The debt pile-up due to over-leveraging did not happen overnight. How did the RBI, as the regulator, miss the goings-on? Are the shareholders, which are well-known institutions, guilty of misplaced faith in the management, or were they negligent? Finding answers to these questions is as important as rescuing IL&FS.
📰 Up in the air — on stubble burning
North India faces a big test this winter on measures to reduce burning of crop residue
•The onset of the winter season has come to be associated with toxic atmospheric pollution in north India. This year will be a crucial test for a scheme piloted by the Union government to address the winter haze. While road dust and pollution from heavy vehicles are primarily responsible for the noxious pall that sets on Delhi and other urban centres, the burning of paddy stubble by farmers to clear their fields for the next crop is considered to be responsible for 20% of the smog. To address this, and under directions from the Supreme Court-constituted Environment Pollution (Prevention and Control) Authority, or EPCA, the Centre is partnering with Punjab, Haryana and Uttar Pradesh to provide farmers with a range of mechanised implements to clear their fields of paddy crop residue to prepare for sowing wheat. There is a 50% subsidy to farmers, and a 75% waiver to cooperative societies, agencies that rent out equipment, farmers’ interest groups or gram panchayats to buy such machines. States have got nearly ₹650 crore to help farmers buy subsidised equipment such as Happy Seeder, paddy straw choppers and Zero Till Drill. Punjab, which of the three States has the largest acreage under paddy, has a target of procuring 24,315 machines by October 15. A task force, headed by the Principal Secretary to the Prime Minister and comprising Environment Ministry officials and Chief Secretaries of these States, have been meeting since January to prepare for the winter.
•Reports, however, suggest that many farmers, particularly those with land holdings of less than 5 acres, remain sceptical of the efficiency of these machines. Among their concerns is whether these machines will affect productivity. Many have told officials that they are worried there could be damage to the soil. Therefore, just making technological tools available may not be enough; there needs to be proactive engagement to both persuade and reassure farmers. Ironically, it was technology that contributed to the problem in the first place. The rising cost of labour nudged farmers to adopt mechanised equipment that, while efficient, left behind much longer stalks of paddy than what the traditional practice of removing them by hand did. The greater availability of machines and the zero-tolerance policy need to be seen as works in progress to derive lessons on how to refine the crop-clearing process in an ecologically sound manner. There must also be a sense of proportion, as 80% of the atmospheric pollution in Delhi in winter draws from sources other than burning stubble. Given Delhi’s geography, low wind speeds and a spike in local pollution (from vehicles, biomass burning, firecrackers, etc.) raise the particulate matter count dramatically during winter. To be effective, the fight against pollution must necessarily be broad-based.
📰 Studying fault lines
Filling of reservoir near a fault can cause quakes
•Even very small reservoirs impounding water seasonally can cause deformation in the neighbouring region. Such deformation may add to the stress of a nearby fault, which if already critically stressed, can trigger an earthquake.
•Based on Global Positioning System and satellite data, a team of researchers led by Vineet Gahalaut of the National Centre for Seismology, found crustal deformation in four reservoirs — Koyna, Tehri, Ukai, and Dharoi. These are of varying sizes and are located in different geological zones in India.
•In two papers published recently in the journal Bulletin of the Seismological Society of America, the researchers concluded that there is “no lower threshold on the size of the reservoir to cause deformation” in the surrounding area.
•A 6.3-magnitude earthquake near the Koyna dam that struck in December 1967, killing about 180 people, occurred about five years after it was built. Many smaller quakes occur each year .
•“There are no reports of any earthquake from the other three reservoirs. But that does not mean there are no earthquakes. It is just that we don’t have adequate seismic monitoring network to collect data in these places,” said Mr. Gahalaut.
Lubricating the fault
•“The strength of the fault reduces when the reservoirs are full. Impounding of water causes stress, and the water that percolates from the reservoir lubricates the fault, thus reducing the frictional force, leading to reduced strength of the fault or even aiding the fault to fail, causing an earthquake,” he said.
•In addition to deformation caused by loading of the reservoir, tectonic movement of crustal plates causes stress build-up. The fault fails, causing an earthquake, when the combined stress caused by the two factors crosses a critical point.
•The researchers found that the eastern block of the Koyna-Warna fault zone is moving about 0.7 mm faster per year than the western block. Such anomalous motion adds stress to the fault, leading to earthquakes. Differences in the rock composition could be causing the differential movement. “We don’t know how much of compositional variation of the rock is needed for the differential motion between the blocks. We now need to study what is causing this differential motion,” said Mr. Gahalaut.
📰 IL&FS: a beleaguered behemoth and its 169 units
IL&FS has debts of ₹91,000 crore; how did over-leveraging of the systemically important company escape RBI notice?
•A series of defaults by the IL&FS holding company and group outfits beginning in August have set off a market-wide contagion. Here is a low-down on how the issue snowballed.
•Infrastructure Leasing & Financial Services Ltd. (IL&FS) was set up in 1987 by the legendary M.J. Pherwani (former chairman of Unit Trust of India, National Housing Bank, etc.) to finance and promote infrastructure projects in the country.
•It is now a financial behemoth with assets of over ₹1,15,000 crore — and debt of ₹91,000 crore.
•IL&FS is a holding company that operates through 169 other companies that are either subsidiaries, group companies or joint ventures with others. It is/has been associated with landmark projects such as the tunnel under the Zoji La Pass, Delhi-Noida toll bridge, Gujarat International Finance Tec-City (GIFT) and a host of road, power, water and port projects.
•Three of its group companies are listed on the stock markets. They are IL&FS Investment Managers Ltd., IL&FS Engineering and Construction Company Ltd. and IL&FS Transportation Networks Ltd. IL&FS was originally promoted by the Central Bank of India, Unit Trust of India and HDFC. Orix Corporation of Japan, Abu Dhabi Investment Authority, LIC and SBI joined in as co-promoters later.
What’s the controversy now?
•IL&FS Finance, a group company, defaulted in late August on a commercial paper repayment. This was followed by a default by IL&FS on repayment of a ₹1,000 crore deposit to Small Industries Development Bank of India (SIDBI). A series of defaults by the holding company and group outfits followed in the ensuing weeks running up to the annual general meeting of IL&FS on September 29.
•That the group was over-leveraged and facing liquidity issues was well known in the market over the last few months leading to ratings downgrades by CARE and ICRA of IL&FS paper to junk status. Yet, the series of defaults in September shocked the markets. When a mutual fund sold the debt paper of a housing finance company at a steep discount to meet its fund redemption obligations in mid-September, the markets pressed the panic button and resorted to wholesale selling of all NBFC shares. The fear set in that defaults by IL&FS, a company rated as important to the system by the RBI, was spreading across the financial system.
How did IL&FS land in this mess?
•Simply put, the company borrowed many times its equity (rumoured to be between 10-18 times its equity) to fund its infrastructure projects, most of which bring in returns over 20-25 years. Making things worse, IL&FS’s borrowings were all repayable in the short to medium-term of roughly 8-10 years. Usually, these would be rolled over at the end of the term. Where IL&FS ran into trouble was in its projects stalling and not being completed due to various reasons ranging from statutory approvals not coming in, problems of land acquisition and projects simply becoming unviable as it happened in the case of power plants. With returns from these projects not coming in, IL&FS was forced to borrow more. Lenders pulled the plug leading to trouble for IL&FS.
Was there a cover-up by the company?
•According to the government, a report from the Ministry of Corporate Affairs regional office in Mumbai revealed “serious corporate related deficiencies in the IL&FS holding company and its subsidiaries”. Assets and receivables were exaggerated in the financial statements and the top managers took home large pay-outs and continued to pay dividends to shareholders despite the financial situation. An investigation has been ordered by the Serious Fraud Investigation Office.
What are the unanswered questions?
•If IL&FS was a systemically important company, how did its over-leveraging escape the notice of the Reserve Bank of India? What did the periodic inspections of the company by RBI reveal? How did the developing situation pass the attention of shareholders? Did they look the other way since their dividends were serviced?
📰 U.S., Canada agree on free trade pact
The agreement replaces the 25-year-old NAFTA, which Trump had threatened to cancel
•Canada and the U.S. reached a deadline deal on a new free trade pact that will include Mexico, the governments announced late on Sunday, after more than a year of talks to revamp a pact President Donald Trump had labelled a disaster.
•The U.S.-Mexico-Canada Agreement (USMCA) updates and replaces the nearly 25-year-old North American Free Trade Agreement (NAFTA), which Trump had threatened to cancel. The rewrite “will result in freer markets, fairer trade and robust economic growth in our region,” said a joint statement from U.S. Trade Representative Robert Lighthizer and Canada’s Foreign Affairs Minister Chrystia Freeland.
Intense talks
•Sunday’s announcement capped six weeks of intense talks. In the end, Canada and the U.S. overcame their differences after both sides conceded some ground, hailing an agreement that covers a region of 500 million residents and conducts about $1 trillion in trade a year.
•“It's a good day for Canada,” Canadian Prime Minister Justin Trudeau said. Mexican Foreign Minister Luis Videgaray tweeted that the deal was good for his country “and for North America”.
•Early on Monday a copy of the deal’s 34 chapters was posted on the U.S. Trade Representative’s website.
•Ottawa will now open its dairy market further to U.S. producers, and — in return — Washington left unchanged the dispute settlement provisions. Under Canada’s supply-managed dairy system, Ottawa effectively sets production quotas and the price of milk, which raises prices to consumers but provides farmers with a stable income. Tariffs of up to 275% have kept most foreign milk out of the Canadian market.
•Canada had opposed U.S. demands to weaken or eliminate NAFTA'S dispute resolution mechanism, whose arbitration panels Ottawa used to resolve trade conflicts, and to defend against US anti-dumping and countervailing duties, notably against its important lumber industry.
•Alongside changes to the dairy market in Canada, officials said it includes stronger protections for workers, tough new environmental rules, and updates the trade relationship to cover the digital economy and provides “groundbreaking” intellectual property protections.
•In addition, it adds provisions to prevent “manipulation” of the trade rules, including covering currency values, and controls over outside countries trying to take advantage of the duty-free market, officials said.
