Should India sign the CTBT?

AFTER the successful completion of a series of five nuclear tests

at Pokhran, the Prime Minister, Mr. Atal Behari Vajpayee, claimed
that "India is a nuclear weapon state." In a formal statement
issued at the press conference on May 17, Dr. A.P.J. Abdul Kalam,
Scientific Adviser to the Defence Minister and Dr. R.
Chidambaram, AEC Chairman, said that India possessed both nuclear
weapons and their delivery system.

These tests are the logical conclusion of the process which began
at Pokhran 24 years ago when Indira Gandhi had the first nuclear
explosion done in 1974. The scientific and technological
competence of the Indian scientists and engineers reflect the
vision of Jawaharlal Nehru, who laid the foundation for these
development. This was carefully nursed and developed by the
successive Congress Prime Ministers.

Reacting to the nuclear explosions, the U. S., Japan and a couple

of other countries have declared economic sanctions against
India. They have also demanded that India must not proceed with
manufacturing nuclear weapons and that it should sign
unconditionally the Non-Proliferation Treaty (N-PT) and the
Comprehensive Test Ban Treaty (CTBT) without delay. The G-8
nations in a joint communique adopted at the Birmingham summit on
May 17, asked India and Pakistan not to deploy nuclear weapons.
The British Prime Minister, Mr. Tony Blair, conveyed what he
termed the G-8's " strong exception" to India's nuclear tests and
claimed that he had obtained an assurance from Mr. Vajpayee
during a telephonic conversation that New Delhi would start
negotiations on the CTBT and that the G-8 countries were now
awaiting "delivery on commitments made by Vajpayee to me."

The question is whether India should sign the CTBT and the NPT.
India's refusal to sign the treaties was based on its principled
stand articulated over the years. India's aversion to nuclear
weapons was first expressed by Mahatma Gandhi when atom bombs
were dropped over Hiroshima and Nagasaki in Japan, causing
unprecedented devastation. He said it was the most diabolical use
of science. We were, therefore, appalled that instead of stepping
back from the road to nuclear ruin, the nuclear weapon states
sped faster and faster down it. As they accelerated, India tried
unsuccessfully to apply the brakes.

In 1954, Nehru called for a "standstill" agreement to halt

nuclear tests, to be followed by discontinuance of production and
stockpiling of nuclear weapons. In 1965, India proposed
principles for an NPT. In 1982, it called for a convention to
ban the use of nuclear weapons and for an end to the production
of fissile material for nuclear weapons. In 1988, Rajiv Gandhi
proposed to the U.N. a comprehensive action plan for a world free
of nuclear weapons. However, the nuclear weapon power states did
not heed the advice. Before the signing of the CTBT, the five
nuclear weapon states had conducted 2,047 tests since 1945, the
U.S. accounting for more than half (1,032) followed by Russia
(715), France (210) and the U.K. and China (45 each). China and
France carried out nuclear tests even at the end of the
penultimate stage of negotiations on the CTBT and after the
indefinite extension of the NPT.

In January 1994, the Conference on Disarmament adopted an

unambiguous mandate to conclude the " CTBT which would contribute
effectively to the prevention of proliferation in all its
aspects, to the process of nuclear disarmament and, therefore, to
the enhancing of international peace and security." It reflected
a balance among the different objectives that the delegates
sought to achieve. India's constructive approach in the
negotiations had been to try and ensure this balance so that the
treaty did not become a flawed instrument aimed only at curbing a
horizontal proliferation. For India had visualised the CTBT as
part of a step-by-step process of global nuclear disarmament,
leading to the complete elimination of nuclear weapon with a time-
bound framework. In fact, at the special sessions of the U.N. in
1988, the then Prime Minister, Rajiv Gandhi, placed a concrete
action plan for a universally negotiated treaty based on equality
with the objective of not only preventing proliferation but also
completely eliminating nuclear weapons over a definitive time-
frame.

Based on India's position on the CTBT, concrete Indian textual

proposals or amendments were tabled on June 26, 1996. The
proposals served to link the CTBT to the objective of elimination
of nuclear weapons within an agreed time-frame. As the proposals
were not taken on board, India made a definitive statement that
it could not subscribe to the CTBT in its present form as it was
not conceived of as a measure towards universal disarmament. It
was also not in India's national security interest. India pointed
out the deficiencies of the CTBT in the form it was presented:

It was not aimed at nuclear disarmament. it was not an effective

instrument to create a nuclear weapon-free world; it was not
really comprehensive as it did not arrest the qualitative
development of nuclear weapons. it does not enhance the global
security for which the mandate was received at the Conference on
Disarmament in January 1994; both the NPT and the CTBT were
unequal and flawed and both the treaties were discriminatory and
recognised the concept of "deterrence" in favour of the five
nuclear weapon states.
To enhance global security, a decisive nuclear disarmament in a
time-bound framework was needed. Therefore, India informed the
CD on June 26, 1996 that as the treaty had not lived up to its
mandate, the country would no longer be able to maintain its
offer of CTBT monitoring facilities as part of the international
verification system and requested that references to monitor
facilities located in India be deleted from the draft treaty. On
June 28, in the draft text presented the reference to the
monitoring stations in India was deleted but a new article xiv
was inserted which made the entry-into-force conditional upon
ratification of the treaty by 44 countries including India. This
was unacceptable to India. It opposed the adoption to the draft
treaty by the ad hoc committee and its submission to the CD
plenary.

Subsequently, India also opposed the transmission of the special

report by the CD to the 50th U.N. General Assembly as there was
no consensus on the draft treaty text. However, on the basis of a
resolution moved by Australia, the non-consensus draft treaty
text was adopted in the resumed session of the 50th U.N. General
Assembly on Sept. 10, 1996. India, along with Bhutan and Lybia,
voted against the resolution while Cuba, Tanzania, Lebanon, Syria
and Mauritius abstained. A total of 158 countries voted in favour
of the resolution and the CTBT came into existence and 144
countries have so far signed, including the five nuclear weapon
states.

Against this background, it is to be considered whether India

should sign the CTBT. If India is not recognised as a nuclear
weapon state and does not enjoy an equal status with the five
nuclear weapon power states, then it will have to bear the
obligations and will not have any benefit. The tests carried out
will not lead us further as the upgrading of technology would be
prevented by the international monitoring system. Not only on the
nuclear sector, inquisitive inspections would hamper the normal
industrial and technological developments.

Nowadays most of the sophisticated technologies have a dual use.

Restrictions on export of these dual-use technologies imposed by
the industrialised countries are already standing in the way of
technological upgradation of the developing countries.
Strengthened by the monitoring and inspection under the CTBT, the
curbs on use of imported technologies would increase. Therefore,
if India agrees to sign the CTBT unconditionally without
obtaining adequate safeguards for its future plan, it would not
be able to consolidate its gains obtained through the tests.
This is a crucial issue on which a national debate should take
place. As the Government will have to respond to the adverse
impact of economic sanctions, it should initiate a dialogue with
all the major political parties and others on the strategies to
be adopted as they resume negotiations on the CTBT and the NPT.

The Real Reasons Behind India’s Reluctance to Liberalize Petroleum Prices

In just four years the Indian government has had three high-level committees recommend how petroleum
product prices should be determined. All three have shared the same general conclusions: the government
should reform fuel-price subsidies and use other, more effective policies to improve the welfare of the
poor. But the reality behind India's reluctance to liberalize prices is not a lack of good policy advice. It is
that dealers and wholesalers can make large amounts of money out of the subsidies, and, one way or
another, some of this ultimately ends up supporting politicians.
The first committee was commissioned in 2006, as international crude oil prices were climbing, and oil
companies were losing money because of the price controls. The government asked the chair, Dr.
Chakravarthi Rangarajan, former Chairman of the Economic Advisory Council to the Prime Minister, to
look at the pricing and taxation of petroleum product prices, with a view to rationalizing them. The
committee concluded in no uncertain terms that the government should allow oil companies to set prices
based on trade parity – in other words, at international prices – and there should be no further interference
with the market. The committee also warned that if the government failed to liberalize prices, oil-
marketing companies would become non-viable, unable to recover costs and with mounting losses. This
is of course something that has now taken place.
In India, the government subsidizes petroleum products by requiring the companies who sell them –
referred to as ‘oil-marketing companies' – to do so at a fixed price. If the companies are private, they
receive no compensation and must absorb any losses. If they are government-owned, they are given
government bonds in return: financial instruments that guarantee a fixed payment at a future time period,
and can be immediately traded for their future value on financial markets. Giving out government bonds
is essentially the same as printing new money. Government-owned oil-marketing companies are also
compensated with some of the profits earned by government-owned upstream oil companies. Even state
oil companies, however, lose large amounts of potential revenue and the entire sector blames the
arrangement for continued under-investment and financial difficulties. Between fiscal years 2004–2009,
the subsidies resulted in under-recoveries of US$ 67 billion. It is difficult to estimate the total government
expenditure because the creation of bonds is not recorded as spending in the national budget.
In 2008, as crude oil prices continued to increase, and the financial situation of oil companies worsened, a
second high-level committee was organized under the chairmanship of Shri B. K. Chaturvedi, a former
member of the Planning Commission, the government body that draws up India's Five Year economic
plans. Unlike the Rangarajan committee's report, the Chaturvedi report did not recommend the
liberalization of prices in direct and unambiguous terms, but its recommendation that product prices be
based on "export parity", as opposed to trade parity, amounted to the same thing. They suggested very
strongly that there should be no subsidies on kerosene and liquified petroleum gas (LPG), and that the
poor could be more effectively helped through a smart card or coupon system. In December 2008,
dramatically lower oil prices offered an ideal opportunity for reform, but the government did not act on
these recommendations because of populist political pressure from opposition parties and some allies.
The window of opportunity soon closed: prices climbed to over US$ 70 per barrel, once again affecting
the bottom lines of the oil-marketing companies.
In 2009, the government instituted the formation of a third committee, this time headed by Dr. Parikh,
another former Planning Commission member, who in his Integrated Energy Report of 2006 had already
recommended the liberalization of petroleum product prices and the distribution of subsidized kerosene
through a smart-card system. It was not a surprise that the committee's report eventually recommended
market-based pricing (without specifying trade or export parity) for petrol and diesel. It also
recommended the gradual removal of subsidies on kerosene and LPG, while suggesting an immediate
increase of US$ 0.13 per liter in the case of publically distributed kerosene and US$ 2.20 per cylinder in
the case of LPG.
Most importantly, the Parikh committee report discredited the reason most commonly given for the
control of petroleum product prices: fear of increased inflation and price volatility that would negatively
affect the poor. In the view of the committee, as petrol is largely an item of final consumption in India,
price increases would not be expected to have much impact on inflation, and as it is only consumed by the
poor in small amounts, liberalization would not be expected to significantly affect them. A similar
conclusion was arrived at in the case of diesel fuel.
While some of the leaders of the Congress party in the Indian government, especially finance and
petroleum ministers, are currently inclined to implement the Parikh committee's recommendations, their
allies in the United Progressive Alliance (UPA) – the coalition of political parties heading the government
– have been slow to show their support. Even in the Congress party, there is unlikely to be much backing.
The same old arguments are given: price liberalization can give rise to inflation, and the poor will be
affected.
The real reason for their reluctance is that the rationalization of petroleum product prices will reduce
opportunities to collect economic rents. I have conducted analysis into the diversion of subsidized
products, like the adulteration of reduced-price kerosene in petrol and diesel, or the redirection of
residential LPG to commercial and automotive sectors, as well as the misuse of subsidies intended for the
poor, which concludes that about US$ 48 billion of ‘black money' has been generated between 2004–
2009. Unfortunately, while all three government-appointed reports have discussed that this diversion of
products is taking place, none have even attempted to analyze the impact of such colossal amounts of
money on India's governance or energy security.
Reform of India's petroleum subsidies would affect the dealers and wholesalers involved in the
distribution of these sensitive products, and it is a well known and established fact that most of these
dealers are either political leaders or among those close to them. Rationalizing prices in one stroke would
eliminate the opportunity to earn as much as US$ 8–10 billion per year. Which political parties would like
to lose such an opportunity? It is this factor which has prevented any previous efforts to implement well-
argued recommendations from high-level committees. The Parikh committee will see the same fate as
those that have come before. Adam Smith's invisible hand of self interest is indeed at work, but if left to
its own devices I doubt it will promote the common good!