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Some Questions about the Indian Art Market discusses some issues pertaining to India's booming art market today and reflects on its reliability to the investor in art.
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A sharply critical response to the review of Kiran Desai's The Inheritance of Loss in the first issue of Phalanx and also a reply to this criticism from the reviewer.
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Reclaiming the Present for Colonialism
Since the lecture finds itself exhibited on the Reserve Bank of India's web page, this piece reflects on Meghnad Desai's First P. R. Brahmananda Memorial Lecture delivered on September 20, 2004 at Mumbai, in which the economist attempts to draw similarities between the economic growth of India during the last 40 years of the 19th century and the neo-liberal era following 1991.
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The Age of Shiva: A Novel by Manil Suri
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See the contents page
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| Home > Open Page |
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Open Page
Development and Accounting Malpractice
Cyril Lobo |
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I am a practicing cost accountant and about two years ago I audited a firm with its factory in a rural part of South India. The firm is engaged in the manufacture of stainless steel castings and it has won export awards because it has competed globally and has proved itself viable. After examining its functioning, however, certain things came to light that raise questions about development in India and which can perhaps be applied to larger matters.
The fact that led me along this line of thought and made me write to Phalanx was that in order to manufacture stainless steel castings the firm needs river sand - to make moulds into which the hot metal is poured. After a few of these pourings the sand cannot be used any longer and needs to be disposed of. The factory does this by piling the blackened sand beside the road, although used sand is a pollutant and an acknowledged health hazard. The factory is located in a rural area and it will be years before the authorities take note of it. More pertinent however is the revenue account of the firm that shows the cost of sand on the river bed to be zero. The sand is dug up (legally or illegally, I am not sure) from somewhere and only its transportation is accounted for by the firm. The low cost of sand makes the factory 'globally viable' but the issue here is whether it does not amount to an accounting malpractice if a depleting asset belonging to the community at large (and the nation) is assigned zero cost by a private entrepreneur because he has avoided paying for its use.
Much of development in India is based on the exploitation of non-renewable resources like river sand. Other examples that come to my mind are the mining leases being freely handed out especially in backward states like Orissa, Chattisgarh and Jharkhand to private groups like the Tatas, the Jindals and the Sterlite Group. The government has apparently permitted the Sterlite group to mine alumina in a forested part of Orissa at the price of Rs 0.04 per kg, which is almost zero. The government has not found a way to assess the actual value to alumina in the land and this is taken to mean that it has no value.
Social activists are crying over the fate of tribals settled in India's forest land and they do not consider the developmental angle. Still, the various real costs associated with the mining of alumina should be considered while leases are signed if development is to be genuine. For example here are some real costs that Sterlite/ Vedanta group should incur for mining alumina: depleted forest cover assessed at cost of timber today, water table depletion at the cost of water per liter as charged by private water supply agencies (ex-source), the loss of livelihood present and future to those dependant on the land, cost of physically resettling tribals and others living legitimately on forest land though without titles (deliberate encroachers upon forest land should not be compensated), cost of the land upon which those shifted are finally resettled. Also to be borne should be the present and future losses to the tourism industry from the loss of wildlife and the extinction of animals like the tiger. These may be difficult costs to estimate but until it is done by the government, mining should be stopped.
Many social activists like Medha Patkar are questioning the idea of development but I believe that in any development there will be those who benefit and those who do not. If those who benefit through development are made to compensate those who lose, if each group simply makes its own estimate of costs/ benefits accruing to them, could they not resolve the issue through reasonable negotiation? In the Narmada issue, for example, the cost of resettlement of the tribals - also providing for their discomfort at being shifted from their ancestral homes - should be met by those whose lands are irrigated by the project because costs and revenues must be assigned to the right centers. The government should mediate neutrally in the negotiation instead of unilaterally promoting development and the success of the negotiations will naturally lead to quicker development without dissatisfaction.
Development is required if the nation is to march ahead but it is wrong accounting practice to sell a fixed asset and show the sales proceeds as revenue, which is what is being done under development. Industrialists like Lakshmi Mittal, Anil Agarwal and Ratan Tata are providing jobs to people but it is easy to provide a job to someone when you have sold his house and pocketed the sale proceeds. In this case, the house belongs jointly to one million people while those who have pocketed the money provide employment for only five hundred. These 500 persons (who have become the 'working class') are on the side of development while the other 995,500 who have only lost their house and received nothing will be definitely against it. Assigning costs and estimating benefits correctly will bring many more people to the side of development.
Cyril Lobo is a cost accountant who lives and works in Mangalore
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