Wednesday, July 29, 2009

 

Wage differentials speed up migration from farms

From The Hindu, with minor changes

CHENNAI: Labour migration from rural to urban centres and employment-focussed government policies such as the National Rural Employment Guarantee Scheme (NREGS) are having a noticeable effect on the supply of agricultural workers in farms across Tamil Nadu.

Districts such as Theni exemplify some of the complexities of these labour market effects. In the relatively dry Andipatti taluk, sugarcane farms and the attendant agri-business of sugar production in mills have until recently thrived. At Rajshree Sugars and Chemicals, the only sugar mill in Theni district, the annual quantum of sugarcane crushed grew at an average rate of 27.49 per cent between 1990 and 2005. Since 2006, however, it has on average fallen by 27.51 per cent annually. Why is this happening?

O. Ramaswamy, secretary of the Sugarcane Production Farmers Association in Periyakulam taluk, argues that labour migration from farms to NREGS sites has gained significant momentum. “Before the NREGS was implemented I had 25 workers on my farm, now only three workers turn up daily,” he said.

An important aspect of this phenomenon is that the workforce is predominantly female. Women are employed because they are more effective than men at jobs such as detrashing (removal of dry stalks and leaves from the main stalk), and men are twice as costly, according to Mr. Ramaswamy.

The unfortunate coincidence for sugarcane farmers and other cultivators is that the uptake of the NREGS schemes is also predominantly by women: approximately 90 per cent of the workforce on two sites that this correspondent visited in Theni comprised of women.

Mechanisation could be an alternative, according to G. Sathiyamoorthi, General Manager at Rajshree Sugars. Yet, progress in this regard has been modest given the small size of farm holdings and inertia with respect to traditional cultivation techniques.

As a result, the farmers face the choice of switching to less labour-intensive crops such as coconuts (not always feasible given the low irrigation levels) or ceasing farming altogether. Farmers in the region have been petitioning the government to either run NREGS works during their off-season months or include farm work within the scope of NREGS (albeit paying the workers directly as is the current practice).

P. Rani, the head of a self-help group in Lakshmipuram village and a worker on an NREGS irrigation tank project, argued that detrashing is a difficult job. Mr. Sathiyamoorthi concurred, admitting that sugarcane detrashing could be a back-straining eight-hours-a-day effort.
Given that the daily wage on the farms is the same as that at the NREGS site (Rs. 80), workers prefer the latter. District Collector P. Muthuveeran says that within Theni there is likely to be an increase in the daily wage rate under the NREGS to Rs. 100 in the next few months.

However, wage differentials go well beyond the NREGS and encourage, for example, migration within the region. District officials explained that in the better-irrigated Cumbum Valley, for example, it would be common for workers to get up to Rs.130 a day and to have work opportunities throughout the year. There are fewer opportunities available through the year in dry tracts such as Andipatti, and daily wages here rarely rise above Rs. 80.

K. Prahbakaran, a sugarcane farmer in Theni taluk, said farms were also losing out to textile mills. Textile mills in Tirupur are taking large numbers of women in buses from Theni villages daily to mill-sites.

Though they are paid low daily wages, after around three years of such work they are paid a sum in the range of Rs. 25,000 to 50,000. In urban centres such as Madurai, hotel waiters can earn between Rs.2,000 and Rs.2,500 a month besides about Rs.200 a day as tips.

Taken together, these factors generate a powerful labour displacement effect from (and where feasible, a wage-rise effect in) agricultural lands.

Labour migration is a consequence of economic opportunities emerging in urban centres, and the NREGS is a much needed poverty alleviating initiative that has almost directly put money into poor rural households. However the externalities associated with these factors have increased the risk of a fall in agricultural production and consequent inflation.

An interim subsidy for farm production and support towards mechanisation in the affected areas may be the best option at this juncture.

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Saturday, July 25, 2009

 

Financial institutions welcome move to set up financial city

From The Hindu

CHENNAI: Financial institutions (FIs) with operations in Tamil Nadu have welcomed the idea of creating a financial city near Chennai. Senior executives in leading companies saying the policy is a “commendable and thoughtful measure” and a “very positive outcome” for the State.


The plan was unveiled recently by Deputy Chief Minister M.K. Stalin. Subsequently, Industries Department officials confirmed that the initial phases of the project would focus on back office operations.

“The nexus between the prototypical Tamilian and the financial services industry is a strong one”, says Gopal Srinivasan, Chairman of TVS Capital Funds. The State’s workforce has an inherent propensity for hard work and intelligence and there is a sizeable pool of professionals such as chartered accountants.

“The financial city will position Tamil Nadu more competitively for attracting investment relative to other States,” says Sreeram Iyer, Chief Operating Officer of Standard Chartered Bank. SCB, working with Scope International, currently has back office operations in the State employing around 7,000 people.

Other banks with back office operations in Tamil Nadu include ABN Amro, BNP Paribas and the World Bank.

Lakshmi Narayanan, Vice-Chairman of Cognizant Technology Solutions, says given the imperatives of the global financial crisis and the requirements of the Basle II Accord, “The current focus is now on enterprise risk management. This was not given as much attention earlier. Additionally, as more regulation is rolled out across countries, there will be a greater need for reports generated by companies to meet regulatory requirements. This will lead to an emphasis on back office functions.”

However, there are several key attributes that the financial city project will have to possess in order to attain long-term success. Industry leaders emphasise the “ecosystem” architecture of the city, which will have to go beyond mere physical infrastructure provision to develop “soft” infrastructure. This could imply “attracting talent from other financial centres such as Mumbai.”

In particular, Mr. Iyer suggests: “One important step in attracting global talent, high up in the value chain may be getting more international schools for children.” Mr. Narayanan too emphasises technical and management-related education, building on existing institutions such as the Institute for Financial Management and Research (IFMR), the MBA programme at IIT-Madras and the Great Lakes Institute of Management.

Additionally “industry bodies will have to be created for the banking and insurance sectors,” Mr. Narayanan points out. Just as the National Association of Software and Services Companies (NASSCOM) played a key role in attracting foreign investment to the IT sector, an industry body for finance will be required to bring in funds to the financial city. While CII, FICCI and ASSOCHAM have financial arms, this is only one arm among the several, he explains.

At a broad level the financial city will have to be inclusive rather than exclusive, allowing banks in other regions, such as Punjab National Bank, access to its facilities. Strong communication links and partnership arrangements with other financial centres such as Mumbai, Singapore and Shanghai will be vital.

Ultimately it can even serve as “an opportunity for urban renewal,” Mr. Srinivasan argues. It can be viewed as a means to take forward the larger macro goals of “urban de-densification, re-purposing of land and dealing with the challenge of intra-city congestion.”

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Friday, July 24, 2009

 

Initial focus on back office functions at financial city

From The Hindu

CHENNAI: Plans for a financial city announced recently by Deputy Chief Minister M.K.Stalin will initially focus on back office functions, sources close to the project authority said.

The idea of a financial city is based on the fact that workforce in the State has a high level of skill in IT and accounting sectors, with some financial back office functions such as risk analysis for banks and hedge funds already being carried out here.

Speaking to The Hindu, a senior official of the State Industries Department explained that the financial city was initially planned keeping in mind the reforms roadmap for the banking sector that the Reserve Bank of India announced over three years ago. If these reforms progress, Tamil Nadu should be in a position to take advantage of the opportunities that emerge in this sector. While it was expected that the reforms would be revisited in March 2009, “due to the recession that has been put on hold,” the official said.

The official confirmed that the financial city project would nevertheless be taken forward in a “modular, gradual way.” In the first of several phases to be implemented, between 4 and 5 million square feet of workspace will be developed. In addition, work will commence on setting up 2000-3000 housing units. The first phase would also require the construction of “a convention centre, hotels, hospitals and a high-quality school, and subsequent phases would target scaling the project up 4-5 times,” according to the official.

The official suggested that South Chennai would be a likely site for the financial city. “The trade-off between the amount of land available for this project and the distance from the city is an issue,” the official said. The land required has not yet been acquired.

The next step in the project, to be implemented over 2-3 months, will be to conduct discussions with the relevant stakeholders, including banks, mutual funds and insurance companies. If government-owned land is available, then subsequent 3-4 months could see the implementing authority, the Tamil Nadu Industrial Development Corporation (TIDCO), bring on board a consultant to define the requirements and design of the financial city. A “networked” consultant such as Ernst and Young or KPMG may be hired, as this may lead to subsequent benefits in terms of the occupancy of the city.

The project would be structured as a public-private partnership similar to the Tidel Park venture, in which TIDCO owns 25%, the Electronics Corporation of Tamil Nadu owns 4% and banks and other financial institutions own around 50%.

Regarding the broader vision for this project the senior Industries Department officer said, “In the long term we want to position ourselves tactically as being strong in both the manufacturing and services sectors. We will certainly be in competition with other States that are promoting financial centres, but Tamil Nadu is well positioned to overtake states like Karnataka in this area.”

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Thursday, July 23, 2009

 

Sachs of debt


Photo: www.personalmoneystore.com
Written on July 15, 2009 ; there have been some interesting developments since then



Two financial results were revealed in the United States recently, one that suggests prosperity for a few and another that hints at distress for many. Goldman Sachs beat analyst expectations when it disclosed that its second-quarter profits were $3.44 billion, up 64.5% over profits during the same period last year, and its share price has risen about 77% this year. Simultaneously the U.S. Treasury made a bleak admission that the budget deficit had, for the first time in its history, crossed the $1 trillion mark. In a country that has prided itself on being the bastion of laissez-faire capitalism, especially in financial markets, the two results must evoke mixed feelings.

On the one hand the Goldman Sachs results represent the triumph of the relatively unfettered risk-reward relationship that underpins America’s material success in recent decades. The firm is reported to have benefited significantly from taking on higher levels of risk in its fixed income, currency and commodities trading at a time when even its closest rivals, such as Morgan Stanley, have been reluctant to return to the risky behaviour of the pre-credit crunch years. However even Goldman Sachs employees seem to be aware of the awkward timing of their unexpected profits, with Goldman’s Chief Financial Officer saying about the recession, “We are cognizant of it… We understand that we are living in a very uncertain world where a lot of people are out of work.”

On the other, the ballooning budget deficit, rising on the back of a breathtaking $11.5 trillion debt owed by the American people is a harbinger of fiscal, inflationary, currency and tax woes that are likely to depress the economic lives or ordinary Americans for years to come. America has some serious issues of public conscience to iron out.

At the heart of the issues that the country will have to grapple with are fundamental questions about the rules of the game and the architecture of financial regulation. Reforms revealed last month by the Obama administration took some significant steps forward with regards to the latter – it has clarified the role of some agencies, for example by making the Federal Reserve directly responsible for overseeing institutions deemed to be “too large to fail” and by creating the Consumer Financial Protection Agency.

However financial regulation in the U.S. still remains a complex maze of cross-cutting responsibility and authority spread out over multiple agencies – five for banks, one each for securities, derivatives and government-backed mortgage issuers and over 50 other state and consumer protection agencies.

Reform is also incomplete in the areas of monitoring and restriction of the risk that large financial institutions like Goldman Sachs take onto their balance sheets. For example minimum capital and liquidity requirements for such companies have been raised and the infamous practice of mortgage securitisation has been redressed by requiring the underwriter to hold at least 5% of any deal they structure.

Yet, clearer proposals are required for identifying and curbing systemic risks by, for example, limiting the acceptable levels of value at risk (a measure of risk based on the amount, theoretically, that a firm could lose in a single trading day). Goldman Sachs’ VAR rose 20% in the first quarter of 2009 and is likely to have risen further since.

Challenging though it may be to get such reform past Capitol Hill, the price of inaction may be higher still for the Obama regime. It faces the possibility of a political backlash by the American public which is staring down the barrel of higher taxes, higher inflation, lower spending on social services and the unrelenting onslaught of recessionary unemployment and mortgage debt.

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Friday, July 17, 2009

 

Initiatives to upgrade efforts of Narcotics Intelligence Bureau

From The Hindu

CHENNAI: A range of policy initiatives for upgrading the efforts of the Narcotics Intelligence Bureau (NIB) were outlined on Friday. Also, while alcohol production and revenue had increased, the State government emphasised its commitment to curbing the sale and transportation of illicit liquor.

In the context of an increase in the number of drug offenders detained in 2008 from the previous year, the Home, Prohibition and Excise Department said that “intensive raids will be conducted in railway stations, bus stands and near schools and colleges.”

Balancing the focus on raids with plans to spread awareness of narcotics issues, the proposed plan of action for 2009-10 says, “At least one programme per month will be conducted in a school in consultation with the Prohibition and Excise Department.” Addressing the issue of ganja, plans were announced for the coming year to prevent, in coordination with the Forest Department, the cultivation of ganja plants in Tamil Nadu. Steps would be taken to address the issue of “heavy influx of ganja from Andhra Pradesh by road and train.”

The production of Indian Made Foreign Spirits and beer increased to 48.19 crore bulk litres during 2008-09 from 42.82 CBL the previous year.

Revenue from this sector, including excise revenue and sales tax, increased to Rs.10601.5 crore in 2008-09, up from Rs. 8821.16 crore during the previous year.

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Thursday, July 16, 2009

 

School education policy note focusses on girls

From The Hindu

CHENNAI: New proposals for school education during 2009-10, announced on Wednesday, include plans to fill a significant number of posts for secondary grade teachers and graduate teachers.

In addition to filling 5,166 vacancies for teachers in elementary education, the policy note presented by Minister for School Education Thangam Thennarasu reaffirmed the State government’s commitment to the universalisation of secondary education and emphasised the support given to Kasthurba Gandhi Balika Vidyala (KGBV), a “special intervention for enrolling out-of-school girls in the age group of 11-14 years.”

Speaking to The Hindu about special provisions in the policy for girls’ education, Mr. Thennarasu said: “As part of the secondary education programme, we are also building residential blocks in 12 educationally backward districts. We have allocated Rs.42.5 lakh for each hostel, which can accommodate 100 students.”

The total plan outlay for this scheme is Rs.18.7 crore and it will benefit girls from Standard VI to Standard XII. The Assembly has passed a total outlay of Rs.862.309 crore to be utilised for elementary education schemes. The School Education Department has proposed a number of elementary education initiatives relating to projects for enrolling out-of-school children through bridge courses, inclusive education for persons with disabilities, in-service training for teachers and community training for the Universal Elementary Education scheme (Sarva Shiksha Abhiyan Mission).

Further, the Assembly has sanctioned the use of these funds to provide materials to schools.

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