registered against them.

Leaders and members of the Sri Lankan

' Liberation Tigers' discovered to their
chagrin that they had overnight become
'threats to India's national security' during
President' s rule. Financed and trained by
RAW and other Indian intelligence agen-
cies from the early 1980s, they were treated
as special guests both by MGR' s state
government and the centre, and they ran
their own offices in Madras enjoying full
independence. Senior union ministers and
RAW officials used to visit them in their
offices. But in August 1988, negotiations
between the Tigers and RAW broke down
over the question of the future course of
LTTE following the Indo-Sri Lanka ac-
cord. From then onwards, the Tigers
found that they were no longer the
favoured proteges of the centre. Their
offices were sealed, their leaders arrested
under NSA and tortured before being sent
back to Jaf f na.
The repression was thus directed against
friends and foes alike, the sole driving
force being a police state's paranoid suspi-
cion of any possible opposition from any
quarterthe same motivation that mark-
ed the police operations during the
1975-77 Emergency period.
The civil liberties groups in T&mil Nadu
who are now able to operate in a freer
atmosphere, are still busy compiling data
about the atrocities perpetrated during
President' s rule in the state. Specific
complaints have been voiced against cer-
tain senior police officials, including
Sivanandi, the DIG of Madurai. Mean-
while, chief minister Karunanidhi is
reported to have asked his home secretary
to probe into the functioning of the en-
tire police force in Tamil Nadu during the
presidential regime. One hopes that suf
ficient public pressure is built upon the
DMK administration to make it revamp
the police force and punish the guilty
police personnel.
INTERNATIONAL DEBT
Changed US Stance?
THE Baker plan to tackle the problems
of the heavily indebted third world coun-
tries was long on sermons and short on
concrete action. As a result, despite all the
lip service it received from various
quartersincluding, of course, the US
government in which James Baker then
presided over the treasurythe plan
hardly took off. Not only that, no
substitute plan was allowed to take the
place of the Baker plan, given the US
posture that it would not countenance its
plan being discarded. Not even the
Japanese could make much headway with
their plan, t he Miyazawa plan, which
foundered on the rock of US indifference.
So the world had to wait for a change of
the US stance itself.
And now at last Baker's successor, Nick
Brady, president Bush's secretary of the
treasury, has spokenpossibly because
the pressure of developments in the US
backyard of Latin America had beco le
very strong and further delay could have
been very expensive for US interests.
There have taken place bloody riots in
Caracas, Venezuela, following the in-
troduction of the IMF-dictated package
of austerity measures which the new
government in that country had to
swallow in return for an IMF loan of $ 4.7
billion. There had been trouble already in
.other countries of Latin America with far
larger external debts than Venezuela and
the US government had been forced to put
together a special assistance package to
help out Mexico. Peru too has been facing
an extremely explosive situation.
Brady acknowledges that economic
growth in the major debtor nations has
been far from satisfactory while, at the
same time* inflation has not beep brought
under control. The willingness to accept
economic reform has not, however, at-
tracted timely and/ or adequate commer-
cial bank finance with the result that
capital flight has further drained the
resources of these countries. As Brady
puts.it, "total capital flight for most major
debtors is roughly comparable to their
total debt" So the new US treasury
secretary has called upon commercial
banks to work with the debtor nations to
provide a broader range of alternatives for
financial support, including greater efforts
to achieve reduction in both debt and debt
service.
This is supposed to mark a departure
from the Baker plan" in that Baker was
adamantly opposed to debt reduction as
such. Not that debt reduction has not
actually taken place in the last few years,
but whatever did take place in various
forms, including debt-equity swaps,
occurred in spite of the Baker plan. The
important point that even the Brady
package does not seem to acknowledge is
that given the size of the debt and the
burden of debt-servicing which these
countries have to carryVenezuela's debt
servi ci ng (i nt erest pl us pr i nci pal
repayments) currently amount s to nearly
half its export earningsthe magnitude
of reduction of debt and debt servicing
will have to be sufficiently large so as to
bring some tangible relief t o the concern-
ed countries.
The problem with the Baker plan
basically was that its numbers bore no
relation whatsoever to the magnitude of
the problem it sought to tackle. Given the
external debt of Rs 1.2 trillion, of which
more than half is accounted for by 16
countries, involving annual debt servicing
of Si75 billion, packages which envisage
reliefs amounting to 10 and 20 billion
dollars cannot serve any purpose other
than that of providing temporary sops.
AFGHANISTAN
Testing the Waters
FOURTEEN days of fierce fighting in
Afghanistan around the provincial capital
of Jalalabad gave way to a temporary lull,
sure to be a temporary one, just before the
Afghan ne year. While the government
claimed to have beaten back the mujahi-
deen attack, there is no denying the
damage inflicted on the government
troops. On the political front too, there
have been many moves and counter-
moves, but little progress towards a
solution.
It was in the last week of Februrary that
the Shoora was reconvened and, with
none of the Iran based Shiite groups in
attendance, elected a 'government in exile'
with Sibgatullah Mujaddidi of the Afghan
National Front as president and Abdul
Rab Rasul Sayyaf as prime minister. The
' government' promised to hold elections
in Afghanistan in six months and sought
recognition from the UN. Only one
islamic country has recognised it and that,
not surprisingly, has been Saudi Arabia
which has been funding the mujahideen,
mainly the Sayyaf group. Pakistan while
welcoming the formation of the 'govern-
ment* has said that it would be premature
to either support its application for UN
membership or recognise it.
It was soon after the Februrary meeting
that the mujahideen began their current
wave of assaults on Jalalabad and other
towns. That the attacks caused con-
siderable worry to the Afghan government
is evidenced by its somewhat desperate
plea to the signatories of the Geneva
accord to help resolve the situation. The
mujahideen attack was probably an
attempt to establish some foothold within
Afgharjistan to strengthen the claim of the
newly formed ' government' for recogni-
tion, especially at the Riyadh meeting of
foreign ministers of the Islamic Con-
ference Organisation. It now appears that
Review of Agriculture
The Review of Agri cul t ure is publ i shed quart erl y, with t he last issues
of March, June, September and December. Papers intended for considera-
t i on for publ i cat i on in t he June issue of t he Review shoul d reach us by
May 15.
E d
Economic and Political Weekly March 25, 1989
593
the Jalalabad battle had been planned by
all the rebel groups in consultation. It was
a new experience for these groups and as
things began to go wrong, factional
rivalries regained importance and made
for the stalemate which ensued. This is
one analysis put forward by press cor-
respondents in the area. Whatever the
explanation, despite the rebel claims of
having an edge in a number of areas ir
the country, they have not been able to
capture a single city.
There are reports that the moderates
among the rebel groups are more willing
to accept Najibullah' s invitation to attend
the peace council which he proposed in
early March. In fact several proposals have
been mooted in the different battle areas
both in Jalalabad and the north. For
example, the Afghan government has
guaranteed security to rebel commanders
coming into Jalalabad for medical treat-
ment and in the north the rebel field com-
manders are reported to have assured the
authorities that food convoys would not
be attacked.
In other words, it is quite likely that
there is a wide range of opinion prevail-
ing among t he mujahideen groups about
further moves. At the same time, unless
there is greater clarity about the Afghan
government's staying power or its military
confidence, no political moves will
materialise. In such circumstances Kabul's
repeated accusations about Pakistani
involvement in the Fighting may only serve
a limited purpose if at all. Even if the
Afghan government were to gain inter-
national sympathy as a result, it is the
situation on the ground which will
materially influence the mujahideen' s
future course of action. In any case
Pakistan, though it continues to be the
conduit for American supplies to the rebel
forces, may have more to lose by direct in-
volvement in the Afghan fighting.
BUSINESS
c c i
Case for Financial
Restructuring
BRIEFING newsmen in Bombay the
other day about how the Cotton Corpora-
tion of India had performed in 1987-88
(September-August) and how it was faring
this year (seven months to end with March
1989), the chairman-cum-managing direc-
tor M B Lai stated that "in the absence
of the prices falling to support level the
CCI operations are virtually of only a
government trader". This apparently
innocuous statement has an ominous ring
about it. For implicit in it is the CCI
chiefs concern about the possible implica-
tions of the continuing erosion of the
viability of the corporation' s operations
and consequent accumulation of losses
due to factors beyond the management' s
control.
The CCI chief' s apprehensions are not
ill-founded. As ' government trader' the
corporation cannot hope to achieve any
major breakthrough in turnover which
could make a significant contribution to
its profits and profitability. Institutional
buyers who constitute its main clientele
are under no compulsion to purchase all
their requirements from CCI. During
1987-88, NTC, STCs, co-operative mills
and KVIC purchased 5.52 lakh bales from
CCI and its total sales came to 6.75 lakh
bales. In the current year till February end,
these buyers have purchased 3.20 lakh
bales and total sales amount ed to 3.45
lakh bales. CCI is obliged to effect all
commercial purchases strictly against firm
indents placed by mills. Institutional
buyers have not been extending their full
support to the corporation for reasons
best known to them. It is certainly not
because CCI cannot service them as well
as the private trade.
It is indeed ironical that the CCI which
had been set up in July 1970 to develop
adequate organisational capabilities to
play a useful role in the overall manage-
ment of the cotton economy through
effective market intervention should have
been reduced to the position of a 'govern-
ment trader' engaged mainly in supplying
cotton to institutional buyers against firm
indents.
As for financial results, during 1987-88
the corporation earned an operational
profit of Rs 12.89 crore arrived at after
full provision for interest on bank loans
and on accumulated losses. However, after
allowing for interest on government loans,
the corporation incurred a net loss of
Rs 3.06 crore, raising the accumulated loss
at the end of the year to Rs 122.12 crore
over five times the increased paid-up
capital of Rs 23 crore. On present reckon-
ing, the net loss in the current year could
well turn out to be higher than 1987-88.
In order t o place the corporation' s
miserable financial plight in proper
perspective it is necessary to point out that
by the end of 1984-85 the corporation
which had N S Kulkarni at the helm of
affairs since its inception had accumulated
a loss of Rs 100.21 crore, nearly six times
its paid-up capital of Rs 17 crore. All
through, purchases were effected on com-
mercial basis. A relatively small percen-
tage of the total purchases was in the
nature of price support operation to sus-
tain the breakthrough in the production
of long/extra long staple cotton. Only a
public sector undertaking could indulge
in such financially ruinous operations and
still stay in business. The corporation
would perhaps have been compelled to
wind up its operations if t he government
had not come to its rescue a year earlier
with a loan of Rs 54.50 crore towards
reimbursement of its losses. The loan was
subsequently raised to Rs 92.53 crore by
1985-86.
It is worth noting that between 1984-85
and 1987-88, the accumulated losses in-
creased by Rs 21.91 crore whereas the cor-
poration had to provide for interest liabi-
lity of Rs 61.44 croreRs 11.47 crore on
accumulated interest and Rs 49.97 crore
on government loans. The corporation
also repaid Rs 14.90 crore, reducing the
outstanding amount of t he government
loan to Rs 77.63 crore. The corporation
which is paying dearly for the various acts
of omission and commission prior to
1985-86 cannot be said to have perform-
ed badly in the last two years or so.
However, in view of the several constraints
under which it has to operate, the corpora-
tion can never hope to show a net profit,
no matter how efficiently it is run.
Faced with an uncertain and difficult
future, CCI is seriously engaged in
developing new activities such as produc-
tion and distribution of certified seed,
identifying export farms and areas for
growth and helping cotton growers to in-
crease production and productivity. The
godown delivery facility for supply of
cotton to mills has been streamlined.
While it would seem rather cynical to
dismiss these schemes as a subtle PR exer-
cise to improve the corporation' s image
which has been badly tarnished by the
huge accumulated losses, it would be
wishful to think that these schemes can
yield any significant results and contribute
to improving CCl ' s profitability.
If the government thinks that CCI has
to play the role envisaged in the textile
policy announced in June 1985, it will
need to take some bold steps to extricate
the corporation from the financial debris
it is deeply buried under. CCFs proposal
that the government should convert Rs 13
crore of its loan into equity and waive the
interest on the balanced amount for a
specific period to enable the corporation
to repay the loan merits careful considera-
tion. If the corporation is allowed to func-
tion as at present, losses will keep piling
up and it might not be long before it is
unable to pay even the interest on govern-
ment loan let alone make repayment of
the loan.
So much about the CCI. Now some
observations about the hike in support
prices and export quotas for Bengal Deshi
and extra long staple cotton. New Delhi
has announced a further massive hike
Rs 50 per quintalin the support price
of kapas for the 1989-90 season on top of
a Similar hike effected last year. Never
before have support prices been raised by
Rs 100 per quintal in just two years. Nor
has the announcement about support
prices ever been made so very early, well
before the commencement of sowing
operations. Apparently, the government
594 Economic and Political Weekly March 25, 1989