With typical candour and bluntness, Chief Minister, Omar Abdullah, outlines the perils and opportunities on the road to an economic reversal in Kashmir. Srinagar: Sreenivasan Jain: As we emerge from what seems to be, at least compared to last year, a relatively peaceful summer, it's perhaps a good time to focus on one of the more neglected strands of this entire Kashmir debate, that is, the economy. And that inherent contradiction still remains while you talk of autonomy and others talk of azadi. How does one begin to make these changes when you have a state which is so cripplingly dependent on New Delhi? And it isn't as if all states depend on the Centre for grants, but in the case of Kashmir, you know historically, there's been a problem. It doesn't seem to be shrinking. The demands seem to grow; the deficit of the state continues to remain the same as ever. How can Kashmir then ever obtain any kind of autonomy?
Omar Abdullah: Well I think two things are required for that. One is that we need to begin to start paying for what we use, in terms of basic government services.
Sreenivasan Jain: You're talking mostly about power.
Omar Abdullah: No I'm not just talking about power. Of course, power is the biggest hole in my budget. But even basic government services, municipal services, we're unwilling to pay for. It stretches the whole gambit of what you would normally pay for, so whether its water, electricity, municipal services, various taxes...
Sreenivasan Jain: You mean it is entrenched in the state's culture.
Omar Abdullah: Well it's largely a part of the last 20 years. People basically fell out of the habit of paying for things. Once we develop a bad habit, it's very difficult to lose it. And the government is quite happy to send good money after bad. We're where we are.
Sreenivasan Jain: Let's just focus a little bit on power because that is, as you said, the largest hole in your budget. Apart from paying a massive power bill, you're not able to actually recover any money because of the huge amounts of unpaid bills. There's rampant power theft. I believe your transmission and distribution losses are 60% to 70%, which is way higher than other states. What are you doing about it?
Omar Abdullah: Well, a number of things. The most important thing is to meter consumers. At this point of time, more than 50% of my consumers are unmetered. As a result of which, you enter into an agreement with me that you will utilize a certain amount of power, for which you will pay a flat rate. At the end of the day what you do is that you end up sticking these huge immersion rods into your water tanks and stuff like that and go way above the agreed law. And I end up with a huge power deficit. So that's one part of it.
Sreenivasan Jain: How much metering of power have you done yourself since you came into power?
Omar Abdullah: Well we had a huge court case, unfortunately, which I inherited from the previous government because of some allegations regarding misappropriation of funds during purchase of meters which finally got cleared. New meters have now been procured. We've started an aggressive campaign of metering. We expect, and have targeted, that in the next two years we will complete 100% metering of all consumers.
Sreenivasan Jain: And you think you have the political will to meter power? Because everyone feels the need, and government says so, but no one actually follows it.
Omar Abdullah: We will meter power. We will do it. At the end of the day either people want electricity, in which case they've got to get meters, or they'll have to suffer 8 to 10 hour power cuts in winter, which is what they're getting right now. The choice is theirs. I'm quite happy to give them 8, 10, even 12 hour power cuts and no meters.
Sreenivasan Jain: But you're going to be tough about metering power...
Omar Abdullah: I've told the departments. There will be no leniency in this. We will meter.
Sreenivasan Jain: Regardless of the political cost?
Omar Abdullah: Whatever the political cost, at the end of the day the people have to realize. Why should it be a political risk to tell people to pay for what they're using? I'm not forcing you to use electricity.
Sreenivasan Jain: One doesn't know, but presumably there's been a history of carrying on without necessarily charging...
Omar Abdullah: I think that the history is not so much a result of the government wanting to allow it. It's been so because systems basically fell apart because of the militancy. Linemen weren't willing to go into many areas, engineers weren't willing to follow up. There is a whole lot of things that went wrong.
Sreenivasan Jain: One thing is to get people to pay for government services. What are the other ways in which you can begin to make some money and get out of this dependence on Delhi?
Omar Abdullah: Well, power is our biggest problem and power is the biggest opportunity as well. We need to get rid of the transmission and distribution losses, or at least reduce them to a manageable level. We then need to focus on generation because if I can begin to realize some of the potential that I have for electricity generation, then I can begin to sell power outside the state.
Sreenivasan Jain: Yes.
Omar Abdullah: That is the only means I have available to me to turn around the economic...
Sreenivasan Jain: So you have a potential capacity of about 14,000 to 16,000 megawatts.
Omar Abdullah: By conservative estimates.
Sreenivasan Jain: By conservative estimates. It can even go up to 20,000 megawatts.
Omar Abdullah: 20,500 megawatts or thereabouts
Sreenivasan Jain: But Omar how is that going to happen? For instance, your government has come out very strongly asking the NHPC, which runs the majority of the power projects, to hand some of these projects back. But NHPC says that the state government doesn't have the capacity to run these projects. We'll have to come and run it for them.
Omar Abdullah: That's rubbish. Capacity is generated over time. Why would I create capacity for projects I don't have? I'd end up with people sitting around doing nothing.
Sreenivasan Jain: But take Baglihar, for example. That was a project that you developed but had to hand over to NHPC to run
Omar Abdullah: We did not hand it over.
Sreenivasan Jain: To run...
Omar Abdullah: No absolutely not. We did not hand Baglihar over to NHPC to run. We set up an operating and maintenance contract with them for two years to help us with manpower development.
Sreenivasan Jain: Isn't that effectively the same thing? That they're actually handling the operations and running it?
Omar Abdullah: No it isn't. The contract is over. NHPC have packed up and left and the J&K State Power Development Corporation now runs Baglihar.
Sreenivasan Jain: So your saying, the State Power Development Corporation can actually....
Omar Abdullah: Our state will generate capacity as is required. Now tomorrow if, hypothetically speaking, Dulhasti were to be transferred to us or Salal were to be transferred to us, possibly, for the first year or so we would enter into an operating and maintenance agreement with NHPC or some other company. But at the conclusion of that agreement we would take up the full running of the project ourselves.
Sreenivasan Jain: That may not happen overnight but can you develop the capacity to do it?
Omar Abdullah: Well it certainly wouldn't happen overnight. But over the first year or two of the project, being a part of the state's project, we would definitely be able to run it ourselves.
Sreenivasan Jain: And what about future projects, going down the line? Where do you think you're going to raise the finances to do that? Even Baglihar ended up becoming an extremely expensive project. I think it finally came to about Rs 13 crore per megawatt while the average is about Rs 6 crore to 7 crore per megawatt. It's almost double. You don't want to go down that road again.
Omar Abdullah: No we're not going to be repeating the Baglihar experiment again.
Sreenivasan Jain: But you will still need a large amount of financing because these projects are really expensive.
Omar Abdullah: Well, Baglihar has helped us, and as much as it has shot up the balance sheet of the State Power Development Corporation, it has made it more viable, and allowed it to tap into more resources than it was able to earlier. So we will be able to, to a large extent, fund some of the state projects we wanted.
Sreenivasan Jain: But just not on the backs of Baglihar.
Omar Abdullah: That's what I'm saying. We're not just looking at state projects. We have a joint venture now between NHPC and the State Power Development Corporation for three large projects. Just last year we allocated the 600 megawatt Rattle power project on a tariff based bidding to GVK. So there are various models that we can follow depending on the size of these projects, the appetite of investors and whether we want it as a state owned one or whether we want to give it as an IPP.
Sreenivasan Jain: And you want to move on this aggressively...
Omar Abdullah: Well the target we've set ourselves is to be able to generate 4,000 to 5,000 megawatts in the state over the next 5 to 6 years.
Sreenivasan Jain: That's a fairly ambitious target.
Omar Abdullah: It is achievable.
Sreenivasan Jain: And that will help you reduce your current power bill, which is somewhere around Rs 2,000 to Rs 3,000 crore?
Omar Abdullah: I lose about Rs 2,000 crore a year on power.
Sreenivasan Jain: And then another Rs 1,000 crore on transmission and distribution losses.
Omar Abdullah: No. The sum total loss on power ranges between Rs 1,700 to Rs 2,000 crore.
Sreenivasan Jain: The other big hole in your pocket, of course, is your salaries. And that's again been traditionally a huge issue with J&K. I believe that bill is anywhere in the range of Rs 11,000 to Rs 12,000 crore
Omar Abdullah: Salaries, plus pensions will be about Rs 13,000 to Rs, 13,500 crore.
Sreenivasan Jain: That's virtually your entire budget for the state. What can you do about that?
Omar Abdullah: Very little at the moment. Over time perhaps some corrective actions can be...
Sreenivasan Jain: Why do you say that? Are there no avenues for employment?
Omar Abdullah: Well, there are no avenues for employment other than the government in large parts of the state. While Jammu, and when I say Jammu I mean only 2 and a half districts - Jammu, Samba, and part of Katua, has the potential for small and medium enterprises. There is no industry anywhere else.
Sreenivasan Jain: Small enterprises in the valley? Artisanal enterprises?
Omar Abdullah: Well we're trying to develop entrepreneurship. We're trying to develop small units and we have an aggressive, fairly forward looking policy to encourage the youth to come forward and set up these units. These things take time and it takes time to change mindsets. Unfortunately the mindset here is, if you don't have a government job, you're not working. Boys aren't able to find suitable marriage partners. Same is true for girls, if they can't promise their prospective in-laws that they either have a government job or that they're pretty damn sure they're going to get one.
Sreenivasan Jain: There is still this kind of assumption that a government job is the only real job and you expect it will just land in your lap.
Omar Abdullah: And you are actually willing to sit and be paid for 6 to 8 months
Sreenivasan Jain: Waiting for that government job.
Omar Abdullah: No. The assumption is that after 6 to 8months you will get some sort of a salary and become a government servant.
Sreenivasan Jain: Somebody gave me this figure, based on recent census data, that there are 3.75 lakh small enterprises in Kashmir and that they employ about 7 lakh people. Now if you give a little credit, marketing, and technology to these people, they can add one more person and that is straightaway 14 lakh people. That's virtually your entire unemployment pool.
Omar Abdullah: This is the sort of CII, FICCI argument that we keep getting. It is incredibly simplistic to turn around and say that each of these guys would be able to hire one more person because most of these units exist on paper. If you were to actually go out into the field, visit the industrial parks and places like that and see whether these guys are operating, I dare say most of these would not be.
Sreenivasan Jain: But these can virtually be mom and pop outfits. They may not be operating out of industrial parks. They could be somebody doing some craft or trade on the side.
Omar Abdullah: Those are basically household units, where the father and the mother might be working. Possibly the children help after school, if they're going to school at all, but with very little scope. With margins being as tight as they are, there is very little scope to engage anybody from outside the family.
Sreenivasan Jain: There's very little scope you're saying...
Omar Abdullah: We are examining these possibilities, but given the constraints we operate under I wouldn't hold out for this promise that a little bit of support, a little bit of tinkering here and there, will suddenly create 7 lakh new jobs.
Sreenivasan Jain: What about the agriculture sector? Is there a possibility to galvanise and energise it? Could you try and modernize it to create some jobs there?
Omar Abdullah: It's a sector we need to look at. I think for far too long, J&K, particularly Kashmir has noted agriculture as subsistence agriculture. We need to move away from that. As land holdings shrink, as pressure on land increases, clearly the model of agriculture we're following is unsustainable. We're working with farmers and with two agriculture universities to try and promote some culture of progressive farming. There are some areas where it has taken off. We have had successful examples of people who've gone into fruit culture and things like that. And it's been shown to work. So we're trying to create some brand ambassadors of progressive agriculture and try and convince others as well.
Sreenivasan Jain: I actually met somebody who runs possibly only the second cold storage unit for fruit processing, and the only integrated one, in the entire valley. Now that seems quite shocking for a state that produces, possibly after Himachal, the second largest number of apples.
Omar Abdullah: It is. Investment into infrastructure has been particularly poor.
Sreenivasan Jain: But isn't there any accountability of the state? Couldn't the state have set up some of the basic infrastructure?
Omar Abdullah: We have been able to set up some amount of basic infrastructure.
Sreenivasan Jain: Like a cold storage unit? That seems extraordinary.
Omar Abdullah: There are cold storage units. What we don't have are the controlled atmosphere units because those are a lot more expensive and a lot more difficult to set up. That's the one I think you're talking about. There are two in the private sector. As a result of the horticulture mission of the Government of India, we are now looking at setting up more controlled atmosphere storage units, as well as procuring controlled atmosphere vans, so that the fruit can reach the market on time and in good quality.
Sreenivasan Jain: You almost sound as if there's no way out of this box then...
Omar Abdullah: Look, unless we get the power sector to sort itself out, the rest is largely cosmetic. At the end of the day...
Sreenivasan Jain: Isn't that putting just too many eggs in just one basket?
Omar Abdullah: Over time that will change. The more the situation normalizes, the more people will begin to be comfortable with investing into the economy. Yes, we will get there. But today I have no guarantee that the next season will be as good as this season. Now, if I was a hotelier why would I invest a few crores in upgrading my hotel if I wasn't sure that tomorrow one of the separatists isn't going to give a call for protests and all my residents aren't going to run away.
Sreenivasan Jain: So power is at least one sector where demand is always going to be there.
Omar Abdullah: Power is one sector you can depend upon regardless of the situation. Tomorrow if there is a hartal, it doesn't mean that Baglihar will shut down. Over time the government, if not this government then successive governments, will have to get people to pay taxes. Today, three to four of the largest sectors of this economy go untaxed. Agriculture, tourism, horticulture and handicrafts are untaxed.
Sreenivasan Jain: Then where do you get your tax revenues from?
Omar Abdullah: From the toll plazas we have operating at Lower Munda and Kathua. That's it. Obviously we get our share of central taxes. We have been very aggressive in implementing the VAT. To that extent, it's helped us keep our head above water. We've now introduced a water usage charge that we believe will generate some amount of resources for us. But that's about it.
Sreenivasan Jain: What about further fostering young Kashmiri entrepreneurs? I met some of them and they're all doing small things at various levels. Someone has a cement plant; someone has a bottled mineral water plant. But they seem to be doing this largely on their own and without much support or encouragement from the government. Is that fair?
Omar Abdullah: We do as much as we can. Today, in spite of the problems I have with power, J&K's electricity charges are amongst the lowest in the country. We don't tax industry. What more do you want us to do? There are transport subsidies that we make available. We make available subsidies for generators for those that require more power than we can supply. But, at the end of the day, industry has to survive on its own. We try and provide as good set of conditions under which they can operate. Not that they have to do it themselves. To be honest, a lot of them have done it rather successfully.
Sreenivasan Jain: Is this something you think can become a major issue for you? That you may be able to energize the local economy and move towards greater economic autonomy? It's something that nobody centre-stages so much. One often sees more rhetoric on the political front but not much on this.
Omar Abdullah: This is an area you have to do something about without expecting any sort of political kudos for, because there simply isn't any. Nobody is going to be grateful that you've turned the economy around. I'm saying it would be an achievement, but it's not something you can tom-tom and make a big deal about. People would still prefer to hear about political autonomy, self-rule and everything else.
Sreenivasan Jain: But do you believe that there is a political motive behind New Delhi's very strong subsidization of Kashmir, that in a way it keeps the state on a leash. Nehru once famously said that he'd tie Kashmir in golden chains.
Omar Abdullah: If that is the case then it's largely on account of our own faults. New Delhi didn't ask us to pick up the gun and destroy our economy over 20 years. We did that ourselves. It's a fact. Delhi doesn't tell us to steal electricity or to not pay for what we're using. The Planning Commission would like nothing but to reduce the kind of burden we place on them every year to try and get our plan size approved. As a CM I find it incredibly uncomfortable to have to go with a begging bowl every year to meet the PM, the Finance Minister and the Deputy Chairman of the Planning Commission and to tell them that I'm sorry I don't have enough money to survive, can you throw something into this bowl so I can see the next year out. I would like nothing more than this state to be financially self dependent. It's not going to happen overnight but it can happen and I believe we're on the right track. If these power projects take off the way we expect them to, I believe we will take a serious step forward in that direction.
Sreenivasan Jain: How major a problem is corruption? Is it hurting the economy?
Omar Abdullah: well no more or less than it is in any other part of the country. In fact, perhaps in some ways even less. You don't see these massive scams here that you see in other parts of the country.
Sreenivasan Jain: Well you don't see them but you certainly hear a lot when you go out and meet people.
Omar Abdullah: Today you will hear that I have 200 youths languishing in jail, while the actual number is less than a hundred.
Sreenivasan Jain: But would you say that everything, which I'm sure even you're heard, is all just bunkum or do you believe that there could be corruption?
Omar Abdullah: Corruption is a problem but no more or less so than in other parts of the country. I will not for a moment suggest that this state is the shining hope of corruption free governance or existence. Clearly that's not the case.
Sreenivasan Jain: That's true. It's just that in Kashmir everything comes with an added sense of sensitivity. It takes on a different dimension.
Omar Abdullah: The problem with corruption here is that it is of the sort that really pinches the common man. You have to pay for a driver's license. You have to pay for a ration card. You have to pay for a state subject form.
Sreenivasan Jain: You even hear of high level corruption. For example, that there are ministers in your government with villas in Dubai...
Omar Abdullah: I would love for somebody to give me the address of that villa to verify. It's like me turning around and saying that a minister in the Government of India has a house next to the White house in Washington. I mean, c'mon, it's easily said, and very difficult to prove, but once it's out in the public domain everyone believes it to be the gospel truth. We did try to investigate this and we did send a team to look into the whole thing. We didn't find a shred of evidence to suggest that any minister had any property in Dubai. We even asked the newspaper to kindly give us the address so that we could verify. They made all sorts of excuses but never came back to us with any facts.
Sreenivasan Jain: So in conclusion Omar, are you saying that there is a possibility for Kashmir to stand on its own feet but it's just going to take a long time. It may not happen in your time, but it may happen in the future?
Omar Abdullah: I believe it will happen. I am all of 41; I'd like to believe it will happen in my lifetime. It may not happen in this tenure as Chief Minister but I'd definitely like to see it happen. I believe the next 5 to 6 years could be crucial in that direction.
Sreenivasan Jain: Thanks very much indeed for joining us.