Sunday, January 18, 2009

OPEC’s Problem: Why it has failed to increase the price of Crude

OPEC or the Organization of Petroleum Exporting Countries was a cartel formed in the early 1960s. Though only 35.6% of the international crude production is by its 12 member states, yet it is extremely powerful in determining price. When it comes to free trade, forming Cartels is forbidden, but then when you think of it even the EU or signatories of the NAFTA and even Asia and Africa form cartels at WTO negotiations. So not wasting too much time talking about the right to OPEC’s existence lets come down to the point. The fact is that OPEC is the supreme power when it comes to determining global crude prices but the only question is why can’t this supreme power do anything about the crude prices atleast for the time being?

Remember when the international oil price hovered at USD 147 a barrel, the Libyan Oil Minister who was also the OPEC General Secretary – Abdallah Salem el-Badri said that oil prices might even rise to USD 200. In effect he raped the already strained consumer with oil prices seeing their biggest, strongest and most prolonged rally in history. At that time Saudi was the only sensible OPEC member that agreed to increase output. But maybe it’s Karma or maybe it’s just pure economics that’s hit back hard and literally made the OPEC powerless.

There are some key terms that need to be understood before you go through the Paradox:

1. OPEC countries and their dependence on the export of oil:
Its biggest member is Saudi Arabia which receives 90% of export earnings and 75% of its Budget revenues directly from oil while the smallest in terms of output is Algeria which depends on oil exports for 95% of its export earnings. The point is that OPEC countries depend heavily on the export of crude oil and sharp dips in revenue collections from the export of oil can hurt their economy really badly (By either a fall in price or volumes).

2. OPEC’s quota system:
OPEC sets quotas which all 12 member states need to voluntarily abide to. The percentage increase and decrease in the production of oil is generally reflected uniformly amongst Quotas of all member states. An increase in quota leads to reducing prices while a reduction leads to increased oil prices.

3. US Crude inventories:
After OPEC the only other force strong enough in terms of determining international crude prices is the US crude inventories report. These weekly reports determine how much of crude inventory does the biggest consumer of crude have. The greater the inventory the lesser is the perceived demand for crude and hence the crude prices fall and ofcourse vice verse is also true.


OPEC’s Problem:

Enter the Perfect Market: When the OPEC countries reduce their output by say x%, they need the price to go up by more than x% to maintain their already scarce revenues from the export of oil. As of now the forecast for economic growth is so grim that the average price rise after an OPEC decision to cut production isn’t even as much as x% and thus atleast some of the OPEC countries go beyond their quotas. This is quickly reflected in the weekly US crude inventory details. This quickly causes a correction in the price of crude bringing it back to supply-demand equilibrium. The result is inevitable, a long drawn bout of low crude prices and there won’t be much the OPEC could possibly do as of now. There is baseline below which OPEC can’t reduce its output atleast at the current crude prices and maybe we’re already at that point.

It’s sad that to keep the growth engines of the world going, we need to be held ransom by the OPEC. But then maybe there is a force stronger than the OPEC and ofcourse that is the force of economics.

Friday, January 16, 2009

NREG an investment or a waste?


The government has started the National Rural Employment Guarantee scheme. I'd like to point out a couple of instances where i saw what was really happening:

  • Near Pilani in a village called Garinda, people were paid to dig pits and then fill them back again

  • On the way to Delhi, in Haryana we stopped somewhere and saw people sweeping the highway. When i asked them why they were doing this they said it was a part of the NREG scheme.
Theses are figures that the NREG website claims:

Employment provided to households: 3.51 Crore
Persondays [in Crore]:
Total: 138.76
SCs: 42.95 [30.96%]
STs: 33.42 [24.08%]
Women: 67.68 [48.77%]
Others: 62.39 [44.96%]
Total works taken up: 20.68 Lakhs.
Works completed: 7.38 Lakhs.
Works in progress: 13.3 Lakhs.

The NREG was alloted 16000 crores to implement the plan and promised greater funds if and when required. Firstly, the productivity of the scheme is under question and I won't spend much time arguing that. But i do question how much of it actually trickles down to the bottom of the pyramid. There were places where people were promised 100 bucks a day and other places where they were paid only INR 7 a day.

Now looking at it from a different angle, talking about teaching the fellow how to fish rather than giving him the fish, India figures the lowest in terms of public spending in Education. Is it time to learn fishing rather than distribute the fish?

I am quoting a news report:

'In spite of a booming economy, India's public spending on higher education per student is the lowest among developing and developed countries.

Though the Central Government has announced an expected 150 percent increase in central spending on higher education in 2007-08 (at Rs. 6,354 crore over Rs. 2,550.50 crore this year), the fact remains that India will continue to lag behind, compared to its asian counterparts.'

(Please note the difference wrt the NREG budget allotment. Education spending lags by 10000 crore or almost 150% of the educational budget)

'At the moment, public spending on higher education per student in India stands at US$ 400 (Rs. 18,000) and this is expected to improve to around US$ 1,000 (Rs. 45,000)'

it goes on to say:

'Even among the BRIC (Brazil, Russia, India and China) countries, India is at the bottom of the pile. While China, Russia and Brazil spend US$ 2,728, US$ 1,024 and US$ 3,986 respectively on higher education per student, another developing country Malayasia's expenditure under the same head is quite high at US$ 11,790.'

Is it time to pay teachers more to get better people to join the profession and spend on a better tomorrow rather than just a better today?

Time to rethink spending or are we stuck in a time warp election after election?

Tuesday, December 2, 2008

Why did it take Mumbai?

Blast after blast but we haven't seen much done. Demands of resignations and then some rebuttals, the blame game and we're back to square one. Another day and another blast. Today the target was Assam but no one will talk about it. No debates, no coverage, no media persons. The sad fact is that terror has become a part of our lives. India holds the unfortunate record of the second largest death toll due to terror and guess what? We're second only to Iraq. Some might see our ever expanding population as an asset but this is one record we'd rather not hold. The problems?

Our non-optimized defense budgets:
Does every VIP need security? Shouldn't we get more from what we spend for the defense of our country? We spend 5% of our budget towards defense and related expenses while most developed nations spend a maximum of 3% of their budgets. Are we spending the right amount on the right things? When we spend so much on arms and ammunition defense personnel, why wasn't the Maharashtra Police Head Quarters well equipped to fight automatic riffles and grenades?

The morale of our security forces:
Does the police have to be controlled by the state politicians which in a way requires them to be act in the most subservient of ways. There are numerous stories of officers who get posted around just for disobeying a politician. Is it time to separate politics and policing? The Prime Minister is talking about a federal terror fighting agency, but will that have enough teeth to fight the menace of terror or will it become just another puppet in the hands of the
central government?

Corruption:
When even a havaldar needs to pay his way to get a posting he wants you can imagine how deep rooted corruption is. Police officers with the biggest bellies you'd have ever seen and then again for the fresh recruits at the lowest levels the selection process isn't the most transparent either. People pay just to join the force and with the low salaries the only way of making some money is ofcourse bribes. The role of customs also needs to be studied. Although in the case of Mumbai, arms and explosives were smuggled in by the terrorists themselves directly be the sea route, in the numerous blasts preceding this where did the RDX come from? Were the customs officers inspecting whatever comes through our highly border with Nepal have something to do with this? The truth is that large amounts of goods are being smuggled into India with customs being bothered only about how much the smuggler is ready to bribe. This nexus was first exposed after the 1993 blasts when a few customs officers came into the picture. But is that a lesson forgotten?

Naxals:
Who are they? Are they Indian or is all terror exported from Pakistan? You don't expect such a large movement to happen without sympathizers within our country. When tribals in so many of our states were virtually forgotten while we were writing the growth stories for our metros such repercussions were bound to take place. Maybe it is time for us to truly see why the most mineral rich states: Orissa, Bihar, Jharkhand and Chattisgarh are also our poorest states. Maybe then we will get an answer to why the problem exists and it would be more sensible to treat the problem rather than the symptoms.

Mumbai shouldn't merely be used as an excuse to propagate war or earn some cheap political brownie points but as a time to ponder over our mistakes and how we could have avoided them. I sincerely hope what happened on the 26th November in Mumbai will help us overcome the inertia that has driven our systems for so long and hope that the politicians will also see what happened in Assam on the 2nd December as an equal infringement of our security and as big a failure of the system as was Mumbai.

Don't get me wrong. I am no disgruntled youth who wishes to flee his country and settle in a land overseas. I am as proud of my country as anyone else is. What I am not proud of is our leadership, no party in particular because they're all the same.
I salute the bravery of the men who gave their lives in Mumbai trying to save and protect strangers in a city which most had seen for the very first time. All I wonder is why did something like this have to happen in the first place?

61 years ago Nehru had said:

'Long years ago we made a tryst with destiny, and now the time comes when we shall redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom.'

Maybe what Nehru said on the 15th of August 1947 was still true on the midnight of 26th November 2008 while we all watched what happened in Mumbai. Maybe it's time to redeem our pledge yet again.

जय हिंद 

-Akhil Sharma

Saturday, November 29, 2008

Terror Strikes!

9:30 pm-26 Nov, 2008: India had just won the 5th ODI consecutively against England. The Indian team had gone from strength to strength. There were celebrations on the field in Cuttack, but somewhere on the western coast of the country, trouble was brewing. A group of men had just arrived at the Sasoon docks and Bandhwara areas in Colaba in inflatable boats. They had had a long journey after having set sail from a neighboring country. The moment they set sail in a merchant vessel, they looked as if they knew what they had to do. They quietly unloaded on landing and started walking in groups of 2 towards different areas. Each of them had with them a huge bag, indicative prima facie, that they were from outside the city. When one of the fisherman in the Koliwada area enquired where they were from, the men curtly told them that they were from Kerala and told them to mind their own business, although neither the appearance nor the accent established this fact, if not disprove it. One of the groups then proceeded towards the well-known Leopold Cafe and settled themselves in. After having eaten and drunk, they paid the bill and pulled out an Avtomat Kalashnikov assault rifle Type 56 and started firing randomly at everyone present there, which included foreigners as well. And here began the fledgling steps that would then turn to leave a bloody imprint all over one of the most important hubs of the country, a form of urban terrorism that had never terrorised the city in this manner.

Having done that, the two of them proceeded to the heavily crowded Chatrapati Shivaji Terminus which was bubbling with activity, of people going home after a long day at work. A CCTV camera caught them moving towards the station normally, but highly alert and looking both sides. They then walked into CST through one of the entrances and announced their presence by hurling a hand-grenade right in front of the CST Police Station. A huge explosion followed which led to the glass of the adjoining ticket windows breaking, screams of horror and panic and people running out in a stampede. They then randomly started firing using their rifles and walked right into CST after blwing up a passenger hall, claiming their first lives. Here they faced the first resistance from the police, among who was the well renowned policeman and encounter specialist, Vijay Salaskar (Encounter Specialist 48 Encounters, Mumbai Crime Branch) and Additional Commissioner of Police Ashok Kamte. 

Anti Terrorism Squad chief, Hemant Karkare arrived at the spot, wore a flimsy bullet-proof jacket and the three of them retaliated to the fire forcing the terrorists to disperse in minutes. At this time, a commotion was reported at Cama Hospital and the three men rushed to the place to ensure that everything there was under control. After this there was a commotion near Metro Cinema and the three then boarded a Qualis to go to that place. When they were maneuvering this, the terrorists opened fire.  Their service revolvers were no match for the assault rifles of the terrorists and each received 3-4 bullets and fell. The terrorists then threw their bodies on the road, hijacked the Qualis and sped away after firing random shots at a group of people and media persons who thought that it was the police, leading to absolute panic, people lying flat on the road and a press reporter getting injured.

Meanwhile, another group of terrorists, started walking about in the posh south Mumbai area firing randomly on the way and threw a grenade at a nearby petrol pump which thankfully missed its mark and did not blow up completely. They then rushed into a residential area of Colaba and holed themselves into Nariman House, an area in which there were primarily Jewish families including the rabbi who had just recently moved there from Brooklyn and their infant baby. While all of this was happening, the iconic Taj Hotel, a 108 year old heritage structure and now a 5-star hotel was under attack. A group of terrorists had walked into the lobby and started firing randomly and hurled grenades in the lobby. A similar situation was on at the nearby Oberoi-Trident hotel at Nariman Point on Marine Drive. All of this was happening in a surreally fast manner, it was as if the entire city was under siege. Even as shops near the vicinity of these places were shutting down and heavily armed policemen were entering the hotels, the police were frisking people to ensure that the terrorists did not escape. Meanwhile the CM of Maharashtra who was then in Kerala, cut-short his visit and rushed to his capital city. 

While this was happening, an innocent taxi driver was in Vile Parle heading towards the airport, perhaps unaware of what was happening South Mumbai. He was driving from the South of the city and had just taken the turn to the domestic airport. I was at my home in Santacruz, tracking these events when the sound of a blast resonated the air. At first I mistook it for a fire cracker, but a few minutes later, reports started coming in that a blast had taken place somewhere near Santacruz airport. A horrified India then saw on national television, what remained of that same taxi with the driver and co-passengers in it. The biggest part of the entire vehicle that was visible was the 2 front wheels and a small portion of the bonnet. Everything else had been blown to smitherins and there was shattered glass everywhere. It dawned on me then that this was the blast, the intensity of which was so huge that  it resonated across the Mumbai sky and could actually be heard in another suburb. Things were getting graver, scarier and extremely grim...

While all this was happening, the police had cordoned off areas near Chowpatty using barricades to localize the terrorists to one area. The policemen standing at the barricade saw a white civilian vehicle, a silver Skoda approach the barricade really fast. On seeing the barricade, the vehicle suddenly slowed and tried to make a U-turn. Policemen there were very agile and pulled off the key from the ignition after which there were fierce gunshots and one of the two terrorists was 'encountered' and the other had been caught alive after failing to feign death and being caught by the local mob. It turned out that the police Qualis which the terrorists had hijacked had a flat tyre near Chowpatty and realising that they could not go any further, the terrorists had hijacked the Skoda car. This was the first killing by the Mumbai police but in other places situation was getting very serious. In the Taj, media reports started trickling in that a hostage situation was building up with indiscriminate firing from the terrorists. At the Oberoi-Trident, the army arrived indicative of the grave crisis the city was under. Meanwhile, it was reported that the Mumbai police had lost 14 men in a matter of hours. Also, the boat through which they had arrived had been found by the police and it was found to contain bags of explosives, grenades and RDX.  Meanwhile another blast was heard in Wadi Bunder area and Mazgaon on Dockyard road. It was as if the entire city was being bombed at once.  Meanwhile fingers were started being pointed to across the borded, even though some unheard of organization like the Deccan Mujahideen took responsiblity for the attack. Intelligence experts had already started a theory on modus operandi used by these terrorists. The coast guard and navy started a serious combing operation to search for the ship which had brought these terrorists here. The merchant ship MV Alpha was apparently involved in these attacks. Also, the Marine Commandos of the Indian Navy were the first on the site of the Taj and were quick to respond to the threat and started a rescue operation. The bell boys of the Taj were trolleying the guests outside the Taj while the crisis continued. This was going to be one long night and not just one...

Late into the night, it was reported that 6 IAF aircrafts were on the ready at Palam and 2 squadrons of the National Security Guards (NSG) had left for Mumbai. The NSG are the elite commandos of the Indian Army who are very highly trained in combat operations involving difficult situations like these. These brave soldiers left Palam at 2:30 am and arrived in Mumbai early on Thursday and were driectly into the thick of things. Some went to the Taj, some to Oberoi and some to Nariman house, all three who by now had a serious hostage situation with the number of guests in the two hotels running into the hundreds even as the buildings near Sabbath house (Nariman house) were evacuated for safety purposes. The NSG personnel had bullet-proof vests, were heavily armed with assault rifles and all of them took positions around the two hotels. The scene outside the Taj, near the parking lot was fully packed even as police had cordoned off a radius of 100 meters for safety. The operation was to be led by the NSG who went into the Old building amidst sounds of gunshots and grenade blasts with all support being given by the Mumbai police and the Army. Meanwhile there were loud explosions in various places from the frontal wing, western wing, central dome, western dome and other floors of the hotel. Mumbai fire brigade personnel were quick to douse the rising flames which raged inside the building. They also used curtains as make-shift ladders to help evacuate guests from various parts of the hotel. While doing so, a hand grenade was hurled upon them but they continued their operations. By morning many of the guests had been evacuated, but the number still present inside was unknown. Meanwhile, the MARCOS were assisting the NSG personnel at the Oberoi and by late afternoon, the first good news came in that the NSG had successfully gunned down the 2 terrorists inside the hotel, but combing and sanitization operations were still on to make the hotel secure. Atleast one operation had ended, but the devastation and human cost of this was unknown, as bodies were being brought out of the Oberoi. We would later come to know that 30 people had been killed (officially) along with the 2 terrorists. Even as the MARCOs chief issued a statement saying that the terrorists knew the layout of the hotel like the back of their hand and were using black berry phones of foreign origin, the casualtlies were rising. 

Meanwhile, NSG personnel were seen airdropping onto the Nariman House building. The strategy was a 'top-down' operation as the terrorists who were present in the building had made passage from the ground floor difficult since they had vantage positions inside the building. Even during this, NSG personnel were able to rescue 14 hostages from inside Nariman House which included many foreigners and a 2 year old boy who as it turned out was the son of the rabbi and his wife who were still holed up in the house. First reactions from the hostages at the Oberoi and Taj, were of extreme gratitude towards the Indian security forces and the exceptional hospitality of these hotels even in times of these crisis. They praised the forces saying that they were extremely helpful and professional in their operations. Meanwhile, the air dropped NSG personnel took positions on the roof and snipers were placed in adjacent buildings. Simultaneously the NSG secured the first two floors of Nariman House and slowly started moving in, gradually and floor by floor, the idea being to sandwich the terrorists toward the main building. As this operation was on, cover fire was used a diversionary tactic as the NSG arrived on the 5th floor. Gunshots could be heard and it was known that the terrorists were on the move. Finally the NSG commandos used a rocket launcher to blow open the 4th floor to further hole the terrorists to the third floor. The NSG found hostages killed on each floor as they went and realised that collateral damage had already been done. Hence they moved in for the kill to successfully eliminate the 2 terrorists holed inside, even as Israel (the country with the worst history of collateral damage) criticized the Indian Force for rushing the operation which led to the rabbi being killed. What they didn't realise was that they had already been killed by the terrorists before they stormed the house. Sadly, an NSG commando Gajinder Singh had lost his life fighting bravely in the operation as he came under gun fire. But he still didn’t compromise his position and fought bravely for the country, for the city, for you and me...

Having secured Nariman house fully and a successful Operation Black Tornado, the NSG left for the Taj, amidst shouts of a grateful local crowd who cheered these brave heroes and thanked them. Loud cheers of Bharat Mata ki Jai rang out as the NSG left in army trucks towards the Taj, with determination on their face and complete focus on the next task at hand. Not once did they show any signs of fatigue (operation having been on for 46 hours) and moved to the Taj while one unit stayed back to do sanitization operations. 

The situation at Taj was tense. There had been a minimum of 25 blasts reported within the hotel and only the new Taj building had been sanitized while terrorists were still present in the heritage building. One could see Army personnel take up positions around the building, with grenade launchers also being used to smoke out terrorists believed to have been present on the first floor. The terrorists used diversionary tactics causing a blast on the 6th floor but the Fire Brigade was successful in dousing the flame. It was as if the fire in the Taj never seemed to stop with smoke billowing out from various parts of this hotel, which had stood out so proudly as a symbol of Indian pride showing to the erstwhile British Raj the skill of Indian architecture, having been built by Jamshedji Tata. It had almost been 55 hours and the gun-fire in the Taj was sporadic with lulls in between and lasted through the night. In the wee hours of morning, one heard gunshots from the ground floor of the building and a terrorist gun came out of one of the windows and fired at the army personnel outside. There was instantaneous retaliatiory fire in which the terrorist was killed and in a few minutes his body was thrown out of the same window by an NSG personnel. His death marked the end of Operation Tornado at the Taj. It was later known that there were four terrorists in the Taj and all of them had been neutralised. One of them jumped from the top floors to escape the fire, lost his footing and was instantly eliminated by the NSG, the filth of the earth being wiped off with a cloth as if it never existed. Finally in the wee hourse of this morning, all terrorist threats were neutralised and the city that never slept (for a different reason) heaved a sigh of relief. It had been the worse 2 days in Mumbai and it was thoroughly shaken.  Schools and colleges had been shut and even the stock markets were closed on Thursday, which would amount to a huge financial loss. But the biggest loss was the human loss, with a 195 killed (exclusive of Taj casualties) and more than 300 injured in wha is now being called India's 9/11. 

Even as peace begins be restored, the city and the nation have lost a lot. Hundreds have lost their lives and a trail of destruction remains. People have died fighting against this direct, blatant and audacious attack on India's sovereignty with the financial capital of the country being held at ransom. Spare a thought for all those people, Hemant Karkare, Gajender Singh, Ashok Kamte, Vijay Salaskar and all the police force who gave up their lives so that you and me could sleep safely in our beds, who so selflessly performed their duty, led from the front and showed us what true valour is made of. They, who did so much for us and took so little of the credit. These are the true heroes of the nation, the valiant who don't care what religion or caste your are while saving you. For them, we are all INDIAN first. This is the unity that we need to show to the world, to show our solidarity and take stringent action against the perpetrators. The nation today is under threat, the same nation that has raised you to what you are today. The country needs to be defended at all costs and all means possible. ENOUGH IS ENOUGH. Do not dissociate yourself from this event just because you were not affected. Think of all those families whose wives are widowed, whose children orphaned and who did their job NO MATTER WHAT when the situation demanded. THE NATION demands you to DO YOUR JOB and asks for the retaliation that such a heinous act deserves from this passive government and to tell them that this is it. We will not submit, we will not surrender, we will fight back  till the end. This is what Indians are made of. Let us pledge that we, a billion strong Indians will stand by the nation in this time of crisis and bring the perpetrators to justice. And we will give not give an eye for an eye and not a tooth for a tooth but 2 eyes for an eye and a jaw for a tooth. I conclude this by writing a message for you, fellow Indians:

 

First they Came...

 

First, they came for the socialists,

And I did not speak out 

Because I was not a socialist.



Then they came for the trade unionists,

And I did not speak out

Because I was not a trade unionist.



Then they came for the Jews,

And I did not speak out

Because I was not a Jew.



Then they came for me,

And there was no one left

To speak for me..

-Pastor Martin Niemoller

 

RETALIATE, FIGHT & DEFEAT, MY COUNTRYMEN. IT IS THE NEED OF THE HOUR.

 

JAI HIND!