January 2008 Issue

Jammu and Kashmir ’s Monthly Magazine

Jammu, January 1, 2008 / Vol 2 / Issue 1 || Price Rs. 40 || Postal Registration No. JK-350/2007-09 || www.epilogue.in

Now Telling The J&K Stories

Epilogue because there is more to know

ECONOMY & OTHER IDEAS S T E P P I N G I N TO 2 0 0 8 INTERVIEWS Lt Gen (Retd) S.K. Sinha Tariq Hameed Karra Prof. Amitabh Mattoo

.

COLUMNS Abdul Rahim Rather Prof. Nisar Ali D Suba Chandran Ram Sahai Arjimand Hussain Talib Annil Suri Dipankar Sengupta Falender K Sudan Sameer Suryakant Patil

Special Report:

INSIDE

Market :

2007 : The Year in Review

Epilogue Calendar - 2008

Raghunath Bazar

CMRD Publications and Communications

Baba Ghulam Shah Badshah University, Rajouri Keeping our steady march forward and celebrating

On our 3 rd Annual Day on Dec 15, 2007 Hon’ble Chief Minister of J&K State was the Chief Guest Special features of the University t The only fully residential university of the state. t State of art Laboratories. t Well equipped and modernized Library with DELNET t 24 hrs Internet facility for students and staff. t Proactive Placement Cell with full time Placement Officer. t A fleet of vehicles facilitating mobility of residents. t Sab-rang Square - the shopping hub, a place for meaningful socialization. t Health Centre with resident Doctor, Technician and nursing Staff. t Bank, Post Office and Book Stall. t Comodious Hostel facilities for Boys and Girls. t Salubrious ambience.

He inaugurated : s College of Engineering and Technology s University Health Centre s Univesity Cafeteria s Placement Cell s Parent’s Lodge s Centre for Biodiversity Studies Release of University Publications: s University Calender 2008 s Information Bulletin for Academic Session 2008-09 s MBA Placement Brochure 2007-08 s MCA Placement Brochure 2007-08 s Newsletter Annual (November) Special events of the Annual Day : s Obeisance at Shahdara Sharief s Talawat/Quran Khani s Cultural activities s Sports activities s Prize distribution

Facilities we provide : t Interaction with Guest faculty. t 100% Placement. t Coaching for personality development. t Scholarships to 60% of the total Students enrolled in a session. t Newspapers to all boarders free of cost t Provision for indoor and outdoor games t Camp offices at Jammu & Srinagar for the convenience of students. t Conduct of National Seminars and paper reading for unleashing the potential of young professionals in the making. t MoU with leading institutions for arranging an interface between our students and their experienced faculty.

Schools t Management Studies t Mathematical Sciences & Engineering t Bio-Sciences & Bio-technology t Islamic Studies

Centre for Biodiversity Studies

t College of Engineering & Technology

Parent’s Lodge

Cafe Café

Buildings for Inauguration the Annual Day

Rajouri Head Office : 01962-262616. Jammu Camp office : 0191-2466892/264402 Regional Office Srinagar : 941901144 webside : bgsbuniversity.org e-mail: bgsbu@rediffmail.com

Epilogue because there is more to know

www.nag.epilogue.in

CONTENTS

Editor in Chief Zafar Choudhary Consulting Editor D. Suba Chandran

Executive Director Mohammad Yasmeen

Phones & email Editorial: +91 94194-80762 Administration:+91 9419631610 editor.epilogue@gmail.com info.epilogue@gmail.com subscription.epilogue@gmail.com Edited, Printed and Published by Zafar Choudhary for CMRD Publications and Communications Published from ‘Ibadat’, Madrasa Lane, Bhatindi Top, Jammu, J&K Printed at Dee Dee Reprographix, Jammu Disputes, if any, subject to jurisdiction of courts and competitive tribunals in Jammu only.

2

Prologue

3

Column

Associate Editor Irm Amin Baig

Mailing Address PO Box 50, HO Gandhi Nagar, Jammu

Letters to the editor

Volume 2, Issue 1, January 2008

Eye Witness

4

Special Report 2007 : The Year in Review No Progress On Peace Process

6

Interviews

Prof. Amitabh Mattoo

11 16

Cross Loc Interaction Trade

45

Report Wiscomp Workshop

47

Neighbours Burma

48

Market Raghunath Bazaar

50

Opinion Kashmir Today

51

Lt. Gen (Retd.) S.K. Sinha

IN FOCUS ECONOMY & OTHER IDEAS

19

Buoyancy in J&K Economy and Budget 2008-09

23

“Financing Development in J&k is Financing Peace”

29

J&K State in the grip of financial crises

31

Budget 2007-08 : The unfinished business

33

How not to Promote Economic Growth : The case of Jammu & Kashmir

36

Participatory Natural Resource Management : Experiences and Lessons Learnt

41

An economy in disadvantaged position

43

A lot still needs to be done

Price : Rs 40

Columns Tareekh Jest Ponder

Epilogue Ø 1× January 2008

52 54

M A I L

B O X

LETTERS TO THE EDITOR

Letters Mail your letters to editor.epilogue@gmail.com

Make Book Reviews A Regular Feature

I Look Forward To Reading It Regularly

Kashmir has surprisingly not reached Ladakh the way it should have.

Epilogue's special issue on Ladakh

I congratulate you on bringing out a

Epilogue is quite interesting and

(November) issue had come as a

quality monthly magazine within one

objective source of information on

pleasant surprise for us. We were

year of its launching. I don't have any

Jammu and Kashmir. I look forward to

happier to see a follow up in December

major comments on its improvement

reading it regularly.

issue. Should we expect that this

except that there is a need to label

magazine will continue to look at

pictures in the magazine. One book

Ladakh and tell our stories to other

review in each issue may also help in

SANJAYA BARU

promoting reading habit among the

Media Advisor to Prime Minister of India

readers of Epilogue?

readers.

SONAM ANGMO Leh C PHUNSOG Advisor to Government

Epilogue Has Filled Up The Vacuum

Jammu and Kashmir Print media has registered a huge growth

Special Issue On Gujjars

in Jammu and Kashmir over last one and Conduct Some Research on Brahmin

half decade. It is still growing. While

Sikhs

there is a wide array of newspapers to

On reading Epilogue I find out that every

choose from every morning, there was

month you deal with one particular

In Kashmir, the sizable population to the

always a need of a serious journal which

issue besides writing on other subjects.

tune of few lakhs is of Brahmin Sikhs,

looks beyond the run of the mill and

I suggest that one special issue is

scattered in Jammu, Poonch, Baramula

bring about some indepth stories. We are

brought out on Gujjars. This tribe has

and earlier in Muzaffrabad and Mirpur

happy that Epilogue is playing that role

many issues which are required to be

areas. I wonder if EPILOGUE could throw

quite professionally.

brought to the public domain for

some light on these original natives of the

generating an objective debate.

state- may of their history, race and culture. Or some of your research staff could take up this task in hand for the

MIR HILAL AHMED University of Kashmir JAVED RAHI

benefit of posterity.

Secretary TRCF Jammu RAVINDAR SINGH SASAN SOMI Council For Social Development New Delhi

Continue To Look At Ladakh The growth of press in Jammu and

Epilogue Ă˜ 2Ă— January 2008

P R O L O G U E FROM THE EDITOR

We are celebrating Zafar Choudhary It is the New Year eve and the world is in festive mode. In this restive part of world too celebrations are taking center stage.

It is New Year revelry every where around. When looked at from other parts of world, Jammu and Kashmir is seen as a country lost in violence and unrest. The violence and unrest have though become more or less a legacy of this state but love for peace and prosperity is unprecedented here. One can gauge the trend from the New Year party rush. It all begins from the Christmas Day and continues till people step into the next year.

The Christian population in Jammu and Kashmir is quite miniscule but still the Christmas celebrations are most visible here particularly at Gulmarg where people from across the country pour in. It is this dominating urge for peace and a life full of joy which is giving a run to the elements hostile to peace. Coming to a personal front, to be very honest to my readers, I never like partying. I have never found myself a part of New Year celebrations until recently when a realized something worth celebrating.

B r a v i n g a l l o d d s … l i t e r a l l y, a l l odds…'Epilogue' has completed its one year of well noticed existence. When first issue of this magazine hit the stalls in January 2007 there was little skepticism which has over a period of 12 months turned into confidence. We have been quite careful in being confident of our role and not become over-confident.

A good deal of effort goes into making improvement over the previous issue.

Today Epilogue has arguably become a first choice of intellectuals and the influential readers. Outside the state, this journal is now being seen as most authentic and objective source of information on Jammu and Kashmir.

No wonders that the leading social science journals of the country like Economic and Political Weekly, leading national newspapers like Hindustan Times and the news agencies like Indo Asia News Service have often quoted Epilogue in their reportage and analysis on Jammu and Kashmir. This calls for celebrations and we are celebrating this success. Our way of celebrations is, however, little different. Instead of partying we are focusing on further improvements both qualitative and quantitative.

In our review of year 2007 we have pointed out that the year was certainly not that of Jammu and Kashmir (see page 6) but when we look at each issue of this magazine we easily sum up that 2007 was a momentous year for Epilogue. As we step into 2008, it is going to be another defining moment in the history of Jammu and Kashmir.

The state is up for assembly elections.

The real test is not in seeing as what kind of arrangement returns to power it is actually about seeing as how the democracy behaves. For the forthcoming year Epilogue too has set out an agenda which seeks to empower the readers with knowledge.

Epilogue Ø 3× January 2008

Epilogue because there is more to know

EPILOGUE aims at providing a platform where a meaningful exchange of ideas, opinion and thoughts can take place among the people and about the people of Jammu & Kashmir. The attempt is to research, investigate, communicate and disseminate information, ideas and alternatives for the resolution of common problems facing the state and society of Jammu & Kashmir and in the context of their significance to South Asia as a whole.

We welcome contributions from academics, journalists, researches, economists and strategic thinkers. We would also like to encourage first-time writers with the only requirements being a concern for and the desire to understand the prevailing issues and themes of life in Jammu & Kashmir Contributions may be investigate, descriptive, analytical or theorectical.

They may be in the form of original articles or in the form of a comment on current events. All contributions have to be neatly types in double space and may be sent to the address given alongside or e-mailed to the editor.

While the editor accepts responsibility for the selection of the material published, individual authors are responsible for the facts, figures and viess ithe tier articles.

C O L U M N EYE WITNESS

Some basic facts about J&K economy Balraj Puri There is very little public debate on economic issues of J&K State. Partly because political leaders are engaged in what they consider higher issues of the state's future. And partly because the state government does not involve economic experts and intellectuals, for less the public in general, in evolving economic policies. The annual prebudget discussion that the finance holds is confined to chambers of industrials and commerce, which represents only a sectional interest.

The first step that the government should take to create wider public interest in the economy of the state is to make the entire economic data available on internet and arrange a consideration of all the comments and suggestion it receives.

A formidable difficulty in getting full data at many levels at which the economy operates. Firstly it is about the internal economy of the state ie revenue, expenditure and capital budget from internal sources. Secondly the central aid under different heads namely contribution to the revenue account of the state, capital budget, under state component of the aid, directly operated by the centre, security related expenditure, aid for relief and rehabilitation and so on. Thirdly remittances by the state subjects working outside the state.

But a far bigger component of the economy of the state is its invisible part, hawala money estimated to be Rs 100 crore a year, smuggling, expenditure by the Indian army and by the militants etc.

If one starts going through the entire maze of data on all these accounts, one would get more confused than enlightened. Therefore only a broad summary of its lessons are attempted here (only visible part of the economy).

Net state domestic product has been increasing in the state from 7.91% in 2002-03 to 12.67% in 2003-04 11.33% in

The first step that the government should take to create wider public interest in the economy of the state is to make the entire economic data available on internet and arrange a consideration of all the comments and suggestion it receives.

2004-05, 13.82% in 2005-06 against the maximum national average of 8% and expected to reach 9% in the current year.

Ratio of total revenue expenditure (Revenue expenditure is mainly on administration of which there is no return). to gross state domestic product at 39.20% is more than twice that of the average of all states (vide 12th Finance Commission). Per capita capital

Epilogue Ă˜ 4Ă— January 2008

expenditure of J&K State at Rs 2285 is thrice the national average of Rs 626. (capital expenditure is on productive activities). Total per capita revenue plus capital expenditure of J&K State is 9661 which is more than thrice average of all states of Rs 3969.

The contribution of the centre to the higher rate of growth GSDP and higher revenue expenditure than the national average is mainly due to the higher rate of aid. Ratio of central aid to the revenue of J&K State is 78.6% ie twice the average of all states which is 38.5%. As against total contribution of J&K State of Rs 257 crores to the centre under direct taxes like income tax, corporation tax and wealth tax, it received Rs 719 crores in 2006-07.

Under Prime Minister's Economic Reconstruction Package announced in November 2004, the state is entitled to receive Rs 24000 crores of which Rs 3781 crores was to be spent by the state directly (only 1352.44 crores could be spent till 2007). The state was paid by the centre under security related expenditure and for Relief and Rehabilitation Rs 159 crores + Rs 140 crores in 2005-06.

On the whole the state is spending from various sources Rs 28 crore per day against Rs 19 crore spent by Delhi (as Economic Advisor to the state was reported to have told the state cabinet).

The actual annual expenditure exceeds Rs 1200 crores supposed to be beyond the absorbing capacity of 11 million population of the state.

C O L U M N EYE WITNESS

The level of money being spent in the state by invisible sources could be anybody's guess. If mounting expenditure on all these accounts is added, it is bound to be reflected in the incomes of the people. One such outlet of such incomes is of the rich class which is reflected in an increase of 14 times on vehicular traffic since 1982, from Rs 36,500 to Rs 5,23,549. Every year seven lakh new vehicles are entering the state.

Increasing liquidity is being used to land speculation and higher bank deposits.

J&K bank is the fastest growing bank in the country. Its share value crossed Rs 1000 on new year day. But its deposits are mostly invested outside the state. Thus J&K is perhaps only state of the country which its exporting its capital.

Again while large number of Kashmiri labourers used to go to the plains in the neighbouring states to earn their livelihood, now 2 to 3 lakh labourers from far off states like Bihar, Orissa, and UP annually visit the state to work for menial jobs and masons as construction workers.

The people below poverty line in the state had fallen to 3.48% according to the last NSS round when it was 26% in the country as a whole. Encouraged by economic indicates available in 2003, the renowned economist M.S. Swamnathan had declared, on October 7, 2003, that “the state is in an excellent position to ensure that no one is below the poverty line by August 15, 2007.” At a high level national consultation on the Agenda 2007: A Food Secure and Poverty Free Jammu and Kashmir, “organized by M.S. Swaminathan Research foundation and attended by representatives J&K government, Sher-e-Kashmir University, National Bioresources Development, government of India and Sir Dorabji Trust, he proposed “ a 15 point action plan to ensure a sustainable and profitable farming system, happy rural

and farming families, balanced diets and safe drinking water for all.” It required, for its success, synergy among technology, public policy and people's participation.”

There are many other factors, besides exceptionally favourable fiscal indicators, that made Swaminathan optimistic about the future of the state's economy. They include rich natural resources, hydro-electric potential of 15,000 KW, forest wealth, mines of precious stones, art and craft and human talent.

But happened to the 15 point plan and its objectives? Why is the state far from the targets he had fixed for August 2007?

Despite heavy central aid, debt burden on the state is mounting. Every single person is indebted to the tune of Rs 10,655. The state government had taken an overdraft of Rs 1500 crores in 2006 from the J&K bank to balance its budget.

Even though agriculture is the mainstay of the population, the state is deficit in food grains by 45 per cent. Despite a large number of nomadic tribe of cattle rearers, the state is a big importer of meat and dairy products. There are about 2 lakh unemployment persons registered with the state Employment Exchange. Most of them are educated youth, including graduates, post graduates, engineering degree holders.

The government service is the main source of employment for the people which already has 3.14 lakh employees, largest number in the country in proportion to the population. The state spends Rs 2570 crore on salaries and Rs 620 crores on pensions every year. The state government has proposed to increase the police strength thrice to its present strength which is already at around one lakh. Apart from making it the most highly policed state of the country, which has its own implications, it would be on extra financial burden on

Epilogue Ø 5× January 2008

the state most of which is entirely unproductive.

The objective of a sound economic policy should, be to gradually reduce its dependence on central funds, apart from what it is entitled to according to federal norms, reduce its revenue expenditure and top heavy administration, raise saving and investment capacities of the people, with adequate incentives through appropriate institutions, increase employment avenuesin public and private sectorsimprove social sector like education (including job oriented courses) and health, raise power potential through micro projects, keep in view specific needs and capacities of different regions and sub-regions and their balanced growth, provide facilities to improve skills of artisans, at district and rural levels. The present policy of sanctioning project at highest level, in response to knee jerk reactions to the more vocal demands and agitations or canvassing by political leaders should be replaced by a well thought out long term plans prepared by experts in consultation with decentralized democratic institutions. The economic policy should also aim at maximum utilization of its natural resources.

A full plan for the achievement of all the above objective would make this article too long. But surely it should not be beyond the resourcesof expertise with bureautic assistanceof the government and with the help of nonofficial agenciesto plan such an exercise. The government should appoint a planning commission, which is a pre-requisite of framing economic policies in developing economies, to do the requisite job with largest possible consultations. Above all, the administration of the state, which has the dubious distinction of being the second most corrupt state of the country, should be radically reformed to be able to perform the historic role that awaits it.

SPECIAL REPORT THE YEAR IN REVIEW

2007 : The Year in Review No Progress On Peace Process Epilogue Research Bureau 2007 was certainly not the year of Jammu and Kashmir. There were noises, hues and cries but nothing substantially moved on the ground. Writing a year-end review for Jammu and Kashmir particularly means an assessment of the progress made on peace process at home and with neighbours. This year the peace process was nearly a dud except that the Prime Minister Dr Manmohan Singh convened the third Roundtable Conference and recommendations of four of the five Working Groups constituted by him in May 2006 were adopted. The fifth Working Group which deals with the “bone of contention” center-state relations was yet to arrive at a conclusion till the end of this year. Precisely on peace front the year remained a nonstarter. This lack of progress on the peace process can be primarily attributed to the internal disturbance in Pakistan.

Interestingly, on the peace dialogue front the year had indeed began at a very enthusiastic note but all this enthusiasm fizzled out as scheme of thinks unfolded in Pakistan in the subsequent months. At the beginning of the year, it appeared for a while that some basis consensus among New Delhi, Islamabad and the Kashmiri separatists has been arrived at and its unfolding is just a matter of time. No wonder that J&K Chief Minister Ghulam Nabi Azad told a meeting of his Congress party legislators in first week of January that 2007 will set a milestone in the history of Jammu and Kashmir. “The issue which has been hanging balance for decades is now all set to get settled down”, he had said. The same month Mirwaiz Umar Farooq, the chairman of the moderate faction of All Parties Hurriyat Conference traveled to Pakistan where he met President Musharraf

besides some other leaders as also he called on separatist and militant leaders in Pak administered Kashmir. Mirwaiz's Pakistan visit was widely believed as an exercise with full concurrence of the Government of India to have a word with the leadership in Pakistan. His statement from Pakistani soil that gun has lost its relevance and dialogue is the only way forward gave credence to the opinion that the peace process may be reaching a defining moment. His opponent in the separatist camp, Syed Ali Shah Geelani then said that Mirwaiz was making bids to seek a role in power structure of Jammu and Kashmir by entering into a deal with New Delhi. Since then the entire course of dialogue has been into a pause.

Continuing with precedence of the past, the separatists refused to join the third Roundtable Conference chaired by the Prime Minister Manmohan Singh in April.

Since then neither the Government of India invited them nor did they send any visible feelers for talks with New Delhi.

Later, in September Prime Minister Manmohan Singh expressed his regrets that the separatists did not come for a dialogue despite a commitment. Hours after Prime Minister's remarks a quick reaction came from Mirwaiz Farooq and Mohammad Yasin Malik of JKLF “we had never made any such promise”.

Political observers believe that internal disturbance in Pakistan and President Musharraf loosing authority had a major impact on the course of Kashmir dialogue. A section of separatists here follow the course of dialogue in sync with the vibes coming from Islamabad.

Pakistan embroiled in the internal problems for almost entire year put the separatists on back foot. Dialogue

Epilogue Ø 6× January 2008

between New Delhi and Islamabad too could not pick up the pace. In New Delhi avoided talking Kashmir with Islamabad as sustenance of such a process was doubtful owing to disturbance in Pakistan. It was a thoroughly wait and watch policy for return of normalcy in neighbouring country and the position which President Musharraf assumes at the end of the day. However, with each passing day the things turned from bad to worse culminating into a chaos with the assassination of leading political leader Benazir Bhutto. Though the disturbance in Pakistan cast its imminent shadow on the Kashmir peace process but at the home front the Central Government in India too remained faced with the threat of instability. The controversy over Nuclear Deal with America had a near escape for the UPA government which appeared falling at several occasions. A multitude of reasons kept the Kashmir dialogue process at a backburner. It is pertinent to mention here that 2007 was the most important year lost in Jammu and Kashmir. 2008 is the election year and the dialogue may not pick up at all waiting for the new government to be in place.

Finally, Government Survives Since 1990s, it has been the separatist politics making headlines in Jammu and Kashmir. However, 2007 was the year mainstream politics with separatists looking at the factional fight within ruling alliance. The government survived at the end of the day that is the biggest news of the year.

One important feature of 2002 assembly

SPECIAL REPORT THE YEAR IN REVIEW

elections was that it threw up a rag-tag alliance of various parties and individuals to form the government Congress and the Peoples Democratic Party being the lead players agreed to work under a threeyearly power rotation arrangement.

Everything went smoothly till PDP was in the driving seat. However, Congress' Ghulam Nabi Azad took over as Chief Minister in November 2005, the politics of one-upmanship begin to churn. Azad would often say that he has taken over a corrupt and inefficient system. On the contrary, the PDP leadership accused Aza d of d e ra i l i n g th e p osi ti ve atmosphere of reconciliation consolidated post-2002 elections. In February 2007 the war of words broke out in open. Azad ridiculed PDP's demand for troop reduction. The government came close to a collapse when the Prime Minister intervened to defuse the crisis.

Government got a breather on March 30 with constitution of a central committee to study the troop reduction demand but parties rushed to the field for campaign.

For next two months there was hardly any work in the secretariat as parties entered into an undeclared poll campaign putting the entire state into a political uncertainty.

Some semblance of order returned in summer but the ruling coalition boat rocked once again when Chief Minister stripped a PDP Minister of his portfolio.

Qazi Mohammad Afzal, who enjoys the stardom for defeating NC's Chief Ministerial candidate Omar Abdullah in Ganderbal constituency, resigned as Minister in protest after loosing his Forest department. PDP upped ante against Chief Minister and the government once again appeared falling.

The by-elections to Poonch assembly constituency held on December 12, however, settled down the animosity between coalition partners. Taking cue from a resolution adopted by a one-day session of All India Congress Committee

favouring continuation of the present ruling alliance in Jammu and Kashmir, the PDP desisted from fielding its candidate in Poonch constituency.

Congress got the reading correct. Few days later Chief Minister Azad called on PDP leader Mufti Mohammad Sayeed at his residence. A little later Muzaffar Hussain Baig was re-inducted in the cabinet and the embittered Qazi Mohammad Afzal resumed duties in his Civil Secretariat office and the Forest department was returned to him. Now PDP and Congress leaders don't want hear that there were differences between them as strategies are being working out for a future electoral alliance.

Panthers Party Pulls Out The Jammu and Kashmir National Panthers Party of Bhim Singh having its four members in the State Legislative Assembly walked out of the coalition government. Panthers Party had been a part of the ruling coalition ever since its formation in November 2002 and it had two ministers in the government till November 2005 when Ghulam Nabi Azad took over the reigns from Mufti Mohammad Sayeed under power sharing

Epilogue Ă˜ 7Ă— January 2008

arrangement. Since then the Panthers Party had been sulking and taking on the government on one or the other issue.

While announcing its decision to withdraw support from the government, the party chairman Bhim Singh said that the Congress led coalition has failed to serve interests of Jammu region which his party espouses.

Forces Maintain Edge, Militants on Edge Security forces, including the local Police and the paramilitary forces, maintained a clear edge over the militants in almost all parts of state throughout the year.

Even though the organizations like Hizbul Mujahideen, Lashkar-e-Toiba, Jaish-eMohammad and Harkat-ul-Jehad-eIslami suffered the most at the hands of security forces, neither the political leadership nor the top security bosses could give an objective analysis of the situation. The other outfits which suffered major losses were: These outfits Al-Badr, Tahreek-ul-Mujahideen, AlUmar, Jamail-ul-Mujahideen.

The main reason for the contradictory

SPECIAL REPORT THE YEAR IN REVIEW

figures on the militancy and security situation was that the ruling coalition partners were engaged in a war of wits on demilitarization.

To call the bluff of Peoples Democratic Party's demilitarization demand, the Defence Ministry, state government and various heads of the security forces maintained that the militancy was maintaining a steady trend with no positive change in the situation.

However, security analysis took an interesting turn when the outgoing Chief of Army Gen JJ Singh said that the situation in Jammu and Kashmir was fast returning to normal. However, the next day his predecessor Gen Deepak Kapoor pointed out that the situation was far from normal and it called for stern measures.

The contradiction of analysis notwithstanding, the militants suffered hugely this year with Hizbul Mujahideen suffering the maximum loss of its cadres and top commanders. The HM lost 34 top commanders and 307 cadres in gunbattles with security forces this year.

As a result, Kashmir militancy's backbone has been broken and Hizb cadres have gone into hibernation after getting demoralized. Hizb tops the list of 13 terror outfits whose top commanders were among those killed.

A total of 77 top militant commanders have been killed by security forces till November this year and Hizb tops the list followed by LeT, JeM, HuJI, Al-Badr, HuM, JuM, TuM, HeI and Al-Barq, according to police data.

The list of militants killed includes 17 commanders of LeT, 13 of JeM, 10 of HuJI and three of Al-Badr. During past two years of Congress rule in Jammu and Kashmir, 182 commanders were killed and of these 75 commanders were of Hizb

followed by 49 of LeT, 18 of JeM, 11 of AlBadr and 20 of HuJI. In 2006, out of 105 commanders killed, Hizb lost 41, LeT 32, HuJI 10, JeM five and Al-Badr four. In 2005, Hizb lost 31 top commanders, followed by 12 of LeT, nine of Al-Badr, seven of JeM, two commanders each of HuM and HuJI, besides one each of TuM, JuM, HeI and AlBarq.

This year Hizb lost one operation chief c o m m a n d e r, f o u r d i v i s i o n a l commanders, seven district commanders, nine tehsil commanders, 12 area commanders and company commander, the officers said.

Top among those killed in 2007 include Bilal Afghani, chief commander of AlBadr on December 3 in Budgham followed

by Qari Umar (deputy chief of HuJI for JK), Abu Hamza (chief operation commander of JuM), Qasim Bhatti (chief operation commander of LeT), Iajaz Ahmed Chopan (chief operation commander of HM), Aby Tallah (operation commander of LeT's Jammu region), Mohammad Younis (commander-in-chief, HMPPR) and Mohammad Khalid-urRehman (LeT's India operations head).

With forces continuing to enjoy an edge over militants, the overall security situation in the state improved considerably with the number of militancy related incidents, killings of civilians and security force personnel coming down as compared to previous years.

The number of militancy - related incidents came down by 33 per cent in 2007, confirmed an official spokesman.

During the year, the killing of civilians by militants and in the cross - firing between security forces and ultras also registered a 59 per cent decrease. Similarly, the security force killing fell by 28 per cent

Epilogue Ø 8× January 2008

over the corresponding period of the previous year. During the same period, security forces foiled more than 50 infiltration bid and killed about 100 militants immediately after they sneaked into this side from Pakistan administered Kashmir. However, the infiltration from across the border also decreased as compared to previous years.

More than 100 militants and their families also surrendered before the security forces near the border after their return from PoK during the past two years. Security forces and police eliminated over a dozen top commanders of different militant outfits during the period.

Cell Wars Hot Up Registering a customer base of eight lakh in Jammu and Kashmir, Bharti Airtel claimed to have become lead player in the State, ahead of BSNL. Aircel is third in the line but is improving with its new schemes and BSNL believes that it is a temporary setback.

Celebrating the achievement at end of the year, Airtel introduced Super Life Time Validity (SLTV) recharge at Rs. 499, less than half the standard price of Rs. 999. “The milestone of eight-lakh customers in a short span of three years clearly reflects the conviction of people of the State in the services being provided by Airtel,” said Bharti's Chief Operating Officer, Vishal Sehgal.

Sehgal said the network was operating with 1,100 cell sites and hoped to scale it up to 1,300 cell sites by the end of the current financial year.

With the huge customer base, Airtel accounted for 44.34 per cent of the State's 1.8 million telecom market. BSNL

SPECIAL REPORT THE YEAR IN REVIEW

enjoys 43.32 per cent while Aircel has 10.77 per cent share.

Jammu and Kashmir has emerged as the third best market for Airtel after Delhi and Mumbai and Kashmir valley contributes a major share to this.

Though the BSNL authorities are worried about the emerging growth of its main competitor, they maintain that it is a temporary phase. “We have stopped sales for sometime but we are reviving and will be back in our position” said a senior BSNL official.

Likewise, Aircel is confident of having its pie in the market. “We are not that old but our share is also rapidly improving,” says and Aircel official. The coming year is likely to witness intense competition between telecom players.

War against corruption Audacity of loud slogans may have slowed down owing to political reasons, but tirade against corruption continued in 2007. During the year the Vigilance registered 81 cases against 109 government officials (including 44 gazetted officials) and 18 private persons. These included 41 trap cases in which 46 officials were caught redhanded while accepting bribe.

Of the 81 cases registered in 2007, 43 related to districts other than Jammu and Srinagar. And of the 41 trap cases, 21 pertained to rural areas. Besides, the Vigilance filed challans in 88 cases in court against 154 officials (including 58 gazetted officers) and 164 private persons like businessmen, middlemen and beneficiaries of graft.

Seventy-nine cases against 166 officials (including 69 gazetted officials) were

last year referred to the government for accord of sanction for prosecution.

Sanction for prosecution was accorded in 68 cases against 105 officials (including 30 gazetted officials).

Under the amended provisions of Prevention of Corruption Act, the Vigilance officials said properties of six officials valued over Rs 1 crore have been attached. The total number of attachments of property cases increased to 12 and the attached property was valued at Rs 4.48 crores, they said.

“We registered cases against 19 government servants for acquisition of assets through corrupt means.

Disproportionate assets worth Rs 4.27 crores have been detected in these cases so far,” the officials said.

They added that a number of cases related to misappropriation of government funds in works, awarding of contracts and purchases were also registered, and according to conservative estimate a loss of over Rs 15 crores was caused to the state exchequer in these cases.

“Our objective of quality investigation in a specific timeframe recorded further success in 2007. The success of proved cases during investigation increased to over 90 percent in 20062007 as against 65 percent during 20032005,” the officials said.

The Vigilance Organization during investigation detected a loss of Rs 77.40 crores to the exchequer since January 2005 mainly due to corrupt practices by the officials. The amount includes misappropriation of Rs 58.05 crores and possessing disproportionate assets worth Rs 12.61 crores

Epilogue Ø 9× January 2008

Some More Wait For Baglihar Like several years in the past, the Baglihar hydro-electric project the controversial yet most prestigious power project of J&K failed to keep a date with this year. It had been ambitiously announced that Baglihar will begin generation of electricity by December 31, 2007 but that did not happen. The project has overrun the deadlines several times in the past.

Now finally the government has officially announced that the hydroelectric project will start partial operations by next June, supplying much needed power.

Pakistan has said it fears the one-billiondollar project could deprive its wheatbowl state of Punjab of vital irrigation water. It says the dam violates a decadesold water sharing treaty brokered by the World Bank.

But India says the Baglihar hydroelectric project on the Chenab River does not violate the pact and could go a long way to ending routine 12-hour blackouts plaguing the Himalayan state.

"The first phase of the 450-megawatt Baglihar Hydel power project will become operational by June, 2008," Chief Minister Ghulam Nabi Azad said after a visit to the project site. "The pace of work on the project had slowed, meaning the target date for completion was missed," Azad said, referring to objections raised by Pakistan. The second phase would be completed in the "near future." The project will "considerably improve" the power position in the Himalayan region, he said, giving no details on how much electricity would be generated by the initial startup. The work on the project began in April 1999.

SPECIAL REPORT THE YEAR IN REVIEW

Jammu and Kashmir has the potential to generate 20,000 megawatts of power, but less than 10 percent of it has been exploited. Massive power theft has compounded the state's electricity woes with people refusing to pay power bills.

An expert appointed by the World Bank ruled earlier this year that the dam India is building in the disputed Kashmir region did not violate the water-sharing treaty with Pakistan.

The 1960 Indus Water Treaty governs the sharing of common river waters. Pakistan said it would be deprived of its rightful share of water from the Jhelum River.

At Pakistan's request, the World Bank in 2005 appointed Professor Raymond Lafitte, of the Swiss Federal Institute of Te c h n o l o g y, t o address differences with India over the dam being built in southern Indian Kashmir. Under the terms of the 1960 treaty, the decision was final and binding on both parties, according to the World Bank.

An Year of Honour for Jammu University For Jammu University and its Vice Chancellor, 2007 was a year of glory. The world class and majestic General Zorawar Singh Auditorium this year saw Prime Minister of India Dr Manmohan Singh receiving an honour from the University of Jammu. Prime Minister on July 15 receive an honorary doctorate of letters (D. Litt) from Jammu University, the latest in the many academic honours

conferred on him in his long public career. Jammu and Kashmir Governor and university chancellor S.K. Sinha conferred the doctorate degree on Manmohan Singh - the first from an Indian university after he became prime minister in May 2004.

degrees - a Doctor of Laws from the University of Alberta, Edmonton, Canada; and a Doctor of Social Sciences from the University of Roorkee among others.

institution of excellence. He said, “let me say, at the very outset, that I have been impressed by the remarkable strides that the University of Jammu has made in recent years. I compliment you all, especially your dynamic Vice Chancellor Prof Amitabh Mattoo. The steps taken by your University to establish itself as a center of excellence are impressive. I commend the University's achievements in teaching and research, especially in fields like high energy physics, glaciology, biotechnology and strategic studies. I am also happy that the University has actively participated in extension work, in partnership with civil society, in disaster management, empowerment of rural women and the efforts at strengthening the region's culture of tolerance and peace. It is precisely this blend of academic excellence, social relevance and a e s t h e t i c sensibility that our Universities must n u r t u r e ” . the year was equally momentous for the Vice Chancellor at the individual level. Prof Mattoo was nominated to the board of directors, India Afghanistan foundation (IAF), for an duration of two years.

Prime Minister getting an honorary degree from the University of Jammu was indeed a rare honour for entire Jammu and Kashmir state. On receiving the degree, the Prime Minister remarked, “I have received similar honours before but your gesture is special for me”. The Prime Minister also placed on record his deep appreciations for the Vice Chancellor Prof Amitabh Mattoo for making the University an

The 10-member board has five members each from India and Afghanistan. It was constituted during the Afghan President Hamid Karzai's visit to India in April.

Mattoo is an expert in India's foreign policy and as a member of the IAF board, he is expected to foster the civil society links and academic and scientific contact between the two elected as the member of governing council of Pugwash, the Nobel Prize winning NGO, this year.

Manmohan Singh has been the recipient of honorary doctorates from numerous universities both in India and abroad.

This long list includes honorary degrees of D. Litt from Panjab University, Guru Nanak University, Delhi University, Sri Venkateshwara University, Panjabi University, University of Mysore, Osmania University and Italy's University of Bologna. He has received other honorary

Epilogue Ø 10 × January 2008

D I A L O G U E J & K S I T U AT I O N

We need a J&K-centric solution and not Kashmir-centric Interview with Governor Lt Gen. (Retd.) S.K. Sinha LT. GEN (RETD.) S.K. SINHA’S association with Jammu & Kashmir has completed 60 years. He was a part of the first contingent of Indian Army to touch ground in Kashmir in October 1947. In 2003 he returned to the state as Governor. In an Exclusive Interview, Gen Sinha share with Epilogue’s Editor-in-Chief ZAFAR CHOUDHARY his assessment of the prevailing situation. Here are excerpts : You came to Jammu and Kashmir in 2003. That was 56 years after you had come first as part of India's first Army deployment to Kashmir. You have seen the developments from different levels. What difference do you find in the situation of 1947, 2003 and now?

When I came here in 1947, the feeling was that the Army has been given almost impossible task to accomplish. All odds were against us. On the afternoon of October 26 we were told to go to Kashmir; that Maharaja has acceded and the Army has to be in Srinagar. About enemy: the Pakistani side comprising over 5000 tribals and also regular soldiers was led by Gen Akbar Khan. They had opened an attack from Baramulla. We were just 300 soldiers. I was a Major and the only Indian Army officer at the Controlling Headquarters where all other officers were the British. The British Government had decided that none of their officers will go to Kashmir. For me the task was stupendous, I did not actually know what happens next. It was a miracle that we succeeded.

We were able to defeat the Pakistani raiders as we enjoyed enormous goodwill of the local people of Kashmir. They looked at us as savours. Sheikh Mohammad Abdullah was the undisputed leaders of Kashmir; he had a secular outlook and had opted to with India. I still remember the popular slogan those days: Hamlewar Khabardar, Hum Kashmiri

Hindu, Muslim, Sikh Hain Tayyar…. This was quite an unusual scenario for me.

The previous year I was in Calcutta where

In 2007, there was optimism. Things are moving forward. The level of violence is reducing; ceasefire is holding well on the Line of Control for fourth year now. Peace process is moving on and dialogue with Pakistan is also taking place. There is a general change in the attitude for peace, development and prosperity.

Army was dealing with the communal violence following selective killings. The bottom-line is that despite all the odds

Epilogue Ø 11 × January 2008

against us, in 1947 secularism was at its best in Kashmir.

Though I had worked in J&K for over ten years as an Army officer in between also but in 2003 when I landed at the same airfield of Srinagar where I had landed first 56 years back, my thoughts went back to the same situation. I could mark a stark difference. In 1947 Kashmir stood an example of secularism while in 2003 the element of fundamentalism has badly crept in the Kashmiri society. The Kashmiri Pandit minority had been driven out of the Valley. I can recall when I was sworn in as Governor on June 4, 2003 there were rifle fires quite audible in Srinagar City. There was violence.

But I was more confident of the situation moving forward. For me the fundamentalism was a more serious concern than violence. I had dealt with similar situation earlier also particularly during my term as Governor in Assam.

In 2007, there was optimism. Things are moving forward. The level of violence is reducing; ceasefire is holding well on the Line of Control for fourth year now.

Peace process is moving on and dialogue with Pakistan is also taking place. There is a general change in the attitude for peace, development and prosperity.

For Jammu and Kashmir, the year 2007 had begun at a very enthusiastic note.

Mirwaiz Umar Farooq going to Pakistan

D I A L O G U E J & K S I T U AT I O N

and condemning the use of gun from Pakistani soil. General Pervez Musharraf declaring that the elements supporting violence have no role in the peace process. But slowly every thing came to a halt. How do you analyze the progress on peace process over this year?

the mindset. People are getting disillusioned with Pakistan. You must be knowing Lord Averbury of UK, a renowned protagonist of Pakistan. His organization conducted an opinion poll in Kashmir the MORI survey, its results were quite interesting -61 percent of the interviewed people wanted to stay with

This problem is here for 60 years now. There are so many ramifications. Expecting results in matter of months is unrealistic. We are moving in a situation where expecting matching response from Pakistan is difficult. Political situation in India too has been untenable this year. At one point of time one could have expected fresh elections in the country; there were some signs of instability. Let's keep moving in a direction and wait for the final results.

There have been many models and proposals in discussion for resolution of Kashmir issue.

What do you suggest as a workable way forward?

See, in Kashmir Valley there is a feeling of a separate identity.

Some want to be totally independent. This sentiment for independence needs to be understood. In Jammu and Ladakh regions opinion is not the same. There is a question of managing contradictions. There has to be a “Jammu-Kashmir centric solution” and not the “Kashmir centric solution”. This has to be ensured that none of the identities is compromised with. Realignment of the lines of division is unthinkable. We have enormously suffered on this account and such experience can not be repeated. While moving forward towards a solution, care has to be taken that all aspirations are accommodated.

We are living in an era of globalization.

Shortly ahead of the internal disturbance in Pakistan it was widely rumoured that New Delhi and Islamabad were close to a deal on Kashmir. Can you imagine…?

No don't think so. I don't think there can be a deal on the issue.

I too had read about this but I don't find anything substantial.

How do you see the internal disturbance in Pakistan casting an impact in Kashmir?

In Jammu and Kashmir there is a lobby sympathetic to Pakistan. This lobby was miniscule in 1947. Those who wanted to go to Pakistan had gone. But now over the years this lobby has become stronger. In 1989 when the militancy erupted, the popular slogan in the Valley was “Kashmir Banega Pakistan”. However, after 2002 there has a definite change in

there is complete lack of democracy. The Punjabis are the dominant class; Pathans, Baluchs and Sindhis come in the second category. Still worst, the Kashmiris fall in the third category of people there. Given this situation, in Kashmir the element of sympathy for Pakistan is becoming negligible.

India, 6 percent wanted to be with Pakistan and 37 per cent were undecided. I believe, today even the 6 percent figure too has come down.

As the internal picture of Pakistan comes out, people don't want to be a part of such a place. Apart from the instability, there is sectarian violence, the terror machinery pumped into Afghanistan and Kashmir is now working at home too,

Epilogue Ø 12 × January 2008

The national boundaries are melting and the economy is taking the center stage.

You see, the concept of nation state was first evolved in Europe and now it is Europe taking lead in blurring the national boundaries towards achieving economic empowerment of the entire region. What I propose is a South Asian Economic Union. In such an arrangement all the existing animosities will get a back

D I A L O G U E J & K S I T U AT I O N

seat and the economic prosperity of the people. Jammu and Kashmir, including the areas under occupation of Pakistan and also the Northern Areas can make a beginning in this direction and soon there can be a South Asian Economic Union.

One can also take a cue from the SouthEast Asian countries the ASEAN has emerged as powerful economic bloc.

It is widely believed that the prolonged standoff between the ruling coalition partners in Jammu and Kashmir spanning over a year now contributed in blocking the peace process, particularly the course of dialogue between New Delhi and Kashmiri separatists. My point is that the role of state government is seen as a facilitator in the peace process with the separatists.

I don't known if there was any lack of effort at the part of government. The person, you are talking about, has worked more for the dialogue. In fact he has been the driving force. There is no reason to believe that the government and leaders of the coalition lacked any effort in this direction. It was during this time that we had the roundtable conferences. If you understand what a roundtable conference means, its idea was conceived in 1930s. What British did was that they held roundtable conferences in 1930s and 1940s. That time Mahatma Gandhi was a widely accepted leader with no rivals. The British invited many to the roundtable conference and Gandhi too would get invitations. There can be differences but when all parties sit together it makes the understanding better.

Therefore, the state government can be a facilitator and this role they have played well. If separatists don't come to join the roundtable conference no body can be faulted for this.

Differences between the Congress and

the Peoples Democratic Party seem to be over, for the moment. There have been signs of bonhomie but debate on

The national boundaries are melting and the economy is taking the center stage. You see, the concept of nation state was first evolved in Europe and now it is Europe taking lead in blurring the national boundaries towards achieving economic empowerment of the entire region. What I propose is a South Asian Economic Union. In such an arrangement all the existing animosities will get a back seat and the economic prosperity of the people.

Jammu and Kashmir, including the areas under occupation of Pakistan and also the Northern Areas can make a beginning in this direction and soon there can be a South Asian Economic Union. One can also take a cue from the South-East Asian countries the ASEAN has emerged as powerful economic bloc

the contentious issue still remains.

There has been relocation of some troops from some hospitals and school

Epilogue Ø 13 × January 2008

buildings in the Valley. But in its report the expert panel constituted by the Prime Minister, it is learnt, has not spoken of downsizing the troop strength. How do you comment on the situation after having witnessed a raging conflict of ideas between the ruling coalition partners over the year?

In fact the very word “demilitarization” was ill conceived. Pakistan's Pervez Musharraf used this word and some people in Kashmir starting echoing. In places where there separatist violence or other forms of violence, the troop strength has to be maintained.

However, the strength or positioning can be reconsidered depending upon the evolution of situation. Therefore, there can be three things: ?

Return of troops to the barracks,

?

Reduction in strength or

?

Relocation of position

In first case there has to be an appreciation of the situation prevailing on the ground. The need for politicization does not arise at all. People who have been talking loud about the demilitarization must realize the situation assuming in Pakistan.

The terror infrastructure is still intact.

Reduction in the troop strength is unthinkable without getting convinced about dismantle of terror infrastructure.

As far as relocation of the position of troops is concerned, this process is a continuous. Relocation has been going for several years and it is going to continue.

Jammu and Kashmir enjoys a special constitutional position in India. The Chief Minister too enjoys special powers and authority as compared to his counterparts in other states. Does this difference extend to the Raj Bhawan too?

D I A L O G U E J & K S I T U AT I O N

No, the Governor does not have any special or extraordinary powers or position which is not available to his counterparts in any other state. His powers emanate from the Constitution of India which have been endorsed by the Constitution of Jammu and Kashmir.

You remained Governor of Assam. How do you put the difference in your experience at two places?

The problem of insurgency is almost the same at both places. But in Jammu and Kashmir the serious dimension of problem is the religious fundamentalism which was not in case of Assam. The separatist movement in Jammu and Kashmir would not have been called as fundamentalist if the people involved were mix of all in the state. In Assam the ULFA was not confined to any particular religion. Moreover, the Assam problem did not have international dimension which is a history of Jammu and Kashmir due to involvement of Pakistan.

At more than two occasion, particularly during the demilitarization debate when you raised the security concerns, a part of ruling alliance issued statements asking you not to speak on the political matters. Is this something the Jammu and Kashmir Governor should not speak about?

I never spoke on the political issues.

However, upholding the constitution of India and expressing concerns on the issues of national security is a part of my right and responsibility. I admit that I have been proactive in some matters. I have been proactive in reviving Kashmiriyat, I have been proactive in maintaining the national integrity, I have been proactive in upholding the constitution of the state and country.

Besides being Governor I have been assigned (by the legislature) some other responsibilities too. Therefore, as

Chancellor of Universities I have been proactive in promoting the Higher Education and as Chairman of the two Shrine Boards I have been proactive I

It is just a matter of public perception both were my Chief Ministers.

Once there were some differences of opinion with one Chief Minister on Amarnath Yatra. People asked me a lot of questions but I never criticized the Chief Minister. Today no one asks such questions.

After all it is my government and they are my Chief Ministers. If I returned the Panchayati Raj Bill during the tenure of the previous Chief Minister in case of the present Chief Minister's tenure I have recently returned the Right To Information Bill. Both have respected my opinion.

have been proactive in reviving and promoting the pilgrimage and utilizing the resources for the common good. The

Epilogue Ă˜ 14 Ă— January 2008

Shri Mata Vaishno Devi University and the upcoming state-of-the-art Cancer Hospital are the initiatives for the common good.

You have vast experience of serving in the Armed Forces, Public Life, and Diplomacy and at Raj Bhawans. How do you compare the political maturity in Jammu and Kashmir with other parts of the country?

There may be religion bias among some sections of people but Kashmir as a community is not fundamentalist.

Politics here is quite seasoned and its heritage is Kashmiriyat.

During your present term as the Jammu and Kashmir Governor two Chief Ministers have worked with you. Public understands the differences of relations both maintained with the Raj Bhawan. Could you please tell us who was (or is) more comfortable working with you.

It is just a matter of public perception both were my Chief Ministers. Once there were some differences of opinion with one Chief Minister on Amarnath Yatra.

People asked me a lot of questions but I never criticized the Chief Minister. Today no one asks such questions. After all it is my government and they are my Chief Ministers. If I returned the Panchayati Raj Bill during the tenure of the previous Chief Minister in case of the present Chief Minister's tenure I have recently returned the Right To Information Bill.

Both have respected my opinion.

When last time I had interviewed his Excellency in March 2006, the functional democracy in Jammu and Kashmir was described as best form of self rule. President Pervez Musharraf and other protagonists of self rule were advised to learn from the Jammu and Kashmir experience of democracy. But I

D I A L O G U E J & K S I T U AT I O N

believe in Jammu and Kashmir the democracy in real sense has been denied to people by keeping the Panchayati Raj Institutions in perpetual limbo. His Excellency's comments…

Democracy has to be all levels. In Jammu and Kashmir we enjoy democracy to a greater extent than many parts of the world but there may be some problems in the actual operation of the system. If there are certain shortfalls, they are not constitutional.

The shortfalls may at the level of the people who are supposed to implement the constitutional provisions. There are various levels of democracy. At state level the democracy in Jammu and Kashmir is better than many other states. I agree the real democracy is not percolating down to the grassroots in Jammu and Kashmir as it is the case with many other states in the country. we must understand that the provisions do exist but the people responsible for implementation may not have been able to implement. I hope the Panchayat elections are held soon and the democratic system is devolved to the grassroots levels.

What is His Excellency's vision about the economic development of Jammu and Kashmir?

development of the state this year. He said that 3.7 per cent of the state's total population lives below the poverty line and he wanted this to be close to Zero.

He prepared three vision papers for the state. Since the agricultural terrain is different in Kashmir, Jammu and Ladakh, therefore he suggested different set of mechanism.

In 2007, my government has done tremendous work for development. One can see the coming up of Hajj House in Srinagar in a record time. The Hajj House has emerged as first of its kind in the country.

Works on many important projects are being executed in double shifts.

For sustainable economic development self sufficiency in all spheres is most important. Let's take the example of meat.

The majority in Jammu and Kashmir has a non-vegetarian way of life. To meet the basis requirements a big chunk of meat and eggs has to be imported. Here we are not self sufficient to meet the requirements. I had invited the legendary Agricultural Scientist MS Swaminathan to Kashmir.

He prepared a roadmap for economic

country. Two newly found Universities the Mata Vaishno Devi University and the Baba Ghulam Shah Badshah University are have done exceptionally well in a very short span of time. Now the need is to enhance the quality of education. I am of the opinion that better standards of higher learning certainly lead to economic development.

In Jammu and Kashmir working at bringing peace and ushering the state into an era economic prosperity every day counts its own significance. How do you rate the present year in terms of achievements on different fronts?

In 2007, my government has done tremendous work for development. One can see the coming up of Hajj House in Srinagar in a record time. The Hajj House has emerged as first of its kind in the country. Works on many important projects are being executed in double shifts.

There is a new work culture which sets high standards. The government has been trying to fight corruption in the system. As far as the peace front is concerned, results can not be expected overnight but there have been definite developments.

Your message for the new year…

The vision paper has been forwarded to the government and I am sure its implementation will bring in a revolution and make the state self sufficient in almost all spheres. Education is the key to economic prosperity. Our state is making huge strides in the higher education. There are seven Universities in the state which by all accounts reflects a better picture than other states in the

Epilogue Ø 15 × January 2008

In the year which is about to end we have done well. Whether on restoring peace or economic development all fronts have seen huge activity. The concerted efforts have contributed in improved economic conditions and better education facilities. We need to carry on with this and make Jammu and Kashmir more vibrant in 2008. With such sincere efforts, I believe our state can be a model state in the country.

D I A L O G U E J & K S I T U AT I O N

At peace process there is a comma and not the full stop Interview with Prof. Amitabh Mattoo The Vice Chancellor of the University of Jammu, PROF AMITABH MATTOO plays the role of a strategic analyst and social scientist which stretches far beyond the Campus. In an exclusive interview with EPILOGUE, he shares his opinion about The peace process, educational scenario and possibilities of his joining politics. Here are excerpts: The beginning of year 2007 was quite enthusiastic on peace dialogue. But the enthusiasm thinned down in subsequent months. How do you see the peace process moving?

The immediate impact is that one separatist group has lost the idea as what

Yes if we look back, the year 2007 had begun full of promises and expectations on carrying forward the peace process. I agree that the year has ended at a note of pessimism. There were some positive developments too. Path-breaking reports of four of the five Working Groups constituted by the Prime Minister were p r e s e n t e d a t t h i r d Ro u n d t a b l e Conference. The process of implementation is on. We can say there is a pause or comma but not the full stop at the end of the peace process. There were internal problems in Pakistan due to which the course of dialogue between the Prime Minister Manmohan Singh and President Pervez Musharraf could not be strengthened and sustained as it had been going on. On the internal front, the dialogue between the separatists and the Government of India too turned out to be a non-starter this year. I, however, remain convinced that the Prime Minister is fully committed to using his term as the Chief Executive of the country to bring sustainable peace in Jammu and Kashmir.

Now what shape the South Asian politics takes has to be seen.

Situation is much better than any year in past 15 years. It is still getting better. There is a climate of change and the waves of peace can be clearly seen on the horizons. The major reason for this fast emerging atmosphere of peace is that there is an all pervasive feeling among the people of Jammu and Kashmir that violence is not the instrument of achieving the political ends.

How do you see the impact of internal disturbance in Pakistan on New DelhiIslamabad relations and on the course

of peace process in Jammu and Kashmir?

negotiations they should take on. There is a degree of confusion between several

Epilogue Ă˜ 16 Ă— January 2008

groups. The situation assuming Pakistan has a definite impact on New DelhiIslamabad relations also to the extent that there is no positive development on a wide range of issues. In long term it is important that Pakistan emerges as a stable and healthy democratic society. It is in the interest of India for being the immediate neighbour.

What is your analysis of the latest security situation in Jammu and Kashmir?

Situation is much better than any year in past 15 years. It is still getting better.

There is a climate of change and the waves of peace can be clearly seen on the horizons. The major reason for this fast emerging atmosphere of peace is that there is an all pervasive feeling among the people of Jammu and Kashmir that violence is not the instrument of achieving the political ends.

What is your idea of economic development of Jammu and Kashmir.

Our state has the lowest rate of poverty (little over three percent) but still it is projected as one of the poor states in the country.

This is a stark paradox. People are generally not poor but the state is poor in terms of its resources and production.

There is a general feeling that people lack the due empowerment. There has to be a clearly defined objective of making

D I A L O G U E J & K S I T U AT I O N

people empowered through education and better governance. I believe that the present Chief Minister has a vision for the future to see Jammu and Kashmir emerging as prosperous and economically empowered state. CM has been trying to improve the system of governance but unfortunately the instruments are still caught in a time warp. The bureaucracy needs to gear up to meet the challenges of governance. In this connection, two critical areas for improvement are the Panchayati Raj and the infrastructure building apparatus.

It was provincial university with huge potential. Located in a tense and conflict ridden state it was looking towards future but there was no line of action in place. Some of the departments were doing quite well but the talent was not fully exploited. The campus was lacking in terms of infrastructure.

How do you look at the ch a n g i n g edu cati o n al profile of Jammu and Kashmir? There are seven Universities, two deemed Universities. 40 new government degree colleges have recently come up. How do you make comparative analysis with other parts of the country?

Despite this massive infrastructure development, Jammu and Kashmir still lags behind in higher education.

What were witnessing today in terms of expansion are the revolutionary steps to put the state at part with other parts of country. We are going through a phase which can be described as a real inquilab in enhancing the educational profile. This needs to be sustained and strengthened.

Could you please describe the Jammu University the way it existed on the day when you had taken over as Vice Chancellor?

Which department of the University do you rate as number one in terms of academic excellence?

I would rather talk about two departments. One is new and the other is older with a new outlook. I am talking about the department of biotechnology and microbiology as the new emerging faculties making excellence in the discipline.

The older one is the department of Management studies which was given a new outlook, a new branding and a new name as the 'Business School'. The department was refurbished and put under a dynamic leadership which has made it among the top ten business schools in the country.

Your ISO certification has often been laughed at by the critics. How do you explain the advantages of this quality certification?

Where does the University of Jammu stand today?

Well, today the University of Jammu is on the radar of higher education map of India. Potential of its students is fully booming and is being appropriately exploited. Concerted attempts at excellence have made the University one of the best in the country.

Epilogue Ă˜ 17 Ă— January 2008

We are the first University in the country with ISO certification which simply means quality satisfaction.

The ISO certification is an assessment of level of satisfaction expected by the stakeholders. There are periodic assessments and each time the University comes true up to the expectations of the stakeholders. It is a statement of constant improvement in all spheres including academics, discipline, delivery and infrastructure.

Of late, there have been some cases of indiscipline on the campus. What do you see as provocation?

D I A L O G U E J & K S I T U AT I O N

I have always pursued a liberal approach to student politics. But unfortunately, in liberal atmosphere students sometimes fall prey to some vested interests. It was a difficult situation. In such circumstances, the Vice Chancellor is seen as the only person who can provide some relief. Every body looks up to the Vice Chancellor who comes across the real test of leadership. There were some external influences but we were able to resolve the situation, of course, with the support of an overwhelming majority of the students for whom this University is a pride.

During this disturbance at the Campus, somebody accused you of being communal. How to you react to this?

That was the biggest shock. There have

been several attempts to destabilize me with several ways but the most hurting word was “communal”. In fact the community and caste consideration is an anathema to me. I see myself as religiously blind.

Can you enlist some persons or other influences which contributed to the making of your secular outlook?

I would have a become a journalist It has been widely speculated that you may join politics after your present stint as Vice Chancellor. Media reports have often suggested that two important political parties in J&K have approached you for a role in organization and government. Is there something like this on cards?

My mother, Jawahar Lal Nehru University and Oxford University

(Laughs) Well, honestly speaking, I never had the time to think on anything like this. I may think once I am free from the present responsibilities.

You were selected for Indian Police Service but you preferred to pursue your career as an educationist or social scientist. What would you have preferred to become if not an educationist?

Is it true that political parties have approached you for joining them?

Epilogue because there is more to know

ARE YOU MISSING YOUR EARLIER STORIES ?

Yes that is true!

June 2007 Looking Beyond “K” May 2007 Peace Process April 2007 PDP-Congress Coalition Schism March 2007 Baglihar February 2007 The Promise Ahead

Write to editor.epilogue@gmail.com Epilogue Ø 18 × January 2008

January 2007 Book of the year

I N

F O C U S

ECONOMY & OTHER IDEAS

Buoyancy in J&K Economy and Budget 2008-09 As the Finance Minister prepares to present the last annual budget of the present PDP-Congress coalition government. PROF. NISAR ALI analyses the achievements of previous year and projects expectations For the future planning.

The budget 2008-09 of Jammu and Kashmir State is in its making and has to be linked with the previous historical budget presented by Finance Minister Mr Tariq Hameed Karra in January 2007. It becomes historical for the reason of being preceded by presentation of first ever pre-budget Economic Survey to enlighten public the state of economy and the state of mind and also becomes now an annual feature of budget presentation in the legislature.

One has to view the ensuing budget from its prescriptions of innovations to be presented and responses thereafter, expectations raised and objective functions realized or likely to be realized by the termination of the next fiscal year. In the present paper an attempt is be made to predict the possible outcomes of the budget and its focus areas.

Fiscal Position If we look at current budget completing its three quarter of execution it is difficult to ascertain existing fiscal

position of the state since there is no effective monitoring so that quarterly data could be made available.

The international resource mobilization on account of tax revenue seems to show upward trend primarily due to expected

increase in value added tax and power tariff. Assuming effective tax administration, the revenue on account of service tax is also likely to augment internal tax revenue. We estimated tax revenue to be realized by the end of current fiscal year around Rs 3112 crore , excise and sales tax/vat is likely to perform well given the increase in volume of business and relatively better

Epilogue Ă˜ 19 Ă— January 2008

situation. The sales tax/vat seem to be potential area of revenue generation as during the 2005-06 fiscal year the revenue was around Rs.1015 crore and we estimated the same for the fiscal year Rs 1422 crore.

Combined with power tariff and service tax levied first time we should be able to estimate our tax revenue in the ensuing budget 2008-09 Rs 3000 crore and non tax revenue Rs 1000 crore to generate Rs 4000 crore as internal resource mobilization.

Comparing the own tax revenue-gross state domestic product ratio during 2002-03 to 2006-07 one finds the ratio not has been very low but increasing marginally from 0.047 in 2002-03, 0.052 in 2003-04, 0.0577 in 2004-05, 0.0640 in 2005-06 and 0.0653 in 2006-07.

A similar trend is observed when we compare non-tax revenue-gross state domestic product ratio which stood 0.017 in 2002-03 and 0.020 in 2006-07.

This demonstrates potential buoyancy in

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tax and non-tax revenue and both vertical and horizontal increases in internal resource mobilization are justified. But one has to exercise a caution in advocating this because of the ensuing elections the Finance Minister may not be in a mood to do so.

It would be a land mark budget as in Jammu and Kashmir fiscal history the internal resource generation has been at snails pace as compared to previous decade. The additional revenue generation would be from tax on vehicles, passenger goods, service tax, etc mostly coming from higher income brackets.

depends on effectiveness of tax administration particularly during the last quarter of the current fiscal year.

The budget management much depends on the fiscal discipline. If we look at the revenue expenditure of the current budget estimated at Rs 10763 and primary revenue expenditure mainly comprising salaries, wages and pensions estimated at Rs 8606, that is, 80 per cent of the total revenue expenditure and 53 per cent of the total budget or 84 per cent of the central devolution (share in

Between 2002-03 and 2006-07 the states own revenue has increased by 88.65 per cent.

Similarly the non-tax revenue of state has increased by 75.3 per cent during the reference period which shown buoyancy and needs to be sustained.

The own tax revenue realization need to be compared with capacity in the economy and consumer capabilities and the statistics of the reference period shows that the per capita income during the 10 th plan period,2002-03 to 2006-07, in the state demonstrate a rise from Rs 19219 to Rs.24830 at current prices and a year earlier 2001-02 it was just Rs 17543, that is an annual growth of 7.2 per cent. The per capita income has been sharp particularly during 2004-05 2006-07, hence additional resource mobilization on account of tax revenue is justified.

Budgetary Management and Fiscal Responsibility Much of the revenue augmentation

gains realized on the revenue realization front. We need to exercise budgetary discipline in case of over-head expenditures at this stage of fiscal year to minimize the public expenditure.

Macroeconomic Aggregates and Priority Areas Before we analyze the impact of current budget on the economy and the focus required in the ensuing budget we need to know the pressing problem areas of the economy. One such area is the backlog unemployment of educated manpower as a stock and the net addition to annual unemployment as a flow.

Unemployment

central taxes +resources from centre), the state has to exercise a great care in nits disbursements. According to schedule of establishment, there are 3,14,125 employees depending upon current budget for their wages and I believe there are another 100 thousand so-called employees and in administrative language casual labour engaged in State establishments, budgetary supported corporate and local bodies with annual financial implication of Rs 250 crore. It remains a serious question whether these official organs of state and corporate bodies have legislative mandate to incure the expenditure on account of the said wages comprising disbursements at operational level.The lack of discipline here may end up the current budget with unmanageable deficit or will off-set the

Epilogue Ă˜ 20 Ă— January 2008

The economy is trapped in a paradox. It imports labour more than 300 thousand of various skills who remain gainfully employed across the districts in all economic pursuits. The estimates are based on observations and not any official estimates and seem to be realistic. On the other hand the government appointed a few times Cabinet Committee to look into the problem as serious area of concerned. The official estimates reveal that there are about 109 thousand (2006) educated youth unemployed on live register of employment exchange. Therefore, it looks a paradoxical as labour importing economy is crying for unemployment.

Assuming its seriousness, it works around 1 per cent of the population and 5 per cent of the active labour-force. According to NSS 60 the Round the unemployment rate in the State is 4.21 per cent which means 400 thousand roughly.

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This is to be viewed in terms of identification of unemployed, a youth seeking state sector job or a youth working in a private school as underwage teacher/employee or an educated youth working in a private sector seeking state sector job or a casual labour/ daily wager in the state establishment in the queue for permanent state sector job. To avoid business uncertainties and to cover entrepreneurial initial risk and business risks a provision was made in the current budget for Rs 100 crore as venture capital fund. It was created to facilitate small and medium commercial enterprises to re-equip themselves to carry on activities. But it looks that the takers of venture capital benefits have not made their presence felt when only a quarter of the current fiscal year is left.

This has got to be moved forward in the ensuing budget by reactivating High Power Employment Mission proposed in the current budget. The budget 2007-08 is committed to launch new selfemployment ventures and schemes for upgradation of skills, trainings and drive towards entrepreneurial ability. The other areas in self-employment ventures include service sector ventures, export promotion programmes, new emerging areas like floriculture, fish farming, apiculture and rural transport. In this connection the capital subsidy was raised fro 5 per cent to 10 per cent of the unit cost and the ceiling also is doubled fro Rs 7500 to Rs 1500 in each case. The debt servicing or interest subsidization is extended to other sectors in addition to handlooms and handicrafts. How far these incentives have been fully availed of by entrepreneurs is not known as yet.

Similarly the motivitational incentives for urban entrepreneurs in establishing integrated communication Kiosks, or specialized marketing cells for processed food products were proposed particularly for educated urban women and I do not think the potential entrepreneurs have been driven to the

incentives. Only a few success stories have come on to the surface. The State government Entrepreneurship Development Institute needs to re-orient itself and carry out the budgetary proposed programmes on innovative lines and purposeful mode. Their thrust needs to be on workshops of specific skill and specific venture rather than conventional lecturing to relevant clintale with focus on motivation. As a

block headquarters. The post-workshop trainee and trained potential entrepreneur must be subjected to evaluation and monitoring with exitfeed-back to EDI. This would enable the Honble Finance Minister to keep a track of the extent to which mission proposed in the budget is successful and the extent to which his budgetary incentives realize the desired end.

Resurgence of Tourism to Generate Income and Employment

A self-employment motivational drive, skill formation and skill upgradation has to be made a “movement and a mission” to initiate investment climate and small scale industrial base in the state particularly in the valley

result of this the budgetary proposals do not meet the desired results at the conclusion of the fiscal year. A selfemployment motivational drive, skill formation and skill upgradation has to be made a “movement and a mission” to initiate investment climate and small scale industrial base in the state particularly in the valley The ensuing focus of the budget needs to be for the said mission with EDI skill and motivational workshops at district and

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The tourism industry today is different than what it was in the past. It is not Gulmarg or Pahalgam but with new initiatives and state interventions the new tourist destinations have been identified. There are 50 tourist villages identified and 5 villages have been identified in the phase I at the cost of Rs250 crores. The new road connectivity is initiated to make potential areas accessible to tourists. More than 6 lakh tourists visited the valley in 2005 and more than 29 thousand to Ladakh in 2006 up to July. The pilgrim tourists to Amarnath cave in 2005 stood 3.88 lakhs and in 2006 2.55 lakhs. Thus more than 10 lakh tourists visited in the valley and another 62 lakh pilgrim tourists visited Jammu and Katra. In 2005.There are some new pilgrim and heritage sites like “Buddha Amarnath” in Poonch, “Baba Ghulam Shah Badshah,” in Rajouri which need to have tourist infrastructure so that these sites could be exposed to visitors. We also need to prepare heritage and tourism Atlas for both vertical and horizontal expansion of tourism industry. The resurgence of tourism industry needs to be viewed in terms of development of infrastructure and new thrust in the industry.

Therefore, the greater thrust need to be for promotion of winter tourism ecotourism away from Pahalgam-Gulmarg tourism hence warrants greater allocation for the sector. Shift away from Gulmarg-Pahalgam would have greater

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tendency to generate income and employment.

Agricultural Growth & Economic Leakages Agrarian economy presents a dismal picture for last two and a half decades.

The average size of holdings is declining very fast reducing state's arable land to irreducible minimum.It was 0.93 hectares in 1971 with about 50 per cent of holdings less than 0.5 hectares and about 75 per cent holdings less than just 1 hectare. As per Agricultural Census 2001 the average size of holding is reduced to 0.66 hectare with about 78 per cent holdings less than 1 hectare.It means means most of the state arable land is economically unviable and does not give bare subsistence to cultivating households.We need to make a law on the floor limit for size of holding.There are more than 2 million agricultural workers dependent on farming and if size of holding gets reduced at such an alarming rate, the State may get into insurmountable crisis. Therefore, farmbased supplementary self-employment projects must find a focus in ensuing budget. The net area sown was 732 thousand hectares in 1985-86 and has just increased to 734 thousand hectares

in 2005-06.This means that the irrigation capacity building is stagnant for last two decades hence foodgrains production is stagnant during the reference period.

Therefore, we need to re-focus our agricultural development policy in the ensuing budget

Education and Human Resource Planning Access to education has been a primary interest of the Government in its policy.

That is precisely why the literacy rate has gone up from 12.95 per cent in 1961 to 55.52 per cent in 2001. The number of secondary education institutions and below has increased from 10265 in 198081 to 19735 in 2005-06 with student enrolment from 7.98 lakhs to 20.73 lakhs during the reference period. There are number of state intervention programmes outside the budget to make education accessible in the state. The ensuing budget needs to focus on restructuring education by more allocation for need-based professional and skilled based education and also withdraw the budgetary allocation for primary/middle school education in districts where enrolment is below threshold level. The private schools can be aided to cover poor and under-

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privileged children accessing education in private schools.

Power Economy and Fiscal Management Power economy is a political-economy problem. The state economy is power scarce economy with generation potential of 20 thousand MWs. Ironically the state imports power worth Rs 1608 crores estimated 2006-07 and realizes revenue Rs 266.36 crore estimated 2006-07 thus reducing the power budget deficit Rs 1372 crore. The projected power expenditure for 200708 is Rs 2069 crore.

It is the power budget which makes the state budget deficit and the state is unable to overcome the problem in the short run. The people are entitled to low tariff power because of plenty of states own water resources. Secondly if power sharing from centrally sponsored projects is on 50:50 basis the state is able to reduce its deficit and industrialize for higher growth.

CONCLUSION The ensuing budget of the state is likely to be partly sweet and partly growth stimulating. It seems the additional resource generation may be put off due to elections approaching. However, the allocations for infrastructural development may increase in the proposed budget to stimulate growth.

The state needs to implement service tax on a large scale because it has a lot of potential to generate revenue.

A member of the Editorial Board of Epilogue Magazine, Professor Nisar Ali is Dean Faculty of Social Science, University of Kashmir. He is also member of J&K State Finance Commission.

The views expressed here are personal and not attributed to J&K Govt or State Finance Commission.

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“Financing Development in J&k is Financing Peace” Interview with Tariq Hameed Karra On January 16, the Finance Minister TARIQ HAMEED KARRA will present in the legislative assembly the annual budget for the year 2008-09.

This budget being the last of the present coalition government, being presented in an election year and the first of the Eleventh Five Year Plan raise is huge expectation. In an exclusive interview with Epilgoue Editor-in-Chief ZAFAR CHOUDHARY, the Finance Minister makes an elaborate account of the achievements of previous year and hints at What should be expected from his forthcoming budget.

While presenting your first budget this year, you had said something very peculiar “Finance Department is financing peace in Jammu & Kashmir”.

How far have you been actually able to finance peace in its real sense ?

The comparison of budgets for the two years will vouchsafe the fact that we have committed more resources for

Firstly, I would like to make a correction here for the purpose of record. I never said something to use your phrase, as “peculiar” as “Finance Department is financing peace in J&K”. In fact, in the first part of my budget speech for the year 2007-2008, I referred to the context in which my budget proposals were anchored. Under the caption “The Context”, I talked of peace budget proposals echo the peace through development agenda of the coalition Government. After all, financing the country and the region. Therefore, my budget is about development through more efficient and judicious application of resources and utilization of such resources especially human resource.”

The comparison of budgets for the two years will vouchsafe the fact that we have committed more resources for development.

For the year 2006-07, the capital component of the plan amounted to Rs. 2737 crore and for the current year the same is Rs. 4016 crore i.e. an increase of around 47% in capital expenditure which is entirely for development.

As you will appreciate, there was no reference to Finance Department per se.

However, the central idea behind what I said is that the budget is all about development through more efficient and judicious use of resources. I sincerely hold the view that financing development in J&K is financing peace, not only in J&K but across the country.

Developmental initiatives such as Prime Minister's Reconstruction Plan (PMRP) should also be seen in such a context.

development. For the year 2006-07, the capital component of the plan amounted to Rs. 2737 crore and for the current year the same is Rs. 4016 crore i.e. an

Epilogue Ø 23 × January 2008

increase of around 47% in capital expenditure which is entirely for development.

Besides certain qualitative changes, the annual budget 2007-08 set a different precedence that it was presented in the month of January.

Once again you are up for maintaining the precedence of advancing the budget. Did this shift in timing of presenting budget bring the desired results?

There were many reasons for early budget presentation. One of the objectives is to optimally utilize the learn winter months for seeking legislative approval of the budgetary proposals much ahead of the norm so as to help maximize the limited working season for implementing and monitoring plan schemes. As the wintery climatic conditions improve in the months of February and march, the progress in implementation of various development works can be accelerated. Budget sessions held earlier in February/March would not leave time for various executing agencies and officers to supervise and/or monitor both pace and quality of execution of developmental works particularly towards the close of the financial year. Further, earlier on the budget used to be passed by the Legislature around last week of March. It would normally take the executive two to three months to prepare various

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estimates/plans in pursuance of budget announcements/ allocations. Once our budget for the next year is in place two months ahead of the start of financial year, it gives ample time for the executives to prepare estimates, seek approvals including technical approvals and release allocations so as to ensure execution of developmental works and schemes right from day one of the new financial year. I may add here that so far as non-plan allocations are concerned, 75% of the provision for the current year in most cases was released of March 30 itself.

slightly vary due to some receipt identified earlier not coming through or due to some expenditure budgeted for earlier not taking place or due to some extra ordinary expenditure on account of some extra ordinary situations like natural calamities, etc. arising during the course of the year. If you look at my

Even after years of “Zero Deficit” budget, a majority of people yet do not understand the term in the practical terms. The leader of opposition, Mr Abdul Rahim Rather, who has to his credit presentation of nine budgets, ridicules the “Zero Deficit' as fudging the figures and postponing liabilities. Could you please explain the features of 'Zero Deficit' budget ?

I am glad that you have asked this question, as there is a lot of misunderstanding with regard to “Zero Deficit Budget”. In fact, I get amused when many people use the term incorrectly and call the budget as “Zero Budget”! t has been made clear a number of times that “Zero Deficit Budget” means that our estimated receipts and estimated expenditures are equal. It mean that no part of expenditure is being budgeted for without identifying the resources to fund the same.

At the end fo the day, the position may

budget proposals for the current year in detail, the total receipt were projected at the level of Rs 16,117 crore. The total expenditure has been estimated at the level of Rs 16,267 crore.

Thus, very clearly, there was a resource gap of about Rs 150 crore. The amount/deficit was to be met through

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ARM and the trends show that we will exceed this target.

The growth during the last financial year was estimated at 5.75%. For the financial year 2007-08, the annual growth rate was pegged at 6.5%. You are about to present the second consecutive budget, could you please explain the Jammu and Kashmir growth story.

As you are aware, the growth story of J&K is extremely positive. Gross State Domestic Product (GSDP), which measures the growth in the economy without accounting for the component on consumption of fixed capital (CFC), has increased from Rs. 15,660 crore in 1999-00 to Rs. 29,115 crore in 2006-07. Net State Domestic Product (NSDP) or State Income, which demonstrates the behaviour of the economy in real terms, was estimated at Rs. 24,836 crore in 2006-07 as compared to Rs. 13,533 crore during (1999-00) prices, the NSDP estimates of J&K stood at Rs. 13,533 crore in 1999-00 whileas it is estimated at Rs. 18,516 crore in 2006-07. At constant (1999-00) prices, the Per Capita Net Income for the state is estimated to record a growth of 3.04% during 2005-06 over the previous year 2004-05 and 3.19% during 2006-07 over the year 2005-06. The average annual growth rate of Per Capita Net Income during the period 1999-00 to 2006-07 was 2% at constant prices and 6.37% at current prices.

In short, what I am trying to convey is that, so far as economic growth is

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concerned, we are on tract.

Your budget had painted rosy picture of expectations. In your speech, you had raised expectation son rise in receipt and decrease in expenditure. At the end of the year, what picture do you obtain on this account ?

Our revenue receipts for the current financial year are estimated at Rs. 7,950 crore as against Rs. 7,359 crore last year.

Similarly our plan receipts are estimated at Rs. 4,755 crore as against Rs. 3,921 crore last year besides the receipt under Centrally sponsored Schemes (CSS). So, there is a trend of increase in receipts and hope and expectations is that such a trend will continue.

When I say decrease in expenditure, it does not mean that our expenditure will go down as decline in expenditure would mean lesser developmental activities.

The focus is to restrict growth in our revenue expenditure; not hat there ought to be no growth in revenue expenditure. We have to pay salaries, wages, pensions and meet our maintenance requirements, service debt and interest. All this points out that increase in expenditure is inevitable. The only issue in our focus is to increase developmental expenditure and restrict growth in revenue expenditure. This we have achieved but much remains to be done still. Let us look at the position in the last three years. During 2005-06, the revenue expenditure was Rs 9,921 crore as compared to capital expenditure went up to Rs. 3,365 crore. In the current year, it is estimated that capital expenditure will go as high as Rs. 4,643 crore, while the revenue expenditure will be at the level of Rs 10,615 crore only.

Therefore, we are in a situation where growth rate in revenue expenditure is much less than that of growth under capital expenditure. This is an

achievement, as more and more expenditure is getting committed for development of the State.

What is the deficit position? For the recent few years the government has been trying hard to ensure the fiscal discipline but still the burden of loans and overdrafts has been rising. How do you put the present situation ?

Our revenue receipts for the current financial year are estimated at Rs. 7,950 crore as against Rs. 7,359 crore last year.

Similarly our plan receipts are estimated at Rs. 4,755 crore as against Rs. 3,921 crore last year besides the receipt under Centrally Sponsored Schemes (CSS). So, there is a trend of increase in receipts and hope and expectations is that such a trend will continue.

Much depends upon what type of deficit we are talking about. As I said earlier, our budgetary deficit during the current financial year is estimated to be zero. So far as our fiscal deficit is concerned, we have been trying contain its growth. It cannot be zero as that would mean

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stagnation in our developmental activities. Some part of plan has to be funded by raising loans and the budget also provides for subsequent repayment of these loans. Hence the budget takes care of loans that are being raised for developmental activities.

A realistic picture with regard to our deficit, based on the actual level of expenditure will emerge only after our accounts are fully reconciled with the books maintained by the Accountant General. I am happy to share with you that, for the first time after many years, we have reconciled our expenditure for 2006-07 with the books of Accountant General to an extent of 100%. It is my hope that Finance Accounts for the year 2006-07 will bring out the correct expenditure situation. The trend is continuing and for the current year, we hope to reconcile revenue numbers also to the full extent. We are moving-in a professional consultant to take stock of the state's finances and, thereafter, work out a roadmap for better expenditure and debt management.

The increase in the non productive expenditure would hamper the growth of the State. How efficiently have you been able to check the non-plan expenditure this year ?

You had admitted while presenting last budget that non plan expenditure has increased and there was storage of Rs. 200 crore in the non plan productive expenditure during 2006-07.

As I spoke about just a while ago, the growth of revenue expenditure is under check.

At the same time, the assets that are created through developmental plan have to be maintained and hence the growth in revenue expenditure cannot be zero. Besides, capital expenditure excludes the salaries that being paid for carrying out the developmental activities. It means that increase in

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developmental activities will definitely add a small percentage to the revenue expenditure as well. I would also like to mention that a substantial portion of our plan was accounted for by revenue component including the salaries under the plan. It is first time during the year 2006-07, we took a very bold decision to shift plan revenue component to the non plan side aggregating Rs. 450 crore.

During the current year also, plan revenue component amounting to Rs. 400 crore has further been taken on to the non plan side. All this obviously creates a pressure on the non plan side. Yet, this is the most logical way to go forward. We must transfer liabilities on the plan to non plan and made the plan more and more capital intensive. Further, our interest burden is showing an increasing trend. In the past, we have contracted liabilities for which interest provisions have to be made.

In our pre-budget economic survey you had categorically pointed out that the time for offering amnesty has gone.

However, your budget proposed amnesty for trade and industry but against with a categorical condition that this was the last opportunity. Did the amnesty scheme bring desired results ? If yes what was the quantum ?

I am still committed to eh budget announcement made in the budget. We propose to bring legislation in the budget session for removal of the provision that allows amnesty so that the recently concluded amnesty scheme would be the last and final. I had accepted that the amnesty scheme would bring in additional resources. I am not disappointed with the outcome of that. I shall talk about in detail at the time of presentation of the budget in the state legislature.

Many had said that your budget was entirely based on presumptions. In

your budget speech you had clearly mentioned that the Government of India had decided to give Jammu and Kashmir a plan of Rs. 4000 crore. It was also said that the Government of India will finance the power reforms grant of Rs. 1300 crore. There were fears that if the grant did not come the entire budget proposition will go haywire.

Could you please allay those fears as the year comes to en end ?

Budgets can't be prepared on presumptions. Every decision is based on inputs that are received from various departments, Government of India and Planning Commission of India. Some estimates are based on the recommendations of Finance Commission. Our plan size has been fixed by the Planning Commission. Of India at Rs. 4,850 crore for the current financial year and we expect that Government of India will fulfill all its commitments : there are still more than three months to go before the current financial year comes to a close.

Having said that, I do recognize your specific question on the Power Reforms Grant. I have no hesitation in admitting that this has been a tough task. Power reforms are easier said than done. We have taken up an ambitious programme of electronic metering, electronic billing etc. We have introduced energy accounting at the sub-transmission level.

Huge investments under Prime Minister Reconstruction Plan, roughly of the order of Rs 1,000 crore and similar flows under APDRP, are being made in the transmission and distribution section.

This should leader to reduction in Aggregate Technical and Commercial (ATC) losses. Efficiency gains would not only improve availability of power but also effectively reduce the outgo in terms of payment by the consumers.

However, all this will take time. We are convincing the Central Government to

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agree to the Power Reform Grant dispensation for a period of minimum 3 years. The current year has been year number two. Various other issues like t r a n s f e r o f D u l H a s t i H E P, a s recommended by Dr. Rangarajan Committee, have also got linked up to the larger question of Power Reforms grant for the State. In the Scheme of Financing (SOF) approved by the Planning Commission of India for the current year annual plan, Power Reforms Grant of Rs. 1300 crore has been specifically committed. However, it is true that there are problems with regard to flow of this money. We are sorting out the matter with the Union Ministry of Finance and Planning Commission of India and it is my hope and expectation that the money would come before the close of the financial year.

Employment was the major thrust area of your budget this year. There is no perceptible change in the scenario.

Unemployment still remains a major concern and seen as assuming alarming proportions. Could you please elucidate the achievements on this front ?

I draw your attention the “challenges of unemployment” that I incorporate in my budget speech for the current year. A plain reading of para 73 onwards clearly demonstrates the State Governments' will and commitment for tackling the issue of unemployment. It is my belief that one of the principal reasons for the poor off-take of self-employment schemes is the fault in the design of financing of employment schemes across the country, and more particularly in a state like J&K. Debt financing of employment has not worked.

May it be on account of faulty selection process or poor post-disbursement monitoring of the project and general risk awareness on the part of banks, debt

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financing has simply not worked.

Therefore, in my budget speech, I talked of venture capital funding of selfemployment schemes. This is a new concept and I do not claim final understanding on this concept. But building on this concept, during the course of the year, A draft Employment Policy document has been prepared by the Economic Advisor in consultation with Planning and Development Department and Finance Department.

This draft is currently under the active consideration of a Cabinet SubCommittee. We are looking at review of the existing employment schemes and also up-scaling of the subsidy component so to make the existing self-employment schemes more attractive.

The Banks in J&K are charged with not keeping up their social obligations of giving loans to raise self-employment.

Does the Finance Department have any details on how many youth had applied for loans before the banks this year and how many cases were sanctioned ?

I just covered this issue. The credit deposit ratio in J&K is around 48% as of now and is fairly below the national average of 60%. In the past, meetings have been held with the Chairmen of Banks. Our effort has been to impart greater sense of security and comfort to banks and financial institutions. I must mention here that we have also worked out a new framework of Debt Recovery Tribunals (DRTs) for the comfort of the banks. This legislation has been introduced and is presently under the consideration of the Select Committee.

Apart from this, we have embarked upon an ambitious programme of entrepreneurship development through a re-energized Entrepreneur Development Institute. At the level of SLBC, design issues are being also addressed.

Another significant aspect of the present year's budget was its presentation at the last year of Tenth

I just covered this issue.

The credit deposit ratio in J&K is around 48% as of now and is fairly below the national average of 60%. In the past, meetings have been held with the Chairmen of Banks.

Our effort has been to impart greater sense of security and comfort to banks and financial institutions. I must mention here that we have also worked out a new framework of Debt Recovery Tribunals (DRTs) for the comfort of the banks.

Five Year Plan. You had rightly said that being on the doorstep of XI Five year Plan, the government needed to reflect

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on lessons of the past and make strategies for the future. What cues have you picked from the past and what are the major strategies for the future ?

Yes. Indeed, there are a number of lessons that we have learnt. I would just give one example. Our efforts on the maintenance side leave much to be desired. Our motto should be “public constructs and private maintains”.

In other words, public investment should create infrastructure and maintenance of such infrastructure should be done by private players under Public-Private Partnership mode. Based on this learning, a separate sub-plan for maintenance of assets is being conceptualized so that the flow of resources under non plan maintenance, plan maintenance and allocation under Twelfth Finance Commission could be clubbed together and the challenge of maintenance of assets is met in a more focused and synergized manner.

The J&K Fiscal Responsibility and Budget Management legislation is in force since April 1, this year. This legislation was expected to put in place stringent policy measures for mobilization of additional resources, better tax and non-tax collections and full cost recovery of user charges.

Could you please enlist achievements on this front ?

FRBM is in place since April1, 2007. a number of measures have been taken under FRBM. We require a set of rules which have now been finalized in consultation with the Law Department.

I am sure an honest implementation of FRBM will bring about qualitative changes in expenditure and more efficient management of resources.

Having said that, let me proceed to say that the story on the tax side is extremely positive. Our taxes seem to

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be increasing at over 16% per annum.

Business India in a recent edition has mentioned that the performance of J&K on VAT has been top-class. Our performance has been appreciated at the level of Empowered Committee of State Finance Ministers who have also rates our performance as one of the best. We have made no deviations from the Uniform Floor Rate (UFR). At the cost of being seen as a tough and nonrelenting Finance Minister, I have held my ground in the larger public interest.

The Prime Minister's Task Force on Development of J&K headed by Former Reserve Bank of India Governor Dr. C. Rangarajan had suggested that systems and processes

of fiscal federalism that work for the rest of the country are not necessarily optimal for this state. In this background, the state government had made request to the Gol to front load the second phase of Prime Minister's Reconstruction plan in a manner that it takes off during the first year of the XI plan itself. What is the progress on this front ?

We shall shortly go into plan discussions with the Planning Commission and Ministry of Finance. At the time of the presentation of Union Budget, we would also get a precise ideas of the Gross Budgetary Support (GBS) to the state plans. Thereafter, we will strategize as to how best to access central resources for the second phase of PMRP.

Your understanding of our requirement is absolutely correct. We have taken up the issue for sanction of second phase of PMRP and front loading of exp0enditure under the second phase during the current year itself. Our wishes involve the resources of the Central Government.

The coalition government under the dynamic leadership of our Chief Minister is leaving no stone unturned to maximize the flow of developmental resources for this state because I sincerely hold, to reiterate for the last time in this interview, my response to the first question, “Financing Development in J&K is financing peace!”

Epilogue because there is more to know

December 2007 Forests Foresters November 2007 Ladakh October 2007 60 years of J&K Conflict

ARE YOU MISSING YOUR EARLIER STORIES ?

September 2007 Jammu & Kashmir as Land of Contact August 2007 J&K @ 60

Write to editor.epilogue@gmail.com Epilogue Ø 28 × January 2008

July 2007 Policy Failure

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J&K State in the grip of financial crises Abdul Rahim Rather Indian fiscal federalism is deep-rooted, farsighted and highly elastic. The Finance & Planning Commissions are very strong institutions to keep a vigil on changing economic scenario at regional, national and global levels. The requirement therefore is to ensure sincerity in implementation of the fundamentals of such a fiscal federalism, which are enshrined in accurate assessments, enforcement of discipline and purposeful evaluation of financial input and output ratios.

Any laxity in application of these basic requirements is susceptible of producing negative results. Every scheme of devolution of financial resources and their management has to be under a constant debate, the objective being that while the economy at national level should strengthen, the states should also be allowed a sufficient and durable autonomy in handling its economic developmental requirements in a desirable manner.

In spite of liberal funding by the Central Government, the J&K State continues to be in the grip of the financial crisis.

Generation of internal resources by the state is on its lowest ebb. The treasury is not able to meet even the committed liabilities, which are accumulating at a rapid speed- the present liabilities being around rupees four hundred crores excluding those relating to footing the bill of power purchases. The level of over draft is highest i.e., around rupees two hundred five hundred crores as on date including that relating to power sector.

The overdraft has not been below rupees

eighteen hundred crores on any day during last two years. This alone is a clear

Development of infrastructures for which the State Government feels proud of, deserves rethinking to make it devoid of political considerations. The biggest economic problem of the state is that though gross investment is on a rise, the fact remains that production is falling rapidly. We may be eager to execute mega power projects with highest possible speed, generation from our own sources is declining because of poor maintenance of the existing powerhouses.

indicative of improper financial management and fiscal indiscipline.

Epilogue Ă˜ 29 Ă— January 2008

Financial input and output ratios are highly disturbing, unproductive expenditures are fast increasing mostly because of political considerations ignoring the basic parameters of economic requirements having a wide spread dissemination of developmental efforts. The outcry of attaining financial stability by the state is far from reality.

Development of infrastructures for which the State Government feels proud of, deserves rethinking to make it devoid of political considerations. The biggest economic problem of the state is that though gross investment is on a rise, the fact remains that production is falling rapidly. We may be eager to execute mega power projects with highest possible speed, generation from our own sources is declining because of poor maintenance of the existing powerhouses.

While we establish new education institutions and upgrade old ones, very little is done in providing academic and other essential facilities for running them.

The result is high drop out of the students and decline in literacy rate. Our proud industrial policy and plans are not showing desired results. Bureaurocratic hassles continue to be unmanageable.

The local industrialists as also those coming from outside are getting frustrated. Agricultural production is declining. Imports of food products into the state are increasing day in and day out. This is equally true about key materials required by the state also.

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rupees thirteen hundred crores. The Fiscal Management & Responsibilities Act already passed by the State Legislature is nowhere in sight. Action plans in the form of state budget lack in accuracy of assessment and clear display of the programmes to be under taken during the year.

Our budget for the current year envisages an expenditure of around thirteen thousand crores of rupees, which is funded to the extend of over eleven thousand crores leaving very little to be arranged by the State from their own sources i.e. hardly fifteen percent.

We are not able to lift the central assistance and use the same fully for the purpose for which it is granted.

Even the direct funding under programmes like RHM, PMGSY, and Urban Development is grossly under utilized.

Around six hundred crores are lying in banks on account of such programmes for one reason or the other.

Power deficit grant of rupees thirteen thousand crores assured by the centre has been availed so far. We have not been able to raise market borrowing of around

The State Government should apply required correctives, wherever, called for. While on development spree, we have not to lose sight of making accurate assessment, enforcement of financial discipline, strict monitoring, which are essential keys to generate a sound and healthy economic scenario. Our acts have to be such, which will take us forward on economic development front smoothly and on sustained basis. Apart from meeting present requirements, we owe such commitment to our progeny also.

Perfect economic planning and financial management, can alone be a sound foundation for the states real autonomy. Therefore, while taking optimum advantage of the liberal financial assistance given by the central government, we should be able to develop a mind set for harnessing State's own resources. Nature has been generous by giving potential for our growth, whether it is in minerals, hydrology, and forest real crafts menship and above all in unparalled natural environment.

Now Telling The J&K Stories

Epilogue because there is more to know

Contact ABDULLAH NEWS AGENCY Lal Chowk, Srinagar 9419074859

RAINA NEWS AGENCY Residency Road, Jammu

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How long we can ignore our responsibility in taping this potential to make our selves self sufficient. We should strive to accomplish this goal without any further loss of time.

CENTRAL NEWS AGENCY New Delhi

ABDUL RAHIM RATHER is Leader of Opposition J&K Legislative Assembly. He has remained J&K’s Finance Minister several times

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Epilogue Ø 30 × January 2008

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Budget 2007-08 : The unfinished business Arjimand Hussain Talib The Budget 2007-08 has an uphill task at hand. Apart from struggling for reining in J&K's fiscal and revenue deficits it has also to face the continuous challenge of internal revenue mobilization and also factor in the challenges which continue to dog our public delivery systems, resulting in poor spending and lapsing of precious funds.

During the last budget session, it was revealed that out of Rs 848 crore released under the PM's Reconstruction Package our State was able to utilise only Rs 484 crore during that year. Out of the Rs 4100 crore released last year under ADB-funded projects and Bharat Nirman Yojana hardly 5 per cent of the funds have been spent!

The dismal state of spending and delayed delivery of public services has been exposed in a government document itself which was prepared to argue for time extension for the PM's Reconstruction Package. The ways we have failed to deliver makes interesting reading.

The Package which was scheduled for completion in 2007-08 has already been extended to 2009. Our planners are upbeat that the Rs 500 crore which were not released by the centre for State sector projects for 2006-07 until January 2007 would not lapse and they will be extended to next financial year. It has been revealed that many central projects under the Package which are to be implemented by State government agencies, either work is yet to be taken up or little progress has been made over them.

Under State sector projects, the PM's Package has Rs 3316.12 crore worth of projects, whose cost was subsequently

revised upwards to Rs 3787.42 crore. Out of this only Rs 1215.36 crore have been spent so far.

As against a provision of Rs 1056 crore for transmission and distribution of electricity, only Rs 133 crore have been used until 2006. Out of Rs 142 crore kept for model villages only Rs 44.68 crore have been spent so far. For upgradation of nine women's ITIs only Rs 14.91 crore have been spent against the actual outlay of Rs 30.60 crore. Surprisingly, hardly Rs 17.77 crore have been spent against the sanctioned amount of Rs 49 crore for 14 new degree colleges, which were billed to help decongest the existing colleges and help provide quality education. The dream of electrified villages and quality supply to others has remained unfulfilled despite a provision of Rs 700 crore as reportedly until now only tenders had been floated.

Out of Rs 83.62 crore sanctioned for National Rural Health Mission (NRHM), a mere Rs 8 crore have been used on civil works in Community Health Centres (CHCs) even as people in our State continue to die for want of basic health facilities.

Although promotion of tourism continues to remain the pet goal of our governments, nothing could be as ironic as the fact that our State has spent only Rs 1.64 crore out of Rs 31.50 crore approved for development of tourist villages. Shamefully, only Rs 3.85 crore has been used for providing assistance to Tourism Development Authorities as against Rs 240 crore sanctioned under the Package.

Out of Rs 201 crore sanctioned for rehabilitation of horticulture and establishment of agri-

Epilogue Ă˜ 31 Ă— January 2008

clinics, a paltry Rs 25.44 crore have been spent. The document reveals that only Rs 1 crore was incurred on urban self employment as against Rs 26.94 crore reserved under the scheme during last year. As if all this was not enough work is yet to be launched on upgradation of Jammu and Srinagar Medical Colleges for which Rs 120 crore each were sanctioned.

The PM's package had also earmarked Rs 1741 crore for Greater Srinagar and Rs 1470 for Greater Jammu for drainage and sewerage. But the government has not been able to spend anything despite the fact that Srinagar city has witnessed two floods due to lack of drainage facilities during the last one year alone.

Government had earlier said that for operationalising the new districts our State needs an investment of Rs 400 crore. Such projections must not dampen the process of establishing processes and systems which are not necessarily so capital-intensive. At the end of the day these estimates are "drawing board estimates of our engineering mafia" the working ways of whom are very well known to us. To begin with, the budgetary allocation of Rs 36 lakhs this year for this task is not too bad, given the fact that basic infrastructure to operationalise new districts does exist at their new locations.

There are other challenges too.

According to the Comptroller and Auditor General (CAG) report for 5005-06, J&K's overall fiscal liabilities have increased from Rs 9224 crore in 2000-01 to Rs 16,801 crore in 2005-06. Our fiscal deficit has increased from Rs. 1311 crore in 2002-03 to Rs. 2,643 crore in 2005-06.

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The State also had a primary deficit, which increased from Rs. 216 crore in 2002-03 to Rs. 1,528 crore in 2005-06.

Can we still say we have "zero deficit" budgets?

The report indicates that there was no improvement in the management of cash balances, as overdraft facilities were used for all 365 days during 2005-06 rather than on discreet basis with the J&K Bank. And, as a result, our interest payment on the overdraft has increased from Rs 71.57 crore in 2000-01 to Rs 138.42 crores during 2005-06. No wonder we have an outstanding balance of Rs 2047.44 crore at the close of the year.

The growth rate of fiscal liabilities was 18.33 per cent during 2005-06 over the previous year. The ratio of fiscal liabilities to GSDP also increased from 60.37 per cent in 2000-01 to 73.78 per cent in 2005-06. That means that the fiscal liabilities had grown faster than the State's GSDP. Given the fact that the basis of our GSDP calculations is far from accurate, it is likely that our actual fiscal liabilities grew ever faster than what the CAG has reported.

Over the years many of us have been saying that high reliance on unproductive borrowings, including loans from NABARD and Asian Development Bank (ADB) which our governments have been presenting to people as "heavenly grants" would land our State in a despicable situation. That is what the CAG is saying today. It is common sense that the spiraling debt liabilities often result in a vicious cycle of deficit, debt and debt service payments, unless suitable measures are taken to arrest the persistent increase in fiscal liabilities.

The premise that these loans would spur economic growth and hence enhance the State's ability to re-pay loans has been based on faulty assumptions, more often guided by narrow populist considerations rather than sound economic logic. The huge backlog of NABARD loans, for

instance, for making rural roads is a case in point. As pointed out in the CAG report, public debt is considered sustainable as long as the rate of growth of income exceeds the interest rate or cost of public borrowings subject to the condition that the primary balance is either positive or zero.

An analysis of our primary deficit vis-àvis quantum spread clearly reveals that their sum turns out to be negative in each year of the period 2000-06 indicating rising debt-GSDP ratio and deteriorating situation of debt sustainability in the State. It is incredible that our State is yet to enact its own law which could put a limit to our borrowings. There is another dimension to it: that is preference to creation of populist and decentralised political systems to sound fiscal management without relative accountability.

For instance, the fact that the Ladakh Autonomous Hill Development Council (LAHDC) had not prepared its accounts since its establishment and has indulged in over spending of more than 200 per cent over and above the appropriation budgets is a case in point. CAG's comment that in the absence of "accounts" true and fair view of LAHDC's assets/liabilities could not be assessed in the audit must be taken serious note of.

We must understand this is the by product of creating a virtual State within a State, in disregard to constitutional and other statutory systems without relative accountability. Can J&K government now be able to ensure that such quasi governments ensure compliance to the State's overall financial policies?

Another serious problem dogging our State, mainly the Kashmir division, is the lack of accountability of government departments and other organs in delivering quality in time. Thanks to our shameful work culture and top-down tradition of impunity we don't have a democratic convention of questioning

Epilogue Ø 32 × January 2008

public organs about the appalling quality of works. Time extension of projects in our State has become like a divine norm, resulting in cost escalations. We do not have a coordination platform for public departments, undertaking development activities, to plan and coordinate in an integrated fashion. That is the reason in spite of spending crores of rupees, most of our public works crumble in no time and our landscapes look primitively shabby.

Highlighting this trend the CAG has reported that during the year 2005-06, there were 348 incomplete projects as of March 2006 in which Rs. 1, 716.58 crore were blocked. Besides, there was cost over run of Rs. 1,718.79 crore in these projects as the initial estimated cost of Rs. 2,319.28 crore was revised to Rs. 4,038.07 crore. Nothing could be as bizarre as this in any governance system.

The way the Public Accounts Committee (PAC) of the State Legislature has been taking up follow up and action taken issues has always been far from satisfactory. There is no doubt that it is the legislature which in theory has to use its moral discretion to take up audit issues for correction and remedy. But we will have to acknowledge the fact that the credibility of our democratic system has a long way to go before our legislature could do it with integrity.

J&K State does not need only the traditional appropriation and regularity audits, the propriety audit and the efficiency-cum-performance audits need primacy. For that to happen we must have external audit and quality delivery appraisals and transparent system of ensuring actions are taken. We also need transparency and public information on the Action Taken Notes by various ministries so that people know about the outcomes.

The writer can be e-mailed at arjimand@gmail.com

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How not to Promote Economic Growth : The case of Jammu & Kashmir Dipankar Sengupta It is commonly agreed that when it comes to industrialization, Jammu and Kashmir has not done well as it should have. This arguably is not surprising. After given the unsettled political climate in the state after its accession and the licencepermit Raj that existed in India before 1991 was by no means conducive to industrialization efforts. Ironically, the central government started to dismantle its own economic regime just after militancy hit the state. Thus as India started to unleash itself, the State was to sink deeper and deeper into violence.

Understandably it was Peace and stability, not economic growth through industrialization that occupied the minds of the policy makers.

Revival of Economic Policy Making As the situation started to stabilize and then improve towards end of the nineties, economic policy making made a comeback in this state. For example in 1998, the State government came out with the New Industrial Policy which provided for generous subsidies (in certain cases defraying up to 100% of setup costs eg in the case of captive power generation), single-window clearances as well as circumvention of the land-laws of the state by the provision of leasing.

The aim was obviously to attract investment from without and within by creating financial incentives aimed at neutralizing the impact of poor infrastructure (eg poor and indifferent power supply) as well as overcome the negative impact created by a long period of militancy. It took cognizance of the fact that the state would have to compete for investment with other

states in a national milieu that was getting increasingly liberal and thus

It is commonly agreed that when it comes to industrialization, Jammu and Kashmir has not done well as it should have. This arguably is not surprising.

After given the unsettled political climate in the state after its accession and the licence-permit Raj that existed in India before 1991 was by no means conducive to industrialization efforts.

Ironically, the central government started to dismantle its own economic regime just after militancy hit the state. Thus as India started to unleash itself, the State was to sink deeper and deeper into violence.

Understandably it was Peace and stability, not economic growth through industrialization that occupied the minds of the policy makers.

increasingly competitive. The Central government too was not to be left

Epilogue Ă˜ 33 Ă— January 2008

behind. It provided for income-tax holidays as well as generous subsidies (e.g. a provision of 90 per cent transport was made for raw-material and finished goods from the railhead to factory site).

The State government's Industrial Policy2004 was a continuation of its 1998 policy while the central government policy was extended till 2015. Great emphasis was laid on reconstructing infrastructure destroyed during the years of militancy as well as creating new infrastructure which included harnessing the potential of hydel power in the state.

The latter of course is a long-term policy given the long gestation periods involved while the former was supposed to yield more immediate results. As a result of these policies, from 2002-3 to 2005-6 investment in the Large and Medium Industry was Rs. 2391 crores spread over 132 units employing a little over 19,000 people. This may be compared to Himachal Pradesh's performance where over the same period, over Rs 1400 crores were invested in 160 units employing a little over 13,000 people. Where small scale industries or SSIs were concerned, 1406 units were added in Jammu and Kashmir increasing employment by 10,000 in 2007 while in Himachal this figure was 952 creating additional employment of similar magnitude.

Himachal Pradesh's population it may be pointed out, is 60% of that of J&K. Thus controlling for populations, the difference in performance, it may be argued is not significant. There is however, one major point of difference.

The incentive schemes of HP are not as financially attractive as that of J&K.

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Therefore where HP to do away with these schemes, it may not attract fresh investment but it may be argued that existing industries would not go away.

The same cannot be said for industry in J&K. There is reason to believe that without the fiscal incentive packages, the small and medium hub that has come up in Jammu-Samba-Kathua would simply disappear. This is because many of the industries have been set up merely to take advantage of tax concessions and indeed add very little value in the state and therefore hire few people. Statistics suggest that fewer units under SSIs in HP established in 2006 generated the same level of employment as a larger number units did in J&K in the same year. The overall economic scenario in the state is stranger still. Data reveals that asset ownership at Rs 10.7 lakhs per house hold is the highest in the country! This of course is primarily a reflection that transfer of resources both official and unofficial have not gone to address infrastructural deficiencies but have constituted a massive leakage from an eminently corrupt system.

But to come back to the question of economic policies, can it be argued that given the perceptions about J&K (whether overblown or not) as compared to HP this is a price that has to be paid and fly-by-night capitalism a risk that has to be bourne?

Surprisingly there is a success story so astounding in its magnitude and location that suggests otherwise. It indicates that while sectors that have been given attractive financial incentives at great cost to the central and the state exchequers may not have actually been grow out of their dependency on state largesse, the handicrafts industry that has received very little by way of financial handouts (with State aid coming only partially through marketing) has done very well to carve a niche for itself

militancy in the state notwithstanding! In fact, it was during militancy that the handicrafts sustained the Valley during militancy with increased employment and turnover when every other economic activity had closed down. Official estimates which are conservative in nature reveal that handicraft sales from the state rose from Rs 293 crores in 1996 to Rs 557 crores in 2000 and touched 900 crores in 2005 ie turnover more than trebled in nine years! Equally significantly the players who drove this industry were from the state itself.

Unofficial but knowledgeable experts consider these figures to be gross underestimates and vouch for higher figures.

But by any standards, even these underestimated figures are impressive.

Coming as they do at a time and place where militancy played havoc with law and order, this performance is even more impressive still. And here lies a lesson.

generally seek out niche areas where customers are willing to pay more as the products of these have quality or characteristics unique to them. The best example of a hill economy is obviously Switzerland which produces a range of very exclusive commodities and services be they processed foods, medicine, engineering goods or financial services.

These goods and services carry a premium which more than compensates for any addition to cost brought about high transport costs. In the same vein handicrafts from the Valley have a characteristic unique to them that cannot be duplicated by other craftsmen from elsewhere and thus handicraft buyers are willing to a pay a premium for this particular product which more than neutralises the high cost of transport that has to be incurred when transporting these for sale outside this state. Clearly for such products subsidies and tax breaks are not essential for success!

The Nature of the State's Economy Thee success of the handicrafts industry reveals certain very important facts about the economy of the state which policy makers may ignore to the cost of the state. Indeed, a proper industrial or for that matter an economic policy may be designed only after the nature of the State's economy is ascertained. The J&K is a hill economy and like all such economies will be a high-cost economy due to high transport costs brought about geographical factors. For J&K this is compounded by poor infrastructure and poor management of public services most notably power. But J&K would remain a high cost economy even if infrastructure was to improve and power was to be optimally managed. But the state would be by no means unique in this respect.

This is a common feature of all hill economies nationally or internationally.

How do such economies compete? The fact is that they do not! Such economies

Epilogue Ă˜ 34 Ă— January 2008

When it comes to premium niche markets, J&K is ideally placed. It is well known that the state has considerable market power in a host of horticultural items and indeed the sole supplier for some items like saffron. Endowed as it is with a spectrum of micro-climates the state can grow a variety of items that enables to be a dominant player in a host of markets many of them high-value lowvolume items. Indeed the Planning Commission itself recognizes that there is sufficient raw material to support an industry that processes organic fruit and food products for premium niche markets. Even the documents of the J&K government identify niche industries but propose solutions that have nothing to do with the strengths or weaknesses of these industries!

The problems lie in the areas of brand creation and marketing. An appropriately designed industrial or economic policy would seek to

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accentuate the strengths of the state and suggest appropriate action in problem.

Thus strengths and weaknesses should be identified first and policies should follow form an analysis of these. Judged in this light the present policies in place that concentrate on subsidising capital and transport costs do not address the state's problems nor amplify its strengths.

Indeed it may create an atmosphere for perverse behaviour where the system of incentives actually mis-allocates resources and invites fraud. For example a 100% subsidy on captive power generation sets takes away all incentives to economize on power capacity installation costs.

A 90% transport subsidy pushes investment in products which are unsuited to the state and failing to amplify its advantages. Such industries would go under the moment such support is removed.

The Way Forward What then is the way forward? The Planning Commission of India does take note of the problem of marketing and puts forward a 'statist' solution- it suggests that the state should take the lead in marketing, set up export zones, assume lead role in horticulture, push the brand name “Kashmiri” promote research and disseminate technology.

Although few will disagree with the diagnosis, the solution provided may not be the best way forward. The ultimate aim of marketing is to capture shelf space and this is no means best done by the state. This is best done by corporate India as it is they who control the marketing networks as also being most suited to guide farmers about local growers and manufacturers about standards that are to be met if these products are to be sold. More importantly, from the point of view of

security, corporate India does not have to be physically present in the valley to transact business! The success of ITC's echaupals in sourcing agro-produce for ITC's export arm shows how a supply chain may be set up even in those areas without power or telecommunications.

This points to the feasible possibility where Corporate India markets products as it owns the brand names but the specific agro-industries are set up by local growers and entrepreneurs.

Indeed, the entry of Corporate India in Retail and the entry of major global players in Wholesale trade promises to do much in this regard. This arrangement will of course let the Corporate India get a major part of the mark up. But this too can be worked around. For this it is important not to just promote the brand “Kashmiri” but also follow the French example and brand sub-regions as well.

Thus the districts or even smaller subdivisions of the State would come to represent the specialty of the region. For example Rajmash from Bhaderwah could benefit from this exercise. This would give local growers and local foodprocessing industry some leeway if they were to enter distribution on their own.

Thus the importance of Geographically Indicating products (granting exclusive rights to a product from a region with certain unique characteristics to be named after that region) is of utmost importance if the State is to benefit from its strengths.

This is of course in the State's domain while brand name creation belongs to the private sector. The example of handicrafts shows how strong the brand “Kashmiri” is. This has to be duplicated for the other regions of the state.

through the extensive use and production of knowledge. Given the state's resources, the importance of biotechnology and IT cannot be overstated. That accepted conditions must be created where local industry prepares itself for an infusion of technology and expertise on commercial lines in the near future.

A knowledge economy works best when it is participatory. Thus development of local entrepreneurship through initiatives in collaboration with bodies that secpialise in this field or corporate India would help. The success of the crafts clearly indicate that such a class exists and can function in the most adverse conditions. Be it through private or statist efforts, the basis of a knowledge economy cannot be accomplished by policies of subsidies and tax exemptions that attract “fly-bynight” capitalists, wrong kinds of investment and in many cases phantom factories created on paper (merely to claim subsidies of non-existent capital investments) and do nothing to induce sustainable economic growth. They have instead sapped the State's resources.

This is not to say that subsidies are unnecessary.

Indeed in so far as they remove distortions (and the market for electricity in the state is distorted) they may be welcome. Indeed a different regulatory regime rather than subsidies may be the answer where for instance the State buys power from the national grid and sells to local industry at a profit.

But by and large as Kashmiri artisans have shown the help required is of a different kind. The help provided so far unfortunately has not reflected it.

To Sum Up...

The ultimate goal of the state, no matter how far or distant it may look, is to be a knowledge economy where the prime source of economic growth will be

Epilogue Ø 35 × January 2008

DIPANKAR SENGUPTA Department of Economics University of Jammu

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Participatory Natural Resource Management : Experiences and Lessons Learnt Dr. Falendra K. Sudan Participatory policies are highly relevant and are consistent with overall development strategy of reducing poverty, protecting environment and developing human resources in Jammu and Kashmir. Institutionally sustainable rehabilitation and management of natural resources is possible only where users act jointly to manage the resources. In order to prevent and reverse the degradation process of the Shivaliks and Karewas, integrated watershed development project (IWDP), Hills-I was undertaken. Originally, the project was for a period of 7 years (199097), but was extended for another year up to 1998. The project was supported by the World Bank. It was initiated in three sub-watersheds of Devak and Ramkote in Shivalik hills (Jammu region) and Dudh Ganga in Karewas (Kashmir Valley). The overwhelming evidence from natural resource management projects is that without people's involvement the benefits are not sustainable in the long run. After the funds from the government or donors dry up, conservation structures disappear, committees are disbanded or abandoned and the livelihood base of the people remains only marginally improved at all. Fortunately, these shortcomings were taken care of, to some extent during the implementation of IWDP (Hills-I).

Seeing the physical targets being achieved, the World Bank decided to further extend the programme in the form of IWDP (Hills-II) in 1999, for five years. This was aimed at providing a uniform integrated rural development platform to address the social and

natural resources problems. The experience gained through implementation of IWDP (Hills-I), J&K encouraged the State Government to extend the watershed development project to other rainfed areas of the State viz. Akhnoor and Ramnagar in Shivaliks (Jammu region) and Rajwar and Rambiyara in Karewas (Kashmir Valley).

The main objective of the IWDP (Hills-II) was to restore the productive potential of the Shivaliks and Karewas. The focus was on improving in-situ moisture conservation, water harvesting and land management practices. An associated objective of the project was to assist with the institutional development and consolidate the progress already made under IWDP (Hills-I).

Experiences gained At the beginning of the project, there were many unknowns and uncertainties about the environmental and social situ a tion of th e se le cte d su bwatersheds. Therefore, information gathering was considered necessary before launching the participatory process and a few months were devoted to accomplishing these tasks. Gaining an understanding of the environmental, social and institutional situation of the project area was obviously essential for identifying the key issues, opportunities and constraints to be considered in designing and organizing subsequent phases of the participatory and integrated watershed management process. The project has hired the services of local consulting firms to carry out complementary studies. To obtain sounder information, both conventional

Epilogue Ă˜ 36 Ă— January 2008

and Rapid Rural Appraisal (RRA) methods were used to carry out complementary studies according to specific needs. The focus of these studies differed, however, there were three common areas of research: farming systems research, environmental analysis, and social surveys.

At the beginning of the project, IWDP (Hills-II) attempted to select participating communities according to strictly technical and managerial criteria and relatively strong community organization. In some cases, extension workers made introductory visits of one or two days to the communities. On other occasions, these visits continued over a longer period of time, often through informal contacts with community members. Based on preliminary studies, field visits and the consultant's inputs, team members identified specific needs to be addressed, which included community's population and social organization, income generation and the distribution of wealth, education and literacy, gender issues, accessibility and use of social services, community's infrastructure, functioning and productivity of farming systems and management of common natural resources.

A number of participatory research and action-learning techniques were used including thematic group discussions, time-line analysis and transect walks to explore significant environmental features and participatory mapping to prepare maps of the community's territory or the village, which highlighted important environmental, social or

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agricultural features. The participatory rural appraisal ended with a series of shorter meetings. The main activities carried out during these meetings were feedback of participatory rural appraisal information to communities, identification, analysis and prioritization of problems by participants, identification of solutions and drafting of a tentative action plan. Through participatory feasibility analysis, project management and field staff reviewed participating community members' ideas for action that were developed during the participatory planning meetings, with the aim of assessing the feasibility of the proposed action in the light of the existing conditions. In most cases, this required an intensive discussion with community members on technical aspects of the proposed activities, available incentives and subsidies, and requisites the community should meet for engaging in a partnership with the project. This interaction ensured that the process continued to be participatory. The purpose of the participatory feasibility analysis was to carry out a rapid and practical analysis that would allow for a decision to be made on whether or not to implement the activity in question.

Very often, plans prepared during the participatory planning meetings were redundant and over ambitious, and certain activities seemed to be technically unfeasible. Furthermore, staff often felt the need to focus on those initiatives that best responded to the project's mandate and operational capabilities, such as activities related to the natural resource, improvements in the efficiency and sustainability of farming systems, the diversification of income generation, the empowerment of rural women and the building of smallscale infrastructure. For the sake of transparency and to promote sustainability of the interest groups and to facilitate conflict management, project helped formalize the structure

and the operations of the user groups collaborating on the activities. This usually involved establishing clear rules for membership, watershed revolving fund, record-keeping systems and election of a formal leadership body.

Fulfillment of these requirements was

Project staff held a few meetings with the concerned user groups to review in detail the village development plans and to amend it according to their comments and suggestions.

Project made significant efforts towards facilitating the formation and development of user groups and community organizations.

often stated as a condition for working with the project.

Project staff held a few meetings with the concerned user groups to review in detail the village development plans and to amend it according to their comments a n d s u g g e s t i o n s . Pr o j e c t m a d e significant efforts towards facilitating

Epilogue Ă˜ 37 Ă— January 2008

the formation and development of user groups and community organizations.

The role of user groups in project implementation was in general less direct. However, user groups were often highly instrumental in coordinating the activities and in providing a local forum for the exchange of experiences among groups and individuals. The participatory development functionaries of the project played a major role in the strengthening of user groups. They attended all relevant training activities and were part of the participatory monitoring and evaluation team, and provided constant support to all user groups formed in the project area. They assisted user groups in such areas as organizing and conducting meetings, defining group constitutions and keeping records.

Project was committed to supporting activities aimed at meeting basic needs not directly related to natural resource management. This included incomegenerating activities and improvements in local infrastructure. To fulfill this need, the project supported and promoted a variety of short-term income generating activities. These included both on-farm activities (such as courtyard animal raising, commercial vegetable gardening and agro- forestry production) and off-farm activities (such as cottage industries, handicraft production). All of these incomegenerating activities were small scale, low budget initiatives targeting the local market (i.e. the exchanges taking place in the local community or, at best, in the immediately surrounding area). Because of their small scale, the project and participants were able to start these activities with very limited initial investment and risk. However, their small scale also meant that they only generated a small income. These activities were useful for satisfying the immediate personal needs of participants, especially women, and

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increasing the groups' self-reliance.

Most of the project-supported initiatives for improving farming systems were developed out of negotiations between participants who wanted to have better yields, earn a higher income and save time, and the project's core mandate for promoting the conservations of water, soil and vegetation cover. Therefore, these initiatives were 'conservation by use' activities that sought a healthy balance between environmental and economic needs. In the project area, most initiatives for managing natural resources have been more or less directly associated with farming system improvement. These included regeneration of public forests and rangelands, which resulted from entrusting local communities with the responsibility for management. This included, 'social fencing' (i.e. restrictions on land use imposed through regulations, not physical barriers), fire control and the introduction of household technologies to decrease fuelwood consumption, control of the effects of erosion, such as landslides and gullies, which cause major damage to agriculture and property, and management of streams, including measures for controlling water power and down stream erosion or facilitating the recharging of the local water table.

During participatory planning, user groups often identified and then implemented activities in these areas in response to a specific need related to their livelihoods. On several occasions during participatory planning exercises, participants expressed the need for soil and water retention measures for preventing landslides, gullies and river floods from affecting arable land, houses and roads. To address this need, the project supported forestry plantations and small-scale environmental engineering works by providing technical assistance and incentives. The project

also promoted the sustainable use of forestland by testing agro-forestry techniques for fodder production. Major

Major efforts were made to allow user groups to carry out different activities with less project support (i.e. decreased methodological, technical and financial assistance).

Progressive withdrawal of support to local actors in participatory planning, implementation and evaluation had a dual objective - promoting the self-reliance of user groups in managing their own decision-making and action-taking process, and decreasing the costs of support in each site, so that resources could be used to extend the process to other communities.

efforts were also made to sensitize people to the environmental risks related to deforestation and overgrazing.

Epilogue Ă˜ 38 Ă— January 2008

As part of the integrated system of agriculture, livestock rearing and agroforestry the project prompted additional reforestation and erosion control measures of communal interest, such as roadside tree planting and the establishment of erosion control hedges along the borders of agricultural fields.

Moreover, participatory planning exercises identified the need to control the consequences of erosion, such as landslides and gullies that were affecting communal grazing areas and private agricultural plots. To this end, technical assistance, training and incentives were provided to the user groups concerned.

Actions facilitating better water management were undertaken in the framework of farming system improvement initiatives.

Major efforts were made to allow user groups to carry out different activities with less project support (i.e. decreased methodological, technical and financial assistance). Progressive withdrawal of support to local actors in participatory planning, implementation and evaluation had a dual objective promoting the self-reliance of user groups in managing their own decisionmaking and action-taking process, and decreasing the costs of support in each site, so that resources could be used to extend the process to other communities.

Constraints faced During the process of operationalization of participatory natural resource management, several constraints have been encountered. Some of them were: inappropriate criteria for community selection, community conflicts and infighting, presence of other programmes and projects with softer eligibility criteria, inadequate training in accounts and record maintenance, poor credibility of some executives on user

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groups, lengthy project procedures, security related problems in some areas, political interference and nepotism. User groups were not given adequate representation on user groups. As a result, user groups may be unable to directly influence the decision making process in terms of the watershed development related activities undertaken by the user groups. The project functionaries at sub-watershed level have actively been imparting extension services in the transfer of technology for watershed management.

However, their role in strengthening the user groups and in the integration of traditional knowledge with improved technological option was not fully satisfactory. There have also been complaints of biased approach towards particular area and community, which have created a deep sense of mistrust.

The information flow was also inadequate and project functionaries were charged with a tendency to keep the information hidden, which have hampered smooth participation of the villagers in various activities. The user groups' members representing disadvantaged groups have complained regarding drastic curtailment of essential survival activities due to creation of enclosures. A widespread feeling of hostility among the members has been reported due to inadequate benefits from the resource conservation and protection activities. Further due to lack of inter-agency coordination, field functionaries have not properly attended the vital issues like institutional building, capacity building, financial strengthening and income generating activities.

In the context of natural resource management programme, gender relations are quite significant. Natural resource management programme will only achieve sub-optimal results if gender relations are not considered.

Agriculture, forestry and other natural resource interventions have overlooked the women beneficiaries. The field professionals seemed to be unaware of the full level and dimensions to which women contribute to agriculture,

be in danger of becoming a replica of village panchayat system, which has been a political rather than a development body. The existing monitoring and evaluation system seems to very inefficient in improving the activities of user groups and for effective administration and control of the project.

Lessons learned

The participatory natural resource management implies that those at the top cede decision making power, and (if well conceived) financial control, to those lower down in the system.

However, due to resistance from within the implementing agency, the change is never really operationalized.

forestry and other natural resource management activities. The women's role still appears to be marginalized. It is desirable to give them a major representation in user groups. In the planning process, no assessment of the indigenous forms of farmers' organizations and their traditional institutions appears to be made. Thus, farmers' traditional institutions seem to have been excluded from the planning process. Therefore, the user groups may

Epilogue Ă˜ 39 Ă— January 2008

The participatory natural resource management implies that those at the top cede decision making power, and (if well conceived) financial control, to those lower down in the system.

However, due to resistance from within the implementing agency, the change is never really operationalized. The user groups and their committees were created but, because they were not given adequate resources and effective decision-making power, they became moribund. The success of participatory natural resource management hinges to a great extent on the capacity of the project functionaries to embrace the change and to alter its working practices.

Even, before reform, it was lack of skills within the government sector, which resulted in poor management. The operationalization of participatory natural resource management requires even greater skill levels than the previous systems. Due to inadequate training and experience in social development aspects, the participatory social development functionaries were unable to form effective and sustainable user groups. Likewise, the extension officers were unable to select appropriate sites and design and implement the project interventions. These are critical issues, since once local field functionaries lose credibility with the villagers; it can be very difficult to recover it.

If the field functionaries are to be in a position to elicit and devise programmes,

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which are responsive to local needs, the skill upgrading and capacity building are also important. Demand articulation is not automatic as might be assumed.

Significant local level capacity building needs to take place, usually through the formation of effective local resource “user groups”, before needs can be expressed and subsequently prioritized and addressed. If decentralization within government is designed in large part to institutionalize responsiveness to local people's needs, this is the key issue.

It is also one that is frequently ignored when plans are drawn up to institutionalize 'demand driven' development process. Many project functionaries, for instance, do not have the social skills required to group development. Overcoming such prejudices can be very time consuming, but is usually essential if progress is to be made.

One of the motivations behind operationalizing participatory approaches has been a desire to reduce transaction costs. However, there is little evidence that costs have actually fallen.

Indeed, reform has added to project costs, because the funding requirements for capacity building have increased.

Thus, it is unreasonable to expect that institutional reforms should have proceeded without any setbacks.

Numerous conflicts have been experienced at various levels, such as between individuals, between line departments, and between sub-sectors.

Clear policy pronouncements from government, combined with bold and enforceable regulations about the limits to government involvement, are certainly a good starting point, if these conflicts are not to be fatal for the ongoing reform.

All these will help create 'a sense of mission and commitment' among the project staff, which is important for project performance. Besides, it will contribute to teamwork and inculcate problem-solving attitude as well as to greater coordination between policy and implementation.

Increasing pressure on natural resources together with misdirected government intervention has led to the demise of traditional institutions for natural resource management. However, a participatory approach evolved under IWDP (Hills-II), Jammu and Kashmir has played a facilitating role in resurgence of local resource user groups.

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The future of sustainable resource management lies more with local people though issues of non-poor domination and resource conflict may still is problematic. It is doubtful whether the few such groups that do exist can continue to do so without substantial external support.

At present, resource user groups have achieved a degree of success by monitoring and enforcing resource protection and conservation activities, and thus enhancing resource productivity in environmentally and institutionally sustainable ways. However, most efforts are small scale and heavily subsidized, raising doubts about whether they can be replicated by the project.

DR. FALENDRA K. SUDAN is Reader, Department of Economics, University of Jammu, Jammu and Editor, International Journal of Environment and Development. He was Consultant to World Bank funded IWDP, Hills I and II and Principal Investigator of World Bank and Ministry of Environment and Forests sponsored 'EMCaB Project'.

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An economy in disadvantaged position Ram Sahai The State of J&K has faced lot of turmoil and disturbances since country has attained independence in 1947.

Infiltration from across the border in the guise of Kabaili invaders, Indo Pak War of 1965, again Indo-Pak War in the year 1971, the impact of militancy in Punjab and a very long spell of militancy in our State since 1989 has taken a strong toll of Industrial Development and Economic upliftment. Further our state being at the extreme end of the country has a peculiar locational disadvantage and shortage of marketing for the product which could be produced in the state itself. Due to all these reasons the required Industrial Culture could not be development and no Industrial activity worth mentioning could be started in the state till June 2002. Chamber of Commerce and Industry which is a 72 year old organization realized the fact that in absence of Industrial activities and private investments from outside the state our economy, Industrial culture and substantial generation of employment can not be possible.

Chamber of Commerce & Industry Jammu realizing the need to have a sustainable consistent Industrial policy

In the early years of 50's the state government also realized the importance of establishment of manufacturing units for which certain steps were taken to establish some units under public sector and also the private entrepreneurs were encouraged to start their Industrial units by providing them liberal import quotas and certain tax concessions. But these measures could not prove to be sustainable and when the value of import quotas went down in the market all such units which were established at that time started going sick and the purpose for which these units were encouraged got completely defeated.

spell of militancy in our

The State of J&K has faced lot of turmoil and disturbances since country has attained independence in 1947. Infiltration from across the border in the guise of Kabaili invaders, Indo Pak War of 1965, again INDO PAK War in the year 1971, the impact of militancy in Punjab and a very long State since 1989 has taken a strong toll of Industrial Development and Economic upliftment.

persued vigorously with the state as well as Central Government for taking necessary steps initially for revival of the

Epilogue Ă˜ 41 Ă— January 2008

sick units and later for granting the new package of incentives on the pattern of North Eastern States. Chamber's delegation met the then Hon'ble Prime Minister Sh. Atal Behari Vajpayee and sought his intervention for formulating a consistence Industrial Policy for the development of Industry in the State Mr. Vajpayee, his ministerial colleagues, Minister of Industries and Commerce & Industry which was also strongly supported and recommended at par with the North Eastern States which included 15% COIS, Excise Exemption, Income Tax Holiday, 3% interest subsidy on Working Capital, State of J&K also announced its own Industrial Policy on the persuasion of Chamber of Commerce & Industry and announced similar type of package containing VAT remission, 100% subsidy on Power Generator, allotment of land on subsidized rates etc. Later the present Union Government headed by Dr. Manmohan Singh endorsed the same policy and the Industrial culture started picking up and as a result outside investment started pouring in which totaled upto Rs. 4000 crores. To promote further Industrialization many prestigious units like CIPLA, CADILA, Sun Pharmaceuticals, Berger Paints, Samsung, Hitachi, Phillips, Jindal I n d u s t r i e s , U n i t e d Ph o s p h o r o u s incentives. The Chamber's delegation met the Hon'ble Prime Minister Dr. Manmohan Singh and impressed upon him to extend the period of Income Tax Holiday and Transport Subsidy which were expiring on 31st March 2007. It was also pleaded that the specific Khasra numbers for establishing the units is creating a lot of problems because there is acute shortage of land for further expansion of Industry so it is imperative

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that the entire state should be notified as industrially backward area to overcome the shortage of land. Chamber also requested the Prime Minister for handing over the Dul Hasti Projects to the state of J&K so that the problem of Power shortage could also be taken care of Chamber's pleading got positive response from the Prime Minister Dr. Manmohan Singh and the period of Income tax Holiday and Transport subsidy got extended for another 5 years. Not it is hoped that these provisions will help a lot in attracting further substantial investments from outside the state.

As already mentioned the economy of the state had been based on tourism and trade as the state was primarily a consumer state and not a producer state.

So chamber has always been pleading for formulating a trade policy to give proper direction towards systematic and sustainable trade activities. Chamber has presented a paper in this regard which has been deliberated upon in couple of meetings and has been appreciated by all the concerned.

Besides pleasure tourism and adventure tourism the pilgrim tourism has proved to be the backbone of Tourism Industry.

Ever growing number of Mata Vaishno Devi Shrine, Baba Amarnath Shrine and other places of pilgrimage provide lot of potential for economic upliftment of our state. Chamber has identified many beautiful virgin areas for the development of pleasure tourism which has been brought into the notice of Central as well as State authorities and implored upon them to undertake the infrastructure development of those areas for the perculation of tourists in different parts of the state. Similarly, Chamber has prepared and presented various papers and presentations to make Jammu an independent tourist destination to save it from the adverse impact, it is likely to face after the train goes to Katra and beyond and also to negate the set-back after the completion

of the Mughal Road Project connecting the districts of Rajouri and Poonch with the Valley. For further development of Industry and trade in the state Chamber of vociferously pursuing with the Government that : 1.

The entire state should be notified as industrially backward area.

2.

To provide adequate Power to Industrial Sector.

3.

To entend the new incentives for the old existing units also who have braved the impact of militancy.

4.

To renew the central packages at par with the latest announced package for North Eastern States in which the incentives have been extended to Industry as well as health, tourism and service sector also for another 100 years.

5.

To formulate a policy regarding augmentation of power and tourism infrastructure with public-private participation.

For making Jammu as an independent tourist destination, various suggestions have been made for the proper regulation of traffic and parking etc.

Besides early completion of Cable Car Project from Mubarak Mandi Bahu Fort and Mahamaya Temple, development along the banks of river tawi and creation of lake in the Tawi river and also making it pollution free by diverting all the Nallas and drains entering into the main river, establishment of planetarium alongside the present Kala Kendra, creation of amusement park and international standard golf course etc. The development of present exhibition ground to make it an international Trade centre and certain fly-overs, sub-ways, over head bridges and creation of walkways are some other points which have been taken up with the Government. The steps when implemented will definitely boost the economy of the state.

Chamber of Commerce & Industry while

Epilogue Ă˜ 42 Ă— January 2008

realizing that Government of India and Pakistan have taken the initiative to resume bilateral dialogue for resumption of normal Trade and People to People contact. The bilateral Trade between the two parts of Kashmir and Pakistan is extremely important. To enhance the bilateral trade, Chamber of Commerce & Industry took an opportunity to lead a delegation of 10 members of Jammu Chamber jointly with the delegation of PHDCCI to visit seven cities of Pakistan.

While interacting with the Chamber's of Lahore, Gujranwala, Rawalpindi, Islamabad and Karachi we found their keen desire to have bilateral trade with our Country. India and Pakistan enjoy several complementarities. There are advantages of geographical proximity, common language and cultural bonds, which are important facts for fostering closer economic relations between India and Pakistan. The due removal of earlier restrictions, in a climate of reconciliations of mutual interests and liberal realignments, can help flourish free private sector trade between the two countries and indeed open an array of possibilities for peace between the two neighbouring countries. To open new routes for Indo-Pak Trade and people to people contact across the line of control. In this connection Chamber made strong demand for opening of Suchetgarh-Sialkot route and Nowshera-Mirpur route as these routes have great scope for exchange of Trade.

Sialkot has advanced Sports Industry which needs our willow clefts as their raw material. All the items have a great demand in that country which if allowed to be exported from our state to Pakistan and Pak directly would cost much lesser than what they are getting right now.

Similarly in tradable items which can be beneficial for both of us. These trade routes once opened will bring a great leap in the economic development of the State.

RAM SAHAI is President, Chamber of Commerce & Industries, Jammu.

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A lot still needs to be done Annil Suri Among the six basic principles of the governance underlying the National Common Minimum Programme of the Govt. of India, sustained “economic growth in a manner that generates employment” has a pride of place. It also describes the small scale industries as “the most employment - intensive segment”.

This is indeed so. The small scale industries have a long history of promoting economic growth that is employment-oriented and spatially widespread, and hence inclusive. The contribution of this segment to the economic sinews of the country is no less significant. Nearly 39 percent of the gross manufacturing output and 34 percent of the exports of India arise from these enterprises. During the last four years of the 10th plan, the output of the segment has recorded a real growth rate of 8.87 percent annually. Over six thousand products manufactured by these include several sophisticated items used in high technology areas like nuclear power, missile and space programmes, information technology, biotechnology, etc. The level of exports by this segment also testifies to its overall competitiveness in the global markets.

While examining the characteristic features of the economy of J&K State, one comes to the conclusion that the State is economically backward as compared to the other States of the Country. In view of this state of affairs, it is highly essential to diversify its economic structure by developing industries so that the socio-economic conditions of the State are improved.

Industry will not only play a significant role in providing employment to a large

While examining the characteristic features of the economy of J&K State, one comes to the conclusion that the State is economically backward as compared to the other States of the Country.

In view of this state of affairs, it is highly essential to diversify its economic structure by developing industries so that the socioeconomic conditions of the State are improved. Industry will not only play a significant role in providing employment to a large number of educated youth, it will also give solution to the unemployment crisis through which the state is passing during these days, and also would contribute to raising per capita productivity. number of educated youth, it will also give solution to the unemployment crisis

Epilogue Ø 43 × January 2008

through which the state is passing during these days, and also would contribute to raising per capita productivity.

We are aware that ours is a Land Locked State and is severely handicapped due to locational disadvantages. This results in increase in the cost of production as compared to our neighboring States. In order to offset this additional cost, the State Govt. and Govt. of India has provided special package of incentives to the industrial sector so as to make it competitive. However the effect of these concessions cannot be presumed as direct addition in profits. Ø When State Industrial Policy was introduced w.e.f 1st Feb. 2004, some new elements were introduced: Ø D e v e l o p i n g Wo r l d C l a s s Infrastructure for speedy industrial development. Ø Encourage industrialization of the backward blocks of the State. Ø Encourage existing industrial units to modernize. Ø Provide incentives on brand promotion keeping in view the role of brands in promoting sales.

Concentrate on thrust areas for development as per the list of Central Govt. This spirit behind this was to encourage and sustain the existing struggling industry of J&K out of red and simultaneously attract new investments.

But unfortunately the desired results could not be attained and we could muster only 3000 Crores of new

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investments in comparison to 50000 Crores by Himachal Pardesh during the same period.

However, we are convinced that J&K Small Scale Industry has a future. But while looking at the future, certain considerations will need to be kept in mind. The most important is the diversity in the small scale sector. We do realize that there are still some speed breakers on our super-highway to success. The rationalization of the tax structure is one such example. A good deal of reforms has already taken place and some are under way. Even today the single-man unit is subjected to a minimum of 37 inspections, 52 laws and 116 forms and registers. The govt. should try to frame a single legislation for the small scale sector which would reduce procedural hassles and do away with the Inspectorism. An environment should be created where the accent is on trust rather than mistrust ; on facilitation rather than regulation ; and, on togetherness rather than on division, where the words 'you' and 'I' are replaced by 'ourselves'.

Ø provision of venture capital funds, Ø tax reduction for capital funds, loans at low interest rates, Ø loans for modernization of equipment, and others.

4.

5.

6.

Govt. Mind set has be changed from red-tapism to red carpet welcome to entrepreneurs which will inspire investor confidence and in return boost industrial activities in J&K.

8.

Entrepreneurs should analyze implications of all international agreements and treaties as well as other international developments in the country, industry and own enterprise.

The govt. should take some financial and tax measures to assist SSI'S such as : 9.

Ø guarantee of loans when extended by the Credit Guarantee Association,

Setting up “SAARC Knowledge Platform” including areas like en e t w o r k s , e n e r g y, w a t e r, healthcare, agriculture, food processing and capacity building which will meet the unique needs of regional development and help frame a road map for its time bound implementation.

For competing internationally, the firms and the entrepreneurs should develop pro-active attitude and approach, and should upgrade technology used in their SSI's and also focus on upgrading skills and competence of their personnel through appropriate training by developing competence for training needs identification.

The role of the government and its agencies is very important in promoting competitiveness of the industry in general and small scale industries in particular.

Ø provision of subsidies for R&D costs,

Opening of trade routes with Pakistan like R.S.Pura Sialkot, Rajouri Mirpur routes.

7.

The foregoing discussion leads to several conclusions:-

Innovative and tactical ways of protection needs to be devised for providing a period of adjustment to SSI's and also lending them some breathing space.

of these economic parameters for the firm and the industry on a regular basis would help in decisions regarding production planning, human resources management, marketing and strategic decisionslike diversification, etc.

Entrepreneurs should be vigilant on the changes in the factors that affect the product demand, raw material supplies and their prices and fluctuations in the same. Forecasting

Epilogue Ø 44 × January 2008

10.

The SSI's should undertake ISO 9000 and other quality management system certifications to achieve the level playing field. Further entrepreneurs should initiate efforts towards global success and ultimately aim at global leadership.

Thus, the J&K Small Scale Industries can successfully meet the challenge of globalization.

ANNIL SURI is president Bari Brahmana Industrial Association.

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CROSS LOC INTERACTION TRADE

Time for trucks D. Suba Chandran End October, there was a protest movement in Muzaffarbad and Chakothi in Pakistan occupied Kashmir led by All Parties Nationalist Alliance, demanding truck service between Muzaffarabad and Srinagar. Though there have not been any demonstration in Kashmir Valley or in Jammu region, both the Kashmir Chamber of Commerce and Industry (KCCI) and Jammu Chambers of Commerce and Industry (JCCI), besides numerous other groupings such as the apple industry in Kashmir, for long have been pressurizing the governments of J&K for cross-LoC trade.

This demand is likely to increase further, especially after the first colorful truck from Pakistan entered India via the Wagah. Pressurizing Pakistan to open the LoC for trade is in India's interests and is important for the following political, psychological and economic reasons.

First, politically, allowing cross-LoC trade will be the biggest political CBM, in terms including the Kashmiris in the peace process. The current level of crossLoC interactions is seriously limited towards addressing the concerns the divided families, mainly in Rajouri, Poonch and Baramulla districts; thus the current level of cross-LoC interactions mainly address the concerns of three districts in J&K. Since, there are not many divided families in Kashmir Valley, the bus service between Srinagar and Muzaffarabad, unlike that of PoonchRawlokot, is not a big success. Today, the Srinagar-Muzaffarabad bus does not enthuse the Kashmiris and new political initiatives needs to be taken such as the cross LoC trade, to keep the both peace

processes relevant the bilateral between India and Pakistan, and the internal between New Delhi and J&K. Besides, politically, cross-LoC trade will dent the hold of extremists and militants

This demand is likely to increase further, especially

Second, more than the political impact, psychological and emotional implications of cross-LoC trade is immense. Today, the Kashmir Valley is connected with the rest of the world through Jawahar tunnel.

The route via Kargil and Leh into Himachal, is really circuitous and opened only for three months. The Mughal route linking the Valley with the rest of India through Poonch and Rajouri districts, cutting across the Pir Panjal is being planned, but a long way to materialized.

Historically, Kashmiris are connected to the outside world through the Jhelum river and the Srinagar-MuzaffarabadRawalpindi road.

after the first colorful

economic reasons.

The fact that, today, the linkage to outside world is only through a tunnel and an unstable mountainous road, psychologically have a negative impact in Kashmir Valley. In 2007 itself the JammuSrinagar road was closed more than once due to land slides. Even the air traffic becomes a problem during the winters, as happened during the last week October; the flights were cancelled due to poor weather conditions. Closure of Jammu-Srinagar road even for two days and the subsequent traffic jam causes huge economic losses, creating a psychological fear.

such as Syed Ali Geelani and Syed Salahuddin over the Kashmiri society.

Once the trucks cross, the Kashmir Valley will ignore any political maneuverings against cross-LoC interactions by the militants and their over ground supporters.

Finally, opening the LoC has a significant potential to improve the economic situation inside Kashmir Valley, depending on the nature and extent of trade. Kashmir Valley, though lacks industry, its main livelihood comes from the fruits industry, including apples, almonds and walnuts. Besides, Kashmir valley also produces carpets, shawls and wooden furniture, which could be traded

truck from Pakistan entered India via the Wagah. Pressurizing Pakistan to open the LoC for trade is in India's interests and is important for the following political, psychological and

Epilogue Ă˜ 45 Ă— January 2008