THE HINDU – CURRENT NOTE 27 March
India-U.S. civil nuclear pact likely to miss June deadline
•Bankruptcy of reactor maker Westinghouse clouds operationalisation of the deal.
•More than two years after India and the U.S. announced that the civil nuclear deal was “done,” its actual operationalisation is in doubt over a number of developments that stretch from a “school scandal” in the Japanese parliament to the Cranberry, Pennsylvania headquarters of Westinghouse Electric, which is expected to file for bankruptcy this week.
Six reactors for A.P.
•According to the agreement over liability issues and the negotiations that followed former U.S. President Barack Obama’s visit to India in January 2015 and Prime Minister Narendra Modi’s visit to Washington in June 2016, the two sides had agreed to “work toward finalising the contractual arrangements by June 2017” for six reactors to be built in Andhra Pradesh by Toshiba-owned Westinghouse and the Nuclear Power Corporation of India Ltd (NPCIL).
•When completed, this was to be the first operationalisation of the India-U.S. civil nuclear deal, which was announced in 2008, and proof that both sides had effectively sorted out all their issues, including over the liability that suppliers must accept in the event of an accident.
•However, recent developments have led to uncertainty over the June 2017 timeline. An MEA official told The Hindu, “We are monitoring all developments. We are engaged with all parties. Our intent is to stick to the deadline, for which competitive financing arrangements need to be in place. It must be emphasised that the outlook of global industry on cooperation in India’s civil nuclear programme remains positive.”
•The reason for the concern is that the nuclear arrangement hinged on two major factors — the completion of the India-Japan Nuclear Cooperation Agreement (NCA), as Toshiba and other suppliers for reactor parts are bound by Japanese laws and by the actual contract to be negotiated by the U.S.-based Westinghouse.
•While the NCA was signed in Tokyo in November 2016, it is yet to be ratified by Diet (Japanese Parliament). Japanese officials told The Hindu that the NCA was expected to have been ratified in early March during the current session, but has been derailed by a controversy over accusations that Prime Minister Shinzo Abe, his wife and the Defence Minister Tomomi Inada favoured an alleged “sweetheart deal” for a school in Osaka. With lawmakers stopping all other business to discuss the issue, Mr. Abe’s stock in opinion polls and the Nikkei index have registered sharp drops in the past weeks. “Even once the India NCA is tabled, we expect to see some opposition in Parliament, as this is the first such agreement with a country that has not signed the Non-Proliferation Treaty,” said an official.
•He however, noted that Mr. Abe’s party had the necessary strength to have the agreement passed eventually, and added that he was “hopeful” it would be done by the end of the session in June, just ahead of the Westinghouse-NPCIL contract agreement deadline.
•While the suspense over the NCA plays out in the east, in the west the questions are growing over the impact of a possible bankruptcy filing under ‘Chapter 11’ U.S. laws by Westinghouse over massive $6.3 billion losses the company incurred last year, largely due to cost over-runs. The decision is expected to be announced this week by March 31.
•In February, Westinghouse CEO Jose Gutierrez, who visited India, said in an interview to the Nikkei Asian Review, that the “Government of India and the utility [NPCIL] are committed to continue working with Westinghouse on this opportunity [for six reactors in Andhra Pradesh]. We expect that sometime this year — calendar year — we could materialise that opportunity.” However, in the same interview Mr. Gutierrez said that filing for bankruptcy was “not on the table”, which has now become a reality.
•When contacted, the U.S. Embassy declined to comment on how the bankruptcy issues would affect the deal. Nuclear officials said it was “likely” the June 2017 commercial contract with Westinghouse would be “delayed”, given that other financial companies, insurance companies would require clarity on the company’s future before agreeing to sign on the contract.
•“The truth is the picture is very hazy at the moment,” a senior official of NPCIL said, adding that in the absence of land acquisition procedures for the other India-U.S. nuclear venture with GE-Hitachi for six 1594 MW reactors, the future of the India-U.S. nuclear deal is, for the moment, pinned to the future of Westinghouse itself.
India eyes Dhruv’s foreign market
•In talks with Sri Lanka and Southeast Asian nations; emphasis on maintenance
•As part of efforts to enhance defence cooperation and boost exports with friendly countries, India is in discussions with Sri Lanka and several Southeast Asian nations for the supply of Dhruv, the indigenously developed advanced light helicopter (ALH).
•Supplying defence equipment and providing assistance in setting up domestic manufacturing capability have become the new normal in India’s defence cooperation with regional countries.
•“There are queries … There is talk with Vietnam, Myanmar and Sri Lanka for ALH,” T. Suvarna Raju, Chief Managing Director of Hindustan Aeronautics Ltd. (HAL), told The Hindu .
•Another official said discussions with Indonesia were progressing well. Officials from India were expected to visit Jakarta in April.
•This time, India is putting specific emphasis on maintenance and training in view of its experience of Dhruv sales to Ecuador, which got embroiled in legal issues.
•Amid much fanfare in 2009, India bagged a deal to supply seven of these helicopters to Ecuador worth $45.2 million after defeating several global platforms. However, the euphoria was short-lived as four of them crashed. In October 2015, Ecuador unilaterally terminated the contract and in 2016, put the three helicopters on sale. Following this, HAL had moved a local court there. Of the four crashes, two had been attributed to pilot error and one to mechanical failure.
Availability of spares
•Dhruv, designed and developed by the HAL, is powered by the Shakti engine jointly developed by it and Turbomeca of France. Over 200 helicopters are in service with the Indian military.
•The three Services have constantly complained about lack of spares and support for the fleet. The situation has slightly improved in recent times.
•“We have started mini maintenance, repair and overhaul (MRO) facilities at forward bases where we man them and stock spares and line replaceable units for use. We do a clean exchange when required,” Mr. Raju said. These attempts to stock the spares and supply them as quickly as possible has brought serviceability to “more than 65% to 70%”, he said.
•To increase the delivery rate, the HAL recently set up a second assembly line in Kanpur, which is expected to produce 12 helicopters a year.
Poor vote-getters blame the tools
•Criticisms of the reliability of the Indian electronic voting machine are unwarranted
•The losers are at it again, blaming the electronic voting machine (EVM) for their electoral defeat. Of course, this is nothing new. Every time a party has a rough time in an election, the easiest way out for its representatives to console themselves is to blame the machine. This is a blame game indulged in periodically, notwithstanding the fact that the Election Commission of India (ECI) has time and again demonstrated, through increased and transparent measures, the reliability and fool-proof nature of the EVM.
How it works
•As usual, with EVMs being blamed after the results of five State elections were declared recently, the ECI issued a detailed press note reiterating that EVMs are standalone machines and are not networked either by wire or by wireless to any other machine or system. Hence, they cannot be influenced or manipulated by signals from mobile phones or any other source. The software in the machine is burnt into a one-time programmable chip or masked chip and can never be altered or tampered with. The source code of the software is not handed over to any outsider. The ECI also cited judgments of different High Courts and the Supreme Court of India that upheld the reliability of EVMs.
•The ECI has prescribed a series of steps in its standard operating procedures to enhance transparency and provide an opportunity for political parties and candidates to participate in testing the reliability of the machines. During the first-level of testing before the machines are allotted to various constituencies from storage points, party representatives are invited. They can select at random 5% of the machines in which up to 1,000 votes will be polled to demonstrate the reliability and fidelity of the machines. A computer programme allocates, at random, machines to constituencies. The second-level of testing is done when, from the constituency headquarters, machines are allocated — again at random, using a computer programme — to polling stations. At this juncture, the candidates — who by now come on the scene — are allowed to test the machines at random. The serial number of the machine sent to each polling station is shared with the candidates, who can pass on this information to their representatives in the respective polling stations.
•Finally, before the start of the polling process on the day of the election, each presiding officer conducts a mock poll to demonstrate the “correctness” the machine in recording votes. When absurd allegations were floated that the machine has been programmed to record votes to the same candidate who gets the first 50 votes, the ECI mandated using 100 votes in the mock poll on polling day.
•Even then such elaborate measures have not curbed post-poll enthusiasm for manufacturing absurd-in-the-extreme excuses in explaining one’s poor electoral performance.
The ‘other countries’ excuse
•An oft-fired standard, but blunt, weapon employed in the losers’ armoury is the reference to names of some countries where electronic voting has been given up. The Netherlands and Germany are cited without either knowing or deliberately concealing the vital fact that in the former it was a networkable PC-type of machine running on OS, while in the latter, their Supreme Court had disallowed electronic voting because their law did not have the enabling provision. Such a situation arose in India too when in 1984, the Supreme Court barred the use of EVMs as the law at that time had provision for use of only ballot paper. That in the U.S. such a networkable DRS (Direct Recording System) machine is still used extensively across the length and breadth of the country, with no significant doubts expressed about its fidelity, is conveniently glossed over. It is worth recalling that the Bush-Gore election spat, in 2000, was over the “misreading” of votes recorded on ballot papers, and not about votes polled in DRS machines! In the post-2009 general election brouhaha here, some experts were brought in to trash EVMs, but in a meeting in Chennai, which this writer attended, the presenter, an academic from the U.S., conceded that standalone, non-networked machines such as Indian EVMs cannot be interfered with and are not vulnerable.
Results and the voter
•But despite the comprehensive and transparent measures put into operation, idle minds have not stopped manufacturing wild stories. One such red herring is that of the Trojan horse or secret programme built into the software that will transfer all votes to a favourite party. Those who make this allegation are either ignorant or deliberately indulging in creating a hype. The fact is that the software, once fused into the EVM chip is unalterable, and the machine cannot be manipulated by sending messages from external sources. Therefore, for this allegation to come true, the software should, ab initio , have been suitably programmed to enable such preferential recording of votes. This is impossible because machines of a different vintage are used in an election.
•For instance, in the five State elections, machines manufactured between 2006 to 2012, were in use, with those of 2007, 2008 and 2009 vintage accounting for over 75% of the machines. Further, the position of a party candidate in the EVM is decided alphabetically going by the name of the candidate in the respective State’s official (vernacular) language, and not by the name of the party. So, the position on the ballot unit of a candidate with a name starting with the letter ‘A’ would be first and his own party’s candidate whose name starts with ‘Z’ would be towards the end, even if his party’s name starts with the letter ‘A’. The machines of 2006 to 2009 vintage would have seen service in at least three elections held between 2006 and 2014, prior to being deployed in 2017. Taking U.P. as the case in point, the Bahujan Samaj Party, in 2007, and the Samajwadi Party (SP), in 2012, did well in the Assembly elections. In 2017, it was the BJP. In the Lok Sabha elections, the Congress and the SP did well in 2009, and the BJP in 2014. This should convince any sceptic that the voters, and not the machines, decide the outcome. Even a super-intelligent programmer cannot visualise in 2007 or 2008 or 2009, at the time of manufacture, of where the machines will be used and what the position of a particular party’s candidate will be in the balloting units of different constituencies and accordingly ‘tweak’ the programme to favour a particular party. Such idle talk should be dismissed with the contempt it deserves.
Paper audit
•The introduction of VVPAT or Voter Verifiable Paper Audit Trail is certainly a step in the right direction, further strengthening transparency. But will full coverage with VVPT, expected by 2019, stop allegations against EVMs as hoped by former Chief Election Commissioners with touching faith? Hardly, if one goes by the answer given by a well-known leader who, when questioned about his outburst now against the EVM as against his silence after his party’s runaway victory two years ago, claimed that his over-confident opponent may not have attempted manipulation of EVMs then! Nobody can underestimate our political class’s ability to come out with the most imaginative of answers when it comes to explaining their failure at the hustings.
•Theoretically, there are three entities which or who can be blamed. First, voters for having rejected them, but then no party would dare blame them for fear of annoying and alienating them forever. One can blame one’s own poor leadership or the incompetence of party functionaries, but that level of candour is unknown. That leaves only one entity, the EVM, to be demonised, VVPAT or no VVPAT. Nobody has so far succeeded in waking up a person who pretends to sleep.
Revisiting India’s nuclear doctrine
•No First Use as a nuclear deterrent should work without additional caveats
•Calls for reassessing India’s nuclear doctrine are a regular feature of our strategic landscape. Depending on where the person asking for this reconsideration sits on the strategic spectrum, the demand for revision rests either on scepticism about India’s commitment to a No First Use posture or the intention to retaliate massively to any nuclear first strike, no matter what the yield of the weapon used first. What seems to receive much less attention, however, is the declaration that India reserves the right to nuclear retaliation “in the event of a major attack against India, or Indian forces anywhere, by biological or chemical weapons”. In doing so, we are clubbing together nuclear first use — which has not occurred since 1945 — and biological and chemical first use which, especially chemical, continues to occur sporadically, whether by state or non-state actors. The further question of degree, as in “major attack”, only further muddies these already murky waters.
Use of chemical weapons
•The dramatic assassination in Malaysia last month of North Korean Kim Jong-nam by the chemical agent VX, which was almost certainly orchestrated by elements within the North Korean state, adds another layer to questions about making sponsors of chemical attacks accountable. The ease with which deadly chemicals can be transported across state borders, as demonstrated by the assault, gives further pause. This is not to try to equate a political assassination with a military attack using chemical weapons. The fact remains, however, that the 1992 Chemical Weapons Convention has succeeded in only partly making their use utterly reprehensible; their use is beyond the pale but will not alter the course of history in the manner that we expect will follow a nuclear explosion. Quite simply, there is a fairly strong norm governing the non-use of nuclear weapons; the norm against the use of chemical and biological weapons is still coalescing.
•Despite being banned, chemical weapons have not gone away. They have cropped up frequently in Syria and Iraq, where their recent use has been attributed to the Islamic State. The murder of Kim Jong-nam was the stuff of a spy thriller: two young women approached the estranged half-brother of North Korean leader Kim Jong-un and poisoned him with VX, a nerve agent so deadly that a drop on exposed skin is lethal. The execution was breathtaking in its simplicity: the women delivering the VX were apparently duped into believing they were taking part in a reality TV prank.
•This was, however, not out of the pages of a spy thriller, but from the playbook of a regime that appears not to fear the consequences of using an internationally banned chemical substance for a political assassination on foreign soil. Analogous methods might be employed to use other chemical and biological weapons by other players. If a roughly similar attack were carried out against Indians, whether military personnel, politicians or indeed civilians, how would New Delhi define “major”? This is, of course, assuming India could definitely pin the blame on a state. It might be worth recalling that Bashar al-Assad used the nerve agent sarin against civilians in the Damascus suburb of Ghouta in August 2013, killing over 1,400 people. And yet, former President Barack Obama, having famously invoked a ‘red line’ about the movement of chemical weapons in the region in unprepared remarks a year earlier, eventually stepped back from a military response to that attack.
•All the rhetoric issuing from Washington in the year between Mr. Obama’s statement on the red line and the Ghouta attack led observers within and away from Washington to expect punitive military action against Mr. Assad. However, at the very last moment (by some accounts, the day before the expected air strikes), Mr. Obama stopped short of authorising military action. A diplomatic solution was eventually found with the help of Russian President Vladimir Putin; Syria agreed to give up and dismantle a stockpile of 1,300 tonnes of chemical agents and acceded to the Chemical Weapons Convention (though Damascus’ adherence to the Convention has been patchy, to say the least).
•By most standards, the surrendering and destruction of such a massive stockpile would be chalked up in the ‘success’ column of international diplomacy. Yet, Mr. Obama’s handling of Syria’s chemical weapons will remain a question mark, if not a blemish, on his foreign policy record. But had he not drawn that red line and still achieved the same results, the analysis would probably be quite different. For those inclined to criticise him, Mr. Obama had weakened American credibility by appearing to threaten military action and then walking away from it.
•Credibility – that will-o’-the-wisp of international dealings upon which so much is said to rest — can be a straitjacket that limits a government’s options for creative diplomacy in times of crisis. Mr. Obama was able to step back in part because it soon became apparent that the American public had no appetite for military retribution for a chemical attack against foreigners on foreign soil. However, would New Delhi be able to resist popular pressure for decisive retaliation if Indians suffered a chemical or biological attack, especially when India appears to have committed itself to considering a nuclear response to such an attack?
A game changer
•Nuclear weapons deter other nuclear weapons. To require them to do more is to imbue these weapons with even more political meaning than they now carry. This ultimate weapon is already a political force: from the limited number of states who can possess them, to the devastating generational and environmental consequences of their use, nukes are, in the late K. Subrahmanyam’s words, “the million pound note” that is not to be squandered lightly. That is why a policy of No First Use works well: it builds stability into deterrence by credibly promising nuclear retaliation in the face of extreme provocation of a nuclear first strike by one’s adversary. It promises to take both you and your adversary to the abyss and raises the cost of the adversary’s first strike immeasurably. That is all we need these weapons to do militarily.
•At the end of the day, nuclear weapons are not just another weapon in the military toolkit but a game changer. The toolkit approach to deterrence treats them like different drill bits to ensure that one can drill the correct hole in whatever material one is attempting to breach. A nuclear strike, however, with all the attendant effects that go with the uncontrolled splitting of the atom is not the making of a hole but the bringing down of the entire wall. You don’t need different drill bits for this. And you need to be very clear that the action for which this is taken is worth the losing of the entire wall.
Infrastructure clouds connectivity
•Study finds only 14% of regional airports identified for subsidised connectivity are equipped
•Even as the Ministry of Civil Aviation is very close to awarding regional connectivity routes to air service operators, a study by Crisil Research has found that only about 60 out of the more than 414 identified un-served and underserved regional airports have the necessary infrastructure to support flight operations.
•In other words, only 14% of the airports and airstrips listed under the scheme are equipped to handle small aircraft, that is up to ATR 42.
•Besides, the study has indicated that a passenger load factor (PLF) of about 50-60% would be required to break-even at the EBITDA level (or earnings before interest, tax, depreciation and amortisation) even though the government has offered subsidies to operate flights on regional connectivity scheme (RCS) routes.
•These are some of the major challenges to operator participation in the scheme.
•Though domestic passenger traffic in India has grown 10% a year in the five fiscal years ended 2016, to 85 million annually, it is concentrated in the 6 metro airports, which account for about 65% of the total domestic passenger traffic, leaving the rest to the remaining 73 airports.
•In October 2016, the Government released the final RCS note, just months after a draft was circulated for stakeholder consultation.
•Under this, airfares for a given distance are locked and are subject to a quarterly revision based on CPI inflation. Since these are not high-passenger traffic routes and require deployment of small aircraft that are costlier to operate, the government has decided to encourage the players by providing several incentives, as seen in the table.
•Counter bidding for the scheme ended on February 1 and awarding of routes will be announced shortly. Selected airlines will receive route exclusivity for 3 years from commencing operations.
•But going by the findings of the research study, only up to 60 airports / airstrips including 12 underserved ones are infrastructure-ready. They have the required runway length of up to 1,600 metres that can handle an ATR 42 operation and the terminal buildings.
•“Of these, 25 airports are under the control of Airports Authority of India, 11 under Defence, 11 are private and the rest under the respective state governments,” said Binaifer F. Jehani, director, Crisil Research, who conducted the study.
Select 60
•These 55-60 airports could see an investment of Rs. 50-100 crore per airport for expansion and modernisation to facilitate aircraft operations and passengers, depending on the airlines’ interest, she said.
•In a recent report, the Centre for Asia Pacific Aviation (CAPA) has said that precious capital for airport development must be directed towards viable projects.
•“Airport development needs to be pursued with viability considerations in mind,” it said. “The greenfield airport at Durgapur in West Bengal, built with 100% private capital, has struggled to attract commercial airline operators. Reliance’s investment in regional airports in Maharashtra, and IL&FS’s interests in Karnataka have similarly not performed,” CAPA had said.
•“The tender process which awards concessions to the bidder offering the highest revenue share needs to be reviewed,” it had added.
•As of January 2017, 19 states had consented to the mplementation of the scheme. Of these 11 — Andhra Pradesh, Assam, Chhattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Maharashtra, Mizoram, Puducherry, Uttarakhand and West Bengal — have signed memoranda of understanding. “Together, these states have about 8 underserved and 173 unserved airports – but only 23 of these have the requisite infrastructure,” she said.
•Though subsidies are offered to operate on RCS routes, Crisil’s analysis indicates a PLF of 50-60% is required to breakeven at the EBITDA level, assuming the highest possible revenue per RCS seat for a stage length of 500-525 km.
•“The passenger load factor required to break even at EBITDA will increase with aggressive bidding on viability gap funding (VGF) and reduction in fare charged by the airline operators,” Ms Jehani said.
•She said VGF bidding is a very crucial part of the scheme as it would determine the profitability of the airline. RCS routes will be allocated to airlines on the basis of reverse bidding for VGF (ie, the lowest bid wins).
•The amount of VGF provided to the airline is indexed to inflation, ATF price and the dollar-rupee exchange rate.
•As per the scheme, airlines flying RCS routes should allocate 50% of the seat capacity as RCS seats, subject to a minimum of 9 and a maximum of 40 seats. The airfare cap and VGF will be applicable only to these seats. These seats are also not subject to any levies or charges imposed by airport operators, which account for about 10-15% of the ticket price at metro airports.
Subsidies debated
•Given these, the grant of subsidies could encourage players to invest in this project, said the Crisil study .
•“Even China has been subsidising its regional air routes since 2007,” Ms Jehani said. “Between 2006 and 2015, domestic passenger traffic at Chinese airports grew 12% a year (CAGR) from 299 million in 2006 to 829 million in 2015, led by the growth in number of airports from 144 in 2006 to 206 in 2015,” she said.
•The budgeted subsidies for regional aviation in China have risen from about $70 million in 2013 to $148 million in 2016.
•This is similar to India’s planned VGF collections of about Rs. 500-600 crore per annum (assuming the levy is charged on existing fleet mix) of which 20% is funded by the state government and the rest through a levy on flights on non-RCS routes.
•“While the RCS scheme is expected to increase the reach of aviation in India from 79 airports in fiscal 2016, as it happened in China, the quantum of subsidies provided by the Chinese government has been increasing every year. Which means, while the implementation of RCS can improve connectivity in India, a continuous flow of subsidy will be crucial to make it all feasible,” Ms. Jehani said.
•However, subsidies are not welcomed by all.
•“Rather than providing subsidy, the Government should provide incentives which will make the business attractive,” said Rajeev Wadhwa, chairman and CEO of Baron Aviation which aggregates private jets for business and personal use. “The Government should focus on ease of doing business and ease of operations. Subsidy is negative for foreign investors as this may be discontinued as per whims and fancies,” he said.
