Grand Trunk Road

India recently announced that it will reopen an airbase in Ladakh, the eastern portion of the Jammu and Kashmir state of India, and that it has plans for two more airbases in the same region¹. It is an effort to put some muscle behind its side of the territorial disputes with China that have been heating up for the last year, although the move may upset Pakistan as well.

The other recent hotspot along the Indian-Chinese border is Sikkim², of which China claimed a portion. India has rejected the Chinese claim, and with good reason — Sikkim is a strategically important area, as explained by an interesting report from Radio Free Europe³:

The area itself defends what can be considered the most vulnerable part of India, the narrow corridor that divides Assam from the Indian heartland, at some places less than 30 miles wide. (The corridor runs between Nepal and East Pakistan.)

The defense of Sikkim is the exclusive responsibility of the Indian army, since Sikkim itself has no army of any consequence. The border between Sikkim and India is also vulnerable, since at some sections the terrain can be considered as mild by Himilayan standards. Between Sikkim and the Tibetan valley of Chumbi the passes are easily traversed; the road between Tibet and Sikkim going over the Nathu Pass can be used by vehicles of larger size.

Despite being written in 1965, the report is well worth a read and sounds eerily familiar to today’s situation.

¹ Ladakh base fresh crimp in ties with China. Times of India. June 4, 2008.
² India rejects China’s claim over Sikkim province. Rediff India Abroad. June 4, 2008.
³ Sikkim — A Potential Danger Spot. Radio Free Europe. January 22, 1965.

The Koodankulam nuclear power plant received its first shipment of fuel rods from Russia this weekend. The plant is not yet operational but the first reactor should be complete within the year. When the second reactor is completed (sometime around mid-2009) the plant will produce 2 GW of electricity of India’s nuclear power — a big step towards India’s goal of having 20 GW by 2020. Four more reactors are scheduled to be built at the same location in the coming years.

Another important step will be the completion of the Turamdih mill, which entered trial production recently. The mill, commissioned in 2007, will process raw uranium ore into fuel to eventually be used at several existing reactors that are sitting idle for lack of fuel. Koodankulam, however, will have its fuel supplied by Russia for the lifetime of the reactors.

Subramanian, T. S. Enriched uranium for Koodankulam arrives. The Hindu. May 27, 2008.

Recently, the State Bank of India announced that it was halting loans to farmers for farm equipment such as tractors and combines. Now, Arun Kumar of the Hindustan Times reports¹:

Stung by protests from farmers, politicians and even a section of its own employees, State Bank of India on Wednesday hurriedly withdrew its controversial decision to suspend financing of farm equipment, primarily tractor loans.

“We regret that our circular dated May 16, 2008, concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect,” SBI Chairman OP Bhatt said in a statement.

What misunderstanding was there? According to Anup Banerjee, an official from the SBI, the halt was intended not for small farmers but for large-scale farmers with huge loans who have fallen behind in payments.

Another angle to this situation is the impact of the farmer debt relief plan being pushed by the government. According to Moneycontrol India², the guidelines for the Farmer Debt Waiver Scheme have been passed and will allocate Rs 71,680 crore ($16.8 billion at current exchange rates) to loan forgiveness. Small farmers are expecting to get 100% forgiveness, whereas large farmers (those with more than Rs 50,000 borrowed) will have up to 25% forgiven.

This loan forgiveness program may be at least partly responsible for SBI’s problems to begin with, though. In The Hindu, C. R. L. Narasimhan comments³ on the harm SBI’s backstepping has done to their image as an independent bank. But also, he notes that:

Already there are indications that even farmers who would have repaid their loans are holding back hoping to get a waiver.

This reminds me somewhat of the subprime mortgage crisis in the USA. Even people who could pay their mortgage have chosen to walk away, hoping for some kind of government bailout. What portion of SBI’s 17.8% default rate on farm equipment is due to this sort of behavior is an open question.

¹ Kumar, Arun. SBI backtracks on farm gear loans. Hindustan Times. May 21, 2008.
² Cabinet okays Farmer Debt Waiver Scheme guidelines. Moneycontrol India. May 24, 2008.
³ Narasimhan, C. R. L. Tales behind SBI’s withdrawn circular. The Hindu. May 26, 2008.

Ahmed reports that, for the first time since Pakistan’s November 2003 declaration of ceasefire, its troops have fired at Indian positions in Tangdhar Sector of the Kashmir valley. Indian Prime Minister Manmohan Singh is quoted as finding this to be a worrisome development. Violence is on the increase in the Valley as well as in the plains.

Article: Firing at LoC, India concerned
Author: Rashid Ahmed
Publication: The Hindustan Times