White Paper , September 2013

FDI in Ecommerce: http://orfonline.org/cms/sites/orfonline/html/whitepaper/whitepaper1.html
 

Renewable Energy: Market and Policy Environment in India; Vivan Sharan and Andrea Deisenrieder; September, 2013

India's significant economic growth over the last decade has led to an inexorable rise in energy demand. Currently, India faces a Ichallenging energy shortage. To grow at 9 per cent over the next 20
years, it is estimated that its energy capacity must increase by approximately 5.8 per cent per year. While more than 70 per cent of India's energy is generated from coal based plants, by the end of March 2012, 12.26 per cent of India's energy installed capacity was from  renewable sources. This number is expected to increase to 17.12 per cent by March 2017. India's renewable energy market relies heavily on incentives provided by government programmes. This paper outlines
the potential of renewable energy in addressing India's energy supply  and access; it identifies challenges and provide a discursive overview of  the various market and policy instruments developed to scale up renewable energy generation.

Link to the Paper: http://orfonline.org/cms/export/orfonline/modules/occasionalpaper/attachments/occasionalpaper47_1384251016780.pdf

A Long Term Vision for BRICS; Samir Saran, Vivan Sharan and Ashok Singh; Released on 20th September, 2013

The Observer Research Foundation – the official Indian Track II coordinator at the BRICS Academics and Experts Grouping from the five BRICS nations (Brazil, Russia, India, China and South Africa) – hosted the 4th BRICS Academic Forum in New Delhi between March 4-6, 2012. Delegates at the forum presented papers, debated and discussed key areas of cooperation and coordination among the BRICS countries. The recommendations that emerged from the deliberations were submitted to the Heads of States of BRICS nations who met later that month in New Delhi.

Following up from the Delhi Declaration and the Delhi Action Plan articulated by the Heads of States at the March 2012 summit, this document aims to formulate a long-term vision for BRICS. It was submitted to the BRICS Think Tanks Council in March 2013 in Durban for consideration of other BRICS academic and research institutions in the respective countries. A “Long Term Vision for BRICS” is currently being finalised by the concerned South African institutions, based on the initial submissions of this document.

Link to the report: http://www.bricsforum.com/wp-content/uploads/2013/09/long-term-vision-for-BRICS1.pdf

'The Future of Aid' - Traditional Aid Has No Future: Markets and India’s Lines of Credit, Global Policy Journal, Vivan Sharan, 18 November, 2013

http://www.globalpolicyjournal.com/blog/18/11/2013/future-aid-traditional-aid-has-no-future-markets-and-india%E2%80%99s-lines-credit

This column by Vivan Sharan is part of Global Policy’s e-book, ‘Emergence, Convergence and the Future of Aid’, edited by Andy Sumner. Contributions from academics and practitioners will be serialised on Global Policy until the e-book’s release in the first quarter of 2014. Find out more here or join the debate on Twitter #GPfutureofaid.

The events of September 09, 2001 shook the world. They reaffirmed the fact that domestic security of nation states in the West is also a function of external stability in geographies near and far. While globalisation has created wealth, it has done so disproportionately. Hard data shows that the world is more unequal now than ever before. Aid has traditionally been projected as an instrument of support or relief for those left at the so called economic ‘periphery’ – and perhaps has even been deployed in the same spirit, to bridge the sharp cleavages created by the international system. Ravaged by poverty, hunger and disease, African countries have been the ‘recipients’ of around US$ 2 trillion of such aid since 1950.

In 2005, 15 countries of the European Union (EU) agreed to achieve a target amount of ‘Official Development Assistance’ (ODA) by 2017, a term which the Organisation of Economic Cooperation and Development (OECD) defines as the concessional part of the resource flows towards developing countries. An equivalent spending target of 0.7 per cent of Gross National Income (GNI) on ODA was first pledged in a UN General Assembly Resolution in 1970, by a group of 35 economically advanced countries, without specific timelines.

However, the Global Financial Crisis has left advanced economies with very little fiscal room to manoeuvre. National budgets have shrunk, and spending decisions are under scrutiny. The situation is particularly severe in the EU, which has seen bilateral aid budgets stagnate at 2012 levels. Accounting for inflation, this means there is now a year on year decline in spending on ODA and the chances of achieving the 2017 target are remote. As growth and job creation dwindle, the case for increased spending on external assistance is becoming increasingly politically difficult to navigate for EU leaders. What does this mean for the future of traditional aid?

Traditional aid defined as ODA has largely been the remit of OECD countries. At the same time, there is little doubt that the global economic centre of gravity now lies somewhere to the East of Europe. Concomitantly, the aid discourse emanating from the West is now underpinned by two narratives. The first is that ‘emerging countries’ must share commensurate aid ‘burden’ with OECD countries. And the second is that this burden sharing must take place within suitable frameworks of accountability and effectiveness which have been developed and refined by OECD countries. Viewed from India, this discourse is redundant.

India’s history of external development assistance can be traced back to its independence from British rule in 1947. Its programmes were driven by a principle of solidarity with postcolonial states in Asia and Africa, and not a donor-recipient framework that is characterised by ‘tied aid’. India’s development assistance strategy was shaped by its political stance in global matters, such as ‘Non Alignment’ with geopolitical blocs. While normative principles were never enshrined as policy, India’s aid was, and continues to be premised on mutual benefit rather than burden sharing. Similarly, ‘South-South Cooperation’ is a wide and symbiotic concept that circumscribes India’s development cooperation, and encompasses trade and investment flows.

Over the past decade or so, rapid economic growth has made India a prominent stakeholder in global political and economic governance system. A self aware India, no longer accepts tied aid, and is deploying upwards of US$ 1 billion annually through its development cooperation programmes. In 2012, to maintain strategic consonance with its foreign policy objectives, the Indian Ministry of External Affairs created the Development Partnership Administration (DPA) to manage development assistance programmes. The DPA has centralised within its fold, various functions that were previously disaggregated under multiple institutions and departments.

One of the main instruments of India’s development cooperation, which is coordinated through the DPA, is the Lines of Credit (LoC) scheme. Under this scheme, a concessional rate of interest is extended to overseas borrowers for importing goods from India, by the Indian EXIM bank. The difference between the market rate of interest extended to borrowers and the concessional rate – is provided through the government’s budgetary resources. However, unlike other forms of development assistance, LoCs are relatively unconstrained by the national budget, since the EXIM bank raises funds for them from international debt markets.

In 2012, the total amount of open LoCs was already over US$10 billion. While LoCs are a key instrument for development cooperation, they are fundamentally market based and demand driven. These elements make it the perfect tool for leveraging relatively modest sums of money through the markets, and for benefiting both countries involved. They are simultaneously a form of export promotion for domestic industry, and concessional lending which can fuel consumption and growth in countries that choose to borrow. The Indian experience shows that while LoCs may not check all the boxes of aid effectiveness since all their real impacts are not directly measurable, they cannot be discounted as credible and sustainable instruments of foreign aid.

Markets tend to get a lot of bad press during financial crises. Yet only markets offer solutions for economic rebalancing at the sheer scale and urgent pace at which it is required. Crisis or not, developed countries cannot wish away their historical responsibility and should not obfuscate the aid discourse by alluding to the incumbent responsibility of ‘emerging’ countries. The new stakeholders in the international system, including India, are not easily compelled by the rather misplaced set of assumptions that underpin this discourse. And indeed the accompanying dissonance between responsibility sharing and burden sharing is not easily resolved unless a truly inclusive, innovative and flexible global partnership can be instituted.

By using the markets, whether for programmes on trade similar to the LoC scheme, poverty alleviation through impact investments or even climate change mitigation through pooled funds that can be leveraged through market instruments; developed countries still have a lot to offer the international community – particularly the developing world. However, this would involve a fundamental recast of traditional aid into a wider framework, wherein there would be opportunities to learn and work with the global South.

 

Vivan Sharan is an Associate Fellow at the Observer Research Foundation, India.

Less corporate, more social: Op Ed for the Hindu, Vivan Sharan and Samir Saran, August 10, 2013

http://www.thehindu.com/opinion/op-ed/less-corporate-more-social/article5007515.ece

CSR principles enshrined in the Companies Bill 2012 offer businesses a chance to transform their poor record in community participation and development

Finally we are seeing some signs of life in the business of legislation. Not surprisingly, one of the early beneficiaries is the Companies Bill (2012) which shall replace a six decade-old antiquated law after Presidential assent. The Bill, which was passed in the Upper House this week, was earlier approved by the Lok Sabha in December 2012 and reflects a number of amendments to the Companies Bill, 2011, based on the recommendations of the Parliamentary Standing Committee on Finance. It encompasses important areas for the effective governance of companies including clauses on mergers, audit and auditors, appointment of company directors, aside from providing for constitution of a National Company Law Tribunal and a National Company Law Appellate Tribunal to fast-track company law cases and corporate structuring.

Crucial

Perhaps, the most important new element introduced in Clause 135 of the Bill is the notion of mandatory Corporate Social Responsibility (CSR). Colloquially referred to as the “2 per cent clause,” it has the potential to transform the landscape of CSR in India. Indian businesses have been loath to go beyond the “glorified worker towns” syndrome or providing employee services and benefits passed off as social interventions. Indeed, “Corporate India” has fared rather poorly when it comes to affirmative action in employment, environmental responsibility and in resource efficiency and revitalisation over the years. Therefore, a scheme that potentially transfers profits towards social causes, environmental management and inclusive development could be the much needed medicine for a nation with such deep socio-economic cleavages. This provision in the new bill must be welcomed and its efficient implementation must be ensured.

It is important that Clause 135 is complemented and supplemented with regulatory and institutional mechanisms to ensure that it actually results in a new paradigm of “stakeholder responsibility” and does not become another scheme where a paternalistic government is able to create another framework of patronage that the politician-businessperson nexus finds favourable for its dealings. This hypothesis needs to be carefully examined, particularly in the context of the upcoming general election, when political masters are at once beholden to corporates for election funding, and where constituency-level CSR commitments could be politically useful.

However, beyond the “profit for patronage” issue, there are some other aspects that must be discussed. The new law will make it incumbent for companies having a net worth of Rs.500 crore or more, or a turnover of Rs.1,000 crore or more or a net profit of Rs.5 crore or more, during any financial year, to spend at least two per cent of net profits towards CSR activities. While this seems uncomplicated, the efficacy in implementation may be in doubt for more than one reason.

The whole concept of CSR must, by its very definition, be a product of the fundamental need to price services, infrastructure and resources that societies provide businesses located in their proximity. By mandating a plain vanilla formula for allocation of two per cent of net profits towards CSR, the law will create a locational distortion, delinking CSR from community responsibility. Businesses must be responsible for proximate communities first, rather than being able to choose the destination of this commitment to society.

There is also a temporal distortion in the construct of CSR as spelt out by the Bill. Paragraph 5 of Clause 135 states that two per cent of the average net profit over three immediately preceding years must be allocated for CSR activities. In the case of most large companies of the sort that would be mandated to allocate net profits, business operations would have had a run-off effect on societies and would have fed off communities for more than three years. Therefore, must not the commitment to these communities and geographies reflect the impact of these businesses over their operation periods? And is there not a case for ensuring sustained “plough back” by the company in these geographies before diverting their commitments elsewhere?

Implementation

Even as we begin to debate how best to address these “time-place” distortions, it is certain that the CSR mandate must be made more robust, ensuring that at the very least it stands up to some simple tests of reasonableness and fairness. There are a number of ways to achieve this baseline objective.

First, voluntary policies that ensure a stakeholder approach to CSR is followed by corporates already exist and must be strengthened. The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs) suggest nine core principles which businesses should follow. Principle 8 for instance, directly alludes to coherent, social impact measures and assuring “appropriate resettlement and rehabilitation of communities who have been displaced owing to their business operations.” Integration of NVGs, initiated by the Ministry of Corporate Affairs, in the form of more constructive guidelines for deploying corporate CSR policies, is a viable option.

Second, CSR policies must be determined organically, through demand-driven consensus. Instead of being the mandate of high-level committees, company specific CSR policies should flow from a transparent interface between community stakeholders and corporates. The process must be devolved below the level of the corporation, to the level of the business unit. Corporate leaders and civil servants in the national capital must not determine community engagement strategies. Community stakeholders and the business units concerned must. Allocations must also be made on the basis of how much different stakeholders can absorb.

Employee benefits

Concomitantly, employee benefits must not be passed off as CSR. Such tricks are already used by the banking sector, wherein mandated priority sector lending targets are often met through incredibly convoluted means, including issuance of no-frills/general credit cards for their own contracted workers. A “tick-the-box” approach is simply not legitimate.

The third suggestion also follows from this. A demand-driven process for articulating company specific CSR policies must be instituted at the district level. Consultations can be steered by public officials such as district magistrates, involving village and town leaders and representatives. Decisions could be made through majority outcomes, and the process must be recorded and filed. This sort of a process has the potential to create a public accountability framework for delivery of CSR far superior to legal provisions that we fail to enforce.

Audit

Fourth, as this culture evolves over time, CSR allocations must not remain consigned to bottom line (profits) commitments. Obligations to community stakeholders must be placed alongside the top line (receivables and debt) and must be considered seriously as the next step as CSR must not be an afterthought to profit accumulation. It must be embedded within the very fabric of large businesses.

Finally, there are multiple concerns around the audit of CSR and a discomfort with the lack of audit and oversight required for CSR activities. “Comply or explain” simply has not worked in the case of other existing regulatory frameworks that deal with corporate governance issues. It is time to realise that in India, only a few are in a position to ask, while nobody is in any hurry to explain.

(Samir Saran is vice-president and Vivan Sharan, an associate fellow at the Observer Research Foundation, a New Delhi-based public policy think tank.)

Mitigating Carbon Emissions in India: The Case for Green Financial Instruments

The link to the report: http://www2.gtz.de/wbf/4tDx9kw63gma/Low%20Carbon%20Growth%20Path%20-%20MT%20Soft%20copy.pdf

Published by Deutsche Gesellschaft für Internationale Zusammenarbeit, August 2012

Authors:
Samir Saran, CEO, Gtrade Carbon Ex Rating Services Private Limited
Vivan Sharan, Business Head, Gtrade Carbon Ex Rating Services Private Limited
Bhuvanesh Kumar, Senior Research Analyst, Gtrade Carbon Ex Rating Services Private Limited
Prof. Amit Garg, Indian Institute of Management, Ahmedabad
Aniruddha Shanbhag, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Capital Markets and Sustainability: A Baseline Evaluation of the Indian Context

Published by Deutsche Gesellschaft für Internationale Zusammenarbeit, June 2013

Link to report: http://www2.gtz.de/wbf/4tDx9kw63gma/Capital%20Markets%20-low-NJ2.pdf

Authors:
Vivan Sharan, Business Head, G-trade Carbon Ex Rating Services Pvt. Ltd.
Aled Jones, Director, Global Sustainability Institute, Anglia Ruskin University, Cambridge
Aniruddha Shanbhag, Technical Advisor, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH