i) Customs laws and issues: Standardisation and Harmonisation

Group Coordinator: Amir Ullah Khan
Group Members: Amir Ullah Khan, Nisha Taneja, Douglas Jayasekera, Mohammad Sulaiman, Dilli Prakash Ghimire

The recent past in South Asia's development and trade history is a picture of similarity and heterogeneity. The British had followed existing models of decentralised governance for this subcontinent, incorporating Mughal institutions and Anglo-Saxon institutions of administration, politics and law. Over time, the South Asian countries moved away in various degrees from this model that evolved. However the essential basics remained and today there is more than a fair bit of commonality in markets, institutions and systems.

Colonial-era governance institutions also provided a backdrop for the much broader course of economic development. India, Pakistan and Sri Lanka's independence in 1947-48 marked the beginning of a set of different ways by many ex-colonies embarked on their economic journeys. In South Asia, each country pursued a somewhat different development strategy, and not surprisingly met with mixed results. In trade policy too, the various hues of protectionism adopted met with varying degrees of success. However, one conclusion on trade that remains unquestionable is that the region as a whole suffered enormously and till a few years ago, simply dropped off the trade atlas of the world. Riddled with a complicated set of rules, set in a mindset that encouraged self reliance and trade pessimism, trade within the region came close to naught.

There have been some welcome moves in the last decade or so. However, the degree of openness of the SAARC region to external trade and economic relationships is still relatively low. Exports as a percentage of GDP are 36 per cent for Sri Lanka, 12 per cent for India, 16 per cent for Pakistan, 26 per cent for Nepal, 31 per cent for Bhutan and 12 per cent for Bangladesh. Imports as a percentage of GDP are also low with figures of 44 per cent for Sri Lanka, 16 per cent for India, 21 per cent for Pakistan, 38 per cent for Nepal, 42 per cent for Bhutan and 18 per cent for Bangladesh. For the larger countries, Sri Lanka, India, Pakistan and Bangladesh, this was a function of import-substitution policies adopted earlier. Sri Lanka was the first among the lot to have introduced economic reforms in the 1970s and it is not surprising that its exports in relative terms are the highest percentage of GDP.
A strategic error was the attempt at being self-sufficient without comprehending the role of international trade in development. This prevented us from accessing bigger markets for our products or from using quality inputs. We wanted to produce everything in the production chain, regardless of whether we had the expertise, technology or market. Consequently, whenever a process was less efficient than what was available internationally, the entire production chain was affected adversely. For instance, by forcing the fertilizer industry to use only locally designed catalysts, the entire fertiliser industry's productivity suffered. The same was the case for the electronics sector where the software industry took time to take off because of the insistence on the use of domestic computer hardware. Thankfully, there has been a major departure from the original model.

The region has opened up to trade and to foreign investment. Custom duties have been reduced, quantitative restrictions on imports have gone and foreign investment can now come in more freely in most sectors. We still have a long way to go but have certainly embarked on the road to globalisation. And in this context it becomes important to look at laws and procedures related to Customs and trade that differ considerably. Apart from production and quality issues which have had an impact on limiting trade in South Asia, it is the free movement of goods and capital between countries, and harmonious laws and procedures related to Customs that are required to increase trading opportunities.

The point that needs to be forcefully made here is that integration is more than the trade and investment on which we tend to concentrate. At one level, the forces of world integration are much stronger and more varied than the simple economic variables on which we focus. At another level, and more importantly, the forces of globalisation make economic isolation irrelevant, or contrived. It is impossible to keep oneself insulated from global events even if one tries to follow a policy of relatively closed economic borders. Consequently, one needs to accept globalisation as given and try to make the best of it, rather than wishing it away.

The South Asian region can have a strong global presence by integrating its economy within itself and with the rest of the world. Interdependence and common standards among economies adds to the strength of each one of them. The collective strength is often more than the sum of each of their military might. China's importance in today's world is because it is seen as a business destination by the rest of the world. It has a huge domestic market and cheap labour where foreigners rush to do business. The South Asian region can be in a similar situation only if it can make the world perceive it the same way they perceive China.

It was with this in mind that the group of experts from Pakistan, India, Sri Lanka and Nepal contributed their papers for this section on harmonising Customs laws and practices. The papers in this section came from Mohammad Sulaiman, Nisha Taneja, Amir Ullah Khan, Dilli Ghimire and Douglas Jayasekara. Mohammad Sulaiman in his paper makes a very concerted argument on the issue of valuation of goods. The paper examines the evolution of the agreement on valuation and concludes that by and large the aftermath has been satisfactory. However some countries are getting away with murder. And the deluge of anti dumping cases proves this point.

Nisha Taneja examines the trade facilitation issue in its various contours. She contends that any country that is unable to adopt effective and appropriate trade facilitation measures would be uncompetitive in the global trading environment on account of high transaction costs. South Asian countries incur high transaction costs in trading. Adopting appropriate trade measures would reduce costs for intra-SAARC trade and for trade with the rest of the world. The South Asian Free Trade Agreement (SAFTA) signed in Islamabad in January 2004 has made provisions for trade facilitation under Article 8. If implemented, these measures will enhance the pace of economic integration in South Asia.

Dilli Ghimire looks at the very critical issue of warehousing. Customs warehousing is an integral part of customs Act of any country. Customs warehouses are such places where dutiable goods are stored without the payment of duty. To facilitate trade in the, it is important to have a well defined customs co-operations arrangement. Agreement on regional customs co-operation can address the problmes in customs procedures including warehousing. It would also help the process towards uniform customs procedures and harmonise the laws relating to warehouses of the member countries. An umbrella organisation needs work as the expert group of customs matters including customs warehouses and supply technical assistance to the members. The warehousing facilities in South Asia should be developed in line with the EU countries.

Douglas Jayasekara argues that documentation is an issue that raises transaction costs considerably. Excessive documentation has come about as a result of various complicated and intracte mechanisms set up by various socuntries in their attempt towards selective tarde encouragement and protectionism in a laregr context. However, as in the case of Sri lanka, the move towards a single standard document of declaration in 1994, the CUSDEC, has assisted trade immensely. The time taken for processing of documents has also improved with the introduction of Automation and Selectivity criteria for the examination of cargo on a risk assessment basis. The Risk declaration statement declares that a company has committed an offence, or contravened a customs ordinance. This is promptly verified against the computer data base of offenders.

All the papers make a clear case for harmonisation and simplification. While all South Asian countries strive towards lowering transaction costs, it is important to reconcile provisions under SAFTA with the ongoing negotiations on trade facilitation in the WTO. A beginning can be made through adoption of measures such as harmonisation of standards, mutual recognition agreements, harmonisation of customs procedures and customs classification and simplification of procedures. At the same time the South Asian countries could collectively work towards a common agenda in the ongoing negotiations in the interest of developing and least developed countries. The vast potential in a large region like South Asia will only be tapped to its fullest when there is quick movement towards simplification and harmonisation. It doesn't take long at all for negotiating teams to sit together and work out a mechanism that is uniform, especially since the European experiment and its lessons are well known. In this particular area, with benefits for all concerned, the old bogey of vested interests and entrenched lobbies also does not hold water. There is really no reason for us not to have a common set of principles and laws governing customs procedures across South Asia immediately. All governments swear by the reform agenda and, therefore none can argue against the need to simplify rules, and in quick time.

ii) Regional Economic Cooperation: Investments and Joint Projects

Group Coordinator: Ananya Raihan
Group Members: Indra Nath Mukherji, Ananya Raihan

In the backdrop of emergence of a number of regional trading arrangements, both regional as well as bilateral in South Asia the (Indian ) paper essentially examines India's foreign direct and overseas investment policies, including investment facilitation measures. The paper also investigates India's joint industrial projects (and those with investment potential) in South Asian countries. However, energy projects have been kept outside of the purview of the paper. The paper attempted to show India's trade investment linkages with South Asian countries and finally, it analyses SAARC initiatives in investment facilitation and further possibilities of extending it towards a SAARC Investment Area.

Being the fourth largest economy in the world (in terms of PPP), India has enormous opportunities for investment, both domestic and foreign. Among the reform agenda, initiated in 1990s, reform of investment regime was very important. Liberalisation of India's overseas investment policy was first undertaken in 1992 on the recommendation of the Klyan Banerjee Committee. Further liberalisation and streamlining of procedures was undertaken in 1995 when revised guidelines were notified. Since then the policy has been gradually liberalised from time to time. RBI was designated as the nodal agency for administering the policy, which had earlier been entrusted to the Ministry of Commerce. As a result of liberalisation of investment regime, India opened up her economy for FDI with maximum of 100% equity ownership under the automatic route, with exception of a few sectors. FDI in sectors / activities to the extent permitted under automatic route does not require any prior approval either by the Government or the RBI.

FDI policy is reviewed on an ongoing basis and changes in sectoral policy/ sectoral equity cap are notified through Press Notes by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP). The Reserve Bank of India (RBI) under Foreign Exchange Management Act (FEMA) also notifies FDI policy.

India is one of the SAARC countries where overseas investment policy has been substantially liberalised in recent years. Under the automatic route, Indian companies can invest up to USD 100 million (USD 150 million SAARC countries, excluding Pakistan and Myanmar and up to Rs.7000 million by way of rupee investments in Nepal and Bhutan) in a year without approval of RBI or Go1 provided the overseas investment is not real estate oriented. Funding of such investments can be out of balances held in Exchange Earners Foreign Currency Account (EEFC) of the Indian Company or 100 percent of ADR/GDR proceeds or drawal of foreign exchange from an authorised dealers in India up to 200 per cent of the not worth of the Indian company.
A number of investment facilitation measures have been taken since the opening up policy of early 1990s. Among them, tax treaties have been signed with 74 countries to avoid double taxation. Among South Asian Countries, India has entered into DTAA with Bangladesh, Nepal, Sri Lanka and a LDTAA covering only air transport with Pakistan under a convention on prevention of fiscal evasion. India entered into DTAA/ with Bangladesh on 27 May 1992, after the exchange of Instruments of Ratification.

India also entered into Bilateral Investment Promotion & Protection Agreement (BIPAs) in order to promote and protect on reciprocal basis investment of the investors. Government of India have, so far, signed BIPAs with 54 countries out of which 41 BIPAs have already come into force and the remaining agreements are in the process of being enforced. The important elements of BIPA are: National Treatment for foreign investment; MFN treatment for foreign investment and investors; free repatriation/ transfer of returns on investment; recourse to domestic disputes resolution and international arbitration for investor-State and State-State disputes; nationalization / expropriation only in public interest on a non-discriminatory basis and against compensation etc.

Between 1996 to 2002 India's Investment in South Asian countries was USD 164.53 million, being no more than a little over 2 per cent of its overseas world investment. Nepal was the most important destination of Indian investment followed by Sri Lanka. Since 2002 however Sri Lanka has overtaken Nepal as India's largest investment destination in South Asia.

Between 1996 to May 2004 cumulative Indian investment to Bangladesh was only US$20.42 million as compared to world investment of US$10,656.05 million. In 2003, the very meager inflow of US$1.39 million investment into Bangladesh ranks India 16th in terms of such inflows from different countries. New avenues of investment are being explored by India and Bangladesh in recent times. Indian investors are now more eager to invest in Bangladesh than before. TATA's USD 2 billion investment proposal is such an example.

Since the liberalisation of Bhutan's FDI policy, the major investors in Bhutan could well be Indian companies. Such companies could find the processing of Bhutan's abundant horticulture products profitable for meeting the increasing consumer demand in the Indian market.

By virtue of its proximity and the Trade Treaty with India, close economic linkages between India and Nepal have manifested themselves, inter-alia, through Indian investment and joint ventures in Nepal. In 2000 there were over 265 approved Indian joint ventures in Nepal of which over 100 are operational, with a cumulative total Indian investment amounting to between 36-40% of the total Foreign Direct Investment in Nepal1. In 2004 there were 114 operational Indian joint ventures in Nepal with authorised capital of NR 14.33 billion. Of these, 22 joint ventures had authorised capital of NR 100 million and above.

Government of India has established a special "Nepal Window" to facilitate approvals for Indian investment in Nepal as there is no outgo of foreign exchange. The limit for 'fast track' approval by Reserve Bank of India for investments in Nepal has been raised in July 2000 to Rs. 350 crores (Indian Currency).

There have not been any specific investments in Pakistan through India. However, of late, some signs of possible investment are visible. Reliance Industries is in advanced negotiations to acquire the petro-chemical business of ICI-Pakistan close to US$ 300 million. ICI Pakistan which comprises of 5 Pakistan businesses of polyester, soda ash, chemicals, life science3s and paints is one of the largest quoted companies on Karachi, Lahore and Islamabad stock exchanges. The $ 2.2 billion Indian software services major Tata Consultancy Services (TCS) has taken the first steps to set up a base in Pakistan. If it succeeds, TCS will become the first Indian IT Company to the market. Dabur India will soon have a foothold on Pakistan soil for it will be setting up a manufacturing joint venture with Pakistani firm by the end of this year, Ayurvedic products will be the fulcrums of their joint ventures in Pakistan. Pakistan Government has given them note to set up the subsidiary marketing venture in Pakistan, which would make their products available to consumers at cheaper rate.

In order to facilitate these investments and other investment proposals and/or joint venture proposals between India and Pakistan, the two countries should enter into a Bilateral Investment Promotion and Protection Treaty, which shall ensure national treatment to each other's enterprises2.

The principal sectors which have attracted Indian investment in Sri Lanka are steel, cement, rubber products, tourism, computer software, IT-training and other professional services. During the past three years leading Indian companies such as Gujrat Ambuja, Asian Paints and Larsen and Tourbo have committed substantial investments, while existing companies such as CEAT and Taj Hotels have expanded their operations3.

At the 13th SAARC Summit held at Dhaka in December 2005, a number of initiatives were taken for investment facilitation. One of these related to a Limited Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in Tax Matters. Another important trade facilitation measure adopted by SAARC has been Agreement for Establishment of SAARC Arbitration Council. The Council will has full legal personality. Article II states the objectives and functions of the Council to (a) provide a legal framework within the region for fair and efficient settlement through conciliation and arbitration of commercial, investment and such other disputes as may be referred to the Council by agreement; (b) promote the growth and effective functioning of national arbitration institutions within the region.

The third Agreement relates to SAARC agreement on Mutual Administrative Assistance in Customs Matters. Under this Agreement, the Contracting States, through their respective customs administrations, provide each other administrative assistance and information under the terms set out in the Agreement, for the proper application of Customs law and for the prevention, investigation and combating Customs offences. (Article 2). The information could relate to new enforcement techniques, goods or persons involved in customs offences, new means of offences, etc4.

A comparative picture of different types of Agreements on services, investment and intellectual property under various regional trading arrangements have been illustrated. Most North-South agreements, notably the bilateral FTAs of the US and EU have been important drivers to agreements on new issues and have generally assumed WTO plus provisions. Looking at the composition of members of the SAARC, such provisions do not appear to be feasible. A better approach seems to have been followed by the ASEAN model as reflected in the ASEAN Investment Area (1998), calling for gradual opening up of all sectors to direct investment by ASEAN investors and ultimately to giving them national treatment. While range of ASEAN agreements equips the members to undertake deeper economic integration, yet it makes allowances for weaker members providing them longer time to implement them.

India is becoming an important supplier of foreign private investment globally. Its investment in South Asia, however, remains minimal. India has DTAA with only 3 South Asian countries and 1 LDAA with Pakistan. It has only one BIPA with Sri Lanka. India needs to have more comprehensive DTAAs and BIPAs with all south Asian countries and to make them more comprehensive in the light of new global developments.

Further, countries of this region need to restructure their industries so as to become globally competitive. Free trade agreements, both bilateral as well as regional could bring about the necessary synergy between trade and investment as the Indo Sri Lankan free trade agreement clearly establishes. There also exists considerable intra industry trade among the member countries of this region, which provide opportunity for the countries to bring out the necessary synergy between trade and investment. Above all, there is need for both trade and investment facilitation measures at the regional level. Recent attempts by SAARC to promote investment facilitation are a move in the right direction. However, this still falls far behind in the formation of an investment area for the region. The experience of ASEAN in this regard provides a valuable blueprint.

Footnotes:
1. http://www.south-asia.com/Embassy-India/
2. Ibid.
3. Desihttp://www.boi.lk/investorSite/content.asp
4. SAARC Agreement on Mutual Administrative Assistance in Customs Matters, Ibid.

iii) Energy Issues in South Asia

Group Coordinator: Prof. Mahendra Lama
Group Members: Tripta Thakur, Professor Priyantha DC, Dr QK Ahmad, Fahd Ali, D. N. Raina

Integrating Energy Market in South Asia: Opportunities, Benefits and Challenges
The concept of energy security among the eight South Asian countries have been deliberated upon from two crucial perspectives i.e. the sustainable development point of view and from the security-militaristic angle. In case of the former, energy security as a critical aspect of sustainable development refers to the availability of energy in different forms at all time to the users as per their needs at reasonable and affordable prices. Energy impinges upon all the three primary dimensions of sustainable development viz., economic, environmental and social. The issue of possibility of total draining of natural resources like coal, natural gas and oil reserves thereby posing serious energy insecurity has been critical. The traditional sources of energy viz., firewood, animal dung, crop residues etc. are still major energy sources to the larger populace in an overwhelmingly rural South Asia. This has adversely affected the sustainability of the natural resources including that of forests.

On the other hand, from the security- militaristic plane, energy insecurity could bring large-scale instability among these countries in a given nation-state thereby threatening the sovereignty and identity. This dependence is increasing in South Asia. This happens when a country is dependent more on the external sources for its energy supplies. The quantity and the price risks are the two piquant situations that can inject insecurity particularly in the commercial energy arena. The human security aspects are actually the real linkages between these two parallel strands of thought and conceptual delineation of energy security.

These countries continue to be characterised by low per capita consumption of energy, poor quality of energy infrastructure, skewed distribution and inaccessible and costly energy availability. These countries have remained largely energy importers and increasingly faced a serious energy shortfall. This is likely to deepen further both because of ongoing economic liberalisation- led energy intensive activities and rise in income level-led steady switching over of the rural and urban families from traditional bio-fuels to more efficient and convenient modern fuels. The inability to cater to the increasing industrial and other commercial energy needs have adversely affected their productive activities, social development and investment climate. Power shortages, outages and low quality have imposed substantial costs on the economic growth. This is further exacerbated by structural, institutional and financial problems. Energy security is therefore, emerging to be one of the most critical issues in South Asia region.

South Asian countries have remained largely energy importers and increasingly faced a serious energy shortfall. They continue to be characterised by low per capita consumption of energy, poor quality of energy infrastructure, skewed distribution and inaccessible and costly energy availability. All these have adversely affected their productive activities, social development, infrastructural progress and investment climate. There has been a strong realisation that availability and accessibility to energy can transform the quality of life and work substantially, help raise health and educational standards and retard rural-urban and cross border migration by enhancing the level and pace of income and employment generation.

In South Asia, power generation and its supply for long remained a state monopoly. Respective governments owned, operated and regulated the power entities. The lack of accountability in terms of operational performance and service standards and codes worsened the situation. Most of the power generating units remained highly dependent on the subsidies and other inputs provided by the state. They remained thoroughly unexposed to any competitive and efficient atmosphere. High system loss and low collection from the consumers ultimately made these entities both defaulters and sick. The investment in energy supply requires large inputs of scarce physical, human and financial resources for which there are competing demands from other sectors. South Asian countries are capital scarce.

For the last decade or so, most of these countries have, therefore, undertaken serious reforms in the energy sector. These reforms focus on diversifying traditional energy supply sources, promoting additional foreign and domestic investment for energy infrastructure development, improving energy efficiencies, reforming and privatising energy sector, and promoting and expanding regional energy trade and investment. These also include segregation of the regulatory functions from the Government and vesting them in an Independent Regulatory Commission, tariff reform and unbundling the various activities from a vertically integrated unit to distinct and separate units based on functions.

There are very emphatic mentions about the provisions of cross border power trading in the power sector reforms measures. For instance, The Electricity Act, 2003 of India provides for establishing energy trading as a distinct licensed activity, which allows third party sales. The basic intent is to introduce competitive market in India so that there are no restrictions on the number of players in the business of electricity trading.

There are quite revealing variations in the installed capacities of power utilities in South Asia. These variations also reflect the potentialities as based on their natural endowments. Hydro power has been the most vital source of total installed capacity in Bhutan (100 %), Nepal (90 %) and Sri Lanka (65 %) whereas the thermal power dominates in Bangladesh (95 % gas based), India (72 % mainly steam based) and Pakistan (71 %). In the composition of end use sectors, the share of industry has been over 37 percent in South Asia except Pakistan.

The seasonality factor in both generation and demand is highly noticeable in the South Asian countries. This has in turn generated a lot of interest in the cross border power trading in the region. Most of the South Asian countries have in place energy demand forecasts for next 15-20 years. This, in a way, facilitates the ascertaining of the capacity and energy requirements of the country. For instance, regionwise projection of power demand and supply for the year 2012 indicates a serious shortfall in all the major regional power markets viz., Northern, Southern and Western in India. Since the projected surplus power in the East and Northeast regions would not be adequate to meet the gap in demand, the import of power from the neighbouring countries will be the least cost viable option available.

The South Asian region is one of the richest sources of hydel power in the world. However, a very small proportion (hardly 15 per cent) of this great regional potential (231245 MW) has been exploited so far. There are distinct advantages for South Asian countries to cooperate in the energy sector. These countries together possess vast stores of energy mostly in the form of water resources, oil, forest, coal and gas.

Economic gains based on regional cooperation in the energy sector has become a firmly established practice across the regional groupings. Given the historical context, topographic and demographic features, natural resource endowments and socio-cultural ethos, South Asia could be the most natural unit of cooperation and integration. Creation of a South Asian energy market and cooperative development of the available diverse energy sources in the region can help increase the level of energy security in the region. This would contribute to achieving a sustained higher economic growth and improved political stability.

In South Asia there are clear options emerging in the arena of regional cooperation in energy sector. Cross border energy trade is one of them, with Bhutanese success story spreading to Nepal, Bangladesh and even Pakistan. This is further corroborated by a match between gas deposits in Bangladesh, hydro power potentials of Bhutan, Nepal and North East India and the bourgeoning market in the South Asian countries. The strong seasonality factor in both generation and demand that is noticeable in the South Asian countries has in turn generated a lot of interest in cross border power trading.

A number of organisations in the region, and outside, have been consistently working towards fostering the cooperation in energy sector in South Asia. This includes the technical and professional public sector organisations including Petrobangla, Power Grid and Power Trading Corporations of India, Electricity Authorities of Nepal, Sri Lanka and Pakistan. On the other hand international agencies like the World Bank, ESCAP, Asian Development Bank, USAID (SARI-E initiatives) and UNDP have also been fairly active in the last few years. The SAARC has set up a Technical Committee exclusively on energy sector cooperation under its Integrated Programme of Action and has recently set up an Energy Centre in Islamabad. Initiatives like Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, (BIMSTEC consisting of Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka & Thailand) in its second meeting held in Delhi in 2005 decided to establish a BIMSTEC Centre for Energy for facilitating energy studies and exchange of expertise.

There are a range of options for any energy exchange project in South Asia region. The reality is that till 1947 an overwhelming part of the region had an integrated energy market and system. The choice of a model to trade or exchange electric power and other energy varieties among these countries is a crucial issue. There are successful instances of international gas and power trading mechanisms in some regions across the world.

The possibility of energy trading has opened new vistas of cooperation. Cross border energy trade could lead to i) effective utilisation of natural resources, ii) increase in reliability of power supply, iii) economy in operation and mutual support during contingencies, iv) bring about large scale transformation in the sectors contributing to economic growth, v) act as the single most effective confidence building measure (CBM) through the participation of multiple stakeholders and vi) substantially promote market integration in energy related goods and services . The changing nature of economic actors and institutions and their increasing support base in the civil society are likely to rather force policy designers in South Asia to procreate modalities for a substantive and lasting interaction.

Interconnection of power systems of contiguously located countries and their coordinated operation provide immense technical and economic benefits also. All these interconnections allow each electrical utility to make savings on power plant investment and operating costs as a result of the improved use of the interconnected system. It also contributes to the quality of electricity supplied to customers as well as reduces environmental damage. South African Power Pool (SAPP) created in 1995 under the regional cooperation organisation viz., Southern African Development Community (SADC) is one example which matches very well with South Asian situation. They trade in power with a view to provide a reliable and economical power supply.

There are examples of such regional power pools successfully operating in several parts of the world. There already exist considerable network of inter-connections among the South Asian countries. India's Power Grid Corporation has worked out the inter-connections required, their feasibility and the cost and benefits to the participating countries in the South Asia Growth Quadrangle (SAGQ) region consisting of Bangladesh, Bhutan, North East region of India and Nepal. All these inter-connecting channels will very well match the Indian effort to have integration of all regions to form a National Grid by the end Eleventh Five Year Plan in 2012.

As options for power trading in the broader ambit of regional cooperation in South Asia, the following three mechanisms can be cited.

i) Bilateral power trade and
ii) Pool based
iii) Wheeling Facility

Cross border power trade on a bilateral basis already takes place widely between India and Bhutan and to a certain extent between India and Nepal. West Seti Project of Nepal is a third type of bilateral power exchange, which is likely to take place in the region. A unique feature of this arrangement is the involvement an Independent Power producer (IPP) to develop this power plant, the entire generation of which will be exported to India. Pakistan's informal offer to India in 1998 of selling surplus power very much matched the demand in the northern and the western regions of India. Pakistan's transmission system extending from Jomshoro in the south to Tarbela and Peshawar in the north run very much near to the adjoining borders of India and may not require complex transmission extensions to the Indian borders.

However, the key issues to be settled before the cross border flow is concretised are the cost of transmission line and its sharing mechanism; the determination of power tariff; need and willingness, technical means, national institutions and regional operations and contractual issues. The payment mechanism including the currency and the channel to be used like Asian Clearing Union and most importantly the power supply sustainability and its geo-political immunisation. It is very crucial to maintain a fair balance in the energy security equation in order to avert the risk of 'trade and fade'. The issues of : various pricing methodologies are in use, depending on the nature of exchange/trade taking place. In more competitive systems like British, US and Norwegian pools pricing is based on market bids. Whereas in cooperatives pricing is based on marginal costs and profit sharing. An important feature linked with pricing is coming up with suitable contractual agreements and standardising them to speed up the electricity trade processes.

The pool-based approach, also known as agent-based, integrated simulation, can possibly provide support to develop a competitive long run market equilibrium in regional power trade. In this context, establishing a Regional Power Trading Corporation (RPTC) would be highly beneficial to launch this type of market mechanism in SAARC region also. This could be called “SAARC-RPTC” which could provide market feed-back to individual power producers (agents) as well as the power consumers. To facilitate the process of setting up of SAARC-RPTC , it is rather essential to assess and understand the nature, direction and extent of intra-country power exchange of the South Asian countries. However, currently the power trading is in its infancy in South Asia region.

Besides electricity, the four areas which can be identified for cooperation in the oil and gas sector in South Asia region are i) trans-boundary natural gas trade, ii) trade in refined petroleum products, iii) cooperation in oil and gas exploration and iv) cooperation in NGV developments.

Sizable gas shortfall is expected among the South Asian countries. Optimal techno-economic solution is for India, Pakistan and other South Asian countries to jointly pose their demands to potential suppliers in north and west and other central Asian countries so that economies of scale result in a substantial reduction in unit cost of supply to both countries.

Though the South Asian countries particularly India and Pakistan have been envisaging both on-shore ( Iran-Pakistan, Turkemenistan- Pakistan) and off-shore (Qatar-Pakistan, Iran-India and Oman-India) pipelines, nothing concrete has emerged because of : i) huge financial implications, ii) geo-political apprehensions, iii) unsure confirmation of natural gas reserves, iv) pricing of supplied gas, v) third country approval of transits and vi) environmental fall outs. This has also been the case in intra-regional gas pipeline between Bangladesh and India.

Indian concerns about the safety of the pipeline and assured supply through Pakistani territory can be addressed through dialogue and legally binding guarantees by multilateral institutions. This can also be ensured by extending this pipeline to Nepal, Bhutan and Sri Lanka. Recent months have seen considerable progress in India laying gas pipeline into Nepal and Indian Oil Corporation's (IOC) planning to sell petroleum products in Sri Lanka.

If political apprehensions are set aside, there are strong possibilities and scope for bringing gas from Bangladesh through pipeline. Swapping of Indian gas with Bangladesh gas is another proposal that also stands as mutually gainful project. One of the attractive options of this trans-boundary natural gas trade is to undertake the Iran-Pakistan-India Pipeline. Iran has shown urgent interest. India and Pakistan are now conducting studies on this 2,670 km long land pipeline. This would seem to be a win-win project to all the three countries.

Any of these pipelines, if laid, could change the energy as well as the economic picture of the entire region besides providing a robust CBM between India and Pakistan. The economies of scale will substantially reduce the cost of a unit of gas energy imported jointly than individually. In order, therefore, to promote regional energy cooperation through trade of natural gas via trans-boundary gas pipelines in South Asia, these countries need to work on four major directions i) full-fledged preparatory techno-economic work, ii) Inter-governmental agreement, iii) informed public opinion and iv) promotion of national commercial and financial interest in the proposed projects. This could be done only if an appropriate climate of trust is progressively created.

iv) Water Issues in South Asia

Group Coordinator: Dr Zaigham Habib
Group Members: Dr Zaigham Habib, Satyajit Singh, Ramaswamy Iyer, Dr Bishnu Hari Nepal, Giasuddin Ahmed Choudhury

The Himalayan water resources are shared by India, Pakistan, Bangladesh, Nepal and Bhutan. South Asia is generally facing deficit of useable water for its existing and future needs, deterioration of water resources, management inefficiencies, development concerns and water legislation. Infrastructure development is considered inevitable in the region for the hydropower generation and to meet water demands. While facing problems in the selection of technical solutions, water sharing within and across the countries and water productivity; all countries are experimenting management changes to various degrees. Five papers from the South Asia water group review country specific and trans-boundary issues, brief highlights from different papers are given below:

Ramaswamy R. Iyer in his, “Water in South Asia: A Synoptic overview” summarises water issues of the South Asian countries, trans-boundary water conflicts between India and other countries while emphasising alternative approaches. For the water crises of India, he suggests; “through a combination of two approaches, namely, on the demand side, the practice of the utmost economy and efficiency in water-use and of resource-conservation, and on the supply side, efforts to augment the availability of `usable' water through extensive recourse to local water-harvesting and watershed development, it may be possible to avert a crisis, though the situation will undoubtedly be difficult and will call for careful management.

The economic and water sector reforms in India are generally accepted as a public-private partnership. “This is another prescription of economic `reformers' that seems to be gaining a measure of acceptance in India. The paucity of financial resources is pushing the Governments, Central and State, to think in terms of inviting private sector participation in dam-and-reservoir projects, which would earlier have been exclusively in the domain of the state. The new National Water Policy 2002 includes a clause that specifically provides for this. Turning from projects to services, the idea of privatising utilities has been in the air for some time, and now it seems to be getting extended to water supply in some States.”

Dr Iyer summarises anti-big infrastructure views, also using them in the context of trans-boundary issues. Anti-dam lobbies argue that the economic, environmental, social and human consequences of these projects can not be fully compensated, while the small-scale, local, people-centered alternatives are available. Similar logic is mentioned in the context of trans-boundary disputes,” Bhutan is its deep attachment to its cultural and natural heritage and its determination to preserve them….. an `alternative' view in Nepal dis-favours large, technology-driven, foreign-funded, export-oriented projects imposed by the state or foreign investors on the people, and favours decentralised, relatively small, environmentally benign projects (whether for irrigation or for hydro-electric power) primarily for Nepal's own needs rather than for meeting the needs of other countries.”

Dr. Bishnu Hari Nepal's paper is focused around the theme, "water is to Nepal what oil has been to the Gulf countries, namely, the source of revenues and wealth; and that those revenues will come principally from the export of hydro-electric power to the neighboring countries.” While emphasising the use of advance technologies he criticises anti-infrastructure movements. The 'eco-romanticists', water-mafias and 'dollar farmers' make sometimes 'opposition for opposition's sake' and create havoc to the normal folks. The paper describes surface and groundwater water resources of Nepal, current uses, hydroelectric potential, trans-boundary issues with India and a regional model.

Currently, Nepal is using less than 10 per cent of its rivers inflow of 225 billion cubic meters annually and producing 606 MW hydroelectricity out of 83,000 MW capacities. While, only 40 per cent of the households use electricity generated from different systems and the actual energy needs met from fuel-wood, agricultural waste and animal-dung is 88.64 per cent of the total energy consumption. Out of the remaining percentage, the hydro-electricity contribution is of 1.66 per cent, contribution of renewable energy resources is 0.52 percent and fossil fuel (petroleum and coal) comes to be 11.18 per cent.

Nepal's New Water Resources Strategy and National Water Plan for 2002-2027 suggest physical developments, joint trans-boundary projects for hydropower and management reforms in the sanitation and irrigation sectors. The Farmer Managed Irrigation Systems (FMIS) already covers 70 per cent of the country's irrigated area, some systems are being transferred wholly to the Water Users Association (WUA),while some are jointly managed by the government and the WUAs. The government has accepted that the community-managed systems are better than the government-managed projects.

The scope of joint reservoir and electricity generation projects by Nepal and India is high, however, as India is the main user of this electricity, there is conflict of interests on location, ownership, price, etc. Dr. Nepal proposes a trans-boundary regulatory mechanism outlined through his SA-RRR-S (South Asian Regional Riparian Rights Statutes) model. The Model proposes that the countries of South Asia could take a distance of 8 KM as a distance of mutual agreement downstream and upstream right of acceptance by managing the system of the provision of consent from the respective country for any kind of water and disturbing development activity within the respective country's territory.

In a very interesting paper Dr. Satyajit Singh reviews water sector reforms experiences of the South Asia in the context of local governments, good governance, and communities. He put current decentralisation efforts as the centuries old quest for appropriate institutions for good governance, formulated by different schools of thoughts in different social or institutional contexts. The paper argues that local governments are central to the discussions around good governance. A shift from communities to local governments becomes necessary in order to ensure the sustainability of the community institutions as well as to provide a stable channel for public fiscal transfers from the center or the state to the actual beneficiaries. The local government model provide better defined structural relations with the central state, while it is accountable at the local level and is allowed to make choices between public versus private services. An important assertion is that capacity is an issue at the central level, which should be able to design institutes at the local level. “It is an attempt to bring in a convergence between the institutional and the livelihood paradigm”. While rural communities in South Asia are directly affected by the swings in the financial and trade markets, national and state governments are also realising that good governance for rural infrastructure and service delivery are best handled at the local government level.

In this reforms model, the state focuses on policy, strategy and capacity building of the local government for managing, contracting and supervising NGOs, private and community groups. The services are delivered by the public, private, civil society organisations or their partnerships. The success of decentralisation process is linked with urgent needs, outcomes in the local political economy and the local capacity. However, many aspects of the implementation process and achievable impacts of decentralisation remain to be understood. Crafting a balance between local autonomy, state authority and legitimate national goals is difficult, local governments have neither the capacity nor the local accountability to act autonomously to realise the expected benefits of decentralisation. decentralisation that works across sectors to provide functional clarity and operational freedom to local governments. The capacity of communities and local Governments is essential for success.

India provides examples of different level of decentralisation and success. The sector reforms in Kerala are successful, as they are fully integrate with decentralisation program and the functional local governments, Panchayati Raj Institutions (PRI), which are largely respected by the communities. Bangladesh has adopted major reforms agenda through five year (2005-9) Rural Water Supply Project. However, delivery mechanism is highly centralised as the ministry delegates responsibilities to the local public departments and NGOs. This supply driven approach is not able to response peoples needs, problems in reporting are mentioned while the expected results are not achieved. “Unlike in India where the local government unit actually manages the water projects, the local government in Bangladesh facilitates and regulates the 'private sponsors'”.

Dr. Giasuddin Ghoudhury's paper on water management in Bangladesh highlights existing water policy approach of the country and describes different issues linked to water quality, low productivity and boundary issues with India. Bangladesh has been closely working with the international donors during the last twenty years and has come up with national policy documents, between 1992-99, in the sectors of environmental, forest, energy, Drinking Water Supply and Sanitation, fisheries, agricultural, industry and water. The National Water Management Plan (NWMP) was prepared in 2001 and approved by the National Water Resources Council in 2004.

Bangladesh faces water control and quality problems; groundwater pollution, floods resulted from high river flows and inadequate drainage, and increasing demand for winter irrigation. The arsenic levels are above the safe limit, exposing about 75 million people to this toxic substance on a daily basis. The water use efficiencies are low, while water is subsidized along with other inputs. The country also needs to manage land due to drainage issues and rapid urbanisation. The national water policy of Bangladesh states, “Water will be considered an economic resource and priced to convey its scarcity value to all users and provide motivation for its conservation”.

The trans-boundary conflict with India originates from the fact that, “Bangladesh has fifty-seven common/ border rivers, out of which fifty-four rivers are with India. The ever-increasing upstream withdrawals from these rivers within the Indian territory have deprived Bangladesh from its traditional uses of the river flows, especially in the dry seasons and thereby disrupting the livelihoods of the people depending on these rivers as well as causing serious environmental degradation to one-third of Bangladesh.” The diversions from Ganges and water control at Farakka have been a major concern for Bangladesh, because of its direct impact on supplies to the irrigated land of Bangladesh. With the help of WB, Ganges Water Treaty (GWT) was signed between Bangladesh and India in 1996. However, the Indian River Link (IRL) mega project is considered to pose great threat to Bangladesh. The paper suggests, that Bangladesh needs to take an initiative for regional cooperation with Bhutan, Nepal and India. The Ganges flows can be augmented by construction a reservoir at the Sunkosh River in Bhutan, similarly, Sapta Kosi High Dam in Nepal, could bring significant benefits to Bangladesh.

The paper by Dr. Habib from Pakistan reviews water scenario of Pakistan, indicating the scope and implications of different measures available to address the water scarcity and resource conservation in the country. The country is already utilising more than 75 per cent of its rivers inflow of 178 billion cubic meters, more than 100 per cent groundwater and major part of the rainfall falling in the plains. Different sectors and areas face qualitative and quantitative water shortage in terms of water access, allocation and actual availability. On the supply management side, Pakistan is faced with regional disagreements and technical inabilities for the surface water development, water productivity and conservation of water quality, groundwater aquifer and natural aquatic systems. Not only projected, currently allocated river water is more than actual canal diversion, making shortage sharing a critical process during major part of a year. Recycling through groundwater aquifer has increased the actual water use efficiency in fresh aquifer areas, while causing groundwater depletion and a need to maintain the discharge-recharge balance. The drainage projects and water use practices have failed to arrest water logging in the saline zone. The low yield and traditional cropping patterns are the major performance concerns for the agriculture sector. The livelihood orientation, low investment potential and failure of markets to stimulate agriculture production are the main causes. Feasible technical options in the sweet and saline zones are not properly identified and implemented. The paper suggests sustainable recharge-discharge balance in the fresh aquifer zone and water saving at the conveyance level development guidelines.

In the context of institutional reforms, clear and locally accepted water management model is still far away, existing dichotomies are obvious from the ongoing disintegrated processes of decentralisation and reforms in the political and resource management sectors. The institutional changes in the water sector are initiated and directed by the donor as part of the package (notably World Bank and ADB) leading to the pilot studies. No efforts have yet been made out for the evaluation and formulation of these experiments.
v) South Asian Conflict Resolution Mechanism

Group Coordinator: Professor Moonis Ahmar
Group Members: Professor Navnita Behra, Professor Ameena Mohsin, Professor Moonis Ahmar, Khaled Ahmad, S.I. Keethaponcalan, Lok Raj Baral

Overview
1. Availability of experts who are conflict resolution practionners and who know the ground realities of a particular conflict. Such experts must have a capability to understand, analyze and provide suggestions to manage and resolve a conflict. In a country where such experts are available, it is possible to establish a conflict resolution mechanism without much difficulty.
2. Existence and meaningful role of conflict resolution centers and institutes may also help in creating conditions for proper awareness among people about the origins, escalation and transformation of various conflicts.
3. There is also a need for political will of parties involved in a conflict to resolve a conflict by applying techniques of mediation, conciliation and arbitration.
4. Availability of resources to sustain the process of conflict management and resolution also matters for establishing a conflict resolution mechanism.
5. Meaningful role of media, both print and electronic, also helps in the resolution process of various conflicts.
6. Use of technology also helps to provide verification for ceasefire and steps to monitor the implementation of an agreement.
7. Stakes of the parties involved in a conflict to sustain the process of negotiations through track-I, track-II and track-III channels also help strengthen the framework of conflict resolution mechanism.
8. It is important to identify and involve stakeholders in the process of conflict resolution.

Conflict Resolution Mechanism for South Asia
1. In South Asia, perhaps the most intractable interstate conflict, between India and Pakistan, lends itself to various characterization cast in strategic-military terms, a territorial/border dispute or an ideological conflict rooted in their mutually exclusive legitimising ideologies of being a secular and an Islamic state respectively.
2. The central lynchpin of evolving an alternative set of conflict resolution mechanisms better suited to the South Asian realities must be to make an 'inclusive' process by reaching out to all the stakeholders and transforming the method of evolving conflict resolution strategies by turning in into a bottom up rather than a top-down process.
3. The conflict resolution mechanism in the South Asian context must allow as well as create an alternate set of forums and political spaces where the local stakeholders can themselves think a fresh about ways of resolving their conflicts than merely reacting to those proposed by the state or the 'powers that be' bureaucracies, national political leadership or military regimes at the top of the state power.
4. A meaningful conflict resolution strategy, in a nutshell, must address itself to recasting the fundamental political equations of power sharing, which in turn need to rework the associated basis of the nation-state in South Asia.
5. The mechanism of conflict resolution is interlinked to a variety of issues whose immediate and long-term implications should be weighed. Yet, accepting the primacy of politics, it is suggested that most conflicts are more or less related to the crisis of governance.
6. Mechanism for conflict resolution cannot be uniform in South Asia due to enormity of diversities in countries of the region. Conflicts are also of varying nature and origin. Yet, all conflicts are broadly related to social, economic and political disparities that continue the domination of privileged sections of society or of certain class and ethnic origin.

Individual Countries
1. Devising a conflict resolution strategy for Kashmir calls for both the leadership as well as the larger concerned public in India and Pakistan change their way of thinking about the Kashmir issue. The bilateral negotiating process on Kashmir needs to be disentangled from its historical and ideological baggage. It needs to be de-ideologised and delinked from the respective countries' nationalist discourse that 'Pakistan is incomplete with Kashmir' or that 'Kashmir is the crown symbol of Indian secularism.'
2. For unleashing a process of conflict resolution in Pakistan, it is imperative that first there should be enough knowledge and awareness among people about the use and significance of that technique in order to deal with issues of critical nature. As long as there is lack of proper environment in Pakistan where individuals and groups having an expertise in the management and resolution of conflict can play a vital role, one cannot expect the evolution of conflict resolution mechanism in the near future.
3. Some of the impediments to conflict resolution process in Pakistan are:-
a. The role of state as a promoter and sustainer of conflicts.
b. Military intervention in politics and governance.
c. The absence of a viable civil society.
d. Absence of proper education given at the grassroots level about the concepts, importance and relevance of conflict resolution in the context of Pakistan.
e. Feudal and tribal culture.
f. Distorted information and image of conflict resolution depicted by a section of print media.
g. Promotion of Jihadi culture and militarisation of society.
h. Rhetoric, intolerance and hate propaganda against each other.
i. Lack of proper coordination among civil society groups striving for peace and conflict resolution.
j. Absence of organisations at the grassroots and other levels exclusively dealing with conflict and conflict resolution.
4. Since the South Asian regional initiative is lacking in helping member states to resolve conflicts, each country needs to address the externalities of such conflicts. India and Nepal can work together for mitigating mutual threats to a considerable extent, but remedies lie with their domestic reforms only.
5. A super imposed solution will be feasible in the Sri Lankan context.
6. The LTTE was completely immersed in conflict settlement strategy, whereas, the focus of the government delegations was on conflict resolution.
7. At the societal level, the Sri Lankan people obtain the assistance of elders within the family or the community to resolve their differences. In other words, elders play a major role in family and community conflict resolution in Sri Lanka. It is proposed that the Sri Lankan problem should also be approached with the assistance of the elders from within the conflict setting.

vi) Nuclear Stabilisation and Regional Security Arrangements in South Asia

Group Coordinator: Ejaz Haider
Group Members: Ejaz Haider, Professor MV Ramana, Moeed Yousuf, Praful Bidwai

The South Asian Policy Analysis (SAPANA) Network's Research Group IX was assigned to look into the problem of Nuclear Stabilisation and Regional Security Arrangements. There were four group members, two each from India and Pakistan. Below is the summary of their findings.

Praful Bidwai makes two basic points: first, the normalisation process gives India and Pakistan space to engage each other in nuclear risk reduction and take other necessary arms control measures to reduce the risk associated with the possession of nuclear weapons; and two, the ultimate safeguard against a nuclear conflict is the complete dismantling of their respective capabilities. For Bidwai, the only guarantee against the use of nuclear weapons is total disarmament. As he argues: “There is one way, however, in which India and Pakistan can genuinely contribute to the worthy cause of global nuclear restraint, arms reduction, nuclear disarmament, and peace. If they were to defuse their mutual nuclear rivalry, reach comprehensive agreements on nuclear restraint, and agree to work for a nuclear weapons-free zone in South Asia, they could have a salutary impact upon the world. (Brazil and Argentina offer a useful model of defusion of rivalry through a forswearing of the nuclear option, which they both pursued till the 1980s.).”

Bidwai is not convinced that keeping even small nuclear forces would reduce the dangers of accident or unauthorised use of nuclear weapons. There are too many areas of friction between the two countries and the only way out for them is to get rid of these weapons altogether. He does realise though that this may not be possible given entrenched mindsets on both sides but insists nonetheless that this is the only way out.

“Building even small nuclear arsenals will thus impose further constraints and cuts upon badly needed social sector spending in both countries, further degrading human security and lowering their already low Human Development Index ranks, which put them among the bottom one-fourth of the world's nations. The “bread versus guns” argument holds special relevance for these poor and highly iniquitous societies. “The obsessive pursuit of military security is bound up with a decline in comprehensive or human society in the two countries, especially in the context of the neoliberal economic policies that both have embraced, which disable the state from providing essential public service or taking measures to ameliorate growing inequalities and regional disparities. Growing human insecurity in either society is likely to contribute to greater tensions between them at the state level too by encouraging political movements which foment religious hatred and chauvinistic extremism directed at each other's governments. Ultimately, this will only aggravate military insecurities.”
M. V. Ramana has more or less the same view as Bidwai. Ramana also argues that normalisation allows India and Pakistan to address the issue of nuclear security and begin a process which could lead the two to total disarmament via interim nuclear risk-reduction measures. “The ongoing period of better relations between Pakistan and India offers a rare window to advance some shorter and longer term proposals aimed at reducing and ultimately eliminating the risk of nuclear war between the two countries.” Like Bidwai, Ramana also argues that nuclear weapons have not brought security to India and Pakistan and have in fact introduced an element of severe insecurity and the clear and present danger of a witting or unwitting nuclear exchange. He gives examples of Kargil and the 2001-2002 standoff as Bidwai also does to prove that nuclear weapons have not reduced the danger of war between the two states and in fact now threaten them with mutual extinction.

However, he does place slightly more faith in the interim measures and realises that total disarmament may not be possible in the near-future. But, as he says, it is important for both the states to realise that the capability to generate violence which they now have needs to be capped and then rolled back. Ramana is strongly opposed to the deployment of current capabilities or any further augmentation of them. Like Bidwai, Ramana also favours a nuclear free zone in South Asia and thinks that the peace movements in the region could mount enough pressure on the two governments to move towards that objective. As he puts it: “Since General Musharraf's accession to power in Pakistan, there have been six occasions on which he has officially declared his government's willingness to entertain and move towards such a denuclearised zone provided India is willing to do the same. In an indication of the interest of other countries in the region in such a proposal, Bangladesh has called for setting up a South Asian NWFZ. The time is therefore ripe for an effort to foster a debate on the subject. The hope is that the peace movements in the two countries take this up.”

Moeed Yusuf represented the Pakistani side and takes a realist position on the possession by the two sides of nuclear capability. Yusuf believes that the two sides are not about to either cap their capabilities or roll them back. He, therefore, proposes measures that can actually be debated given the fact that we have to live with the nuclear weapons. To this end, he says: “The concept of stability within the military context implies maintaining a situation where no development disrupts the existing equilibrium in a way that active conflict erupts. In the nuclear context, stability points to the concept of “nuclear deterrence”, or the ability to deter an adversary from taking an offensive for fear of punishment.”

Yusuf argues that the key to strategic stability is crises prevention, not crisis management. To begin with, Pakistan and India need an overarching crises prevention mechanism, which is able to deliver in crises. Nuclear risk reduction measures could include setting up direct signalling channels, concluding a non-deployment agreement and an agreement not to attempt pre-emption, establishing nuclear risk reduction centres, and strengthening command and control structures so that they remain intact under crisis situations.

He believes that as things stand, an evaluation of stability in the Indo-Pak nuclear regime presents a mixed picture. While the nuclear regime is stable during periods of calm, it becomes unstable in crisis situations. Past experiences show that even crises that do not escalate end up inducing instability into the strategic equation. The conditions of survivability, lack of pre-emption and security of the arsenal seem to be satisfied. The most important instability-inducing factor is the lack of direct communication channels between the two countries, which have caused nuclear signalling to be misinterpreted frequently in previous crises. To the contrary, the often-emphasised problem of command and control is futuristic, as it will only come into play were Pakistan and India to deploy their nuclear forces.

Ejaz Haider also takes a realist position like Yusuf and believes that neither state is prepared to either cap or roll back their capabilities. Haider also believes that the possession of nuclear weapons has weaned India and Pakistan, in tandem with other factors, from resolving their issues through military options alone. This creates an incentive on both sides to take measures to reduce the risk associated with the possession of nuclear capability. But Haider does not believe that even that is likely to happen in the near future. He argues that India looks at its capability not just in terms of Pakistan but also China. That adds another factor to the equation which is external to Pakistan but which forces Pakistan into augmenting its nuclear arsenal. Along with this, Pakistan has tried to engage India in conventional force reductions but India has not agreed to that because it has a conventional edge over Pakistan which it wants to retain. Haider is not sure that India is about to negotiate any measure with Pakistan that could diminish its capability vis-à-vis Islamabad. What is seeks instead is a growing asymmetry. This locks Pakistan into a dynamic that is very different from what those who demand disarmament seek. However, because the two sides are also normalising, the atmospherics between them are improving and that by itself helps in reducing risk.

Haider's paper is based on four premises: Having tested their nuclear-weapon potential the two sides would seek not only to maintain their nuclear arsenals but, given a host of inter- and intra-regional factors that are likely to impinge on their security, may move towards acquiring a more sophisticated capability; The increasing asymmetry between the conventional capabilities of India and Pakistan in favour of the former could lead to nuclear instability in the event of an armed conflict. Resultantly, measures to reduce the risk of a nuclear conflict must also address the conventional imbalance; This situation cannot be addressed merely by calls to disarm. It needs an approach that combines the political-strategic reality on the ground with achievable targets; The ongoing dialogue process may provide the only framework in and through which this issue can be addressed, though it must be clear that there are limits to what can be done.

vii) Re-writing South Asian History (and other Social Sciences)

Group Coordinator: Prof. Visalakshi Menon
Group Members: Mr. Ahmad Salim, Prof. Imtiaz Ahmad, Ms. Janaki Nair, Prof. Mushirul Hasan, Mr. Satish Deshpande

Our Research Group on Re-writing South Asian History has six members. While five of the six members have addressed problems and issues in history writing and history textbooks in particular, the sixth member, Satish Deshpande's is a view from sociology. His paper examines the possibilities of a South Asian social science and in this context he draws attention to the surprising lack of interaction between South Asian scholars as South Asians.

Let us look at his observations first, since they provide an overarching perspective. The term 'South Asia' Deshpande explains, carries a self-evident meaning in many contexts. Its most obvious salience is in the sphere of geo-politics and strategic or security studies. Perhaps its earliest avatar was in the context of the post-World War II 'area studies' initiatives emanating from the academic and strategic interests of the United States in the Cold War period. It has long been a familiar term denoting an 'area specialisation' in many disciplines in the Western academy, notably anthropology and political science.

However, none of these meanings requires South Asians to talk to each other. In the academic and intellectual arena, this means that, with the partial exception of fields like strategic studies or international relations, South Asian scholars do not address each other's work, nor do they share a common intellectual space. A Sri Lankan anthropologist and a Pakistani or Bangladeshi or Indian anthropologist have absolutely nothing in common as South Asians. If they meet at all, it is almost invariably in Western institutions or under their aegis. There is hardly anything in South Asia that brings them together -- no common journals, debates, or events; all such things happen elsewhere. There is plenty of social science happening in South Asia, but very little of it addresses the region as such. Isn't such a perspective, which is, at bes,t provincial and, at wors,t chauvinist, completely out of place in a globalised world? This endeavour by the South Asian Free Media Association and the South Asian Policy Analysis will hopefully go a long way in answering these issues.

Coming to the issues of history writing and history textbooks, there are some common concerns that run through the five papers, three of which are from India and one each from Pakistan and Bangladesh. In their different ways, all the experts recognise the paradox while most students tend to regard history as a “useless subject”, it is the content of history textbooks which has seen some of the fiercest contestations in recent years.

The papers have explored the role of the State in history writing, especially in the context of its concern for nation-building. In India, as pointed out by Mushirul Hasan, the first generation of free India's historians was concerned with “not simply the rejection and repudiation of the colonial interpretations but the legitimisation of a secular polity and society.” While Hasan sees nothing wrong with this, Janaki Nair is sharply critical of this “investment in the control of the memory of the nation's past” and the tendency to use history “to build up a sense of exaggerated pride in the nation's achievements…” She sees a link between the State and the left intellectuals in the early 1960s, in the course of which “Questions of history began to be strictly subordinated to the goals of nationalist development and integration, and to secularism.” Visalakshi Menon on the other hand feels that even though history writing and research has come a long way since the early decades after Independence, an emphasis on secular traditions and a keen alertness against communal biases and prejudices is still very much in order. If the State and independent historians share this concern, then it is not to be seen as something unfortunate. Of course, this does not mean that the more recent perspectives of the hitherto marginalised groups should not be incorporated in school history textbooks.

Ahmad Salim points out that in Pakistan, the objective of teaching history, especially since the Bhutto era, is to develop an abiding love for Pakistan and for Islamic culture. The Other is India, the enemy “which is sitting at the fountainhead of our river system” with its Hindus, who are portrayed as backward and superstitious. There is also a glorifying of militarism with chapters in Social Science textbooks emphasising the importance of the armed forces in the defence of Pakistan against the enemy.

Imtiaz Ahmed's paper on Bangladesh, which is largely on madrasa education, calls for a thorough de-governmentalisation of schools “for the reproduction of fresh, bold and creative thinking”. He also feels that there is a need to overcome the majoritarianism which has come to define the core of 'national history' and has in turn alienated the minorities, both religious and linguistic…”

This brings us to the issue of silences and erasures in history. Ahmad Salim cites the findings of Khurshid Hasanain and A.H.Nayyar that textbooks on History and Pakistan Studies rarely mention the cultures of the Indus Valley and completely bypass the entire Buddhist and “Hindu” periods of history. They suddenly jump to the advent of Mohammad bin Qasim and treat it as the beginning of history for all practical purposes. In India there was an attempt in 2001 to delete certain portions from the existing NCERT history textbooks on the grounds that they were hurtful to certain religious communities. In accordance with this, the references in R.S.Sharma's book on Ancient India for Class XI to the people of ancient India eating beef and the inequities of the varna system were sought to be expunged. Any reference to the Jats as plunderers was also to be avoided. Here it is pertinent to cite from Mushirul Hasan's paper: “Those unwilling to confront the past will be unable to confront the present and unfit to face the future.”

When we attempt a common history of South Asia, the question of perspective is major. Will our positioning in different South Asian countries, some of which are not well disposed towards each other, affect the emergence of a common perspective? To take one example: while the people of Pakistan take pride in their country and would naturally view the creation of Pakistan as the culmination of a long and legitimate struggle, for Indians it is very difficult to understand, leave alone share, that perspective. From the Indian point of view, the creation of Pakistan was an unfortunate event and continues to remain so. A similar problem would pose itself in Pakistan vis-a-vis the creation of Bangladesh. Can this problem be solved by avoiding anything which smacks of narrow “national pride”?

Another common concern is with the way in which history is taught in schools. There is no attempt to develop critical faculties in students since the whole emphasis is simply on memorizing certain facts. Janaki Nair asks : “how has the textbook become the sole or the most important focus of concerns about the teaching of history in the school classroom? What are the consequences of this 'textbook culture' for teachers and students of history?” The increasing reliance on the textbook as the sole provider of knowledge and the active discouragement of any other related reading material has been noted by more than one expert. Ahmad Salim points out that the State encourages teachers to adopt an authoritarian attitude “required for establishing the finality of their word and the words in the textbooks.”

And yet teachers, if they so desire, can play an important role in subverting the government's agenda as Janaki Nair points out, “students rarely remember their textbooks and…the love of any subject usually comes through an inspiring and motivated teacher.” She feels that, in the preparation of the curriculum framework and the syllabus as well as the textbooks, there is a need to involve schoolteachers on a large scale. At present they are being marginalised in the whole process.

Ahmad Salim expresses his unhappiness with the scenario in which “historical interpretations are predetermined, unassailable and concretised.” At what stage should a child be told that there is no one single interpretation in history that there can be several ways of looking at an event or a period? Mushirul Hasan suggests that “History for young children must be simplified and this means that as they grow up, not only must their history be retaught and relearned, but also unlearned.” Janaki Nair is of the view that that the textbooks must become meaningful reflections of, and an introduction to, the kinds of debates and discussions about history that are current in our society.

Imtiaz Ahmed has also drawn attention to the impact of the diaspora on education, especially on religious education. “The post-national Bangladeshi diaspora, particularly in the Middle East, could not help but be attracted to a puritan version of Islam and in turn help promote the Wahabisation of Bangladesh.” This is a subject which could be explored at length in the context of the other South Asian countries as well, given the fact that each of them has a substantial diaspora which is increasingly seeking to make an intervention in their respective home countries.

Most of the papers show a concern about history becoming a tool in the hands of those who want to spread communal hatred or chauvinism of one kind or the other. How is this to be countered? Mushirul Hasan stresses the importance of the need for the professional historian to “live up to the ideals of intellectual honesty and not be controlled or manipulated by various agencies.” Ahmad Salim feels strongly that a joint secular minded commission, consisting of representatives from all the south Asian countries, should be set up to review and revise the existing history and social sciences textbooks. Any material promoting communalism, obscurantism, casteism and regional and linguistic chauvinism and that is prejudicial to basic human values and rights, should be eliminated from the textbooks. Janaki Nair is of the view that there is a need now to dwell more upon the pedagogical rather than the ideological aspects in textbook writing. “A genuine love for the discipline must drive the rewriting effort, rather than a programmatic drive to combat prejudice.” The need to incorporate in school textbooks the more recent and exciting explorations in history is recognised by both Janaki Nair and Visalakshi Menon.

Regarding the evolving of a common history of South Asia, there are some suggestions. Satish Deshpande has offered some projects “ which might stand a good chance of bearing fruit in truly regional terms studies in the history and practice of classical music, an intensive social history of subcontinental cricket, the pull of Bollywood cinema, and so on.” Besides these, there could be meaningful studies on the immediate post-independence periods of the South Asian countries, in terms of their trajectories. To what extent is the category of the nation relevant and meaningful in such an exercise can be explored and debated.

The papers of this panel have revealed that each of the South Asian countries can have a very different way of viewing the past but there is a common concern about the misrepresentations and distortions. Besides this, the plight of history as a discipline points to some of the larger problems in education. Almost everywhere there is a growing marginalisation of history and the social sciences. Specifically in the context of India, there is clear pressure to develop those disciplines which are “market oriented” (See Janaki Nair's references to the Mukesh Ambani-Kumaramangalam Birla report) and in certain parts of the country, the teaching of history and the social sciences has even been discontinued. And yet ill-informed historical statements and generalisations are constantly being made and justified. Historians must undertake exercises in popularising history in a meaningful fashion in order to counter this unfortunate tendency. One can end this summary by quoting from Mushirul Hasan: “…knowledge of history can give rise to statesmanship, and lend our daily thoughts a breadth and scope unattainable by those whose view is limited to the present.”