The RBI knows now that raising interest rates isn’t likely to help. But that’s all they can do really – the solution needs to be political. A number of things I’ve heard suggest the situation won’t get better very soon
NREGA is exacerbating it. Most harvest season hires are temporary workers, who now have permanent paying jobs with NREGA and therefore don’t want to bother harvesting. Farmers have reacted by reducing crop acreage; supply shortfalls will increase when the pattern applies country-wide.
Sharad Pawar talks his shop – people loyal to him take cues from what he says and raise prices when he suggests any commodity is under supply stress.
The middlemen in the food supply chain, politically very strong, have been hoarding; and the politicians are helping by not flooding the market with the FCI stored resources (of which 40% are wasted!)
There was a drought last year, which constrained supply. Not much of a drought, but it doesn’t take much to fuel a panic.
Food is a very small portion of our monthly expenses considering you dont own an apartment are living on a rental basis, about half of the rent we would normally pay if we dont own a house, so even a 30% increase isn’t going to kill you. But it hurts the poorest of the poor; while as a nation we don’t care about our poor, it is simply inhuman to let them starve while we consider stupid things like raising interest rates. Even if they don’t starve, the high prices of certain items makes them undernourished as they can’t afford what’s nutritious. It’s not yet too bad but it’s progressively getting worse. With oil prices set to increase this WPI looks like it’s only headed one way: UP
Winston Dsouza
Tuesday, February 16, 2010
Thursday, February 11, 2010
RBI Mandates Single Base Rate for Banks
RBI has decided to curb the current practice of banks using different benchmark rates for different customers. From April 1, 2010 all banks will have to use a single base rate that will be the reference rate for all customers:
The Base Rate system will replace the BPLR system with effect from April 1, 2010. Banks may determine their actual lending rates on loans and advances with reference to the Base Rate. Base Rate shall include all those elements of the lending rates that are common across all categories of borrowers. While each bank may decide its own Base Rate, some of the criteria that could go into the determination of the Base Rate are: (i) cost of deposits; (ii) adjustment for the negative carry in respect of CRR and SLR; (iii) unallocatable overhead cost for banks such as aggregate employee compensation relating to administrative functions in corporate office, directors’ and auditors’ fees, legal and premises expenses, depreciation, cost of printing and stationery, expenses incurred on communication and advertising, IT spending, and cost incurred towards deposit insurance;and (iv) profit margin. An illustration for computing the Base Rate is set out in the Annex
The actual lending rates charged to borrowers would be the Base Rate plus borrower-specific charges, which will include product-specific operating costs, credit risk premium and tenor premium.
All categories of loans should henceforth be priced only with reference to the Base Rate. The Base Rate could also serve as the reference benchmark rate for floating rate loan products, apart from the other external market benchmark rates. The floating interest rate based on external benchmarks should, however, be equal to or above the Base Rate at the time of sanction or renewal.
Since the Base Rate will be the minimum rate for all commercial loans, banks are not permitted to resort to any lending below the Base Rate.
The Base Rate system would be applicable for all new loans and for those old loans that come up for renewal. However, if the existing borrowers want to switch to the new system before the expiry of the existing contracts, in such cases the new/revised rate structure should be mutually agreed upon by the bank and the borrower.
This is significant – many banks have had this kind of funda:
• Lure a customer using a fundoofied low interest rate like 7.25% floating
• Make the paperwork such that the loan adjusts with respect to a benchmark rate called “Home Loan Benchmark”, say 200 basis points below it. Set this benchmark rate at 9.25%.
• When the customer’s signed up and paid for a few months, INCREASE this Home Loan Benchmark rate slowly – to 10%, then 11% etc.. The customer now has to pay 200bps lower.
• Most customers won’t care because you will increase the tenure of the loan rather than the EMI. They are too busy or ignorant to realize that they are paying 10% more interest to the bank over the term of the loan if the loan tenure is extended, for each 0.25% increase!
• Example: 30 lakh loan for 20 years at 7.25% is 23,711 a month, and you pay Rs. 27 lakhs in interest over 20 years. If they bump up the rate to 7.5%, and keep the EMI the same, you’ll pay it for 20 years 11 months; the amount of interest you pay, though, goes up to 29.4 lakhs, or 9.36% more. Screw that – you pay 3% interest in the first year.
• But this means you can’t snare the new suckers – who want low interest loans. So instead of losing that juicy extra income from the already trapped customer, you create a different benchmark called “NEW Home Loan Benchmark” and offer loans at 7.25% only to new customers. That way you can milk the older customers who have no choice but to pay, and get new customers at lower rates.
• Your older customers can’t run off easily; you set up a pre-payment penalty.
This is at the retail end. At the corporate end banks were killing each other by offering rates way below the BPLR benchmarks (one of the many numbers) and since there is no “bottom” banks could simply lowball each other to whatever end.
A fixed base rate will solve some of these problems – all loans, corporate or retail, must benchmark themselves to the base rate. (Note: Floating rate products can take on external benchmarks also – but that’s good enough if the bank doesn’t control the external benchmark. )
What this will do though, is show you the huge spread between what is offered to corporates and what you and I get. Where corporates can get loans at 7%, we can only get them at 10% or more; once they put in the base rate at 7% we get some negotiating room to eke out a better rate. But honestly most borrowers will be too ignorant to even check a bank website for it’s current base rate, so who am I kidding. All it will do right now is create a more competitive environment for certain banks.
Public sector banks are most certainly going to benefit – they didn’t indulge in these kinds of practices. Private banks are going to see margin erosion. I hope they make pre-payment penalties illegal too – then private banks are hosed. But there are ways to make money – not as much as before but still, good money – for banks, and I hope they come around and offer better products instead of trying to squeeze the last naya paisa from customers.
Winston Dsouza
The Base Rate system will replace the BPLR system with effect from April 1, 2010. Banks may determine their actual lending rates on loans and advances with reference to the Base Rate. Base Rate shall include all those elements of the lending rates that are common across all categories of borrowers. While each bank may decide its own Base Rate, some of the criteria that could go into the determination of the Base Rate are: (i) cost of deposits; (ii) adjustment for the negative carry in respect of CRR and SLR; (iii) unallocatable overhead cost for banks such as aggregate employee compensation relating to administrative functions in corporate office, directors’ and auditors’ fees, legal and premises expenses, depreciation, cost of printing and stationery, expenses incurred on communication and advertising, IT spending, and cost incurred towards deposit insurance;and (iv) profit margin. An illustration for computing the Base Rate is set out in the Annex
The actual lending rates charged to borrowers would be the Base Rate plus borrower-specific charges, which will include product-specific operating costs, credit risk premium and tenor premium.
All categories of loans should henceforth be priced only with reference to the Base Rate. The Base Rate could also serve as the reference benchmark rate for floating rate loan products, apart from the other external market benchmark rates. The floating interest rate based on external benchmarks should, however, be equal to or above the Base Rate at the time of sanction or renewal.
Since the Base Rate will be the minimum rate for all commercial loans, banks are not permitted to resort to any lending below the Base Rate.
The Base Rate system would be applicable for all new loans and for those old loans that come up for renewal. However, if the existing borrowers want to switch to the new system before the expiry of the existing contracts, in such cases the new/revised rate structure should be mutually agreed upon by the bank and the borrower.
This is significant – many banks have had this kind of funda:
• Lure a customer using a fundoofied low interest rate like 7.25% floating
• Make the paperwork such that the loan adjusts with respect to a benchmark rate called “Home Loan Benchmark”, say 200 basis points below it. Set this benchmark rate at 9.25%.
• When the customer’s signed up and paid for a few months, INCREASE this Home Loan Benchmark rate slowly – to 10%, then 11% etc.. The customer now has to pay 200bps lower.
• Most customers won’t care because you will increase the tenure of the loan rather than the EMI. They are too busy or ignorant to realize that they are paying 10% more interest to the bank over the term of the loan if the loan tenure is extended, for each 0.25% increase!
• Example: 30 lakh loan for 20 years at 7.25% is 23,711 a month, and you pay Rs. 27 lakhs in interest over 20 years. If they bump up the rate to 7.5%, and keep the EMI the same, you’ll pay it for 20 years 11 months; the amount of interest you pay, though, goes up to 29.4 lakhs, or 9.36% more. Screw that – you pay 3% interest in the first year.
• But this means you can’t snare the new suckers – who want low interest loans. So instead of losing that juicy extra income from the already trapped customer, you create a different benchmark called “NEW Home Loan Benchmark” and offer loans at 7.25% only to new customers. That way you can milk the older customers who have no choice but to pay, and get new customers at lower rates.
• Your older customers can’t run off easily; you set up a pre-payment penalty.
This is at the retail end. At the corporate end banks were killing each other by offering rates way below the BPLR benchmarks (one of the many numbers) and since there is no “bottom” banks could simply lowball each other to whatever end.
A fixed base rate will solve some of these problems – all loans, corporate or retail, must benchmark themselves to the base rate. (Note: Floating rate products can take on external benchmarks also – but that’s good enough if the bank doesn’t control the external benchmark. )
What this will do though, is show you the huge spread between what is offered to corporates and what you and I get. Where corporates can get loans at 7%, we can only get them at 10% or more; once they put in the base rate at 7% we get some negotiating room to eke out a better rate. But honestly most borrowers will be too ignorant to even check a bank website for it’s current base rate, so who am I kidding. All it will do right now is create a more competitive environment for certain banks.
Public sector banks are most certainly going to benefit – they didn’t indulge in these kinds of practices. Private banks are going to see margin erosion. I hope they make pre-payment penalties illegal too – then private banks are hosed. But there are ways to make money – not as much as before but still, good money – for banks, and I hope they come around and offer better products instead of trying to squeeze the last naya paisa from customers.
Winston Dsouza
US Trade Deficit increases to $40.2 Billion
A Brief Look at the US Trade Deficit
Total December exports of $142.7 billion and imports of $182.9 billion resulted in a goods and services deficit of $40.2 billion, up from $36.4 billion in November, revised. December exports were $4.6 billion more than November exports of $138.1 billion. December imports were $8.4 billion more than November imports of $174.5 billion.
The first graph shows the monthly U.S. exports and imports in dollars through December 2009. Both imports and exports increased in December. On a year-over-year basis, exports are up 7.4% and imports are up 4.6%. This is an easy comparison because of the collapse in trade at the end of 2008.
The second graph shows the U.S. trade deficit, with and without petroleum, through December. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.
Import oil prices increased to $73.20 in December - up 87% from the low in February (at $39.22). Oil import volumes were up sharply in December. Overall trade continues to increase, although both imports and exports are still below the pre-financial crisis levels.
Winston Dsouza
The 34 Million
“Scary,34 million joined the ranks of the poor in India because of the recession that everyone was in denial of.UNDESA figurs"
I usually find these figures very global-warming type – meaning, highly suspect and jugaad methodology - so I thought I’d investigate. In the “World Economic Situation and Prospects, 2010” report, Page 35, they say:
The reduction in employment and income opportunities [due to the slowdown] has led to a considerable slowdown in the progress towards poverty reduction and the fight against hunger. Estimates by the Department of Economic and Social Affairs of the United Nations (UN/ DESA) suggest that, in 2009, between 47 and 84 million more people have remained poor or will have fallen into poverty in developing countries and economies in transition than would have been the case had pre-crisis growth continued its course (table I.3). This setback was felt predominantly in East and South Asia, where between 29 and 63 million people were likely affected, of whom about two thirds were in India.
So the figures for Asia are between 29 and 63 million people – that is a huge enough range, and 2/3rd are in India, so for us it’s between 20 and 42 million people. 34m is somewhat in the middle if you are slightly mathematically challenged, but let’s not bicker about a few million here and there.
The important thing is how they arrived at it. They said – okay, India’s growing at 9%. If it continued to grow at 9%, then X number of people would be poor. But because of this slowdown, we have Y poor people, and Y is larger than X. Therefore, this figure Y-X is the number of people that have been reduced to poverty by the slowdown.
Let’s not talk X and Ys. Let’s talk real numbers.
Assume we had a 100 poor people. Let’s say that for every 1% growth, we reduced poverty by 1 person. So with 9% growth, we are left with 91 poor.
But we grew only 6%. So, post the recession, we have 94 poor people. 94 is less than 100. That might sound like a good thing. But no.
The UN-DESA way of looking at this – and their glasses must forever be half empty – is: recession did not take 3 people out of poverty, so 3 people got poorer.
Another way of looking at it is: 6 people got out of poverty. 6 is good. Even 1 is good, come to think of it, but 6 is definitely good. And it is wrong to focus on the 3 number.
For one, 9% growth was not sustainable; it was extraordinary. It was likely to be 6-7% averaged over years, so one year we’d do more, another we’d do less. Extrapolating a pre-crisis growth figure is silly; in that way, I could extrapolate the “Hindu Rate of Growth” of 3% pre-1992 and say damn, 600 million people are out of poverty today since 1992 because we grew more than expected.
Second, the focus on the smaller figure throws real achievement out the window. There are no real figures in that sheet – but I can imagine that if this calculation yields 34 million “poorer”, then the absolute number of people we got out of poverty must then exceed 60 million. That means, we got 6 crore people out of poverty, post recession – less than the 9 crore we expected. That statement paints an entirely different picture.
Finally, I must say the statistics are screwed up because it uses per-capita income to determine poverty levels – yet, if money was earlier more concentrated in a few rich people, and post recession got better distributed among the entire population, the poverty figures UN-DESA quotes will be overstated. They acknowledge this, though:
It should be noted that the estimates presented here take into consideration the impact of the downturn only on growth in income per capita compared with continued pre-crisis trends. Hence, these should be interpreted in the first instance as a slowdown in poverty reduction owing to a drop in the mean per capita income of developing countries. For lack of additional information, the estimates do not take into account likely changes in income distribution.
That statistic is simply gleaned from macro-figures. We aren’t told how many people are really poor (buying power wise), how many of these are urban/rural, how many are in organized/unorganized sectors, what’s the birth/death impact and how the numbers are moving. Those stats may tell us where we need to focus, where achievements are good and where we can improve. What we can’t afford is to have global statements like “the recession made 34 million people poorer” – because it is a hollow statement with conveniently extrapolated matter, and yields nothing. It truly makes us poorer.
Winston Dsouza
I usually find these figures very global-warming type – meaning, highly suspect and jugaad methodology - so I thought I’d investigate. In the “World Economic Situation and Prospects, 2010” report, Page 35, they say:
The reduction in employment and income opportunities [due to the slowdown] has led to a considerable slowdown in the progress towards poverty reduction and the fight against hunger. Estimates by the Department of Economic and Social Affairs of the United Nations (UN/ DESA) suggest that, in 2009, between 47 and 84 million more people have remained poor or will have fallen into poverty in developing countries and economies in transition than would have been the case had pre-crisis growth continued its course (table I.3). This setback was felt predominantly in East and South Asia, where between 29 and 63 million people were likely affected, of whom about two thirds were in India.
So the figures for Asia are between 29 and 63 million people – that is a huge enough range, and 2/3rd are in India, so for us it’s between 20 and 42 million people. 34m is somewhat in the middle if you are slightly mathematically challenged, but let’s not bicker about a few million here and there.
The important thing is how they arrived at it. They said – okay, India’s growing at 9%. If it continued to grow at 9%, then X number of people would be poor. But because of this slowdown, we have Y poor people, and Y is larger than X. Therefore, this figure Y-X is the number of people that have been reduced to poverty by the slowdown.
Let’s not talk X and Ys. Let’s talk real numbers.
Assume we had a 100 poor people. Let’s say that for every 1% growth, we reduced poverty by 1 person. So with 9% growth, we are left with 91 poor.
But we grew only 6%. So, post the recession, we have 94 poor people. 94 is less than 100. That might sound like a good thing. But no.
The UN-DESA way of looking at this – and their glasses must forever be half empty – is: recession did not take 3 people out of poverty, so 3 people got poorer.
Another way of looking at it is: 6 people got out of poverty. 6 is good. Even 1 is good, come to think of it, but 6 is definitely good. And it is wrong to focus on the 3 number.
For one, 9% growth was not sustainable; it was extraordinary. It was likely to be 6-7% averaged over years, so one year we’d do more, another we’d do less. Extrapolating a pre-crisis growth figure is silly; in that way, I could extrapolate the “Hindu Rate of Growth” of 3% pre-1992 and say damn, 600 million people are out of poverty today since 1992 because we grew more than expected.
Second, the focus on the smaller figure throws real achievement out the window. There are no real figures in that sheet – but I can imagine that if this calculation yields 34 million “poorer”, then the absolute number of people we got out of poverty must then exceed 60 million. That means, we got 6 crore people out of poverty, post recession – less than the 9 crore we expected. That statement paints an entirely different picture.
Finally, I must say the statistics are screwed up because it uses per-capita income to determine poverty levels – yet, if money was earlier more concentrated in a few rich people, and post recession got better distributed among the entire population, the poverty figures UN-DESA quotes will be overstated. They acknowledge this, though:
It should be noted that the estimates presented here take into consideration the impact of the downturn only on growth in income per capita compared with continued pre-crisis trends. Hence, these should be interpreted in the first instance as a slowdown in poverty reduction owing to a drop in the mean per capita income of developing countries. For lack of additional information, the estimates do not take into account likely changes in income distribution.
That statistic is simply gleaned from macro-figures. We aren’t told how many people are really poor (buying power wise), how many of these are urban/rural, how many are in organized/unorganized sectors, what’s the birth/death impact and how the numbers are moving. Those stats may tell us where we need to focus, where achievements are good and where we can improve. What we can’t afford is to have global statements like “the recession made 34 million people poorer” – because it is a hollow statement with conveniently extrapolated matter, and yields nothing. It truly makes us poorer.
Winston Dsouza
Saturday, January 23, 2010
10-10-10
A good day....
Is a day when you learn something new..And there is so much beauty and knowledge and wisdom in this world, that every day can be good, I say!
Well, today as I was browsing through for some interesting reads, I eyes were freezed by title of book called '10 10 10' by Suzy Welch. I flipped through it and essentially she says:
"When making any difficult decision think about its consequences in 10 minutes, 10 months and 10 years."
Wow, I thought. That *is* a great rule to live by!
Now I don't plan to read the book itself (reviews are average) but the five minutes reading that was certainly well spent!
On the way home I tried applying the 10-10-10 rule to a few dilemmas I'm facing in life. Let's take a relatively minor one, like not being able to blog often these days.
It isn't lack of ideas, but a question of priorities. I'm trying to complete all my assignment besides my regular reads for my class participation ,hey not for DCP..:))...and that takes all my heart, soul, discipline and determination!
So when I feel like writing a post I often just... let it slide.
For 10 minutes: It feels bad.
In ten months: It may affect this blog's readership (sometimes I wonder, if I slow down too much would I simply lose the *desire* to blog?)
In ten years: If I write a book which touches lives and ignites minds, it would all be worth it!
So, folks, let’s try and apply this 10-10-10 rule in our own ways, and see whether can we benefit from it; But hey, don't overdo it....
Like today I also learnt that I can eat an entire thin crust pizza (all 8 pieces) when really really hungry. But I don't think it qualifies for the 10-10-10 treatment.
Will just compensate by eating light tomorrow!
Mervyn Lewis
Roll # 15
Tuesday, January 19, 2010
What do you want to become in life..???
10.30 In the morning, Mr. Amitabh chatterjee, senior VP of Godrej Saralee walks in to address the class of 60 students. We as usual were sitting as ducks expectation some Gyan. Within minutes, everyone was foxed with simple question; what is our Goal in life/ purpose of life. As often, the class engaged themselves with “desperate class participation” (DCP) trying to make their presence felt. During this process, I was taken back to my school days where I was asked similar question by one of our elderly gentlemen who stayed in our locality. He emphasized his children to score high marks, and bent on them pursuing dreams which he couldn't fulfill , attitude was no different from most of our parents.
When I was thrown this question then, I thought being a vagabond exploring new places seemed great, because in my non detail English reader, adventures in far-away lands brought me far pleasure than sucking up to Axioms and Theorems. I also thought being a news reader was fun and visiting new places. BUT, was that an answer you could tell to anybody? NO, not when the kids around me in class 9, were rattling off words like NTSE, BITS, IIT M and Blah blah...
Didn’t want to think too much and I said "Engineer". I knew heart of hearts; it wasn’t something I wanted to be. Secondly I had not faced too much success in life. So I didn’t even know whether my brain could take me to the path of being an engineer. I suddenly felt that I was carrying loads of guilt by giving that answer and that guilt carried all the way till my engineering.
When I was thrown this question then, I thought being a vagabond exploring new places seemed great, because in my non detail English reader, adventures in far-away lands brought me far pleasure than sucking up to Axioms and Theorems. I also thought being a news reader was fun and visiting new places. BUT, was that an answer you could tell to anybody? NO, not when the kids around me in class 9, were rattling off words like NTSE, BITS, IIT M and Blah blah...
Didn’t want to think too much and I said "Engineer". I knew heart of hearts; it wasn’t something I wanted to be. Secondly I had not faced too much success in life. So I didn’t even know whether my brain could take me to the path of being an engineer. I suddenly felt that I was carrying loads of guilt by giving that answer and that guilt carried all the way till my engineering.
Today I look back, and ask myself what would I want to become, I still not have answer. I still like being a vagabond traveler, but that’s probably a phase of life that I might enjoy. So is the answer to the question always a profession that would yield money and keep you secure or that would give you happiness? I seem quite lost. One thing I see is it’s never too late to keep asking this question, as long as you don’t carry guilt with the chosen path. Let’s see how life progresses!
Mervyn Lewis
Propogator-15
" Life is a comedy for those who think and tradegy for those who feel"
Tuesday, November 17, 2009
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), aimed at combating global warming. The UNFCCC is an international environmental treaty with the goal of achieving "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system".
India signed and ratified the Protocol in August, 2002. Since India is exempted from the framework of the treaty, it is expected to gain from the protocol in terms of transfer of technology and related foreign investments. At the G8 meeting in June 2005, Indian Prime Minister Manmohan Singh pointed out that the per-capita emission rates of the developing countries are a tiny fraction of those in the developed world. Following the principle of common but differentiated responsibility, India maintains that the major responsibility of curbing emission rests with the developed countries, which have accumulated emissions over a long period of time. However, the U.S. and other Western nations assert that India, along with China, will account for most of the emissions in the coming decades, owing to their rapid industrialization and economic growth.
Kyoto Protocol: India’s Stand. - I would say although all of us are affected by the climate change, the historical accumulation of carbon dioxide is not as a result of anything that we have done. It is largely a consequence of 150 years of industrialization in major developed countries of the world. India has to put in place a national action plan for climate change to improve our response mechanism meeting the challenge of climate change. We do not have to succumb to the hegamony of the US & Australia led coalition.
India should try to maximize its gains from the treaty when the members meet again in Copenhagen; through technology transfers as well as help in R&D. India should lead the developing countries at such forums, and also leverage its position as a significant world player in its advantage. The developed countries can wait, but India can’t; its time India shows some steel by coming out of such baseless treaties that hinders its growth.
UN climate treaty being renegotiated in Copenhagen this December, The US who is the world's largest emitter of greenhouse gases signed, but refused to ratify, the Kyoto Protocol. Similar are stories of Australia and Japan who claimed to cut emission down by 2020, it was just a dress reharsal which failed badly.
Environment Minister Jairam Ramesh has suggested to the PM that India opt out of the Kyoto Protocol, jettison the G77 developing countries, and voluntarily accept cuts in emission without any guarantee of funding or technology from industrial nations in return. This goes against every principle which India has articulated on behalf of all developing countries.
Last Month India, indicated that it was ready to undertake cuts of emissions, although it couched this as part of its internal adaptation strategy. India was even prepared to quantify the cuts over a period of time. Environment Minister Jairam Ramesh had told Hillary Clinton on her visit to Delhi after the G8 meets in Italy precisely the opposite. No less a person than the prime minister has gone on record to refuse to specify what cuts India will undertake, stating that it will never allow its per capita emissions to rise above the current global average of 4.4 tonnes.
Since then the Congress party is already in damage-control mode, In September, Ramesh told the Indian Express regarding the acceptance of voluntary cuts by India: “Yes, there is a nuanced shift. But the shift is not in our negotiating stand. That stand remains the same. We are not going to accept any legally binding commitments on reducing carbon emissions. We will not allow the dilution of the per-capita principle. There can be no compromises on these. The shift is in the atmospherics around the negotiations. For long, this canard is being spread that India has been holding up an agreement…that India is not proactive on climate change. This should be able to nail those lies.
He went on to say that “We are already taking a number of actions that will result in significant reductions of greenhouse gas emissions. We are in a position to quantify these reductions into a broadly indicative number that can be shared with the rest of the world. I see no problem with that…it will completely demolish the myth that India is doing nothing to reduce its emissions. India, which has no historical liability in polluting the atmosphere and has no commitment to reduce its emissions, is doing much more than the countries which are responsible for the current mess and bound by international law to take targeted emission cuts.”
Kyoto Protocol was born out of this convention which the US also signed, and therefore it is the only valid international treaty on which to negotiate when the first phase of the protocol ends in 2012, not the protocol itself. EU has revealed that it already decided on scrapping the protocol one whole year ago. The only reason why the EU was contemplating a change of setting for the drama was the obduracy of the US to the K word, the very mention of ‘Kyoto’.
EU further mentioned that, this had much to do with President George Bush’s explicit statement that the US wouldn’t sign the protocol not only because major emerging countries like China and India weren’t coming on board. He also made the atrocious remark that when it came to cutting emissions, and thereby hurting less energy-efficient sectors of the US economy, it wasn’t kosher because “US lifestyles can’t be compromised”, or words to that effect.
The proposal, which the US has lobbied India in bilateral forums and in multilateral meets to accept, asks all countries regardless of existing status, to take obligations. In its present form, when read with other proposals, it seeks to cap India's emissions by 2020 and force further reductions later on. A cap on emissions automatically converts into a cap of how much energy India can use".
India has less than a quarter of carbon dioxide and total greenhouse gas emissions of the leading emitters of the world, China and the United States, in both annual and per capita terms. India’s per capita carbon dioxide emissions are almost a third of the world average of 4.4 tonnes. Each American emits on average 20 tonnes a year. The International Energy Agency (IEA), in its Reference scenario, projects that India’s emissions will grow at about 4% per year, contributing less than 7% of global carbon dioxide emissions by 2020 (though India is home to almost a fifth of world population).
At the Bangkok meet, the EU, which has been the most proactive on climate and has announced a 20% cut below 1990 levels by 2020, rising to 30% if the US comes on board, itself came in for criticism by several international green organisations.
The G8 declaration, astonishingly, left it to individual countries to determine the baselines from which emission levels have to be reduced: 1990 “or later years”. Germany, the UK and other European countries, which are the greenest in this regard, want to cut theirs by 80% below 1990 levels by 2050.
The US, which accounts for a fifth of all emissions, wants to reduce its emissions from current levels. Industrial counties’ emissions have grown both in absolute and per capita terms till 2007. This was precisely at a period when President Bush refused to sign the Kyoto Protocol on the grounds that China and India weren’t agreeing to cut their emissions.
While there is a consensus even in the US that 2050 is the ultimate deadline for the world to get its climate in order, the intermediate goals are by no means settled. For any long-term goals, there have to be credible mid-term goals. If major industrial countries intensify their efforts only as this date looms near, it will be virtually impossible to prevent temperatures from rising beyond 2 degrees, the “tipping point”. The much-vaunted Waxman-Markey bill in the US, which seeks to cap emissions by the world’s biggest polluter, kicks in only towards the end of this period. By some calculations, to keep within 2 degrees, global emissions must reduce by 10% from 2010 itself and 25% by 2012, which no country will accept.
The Obama administration is hoping to win new commitments to fight global warming from China and India in back-to-back summits next month. China and India are both critically important to achieving our international goals on carbon,’’ said Senator Ben Cardin, a Democrat who serves on the Foreign and Environment Committees. India wants help in speeding its adoption of new, greener technologies and expanding its use of solar power.
The US has a time-honoured method of entering into bilateral relationships with developing countries to further, if not force, its national interests, as we have seen in trade talks. On global warming, the Bush administration had introduced the abortive Asia Pacific Partnership on Clean Energy & Climate, with Canada, Australia (the erstwhile Ophelia and still a strong contender for the role), Japan, South Korea and India precisely to bypass the UN climate change convention, with its compulsory emission cuts and penalties for violations. The sectors it targeted for an exchange of technologies, like cement, steel and power generation, are precisely those which the US and Australia fear China and India will have a competitive advantage in, if they do not undertake to cut their emissions.
If, as the US and EU are now proposing, the Kyoto Protocol is scuttled and a brand new entity comes into effect, it will presumably funnel some of the funds that will be paid by industrial countries to mitigate climate change but also have the powers to monitor the moves in each country to reduce emissions, rather like the World Bank with its loans or International Monetary Fund with its structural adjustment policies or World Trade Organisation with its eagle eye on removing trade barriers , all of which have plunged the world economy into deep crisis.
These institutions, if formed are far from being democratic, since there is no “one country, one vote” system. The very fact that the US always chooses the head of the World Bank from one of its nationals, and the French, the IMF, speaks for itself.
On October 21st 2009, India signed an agreement with China, the world’s biggest polluter, to increase cooperation on tackling climate change after the countries rejected calls from rich nations to set binding caps on carbon emissions. China and India say wealthy countries including the U.S. should lower emissions by 40 percent from 1990 levels by 2020 and share technology with poorer nations to help them fight climate change.
Winston Dsouza
India signed and ratified the Protocol in August, 2002. Since India is exempted from the framework of the treaty, it is expected to gain from the protocol in terms of transfer of technology and related foreign investments. At the G8 meeting in June 2005, Indian Prime Minister Manmohan Singh pointed out that the per-capita emission rates of the developing countries are a tiny fraction of those in the developed world. Following the principle of common but differentiated responsibility, India maintains that the major responsibility of curbing emission rests with the developed countries, which have accumulated emissions over a long period of time. However, the U.S. and other Western nations assert that India, along with China, will account for most of the emissions in the coming decades, owing to their rapid industrialization and economic growth.
Kyoto Protocol: India’s Stand. - I would say although all of us are affected by the climate change, the historical accumulation of carbon dioxide is not as a result of anything that we have done. It is largely a consequence of 150 years of industrialization in major developed countries of the world. India has to put in place a national action plan for climate change to improve our response mechanism meeting the challenge of climate change. We do not have to succumb to the hegamony of the US & Australia led coalition.
India should try to maximize its gains from the treaty when the members meet again in Copenhagen; through technology transfers as well as help in R&D. India should lead the developing countries at such forums, and also leverage its position as a significant world player in its advantage. The developed countries can wait, but India can’t; its time India shows some steel by coming out of such baseless treaties that hinders its growth.
UN climate treaty being renegotiated in Copenhagen this December, The US who is the world's largest emitter of greenhouse gases signed, but refused to ratify, the Kyoto Protocol. Similar are stories of Australia and Japan who claimed to cut emission down by 2020, it was just a dress reharsal which failed badly.
Environment Minister Jairam Ramesh has suggested to the PM that India opt out of the Kyoto Protocol, jettison the G77 developing countries, and voluntarily accept cuts in emission without any guarantee of funding or technology from industrial nations in return. This goes against every principle which India has articulated on behalf of all developing countries.
Last Month India, indicated that it was ready to undertake cuts of emissions, although it couched this as part of its internal adaptation strategy. India was even prepared to quantify the cuts over a period of time. Environment Minister Jairam Ramesh had told Hillary Clinton on her visit to Delhi after the G8 meets in Italy precisely the opposite. No less a person than the prime minister has gone on record to refuse to specify what cuts India will undertake, stating that it will never allow its per capita emissions to rise above the current global average of 4.4 tonnes.
Since then the Congress party is already in damage-control mode, In September, Ramesh told the Indian Express regarding the acceptance of voluntary cuts by India: “Yes, there is a nuanced shift. But the shift is not in our negotiating stand. That stand remains the same. We are not going to accept any legally binding commitments on reducing carbon emissions. We will not allow the dilution of the per-capita principle. There can be no compromises on these. The shift is in the atmospherics around the negotiations. For long, this canard is being spread that India has been holding up an agreement…that India is not proactive on climate change. This should be able to nail those lies.
He went on to say that “We are already taking a number of actions that will result in significant reductions of greenhouse gas emissions. We are in a position to quantify these reductions into a broadly indicative number that can be shared with the rest of the world. I see no problem with that…it will completely demolish the myth that India is doing nothing to reduce its emissions. India, which has no historical liability in polluting the atmosphere and has no commitment to reduce its emissions, is doing much more than the countries which are responsible for the current mess and bound by international law to take targeted emission cuts.”
Kyoto Protocol was born out of this convention which the US also signed, and therefore it is the only valid international treaty on which to negotiate when the first phase of the protocol ends in 2012, not the protocol itself. EU has revealed that it already decided on scrapping the protocol one whole year ago. The only reason why the EU was contemplating a change of setting for the drama was the obduracy of the US to the K word, the very mention of ‘Kyoto’.
EU further mentioned that, this had much to do with President George Bush’s explicit statement that the US wouldn’t sign the protocol not only because major emerging countries like China and India weren’t coming on board. He also made the atrocious remark that when it came to cutting emissions, and thereby hurting less energy-efficient sectors of the US economy, it wasn’t kosher because “US lifestyles can’t be compromised”, or words to that effect.
The proposal, which the US has lobbied India in bilateral forums and in multilateral meets to accept, asks all countries regardless of existing status, to take obligations. In its present form, when read with other proposals, it seeks to cap India's emissions by 2020 and force further reductions later on. A cap on emissions automatically converts into a cap of how much energy India can use".
India has less than a quarter of carbon dioxide and total greenhouse gas emissions of the leading emitters of the world, China and the United States, in both annual and per capita terms. India’s per capita carbon dioxide emissions are almost a third of the world average of 4.4 tonnes. Each American emits on average 20 tonnes a year. The International Energy Agency (IEA), in its Reference scenario, projects that India’s emissions will grow at about 4% per year, contributing less than 7% of global carbon dioxide emissions by 2020 (though India is home to almost a fifth of world population).
At the Bangkok meet, the EU, which has been the most proactive on climate and has announced a 20% cut below 1990 levels by 2020, rising to 30% if the US comes on board, itself came in for criticism by several international green organisations.
The G8 declaration, astonishingly, left it to individual countries to determine the baselines from which emission levels have to be reduced: 1990 “or later years”. Germany, the UK and other European countries, which are the greenest in this regard, want to cut theirs by 80% below 1990 levels by 2050.
The US, which accounts for a fifth of all emissions, wants to reduce its emissions from current levels. Industrial counties’ emissions have grown both in absolute and per capita terms till 2007. This was precisely at a period when President Bush refused to sign the Kyoto Protocol on the grounds that China and India weren’t agreeing to cut their emissions.
While there is a consensus even in the US that 2050 is the ultimate deadline for the world to get its climate in order, the intermediate goals are by no means settled. For any long-term goals, there have to be credible mid-term goals. If major industrial countries intensify their efforts only as this date looms near, it will be virtually impossible to prevent temperatures from rising beyond 2 degrees, the “tipping point”. The much-vaunted Waxman-Markey bill in the US, which seeks to cap emissions by the world’s biggest polluter, kicks in only towards the end of this period. By some calculations, to keep within 2 degrees, global emissions must reduce by 10% from 2010 itself and 25% by 2012, which no country will accept.
The Obama administration is hoping to win new commitments to fight global warming from China and India in back-to-back summits next month. China and India are both critically important to achieving our international goals on carbon,’’ said Senator Ben Cardin, a Democrat who serves on the Foreign and Environment Committees. India wants help in speeding its adoption of new, greener technologies and expanding its use of solar power.
The US has a time-honoured method of entering into bilateral relationships with developing countries to further, if not force, its national interests, as we have seen in trade talks. On global warming, the Bush administration had introduced the abortive Asia Pacific Partnership on Clean Energy & Climate, with Canada, Australia (the erstwhile Ophelia and still a strong contender for the role), Japan, South Korea and India precisely to bypass the UN climate change convention, with its compulsory emission cuts and penalties for violations. The sectors it targeted for an exchange of technologies, like cement, steel and power generation, are precisely those which the US and Australia fear China and India will have a competitive advantage in, if they do not undertake to cut their emissions.
If, as the US and EU are now proposing, the Kyoto Protocol is scuttled and a brand new entity comes into effect, it will presumably funnel some of the funds that will be paid by industrial countries to mitigate climate change but also have the powers to monitor the moves in each country to reduce emissions, rather like the World Bank with its loans or International Monetary Fund with its structural adjustment policies or World Trade Organisation with its eagle eye on removing trade barriers , all of which have plunged the world economy into deep crisis.
These institutions, if formed are far from being democratic, since there is no “one country, one vote” system. The very fact that the US always chooses the head of the World Bank from one of its nationals, and the French, the IMF, speaks for itself.
On October 21st 2009, India signed an agreement with China, the world’s biggest polluter, to increase cooperation on tackling climate change after the countries rejected calls from rich nations to set binding caps on carbon emissions. China and India say wealthy countries including the U.S. should lower emissions by 40 percent from 1990 levels by 2020 and share technology with poorer nations to help them fight climate change.
Winston Dsouza
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