Tag Archives | Pavan Srinath

Smart Cities and Thoughts for Karnataka

Karnataka held its annual global investors meet last week. On its sidelines, Rajya Sabha MP Dr Rajeev Gowda launched Resurgent Karnataka, a publication by Raintree Media. I shared my thoughts on smart cities and urban governance with them. Full text below.

Q1. How, why and when will Indian businesses invest in making cities smart? What policies should the government adopt to facilitate the creation of the right investment climate for private investment in building smart cities? What are the business models being used to monetise investments and what is the customer value proposition? How will Return on Investment be measured and will a holistic approach being taken to measure value creation?

Pavan: Indian businesses will invest in making cities smart when the government provides public goods, ensures the rule of law and is faithful to contracts. Often, contracts signed by Indian municipal authorities are not upheld, and government authorities change their mind at will, making it exceedingly hard for businesses to work alongside governments with integrity. City governments should also modernise land titles, property tax records and make it easy for private entities to do business in the city – reducing the time it takes to get electricity and water connections, construction permits and more. When the private sector finds that cities do not add to business uncertainties and could actually lower them, then the investment will flow into the cities steadily.

Q2. Apart from private investment, are there other innovative financial instruments that could be adopted in funding a city’s transition to smartness? What is the value and the source of funding for the smart city projects? What business structures may have to be established e.g. PPP, JVs?

Pavan: It is a myth that Indian municipalities are poor. All Indian municipalities have numerous assets at their disposal – including land and properties that are at various stages of development. Municipal corporations do not do accrual-based accounting and have asset registers of differing qualities. Most municipal budgets are not even audited regularly. Thus, they have a weak understanding of the assets at their disposal and liabilities they have to manage.

A smart city is one that professionalises its accounts, and uses innovative means to extract sustainable incomes from their assets. For example, if a 2-storey government building sits on prime land, a smart city government is one that gets a 15 storey building built and leases out the other 13 floors of real estate. A smart city is one that professionally manages its advertisement and property tax revenues by using technology and intelligent contracting.

A smart city is also one that pursues economic development explicitly, works towards attracting businesses and job creators with dedicated staff to do so. While this is not a financial instrument per se, it certainly can be an innovative way to increase city finances.

Q3. Do cities in India have a vision, clear objectives and quantifiable targets (KPIs)? More importantly, how will citizens get ‘smart’ in adopting technology? When and what will prompt this behavioural change and how long will this process take? What is the role of traditional and social media in promoting smartliving?

Pavan: We often say that cities are the nation’s engines of economic growth. However, in India have no idea how well these engines are doing – what their horsepower is, how many pistons they have, how efficiently they run, and more. To truly understand how well our cities are doing, India needs to start measuring city or metropolitan-level GDP. Cities are also natural units of economic activity, and with some effort India can start measuring GDP yearly for all million-plus cities. All high income countries – including China and other Southeast Asian countries today measure city GDPs.

In order for India to sustain an 8 percent GDP growth, Indian city GDPs need to be growing at 20 percent or more per year. By understanding how well each of our cities do year on year, policymakers and the public will get a better handle on how our cities are doing, and what public and private inputs are transforming into meaningful outcomes. Measuring GDP along with other standard parameters like municipal finances and service delivery levels are vital to the health and development of India’s cities.

Citizens will become ‘smart’ in adopting technology the moment it makes sense for them to do so. While governments might complain that citizens are not using technology efficiently to communicate with government, the reality is that citizens have rapidly adapted to shopping online on e-commerce stores, using mobile payments and e-wallets for transactions, taxi-aggregators for transport and more. If governments start delivering better services through tech and mobile-enabled means, then citizens will start using them quickly.

Q4. How can medium-sized cities in Karnataka (Shimoga, Belgaum, Mangalore, Davangere, Hubli) achieve ‘smartness’ in the areas of Governance, Economy, Mobility, Environment and Living? What smart city services will be developed? What are the proposed benefits resulting from the services?

Pavan: Medium-sized cities in Karnataka have a great opportunity in avoiding many of the problems that a megapolis like Bangalore already suffers from. ‘Smart’ ideas can be more readily implemented in medium-sized cities – be it developing a complete digital ‘road history’ of all works that take place above and below city roads; or a professional GIS-linked property-tax system; a forward-looking FSI or building height-restriction policy and more.

Karnataka has performed poorly compared to its neighbours Tamil Nadu, Maharashtra and Andhra Pradesh when it comes to developing multiple centres for urban growth. After Bangalore, other Karnataka cities are still around 1 million people or less in population. The development of industries that create thousands of jobs is vital to developing new centres of growth – rather than focusing primarily on IT.

Q5. What were the regulatory market conditions in Europe (international best practices) that fuelled innovation, technology transfer and largely promoted indigenous manufacturing of affordable smart technology? What are the key legal and regulatory policies that have had a material impact (positive/negative) on the development of pilot projects? Can these be replicated in India under P.M Modi’s ‘Make in India’ initiative? What is the future for smart ICT? How can Indian companies successfully navigate the ‘valley of death’ phenomenon /seed funding constraints?

Pavan: India’s smart cities mission should look to the Charter cities concept that has been championed by the economist Paul Romer. The idea of charter cities is to create a ‘policy window’ for select charter cities – where they can experiment with local rules and laws that are not encumbered by complex regulation that usually exists in other parts of the state or the country. Karnataka’s urban governance laws require significant reform – from allowing private buses to formally recognising the role of taxi aggregators to having functional ward committees and more. Such reform can take a long time, and partial reforms can often show limited outcomes. Charter cities are like the opposite of SEZs – where instead of a tax break, these areas get a break from some of the laws that can pose an impediment to the development of smart cities. And thus they get a chance to develop new laws and rules and test them out.

The smell test for such rules is asking yourself whether the state would be better off if the laws in the charter cities were to be universalised across the state.

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Internet as a public good: A case for net neutrality

The internet has public good characteristics, and telecom liberalisation will not be sufficient to keep the internet healthy and growing.

Classic OPTE Project Map of the Internet 2005

Classic OPTE Project Map of the Internet 2005: Flickr

Knowledge is the currency of power today. Land, capital and unskilled labour will not matter as much as knowledge as ‘factors of production’ beyond a point in achieving growth and prosperity.

The internet is both the manifestation of the power of knowledge, and has allowed knowledge to have so much value by interlinking vast amounts of it. In the net neutrality debate, a lot of analogies have been drawn about what the internet is, on why you should either enforce neutrality or stick to market competition. People have compared the internet to highways, to cable TV, to milk cartons, to electricity grids and to many more things. Rather than improving clarity, metaphors are distracting here – as the internet is only very poorly comparable to most other things.

A basic notion about the internet is that it is a networked good, which means that its value increases with its size. As my colleagues Karthik Shashidhar and Saurabh Chandra have pointed out, the utility of a network increases as the square of the number of nodes on it. Any barriers in this network will fragment it, and reduce the overall value of the network. It can however be argued if the size of the network needs to increase, then there needs to be sufficient private gain for the network provider. Enforcing something like net neutrality, they argue, could come against that. This logic is certainly used in many other networks including that for cable TV.

The internet is all but a public good – which means that the marginal social benefit of consuming internet services is much larger than the private benefit of doing so. Human civilisation as a whole is better off when it is more interconnected, more radically networked, and capable of doing things previously unimaginable. In that context, the internet defies comparison to any other network previously built by humanity. After proto humans manage to walk upright, the quest for knowledge has been central to their progress. Since the invention of language and of writing, the internet might be the biggest radical jump in making the quest for knowledge easier.

It is true that the internet was not always open (remember AOLnet?) and that it took a series of accidents to get us where we are today. It is also true that future networks could be even more radical and we must not constrain our imagination to what is presently possible with the internet. Many argue that sufficient competition in the network provider space can ensure network health – that regulations enforcing net neutrality are both unnecessary and counter productive. My colleague Nitin Pai in fact bats for net neutrality because the ISP market is uncompetitive in India, with high entry barriers and intense regulation.

However, if  the internet is a public good – will competition ever be sufficient to ensure the vibrancy of the network? Will competition be sufficient to improve the effective network size? I would argue that it might fall short of the mark. Thus, regulations that enforce net neutrality may be necessary to prevent ‘walled gardens’ from springing up. Competition must certainly be encouraged, but restrictions must be placed both on differential pricing of data from different sources, and of content providers from directly paying for the data their consumers use. While this will lead to a few inefficiencies, it is a necessary trade-off to keep the internet as open and flat as possible.

PS. Read the takes of Pranay Kotasthane, Gautam John, Anupam Manur, Varun Ramachandra and Devika Kher on the net neutrality debate.

PPS. Also read Deepak Shenoy on how telcos aren’t really hurting and Nikhil Pahwa‘s useful definition of net neutrality.

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In The Hindu: Medicines in India, For India

I write in The Hindu on what it takes to get a drug from the lab to the market. Here is the full piece along with hyperlinked references.

January marked an important breakthrough in the fight against tropical diseases. Researchers at the International Centre for Genetic Engineering and Biotechnology (ICGEB) in Delhi found a drug candidate that prevented the TB and Malaria pathogens from infecting human blood cells.

This cutting edge research took place not just in India, but for Indian challenges — whose solutions have global implications. Further, Anand Ranganathan and his colleagues did not just find this drug candidate, but also helped develop processes to develop these drug leads. It also happened thanks to a combination of a UN facility set up decades ago, attracting top global research talent to come back to India and work here. And the research was funded not just through international sources, but also a ‘Grand Challenge Programme’ on vaccines set up by the Department of Biotechnology, Government of India. Much of this success is a delayed fruit of a biotechnology push in India that started in the mid 1980s, which has gained in strength over time.

However, the discovery of the drug candidate ‘M5 synthetic peptide’ is the beginning of a long road and not the end. The process of drug discovery here is not yet complete, and has to be succeeded by more research and a host of clinical trials. Here is a plausible set of intermediate steps before a new TB or Malaria drug enters the market from the work of Ranganathan and others.

The ICGEB researchers have attempted ‘rational drug design’, where they have not only found a drug candidate, but have done so while identifying what protein target it interacts with in the body, and the mechanism it uses to prevent disease. The first steps forward for all interested researchers in the field will likely be to study further how the peptide drug candidate works, what its structure is, what the key biochemical interactions are, and how its target proteins behave.

While the drug candidate might work well in a test tube or an agar plate, its efficacy in the human body is an entirely different story. At this stage, whether the peptide can be easily absorbed by the body or be happy in blood, whether it finds the right targets, has no side effects or toxicity, are all unknown. Researchers, including those in private pharmaceuticals, can start developing variants of the M5 peptide that might have more desirable properties and have higher efficacy, and a good number of promising drug candidates might be patented by public sector researchers or pharmaceutical companies, depending on who discovers their utility.

It is after this that pre-clinical trials start on promising compounds, from tests in mammals to finally humans. Phase I clinical trials are typically about testing safety among healthy people, moving to phase II which are small trials of efficacy among patients. The last and the most expensive — Phase III, involves large, double-blind tests to determine both safety and efficacy among large groups of people.

The entire process of drug development is one of attrition, where a hundred lead compounds might trickle down to one or two medicines. It can take a decade or more, and cost in the order of a billion dollars, or 6000+ crore rupees.

Science is often described in popular retelling in a triumphalist manner, when in reality research involves many misses by researchers, incremental progress, and the eventual success of someone who stands on the shoulders of many giants.

For this process to happen, you need to have a robust research ecosystem, adequate funding, and good pipelines that ensure minimum friction in the development of drug candidates and lead compounds into medicine that you can buy at the corner shop.

The challenge in India is that tropical diseases have often been neglected by big pharmaceuticals because the size of the drug market is lower, with people having lower incomes in tropical countries. Further, companies are uncertain about intellectual property rights on essential drugs, unsure about whether they can recover high sunk costs in this inherently risky proposition. It is no surprise that big Indian corporations have stayed away from pharmaceutical R&D, finding more secure avenues for a return on their investment.

Policymakers in India will need to strike the right balance between public funding, and the role and return on private investment on drug development. Greater clarity on India’s eminent domain and compulsory licensing positions could make foreign-patented drugs more costly for India, but might spur R&D on tropical and endemic diseases in the long run.

Further, the unwritten compact in developed countries on drug development is that a thick layer of public funds pay for the basic research up to and including drug candidate discovery. It is over and above this that private pharmaceuticals come in, patent drugs and develop them.

Indian funding on basic research and drug discovery remains minuscule in comparison, with the entire Department of Biotechnology budget being lesser than 1500 crore rupees in 2014-15, or about 250 million dollars. The Government of India’s spending on drug development is broadly of the same order of magnitude of what is spent by the Gates Foundation and others on drugs for tropical diseases, and both the quality and quantity of public spending has to dramatically improve if we want more drug candidates against TB, Malaria, Dengue, Cholera and other diseases.

One way to increase the funding is to redirect extensive funds that go towards large healthcare subsidies, so that future drugs can be both better and cheaper.

India also has the opportunity to re-examine how clinical trials are governed. While we want ethical and safe practices in clinical testing, American or European regulations have accumulated some extra bureaucracy and regulations along the way. India can also set new standards on transparency so that new research is easy to discover, verify and build on.

Getting 21st century medical solutions to India’s health concerns is a long slog. The new potential cure for TB and malaria gives us a chance to think through how to develop medicines in India, and for India.

Hindu_Feb14_PavanSrinath_MedicinesFromLabtoMarketRead the article in The Hindu on their website.

 

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In Mint: Let India’s urban poor pay for good water

I write in Mint this week on how thinking along the lines of micro finance principles can change how we approach water pricing. Instead of an ideological stand on keeping water free, it’s better to ask how we can make clean water cheaper and more affordable for urban India’s most deprived.

In microfinance, people also acknowledge that it costs more to lend to the poor. When most people have to take a big loan from a bank, they have a steady income to show. They have a credit history. They also have assets they can pledge as surety, in case they default on the loan. The poorest of the poor don’t have salaries to showcase. They don’t have assets to pledge. The risk of defaulting on a loan is higher, and it is humane that they be allowed to default when the circumstances are dire. By allowing microfinance institutions to charge higher interest rates, the policies allow them to service these needs.

Similarly, the costs of supplying water for a city’s poor can be high. People often don’t have address proofs or any proofs of legal residence, making installing water connections harder. Getting even basic piping to reach the heart of a slum is not always cheap, given that there is hardly any road space to dig up. Maintaining pipes is even tougher. Installing and maintaining water meters is difficult, thereby making bill collection costlier.

It is highly disingenuous to ignore all these real issues and shout for a right to free water.The better approach is to ask, “how can we make water cheaper for the poorest?” And that line of thinking can birth an entirely new range of solutions.

Read the full article at Live Mint, February 13, 2015.

Live Mint e-Paper - Mint - 14 Feb 2015 - Page #11 Pavan Srinath

 

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INI9: 9 minute conversation with Rohini Nilekani

I discuss sanitation, malnutrition and dams with Rohini Nilekani in the latest INI9: 9 minute conversations on strategy, policy and politics.

The conversation happened on the sidelines of the Takshashila-Hudson conference, Shaping India’s New Growth Agenda: Implications for the World, Bangalore 2014.

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In Business Standard: Indian Cities, New and Improved

I write in Business Standard today on the 100 smart cities plan announced by Venkaiah Naidu and the lessons they must learn from JNNURM almost a decade of centrally-sponsored urban development schemes:

JNNURM had a tantalising premise when it was first launched: the Union government will give cities money for infrastructure as an incentive for states to devolve power to cities, and for these cities to reform. The Union government was a third party in the state-city equation, hoping to tip the scales in favour of cities and true decentralisation.

The promise of JNNURM was lost for two broad reasons. One, the ministry of urban development had to perform two conflicting functions: it had to spend money by disbursing it to states, but it also had to audit and verify the reforms process. The outlays were conditional on meeting reform targets. Though the ministry did a lot in checking whether cities had completed enough reforms, the spending mandate usually won through, and poor reformers were rarely punished. This made it a weak incentive for genuine urban reform. Some cities like New Delhi also received large infrastructure funds from sources such as the Commonwealth Games, making JNNURM irrelevant as an impetus for reform.

Two, the Union ministries demanded an extraordinary amount of scrutiny and control for the projects approved. For example, if a town in Karnataka wanted to finance a water supply project under JNNURM that improved the lives of its residents, often the project had to meet extremely trying norms such as 24/7 water supply or complete metering of connections, which were enforced by Union ministries and attached bodies. While these are desirable, the lack of state-level decision-making led to the projects losing local relevance, apart from being subjected to an excruciatingly long and difficult process of approval. If the intent of the Union government was to incentivise reform, then perhaps it should not have controlled the type of infrastructure projects beyond setting broad norms.
[Full Article: Building Blocks to Smart Indian Cities, June 3, 2014]

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In Pragati: The Strategic Import of India-US migration

I write in Pragati–The Indian National Interest Review on why the movement of people is the most important component of India-US relations:

There are two challenges facing Indian migration to the US today. The first is that while the rich contribution of Indian Americans to the US economy has been widely noted, this has not translated into thought on policies that make it easier for talented Indians to work in the United States. The second is that migration finds little purchase in government-to-government relations that policymakers in India and the US have been trying to boot up over the past decade.

While visa policies can be dismissed as pedestrian concerns beneath the notice of strategic thinkers, immigration is a tie binds the two nations and the two states with greater strength than anything else today. More dinnertime conversations in India revolve around US visas every month than the sum total of all discussions on India’s nuclear cooperation with the US. It is immigration that is the main reason why Indians have had a uniformly high positive attitude towards the United States, across years and presidential regimes. A sound strategic partnership has to start by strengthening this.

The two governments, and analysts on both sides have rarely looked at immigration as a matter of strategic import. From before the introduction of Senate Immigration Bill in April 2013, legislators in the United States mostly considered the US-Mexico bilateral relationship in relation to immigration. The India-US bilateral relationship has had a weak influence, if any, on the drafting of immigration policy.
[Full Article: The strategic import of India-US migration, April 18, 2014]

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In Pragati: Spending for a Modern Armed Force

I write in Pragati–The Indian National Interest Review along with Rohan Joshi on the sorry state of defence modernisation in India:

As Ajai Shukla highlighted in February, only 4 percent of the 2013-14 capital budget is allocated for new acquisitions, down from 38 percent in 2010-11. The interim defence budget announced in February 2014 appears to do little to alleviate this systemic decline. Although a 10 percent increase in the defence budget was announced, there was only a paltry 3 percent increase in capital outlay, with revenue expenses garnering a large part of the increase. What little money will go towards defence modernisation from the overall capital outlay is as of yet unknown.

In the context of the budget, Mr Antony’s admission that there was no money left for the MMRCA deal in FY 2012-13 is surprising. Capital allocation for the IAF was increased in FY 2012-13 by 22 percent, conceivably in order to account for the first installment of Rs. 10,000 crore due to be paid to Dassault after the deal was to be signed in FY 2013.  If we are told that the IAF has spent all but 3 percent of its allocated capital acquisitions budget for FY 2013, where has the rest of the money gone?  The interim budget for FY 2014 has decreased the IAF’s capital allocation budget by about 15 percent (over FY 2013 beginning estimates) to Rs. 31,818 crore.  Worse, if the worrying trend of committed liabilities accounting for 95 percent of the capital acquisition budget lingers, this effectively means that the MMRCA deal cannot be concluded in FY 2014-15 either.
[Full Article: Spending for a modern armed force, March 14, 2014]

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In Business Standard: Cartel Breaking

I write in the Business Standard today about the demise of the Russian-Belarusian Potash cartel.

The world witnessed a shake-up of the global potash industry last month, with the Russian-Belarusian cartel Belarusian Potash Company(BPC) disintegrating. Russia‘s Uralkali decided to break away from BPC and sell potash independent of its counterpart Belaruskali at higher volumes for lower prices.

If the Eurasian cartel had remained stable, potash prices would have stayed up and all suppliers would have benefited. Cartels ensure that by fixing prices, by coming to an agreement over market shares and the total industrial output. With collusion trumping competition, cartels are considered illegal within most domestic economies but national or international cartels are quite commonplace globally. The most prominent of these is the Organisation of Petroleum Exporting Countries (OPEC), which has successfully controlled the global oil market for over 40 years.

Potash is but one commodity on the international market where supply has been cartelised. India is on the wrong side of international cartels most of the time, and it is in our strong economic interest to champion the cause of free global trade. In the meantime, we can do our best to reap the dividends of lower potash prices. To ensure India’s economic growth in the long run, the nation will have to do its best to destabilise global cartels, or at least secure favourable terms.
[Full Article: Potash – From Russia With Love, September 13, 2013]

Over the next few months I will be studying how cartels work, with a special emphasis on OPEC. Expect more posts on cartels on this blog in the coming weeks and months.

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NDTV’s We The People – On the Uttarakhand floods

Last Sunday, I appeared on NDTV’s We The People hosted by Barkha Dutt, to talk about the recent floods in Uttarakhand and on the “eco-insensitive” nature of politics in India. Here’s a clip of the comments I made during the show. You can watch the full recording at the NDTV website.

I also had the opportunity to underscore the same points during an interview by Maseeh Rahman of The Guardian.

But most analysts believe restricting the number of pilgrims would be political suicide. “The desire to worship at Kedarnath is almost like an irresistible force,” said Pavan Srinath, of the Chennai-based thinktank Takshashila Foundation. “Despite the tragedy, people are already talking about when they will undertake the sacred journey. No government can bar the devout from the Himalayas.”

Not all experts are in agreement. Srinath maintains that the devastation would have been even more widespread if the reservoir of the region’s biggest dam at Tehri had not contained a significant volume of the deluge. “Dams can also prevent disasters,” he said. “The critical issue is not dams, but proper dam management. In India, we just don’t have a culture of public safety.”
[The Guardian, June 28, 2013]

The comment the regulation of pilgrims, however, isn’t just about political feasibility – but about policy realism. In all likelihood, a strict regulation of official pilgrims to the holy sites will lead to a large number of illegal traffic of tourists and pilgrims, with much less safety.

Also, this blogger thinks that it’s more likely that the Tehri dam was empty and capable of receiving flood waters more by circumstance than by intent – nevertheless, it demonstrates the positive role well-managed dams can play in disaster risk reduction.

Related posts: Not every disaster is man-made | We are still vulnerable to climate variability

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