July 09,2006

Amit Sen Gupta

The World Trade Organisation stuttered towards another collapse as a mini-ministerial meeting in Geneva, earlier this month, ended without any progress. That the talks seem to have reached an impasse was borne out by WTO chief Pascal Lamy’s comments that: "There has been no progress and therefore we are in a crisis." It is being predicted that if no agreement is reached by the end of the G8 meetings in St Petersburg this month, the round will collapse.

The ongoing round of negotiations in the WTO is termed the “Doha Development Round”. It gets its name from the fact that this round of negotiations was initiated in at the WTO ministerial meeting in Doha in 2001, and ministers agreed that the round should be focus on “development” that is designed to create opportunities for developing countries.  

INTRANSIGENCE OF DEVELOPED COUNTRIES

The latest breakdown in negotiations came as a result of the extreme intransigence of developed countries, whereby they wish to negotiate the opening up of developing country markets for their industrial goods and services, while at the same time refusing to respond likewise by cutting subsidies that they provide to their farm products in order to promote access to agricultural products from developing countries. This stance puts to question the real intent of developed countries, especially their adherence to a “development” agenda in the WTO.

It may be recalled that since Doha, the WTO has been on the brink of collapse. The Cancun Ministerial in 2003 collapsed without any agreement. The Hong Kong Ministerial in 2005 tried to salvage some ground by keeping many issues open for negotiations. It is now clear that when pending issues are negotiated, there appears very little common ground between the interests of developed and developing countries. As mentioned earlier, at the heart of the continued failure to reach an agreement, lies the refusal of the EU and US to cut subsidies to their agriculture and agricultural exports. Given this, developing countries are loath to concede any more ground, recalling the repeated failure of developed countries to honour earlier commitments.

GROWING UNITY OF DEVELOPING NATIONS

Matters had reached a flashpoint in 2003 in Cancun when a large number of African countries walked out of the negotiations saying “enough is enough”. The WTO has, since its inception, functioned through murky backroom deals and arm-twisting by developed countries. This has often made a mockery of the supposed democratic decision making process in the WTO, where technically each country has one vote. What we are now starting to see is a closing of ranks within developing countries, apparent since the last rounds of negotiations in formation of coalitions of developing countries in the form of G20 (group of 20 developing countries), G33, G90 etc. While such coalitions have tended to be fragile and open to subversion by the US and EU, they seem to have started solidifying into groups that speak with coherence in the interest of developing countries.

The issue for developing countries like India has always been, at what terms should they agree to be part of the global trading system. The WTO had been created from the earlier framework called GATT in 1995, in order to provide an impetus to global trade. It is natural that there are differing perceptions regarding how global trade should be regulated, depending on which side of the North South divide one comes from. Developed nations see the expansion of global trade as a way to prise open markets in developing countries on one hand, while on the other restricting the ability of developing nations to develop their independent capabilities in manufacturing and services. Developing countries on the other hand would like to see global trade as addressing their needs of accessing the markets of rich countries, while at the same time developing their independent capabilities. There is an obvious dissonance between these two objectives. Developing countries erred grievously during the Uruguay Round of negotiations, by agreeing to terms that placed onerous conditions on them through the WTO agreement. Having been sucked into this system, developing countries are now having to look for ways to negotiate terms that provide them with some advantages. This has not been an easy process. On the face of it, developing countries are in an obvious majority in the WTO, and should be able to negotiate better deals for themselves. In practice, such an unity of developing countries have been almost impossible to forge. Part of this has to do with bilateral pressures exercised by the US and EU to break the unity of developing nations. The other part also has to do with the policies promoted by ruling classes in developing countries themselves, which rely on virtues of the market.

If we understand this background, it is clear that if talks in the WTO are collapsing, it is because the US and EU are finding it more and more difficult to push through their interests in the negotiations. Clearly 2006 is very different from 1995. After being pushed against the wall, developing countries are being forced to negotiate better deals for themselves to salvage some degree of legitimacy as they go back to their people. The ruling classes of most developing countries had negotiated away large parts of their economy when they signed the WTO agreement. Now they are being forced to negotiate back some of the lost ground.  

NO TEARS NEED BE SHED FOR THE WTO

Given such a situation, one need not shed tears if the WTO negotiations falter and come to a standstill. India and other developing countries have a stake, not in perpetuating the present trading system, but in negotiating a system that serves their interests. This is not an easy process, but the growing unity of developing nations is a step in the right direction.

Let us now turn to the substantial issue that lies at the heart of the present dispute. Much of it has to do with subsidies that the EU and the US provides to its farmers. These subsidies include subsidies for domestic production as well as for exports. At the Hong Kong Ministerial there was some progress only in the case of export subsidies, with a commitment by the EU that these would be phased out. But the bulk of the subsidies still remain and there was no progress on phasing these out. It has been calculated, for example, that the averaged subsidy available for rearing a cow in Europe is more than the income of an Indian peasant! This translates into closing the markets of rich countries to products from the developing countries on one hand, and the accelerated entry of agricultural products from the EU and US into developing country markets. The EU and the US have linked their willingness to reduce agricultural subsidies, to what is called Non-Agricultural Market Access (NAMA). NAMA pertains to market access for non-agricultural goods (viz. manufactured goods) and this is sought to be facilitated by lowering of import tariffs. Traditionally developing countries have kept import tariffs high in sectors where it wants to protect its domestic industry. It needs to be understood that such protection has been a historical ploy used by all countries at the stage of development when their domestic industries are just starting to find their feet and require protection. The US did it against imports from Europe in the nineteenth century, Japan did likewise in the early twentieth century, and S.Korea and Taiwan did it in the late twentieth century. But now this obvious method of protecting domestic industry is sought to be compromised.

The story around agricultural subsidies is even more interesting and points to the negligent ways in which developing country governments (including the present Indian) have carried out negotiations in the WTO in the past. Traditionally developing and developed countries have protected domestic agriculture in different ways. The former, lacking resources to directly subsidise its agriculture, have tended to protect its agriculture through Quantitative Restrictions – i.e. by setting quotas above which agricultural imports in specific areas were not allowed. The latter, as elaborated earlier, provide direct subsidy to its farmers. Since 1995 developing countries have signed away their bargaining power by removing QRs on agricultural imports, without receiving anything in return from developed countries.  

NEED TO GO BEYOND GESTURES

Kamal Nath, India’s representative at the talks in Geneva, has sent the correct signal by being part of the developing country bloc that refused to be brow-beaten into agreeing to an unfair deal. But just as one swallow does not make a summer, this position of the Indian Government needs to be followed up with other measures and have to be consistent with policies being pursued by the Government. Among other measures, the Government needs to impose QRs again on imports from developed countries, because clearly the US and the EU have refused to honour their side of the bargain. India should also refuse categorically to negotiate on NAMA till there is a firm commitment from the US and EU to reduce farm subsidies. As importantly, India’s positions at the WTO need to be consistent with its domestic policies. Unfortunately this is far from the case, as India proceeds to liberalise imports of agricultural commodities on its own, without being obliged by the WTO to do so. A case in point is the decision to import 3.5 million tonnes of wheat by drastically reducing the import tariff to zero. It is understood that the Cabinet has approved plan to give unilateral market access in sugar against zero duty.
In the absence of a consistent approach to trade, India’s position at the talks in Geneva can be interpreted as being mere posturing. Gestures do not make a real difference, hard policy positions do. It is to be hoped that the signal sent out by India in Geneva will translate into some actual action.

As Bush descends on the country, a number of events are planned to synchronise with his visit and mark its success. One amongst the many has a vital bearing on more than 60% of Indian population, namely the “Indo-US Knowledge Initiative on Agricultural Research and Education.” This is a follow-up of the understanding reached during Manmohan Singh’s US visit and the subsequently, the Indo-US Umbrella Agreement signed in October last year. The disquieting part of this knowledge initiative is that it is very clearly driven by Monsanto and Wal Mart from the US side. The US side has also made clear that any funding that comes to this initiative from the US side will be from the private sector and will be obviously tied to the US IPR laws.

 The Indian side may hark back to the green revolution and the role that the US land grant universities played in it. The world has changed since then and the key element of this change in the realm of agriculture is that unlike the science of green revolution that came from public domain science, today’s gene revolution depends almost entirely on private domain science. This means that if we harness Indian scientific research to the US, then it is allowing the complete dominance of companies such as Monsanto on Indian agriculture. If the future of Indian agriculture lies in biotechnology, as the Indian Government believes, then allowing US MNCs to dominate Indian agricultural research would be the worst outcome for Indian farmers.

Coupled with this attempt to yoke Indian agricultural research to the US private bandwagon, is the attempt to sell a model of a completely corporatised agriculture. Manmohan Singh and Montek Ahluwalia have been talking about the need to bring in private capital in a big way in Indian agriculture as the only solution to the agrarian crisis in the country. We will not go in the details of this vision, but will only note that corporatising agriculture will do little to help the bulk of the rural population. With its focus on commercial crops, bulk procurement and retail chains, such corporatisation can only weaken the small farmer even more. Already in Punjab, corporate interests such as Monsanto, Reliance and others are making a beeline for agri-retail trade. With gradual withdrawal of the Government from procurement, more and more of retail trade for agriculture is going pass into these hands.  The presence of Wal Mart on the US side also makes clear the interest that the US has in opening India’s internal and external trade in agriculture to US companies.

The first Green Revolution grew from an international public research system that began in the 1940s and built up a chain of research centres worldwide. These centres collaborated through the Consultative Group on International Agricultural Research (CGIAR), a consortium of donors including foundations, national governments, United Nations institutions, etc. These centres operated in a world without Intellectual Property Rights and distributed seeds and new varieties all over the world. The striking improvements of yields in a number of crops, particularly wheat, rice and maize came out of this open institutional structure of science and research.

The key difference today from the green revolution days is that agricultural research has now been largely privatised in the US. Even the university system in the US today operates with the patents being licensed to private parties. This is a fundamental shift in science that has taken place. Earlier, all advance stemming from publicly funded research was supposed to be in the public domain. However, in the US, it changed with the Bayh Dole Act of 1984 that allowed knowledge created by public funding to be patented. This has been followed in most countries with public institutions joining the private sector in the rush for patents. The problem here is that such patents held by public institutions are not used for public good but in turn are licensed to private companies. The university or the public institution may get a large revenue as a result, but the public does not get any benefit to this public funding of such research.

Therefore, even the institutions that helped in the first green revolution are pursuing a different agenda today. They are so closely tied up with agribusiness in the US that instead providing help to our agricultural research, they are more likely to be allied with US big agribusiness.

The other major shift that has taken place in agriculture is that before the 80’s, the only protection available for plants were plant breeder’s rights. However, since then the US has followed an aggressive policy of patenting micro-organisms, life forms, seeds, genes and even gene sequences. This is the route that other countries are also following, particularly after the WTO/TRIPS agreement of 1994. TRIPS forces IPR protection for micro-organisms and allows countries to introduce life form patenting. A recent survey published in Nature, found that about three-quarters of plant DNA patents today are in the hands of private firms, with nearly half held by 14 multinational companies; virtually no such patents existed before 1985.

Let us take the current biotechnology advances in creating new varieties of plants. The major thrust of creating new varieties is to introduce new traits by transferring genetic material from other species. This is why such varieties are called transgenic (more commonly genetically modified organisms or GMOs).  The two main processes for transferring genetic material across species is to use a soil bacteria, Agrobacterium tumefaciens as a vector for transferring genetic material or to use the gene gun. Agrobacterium is a soil bacteria that introduces some of its own genetic material in the infected plant causing tumours or gall in the plant. Agricultural scientists have modified the bacteria and can use it as a carrier for other genes to incorporate novel traits of other species. The gene gun sprays the genetic material and thus can be used to insert genes from one species to another.

Both the above procedures are covered by a variety of patents. Cornell University holds the patents on the gene gun which in turn it has licensed it to Du Pont. Monsanto and a few companies hold the patents on the use of Agrobacterium and thus make it difficult for any transgenic variety to be developed without infringing their patents. Although much of the basic research that led to Agrobacterium-mediated transformation was done in public institutions, the private sector now holds many of the key patent positions, either through internal research and development, or from public institutions in the form of licenses.

A simple case of trying to use genetically modified organisms for public good is that of the much-touted golden rice, which incorporated beta-carotene as a source of Vitamin A. It is subject to at least 40 patents and only after a major international effort could its use in public domain be permitted. The current patent landscape effectively seals the potential of using it for the small and medium farmers in developing countries. They simply cannot pay the cost of intellectual property that is being claimed by the agribusiness companies such as Monsanto.

We have already written extensively on IPR issues in these columns earlier. This article is not simply to repeat the dangers of the current IPR regime. That does not need any reiteration. What we are bringing out here is that by tying India’s agricultural research to Monsanto and other agribusiness companies, we are effectively sealing other avenues of development.

Are there other options available to Indian agricultural research? No one denies the strength of Indian science today. Indian agricultural scientists number 7,000 and another 40,000 are involved in the extension program. What other avenues exist to use this strength in the interests of our agriculture?

One of the most exciting developments in biotechnology today is the development by a group of scientists – a multi-country initiative called Cambia  -- of Transbacter for transferring genetic material, as an alternative path to that of Agrobacterium. It is not the actual technical advance that is important but the model of science used. This group decided that the current model of IPR protected biotechnology is against the interests of the farmers and it is necessary to provide in the public domain alternatives to such patent protected technologies. They explicitly modelled themselves on the Free Software/Open Source Software paradigm and now Transbacter, effectively have broken the monopoly of Monsanto and others private companies. The Cambia initiative does not do away with patents; what it does is to put this patent in public domain and ensures that any process that uses Cambia’s patent also has to be put in public domain.

Cambia’s development of Transbacter as an alternative to the Agrobacterium route has been hailed as a major technological achievement in itself. While Monsanto and others did make some initial noises of examining whether Cambia is violating any of their patents or not, it is now clear they have thrown in the towel. Cambia had in fact looked at all the current biotechnology patents and found that if an alternative to Agrobacterium exists, the rest of the patents could be circumvented: most of these patents stood on the narrow base of this specific gene transfer vector. But more than the scientific achievement itself, it is the vision of scientists joining worldwide in a co-operative venture to develop public domain science that provides the excitement around the Cambia initiative.

China has taken a different route in ensuring that their agriculture does not succumb to the seed MNCs such as Monsanto. They have bought some crucial patents from smaller companies in Japan and other countries and have developed their own GM products. Bt Cotton and Bt rice in China are from their public sector scientific institutions and operating on the same principles that green revolution did.

One of the major challenge that genetically modified plants face is that no country can afford to give up its independence and surrender its agriculture to Monsantos of the world. Unfortunately, if the scientists across the globe are banding together to develop public domain science, the Indian science establishment, under the Mashelkar-Montek Singh aegis is tying up to the apron strings of global private capital.

The Umbrella Science Agreement signed between Kapil Sibal and Condoleeza Rice last October has yet to be made public. We do not know what are the terms of this agreement. All we know is that in 1993 a similar agreement collapsed on IPR issues. The nation would like to know what has changed in the Indian position since then which make the IPR issues raised earlier no longer valid? Why is it that this agreement is still being kept secret? Are the IPR terms of the Agreement in conformity with our patent laws where no life form can be patented? How has micro-organism been defined? Or has micro-organism being defined in a way that genes and gene sequences can also be patented? The country has a right to know these issues before any grandiose agricultural knowledge initiative is signed between the US and India.

If the British conquered India using Indian soldiers, this Government seems eager to provide similar services to the US. In today’s knowledge world, instead of soldiers, the US requires Indian scientists. The knowledge initiative seems to be tailored to this purpose. A sad day indeed for Indian science when the very institutions set up to develop Indian agriculture are used to subvert it.

Last month, a new global telecommunications agreement was reached under the aegis of World Trade Organisation (WTO). It follows various other unequal agreements that have been reached under the new global trade regime of WTO. This agreement opens up the $615 billion global telecom markets of all countries, hitherto a preserve of their national telecom carriers, to global competition. No wonder that Charlene Barshevsky, the US Trade representative to WTO, hailed the pact saying that it will give international carriers (read US multi-nationals) free access to nearly 100% of the world’s telecom market as against only 17% now. Barshevsky also added that this will create upto one million jobs in US alone.

The India has also agreed to provide such market access in long distance and international calls by 1999 and 2004 respectively. Though India has agreed that the foreign ownership will be allowed up to only 25%, this has little meaning as it has already allowed foreign ownership of 49% directly and 75% indirectly in Indian telecom companies. The only saving grace has been that India has managed to keep the call accounting rates out of the purview of the agreement while agreeing to market access. However, once competition is allowed as well as foreign ownership, this will be difficult to sustain. This will reduce, if not eliminate, the cross subsidies that currently long distance and international calls provide for expanding and maintaining low cost telecom access.

 The telecom market has seen tremendous growth in the last decades. The services segment has grown even faster, the bulk of the turnover today in telecom is in the services sector. Not only is this chunk of the market much bigger than the equipment market, it is poised for even higher growth with the expansion of Internet and data communications. As the telecom services grow rapidly, the global telecom pie is going to become even bigger.

 Telecom and Information technology have been identifies as levers thorough which less developed countries can leverage their growth and leap frog intermediate stages. The Maitland report, in 1984, had raised this possibility. The reality has been quite otherwise, with the disparities between the information rich and the information poor countries growing even sharper. Obviously, the disparities within these countries are even sharper, with a thin creamy layer aspiring to global standards while the rest are denied even rudimentary access.

 Initially, the developing countries considered telecom a luxury. This view was to change in 1980’s. It was recognised that telecom could motor economic growth and therefore its provision became a state priority. The strategy of growth for these countries have been to provide state investments to develop the telecom infrastructure, keeping in mind the need also to expand telecom services to rural and backward areas. Korea, Taiwan and Malaysia followed this route; subsequently China and India adopted this as a part of their strategy of development.
 An underlying philosophy of such telecom expansion has been the provision of  universal service obligation -- the telecom carrier has to provide similar telecom access irrespective of location. Provision of universal service obligation requires cross subsidies as less lucrative areas or traffic have to be subsidised from more lucrative areas or traffic. Thus, cheap connection costs and local calls are subsidised by higher long distance and international call rates.

 The new telecom agreement stipulates that each of the market segments -- the local, the long distance and the international segments will have to be opened to competition. This will make cross subsidies increasingly difficult. Telecom will be considered a commercial activity like any other, and its role in advancing other economic activities will take a back seat. Under such a competitive regime, the users who originate the highest call rates will undoubtedly benefit. However, the cost to all others will increase sharply. It will help the local elite to globalise more easily while the rest are excluded from the larger economy. There will be thus no incentive to provide telecom access to rural and backward areas that have low call densities.

 Which are the companies most likely to benefit from the new open telecom regime? Opening the national markets to global penetration is skewed heavily in favour of existing telecom giants. While the telecom agreement was under negotiations, first under General Agreement on Trade in Services (GATS) and subsequently in WTO, the advanced countries sorted out their internal differences. Originally, USA scuppered the telecom agreement in GATS as they were not willing to accept foreign equity beyond 20% in the telecom sector. Germany, and France were not too keen either to allow for foreign companies in their domestic markets. However, new alignments have been formed in the last two years -- MCI of US has now merged with British Telecom, Deutch Telecom (Germany) have aligned with French Telecom. Apart from the above, the other players are likely to be the telecom giant AT&T of USA and NTT of Japan. These major telecom players are now prepared to expand out of their national markets. Once the advanced countries had cleared the decks for their national telecom companies though such alliances, they had little difficulty in forcing this highly unequal agreement on all other countries.

 The telecom agreement is one part of the attack that US and other advanced countries have launched on the less developed countries. The Federal Communications Commission (FCC) has recently argued for a change in call accounting rates. Today, more calls originate from US for other countries then is received in US from others. The US has to pay the difference according to a settlement rate bilaterally agreed  between the telecom carriers. The US is now arguing that the each telecom company can charge only what is the cost of carrying the call according to certain bench mark costs worked out by FCC. Thus, if the carrier in US has higher costs than the Indian carrier, the Indian carrier should pay a higher amount while the US carrier pays a lower amount. Further, such an accounting will also remove subsidies that the international traffic today provides for the expansion of the network.

 The impact of the FCC proposal can be seen for the Indian case. US will bring down its differential payment from the existing $915 million to about $160 million. VSNL and the Indian representatives have rightly argued that the outflow from US is higher as the calls that originate from US are far higher than calls for US originating from India, and not because of the call accounting rates. Though there was a lot of pressure to bring the call accounting rates under the WTO purview, the Indian negotiators successfully kept this out of the scope of the agreement. This lead to other countries such as Pakistan, Bangladesh, etc., also opting out of the WTO framework for settlement of call accounting rates.

 However, the settlement issue will become irrelevant once competition is allowed in long distance and international traffic. Once these areas are opened to competition, cross subsidies will no longer be possible. The removal of cross subsidies, is therefore, the inevitable fall out of the telecom agreement.

 The Indian Government gave away its entire bargaining strength with the introduction of the new National Telecom Policy in 1994. This policy, announced a day before the then Prime Minister, Narasimbha Rao left for US, accepts unilaterally all the terms of the telecom agreement. The proviso of agreeing to only a 25% cap on foreign ownership in WTO now is an empty proviso, as the terms of the so called National Telecom Policy allow for 49% direct foreign ownership and 75% indirectly through foreign investment companies. At the time of announcement of the Policy, a number of experts had argued that such a policy should not be finalised while the telecom agreement was still under negotiations. Once the bargaining position was thus given away, there was little we could hope to gain from the negotiations. The contrast with China is glaring in this respect. China allowed foreign companies to operate but was able to secure technology upgradation for its state sector telecom manufacturing units in exchange for its market.

In India, we are willingly handing over our internal market while allowing state sector companies such as ITT , C-DOT, etc., to fall sick. The Sukh Ram episode only brings out that the policy changes did not take place out of ignorance. It was selling India -- pure and simple -- for private profit.

 The global trade regime is only another name for neo-colonial penetration. The trade agreements under WTO are thinly veiled designs for re-division of the world markets amongst leading countries and their multi-national companies. The issue here is not whether there should be globalisation or not, but the terms on which this globalisation is taking place. The WTO is therefore an arena of dividing the global market, with developing countries increasingly submitting to the dictates of imperialism. The telecom agreement is the latest example of this neo-colonial re-division of the world market.

The World Bank ran a series of advertisements in the US last year that said that a buck spent by the Bank as loan created a much bigger bang for US companies. They gave also a few examples: in an African country, a loan of few millions, led to a quarter of a billion dollar contract for McDermott, a US multi-national. A very big bang indeed for very few bucks. The examples that they could have given from India are also equally apt. Enron, in a consortium with Reliance, was handed over the Mukta Panna oil-fields after ONGC took a loan from the World Bank. The loan had clear conditionalities attached: the oil fields discovered by ONGC and Oil India would have to be developed as joint ventures with private and foreign capital. Of course, the Indian state went one better. It decided to hand over to MNCs for a pittance, oil fields discovered by ONGC at a great cost. No wonder Comptroller  and Auditor General of India called this scandalous and passed severe strictures on the Government.

The privatisation spree that India has gone in for in the last few years, has had dual objectives. One is the objective of global capital operating through institutions such as the World Bank, IMF etc., for opening up the Indian economy to MNCs. The other is the desire of Indian monopoly houses to participate in this loot of the Indian public sector in connivance with venal political sections. It is not surprising that money, allegedly paid by Reliance to the then Petroleum Minister figures prominently in the buying of MPs during the no-confidence motion against the Rao Government. The issue here is that the sums involved in such transactions are truly staggering. The Mukta-Panna oil fields are worth at least $4-6 billion in terms of known deposits of oil and gas. The actual deposits are likely to be much higher. And if this was not enough, we are now paying higher than international prices for oil from fields discovered by us. For gas, the amount that was paid last year is even twice the value that Enron was able to charge in Jamaica from its own oil fields. Thus, the privatisation of just two oil fields can give enormous “benefits” to those taking decisions. The argument that private capital reduces the role of what the economists call “rent”, read corruption, is completely spurious as it conveniently forgets that the privatising such state assets can yield a much larger rent then could be realised by developing them.

It is worthwhile to make a detailed analysis of the Mukta-Panna oil fields and how the process of privatisation is currently taking place. The Government of India forced ONGC to take a loan of 450 million dollars in 1991 with certain conditions attached. This, though ONGC had known reserves which it had discovered and could have easily raised an equivalent loan in the world financial market. However, those were the years that the Finance Ministry was forcing the public sector to take loans from the World Bank and thus make easier its task of privatising the Indian economy. The condition that the World Bank attached was that ONGC and Oil India would have to have joint ventures with private and foreign capital. The 450 million dollars were the few bucks -- the bang was not far behind Mukta-Panna, Tapti and Ravva oil fields worth billions of dollars were handed over to private and foreign capital, virtually without any payment.

 The Indian state has had own twist to the privatisation agenda of the Bank. For those running the state, privatisation was the big bonanza, particularly as there was a serious capital crunch and lack of development funds. In any case, the net present value (NPV) of these contracts -- the total amount that would be earned by the companies discounted to their current values -- is typically in billions of dollars. Enron’s contract for the infamous Dhabol project has a net present value of Rs. 50,000 crore, a figure more than 10 times the total budget of MSEB! The Mukta-Panna oil field is not an isolated incident -- it is part of the globalistaion and rent seeking nature of capital, realised though privatisation of public assets. The recent melt down of the economy of the Asian “Tigers” has also shown the true nature of privatisation e.g., the Indonesian and the Thai political elite amassed billions through loot of its public assets, and did this hand in glove with the MNCs. No wonder that these economies were paraded around the world as “model economies” by the IMF and the World Bank in their crusade against the state sector. It is only after the melt down that these entities are now discovering all kinds of hidden weaknesses in these economies including corruption, even though this has been public knowledge world over.

 Following the World Bank loan in 1991, tenders were floated in 1992 August, for 12 medium sized and 31 small sized oil fields. This included the Mukta-Panna oil fields which had already been developed by ONGC and was producing oil. This, though the Ministry of Petroleum had earlier clarified that the oil fields that were already developed would not be hawked to the private sector. It must be noted that the major cost in the oil industry is in finding oil and not developing it. Oil exploration is uncertain business and needs huge amount of capital as most test drilling does not produce a strike. The global oil majors have never shown any interest in oil exploration in the country: they have enough reserves in their oil fields in other countries for them not to invest money in exploring India. ONGC thus was formed in 60’s, at that time with Rumanian and Russian help to develop Indian capabilities and find oil so as to conserve scarce foreign exchange. Whenever India has tried to involve major oil companies, their interest has been only in those areas that ONGC has already explored and struck oil. Thus Bombay High and in oil fields such as Mukta-Panna, where there are known reserves and therefore no risk is involved are areas they have shown repeated interest.

 The bids received and the evaluation done for Mukta-Panna as pointed out by CAG, was full of holes. Thus, the Enron-Reliance bid was “received” three months after the last date which was unilaterally extended by the Ministry of Petroleum on the day that the bid was being received. No evaluation criteria was laid down in the tender: exactly the same as in the Telecom tender for privatisation floated by Sukh Ram. The scenario is by now familiar: first decide to hand over developed and prime public assets, then vitiate the tendering process and last evaluate using a completely flexible “criteria” based on who you want to favour.

 That favour was shown to the Enron-Reliance combine is clear. The corroborative evidence is now available from the Jharkhand Mukti Morcha bribery case. It has now been recorded as evidence that Rs. 4 crore was paid by Reliance industries to Satish Sharma, the then Petroleum Minister, which was subsequently used  to bribe MPs. Of course, given the size of the contract, this was only the tip of the iceberg: the actual amounts must have been much bigger.

 How much did the country lose on account of this deal? First, let us take the basis of the evaluation. Though the known reserves of the oil field was 31.35 million metric tonnes, during evaluation it was brought down to 14.5 million, that too without any explanation. And the known reserves are always an under-estimate: the actual reserves are likely to be much larger. Further, ONGC’s costs of at least Rs. 500 crore for developing the oil field was not compensated at all. Instead, it was given a pittance of 12.6 crore for discovering the oil field, and a production bonus payable in two tranches -- 8 and 14 years later. The net present value of these payments are almost zero and in no way compares with the original costs incurred by ONGC for developing the oil field. The total payment made to GOI was 12 crore before handing over of these fields. ONGC has been given a 40% equity for handing over assets it fully owned and had partially developed. Thus 60% of the equity of a $4-6 billion oil field was handed over for Rs.12 crore!

 However, if we think that this is the only loss to the country: handing over our assets cheaply to private and foreign capital, we are under-estimating the greed and rapacity of capital. The Government of India is now committed to pay a premium of $4 per barrel over and above the international price of crude to Enron-Reliance even though we had discovered the oil field and thus incurred the major cost: that of exploration. This against $8 it pays to ONGC. And if this were not enough, we are now paying Enron-Reliance for gas twice what Enron gets for its own oil fields in Jamaica. The loot was not a one time event: it still continues.

 The Mukta-Panna case in now before the Delhi High Court as a public interest litigation. It was investigated by a CBI officer before he was transferred. There are other oil fields that have also been similarly handed over to private capital. The Tapti oil field was also handed over to the same consortium while the Ravva oil field in the Krishna Godavari basin has been transferred to a Videocon-Marubeni consortium. Enron’s inroads into India was not limited to the power sector. And the Petroleum Ministry under Satish Sharma, had its own saga of corruption, much of which still remains to be fully unravelled.

The Enron scam in Dhabol in the power sector and the Mukta-Panna scam in the oil sector shows the true nature of globalisation. It is private loot of public capital: this is the essence of globalisation under the Fund/Bank aegis. If India does not want to follow in the wake of the Asian “tigers” it will have to re-think its strategies. The people of this country will not let its leaders fritter away indefinitely national assets the Mukta-Panna or the Dhabol way.