ABORTED SATYAM DEAL WAS TO PUT MAYTAS ON TRACK?

By M H Ahssan & Ayaan Khan

Satyam’s deal to take over Maytas may have been stymied, but has left analysts, stock holders and laymen aghast. Why was Satyam insistent on sharing its goodies with Maytas ? Moreover how were the promoters with merely 8 per cent of Satyam’s equity able to drive the “independent” board of directors? Or is the board not really “independent”? HNN examines.

Even as Satyam's deal to buy Maytas had to be hastily annulled in the wee hours of Wednesday morning as the company lost 52 per cent on its ADR listed on the New York Stock Exchange (NYSE), a credibility crisis has begun to grip India's fourth largest IT company. "How can we trust the management of this company and its board of directors after it tried to enter into a deal that prime facie would benefit only the promoters who just own 8 per cent of Satyam? We have to examine whether the management needs to be changed," cried analysts in a reflection of the deep anguish caused by the now stymied move.

"We have decided not to move ahead with the acquisition in deference to the investment community's views," said Satyam in an SMS sent out at 3.45 am to the media on Wednesday, clearly shaken by the reaction on the US bourse of its move announced barely 10 hours ago.

But this was clearly not enough to save the company: Satyam's stock tanked on the Indian bourses by 30 per cent, even after the company announced its decision to go back on the deal. "The deal was seen as Satyam buying into companies owned by its family members. Cash from a company where the Rajus own 8 per cent was being transferred to a company where they hold more than 35 per cent. This is what investors are resenting. It has become a corporate governance question. Whether the company can be trusted in future to take a proper decision is the moot point," pointed out another analyst. Satyam's scrip closed at Rs 158.05 which is a 52 week low.

"Nearly 58 per cent of Satyam is owned by FIIs and they had no inkling that such a deal was in the offing. There were questions about the future of Satyam after acquiring these companies when it doesn't have any experience in these businesses. It makes more sense to deploy your funds in related businesses or pay your investors," said Sourav Mahajan, analyst with Karvy.

Moreover, what irked investors was as to how Satyam decided to pay Rs 6,500 crore ($1.3 billion), just for Maytas Properties' assets, a land bank of 6,800 acres valued at almost Rs 1 crore per acre. "It is not easy to value real estate in this falling market. So there are questions on the valuation of the acquisition," said Monotosh Sinha, executive director of Centrum Capital.

Later in the day as the company started a firefighting exercise, Satyam's chief financial officer (CFO), Srinivasa Vadlamani told HNN: "We never anticipated this reaction. We underestimated it. We thought we could manage it." He also indicated that the deal had been on the table for the last few months claiming that for starters many other companies were looked at for being acquired. But the choice fell on Maytas Properties because it was zero debt unlike other companies that were in the consideration zone.

"As for Maytas, it had cash on its books. So, it was a judgment call and sometimes some judgments do not turn out to be good," Ram Mynampati, president of Satyam and a board member tried to reason.

Satyam’s move to acquire Maytas has now been stymied thanks to shareholder activism but has put the spotlight on the board of directors of the $2 billion plus company. The board had approved the deal “unanimously” against which the shareholders virtually revolted and Ramalinga Raju had touted this clearance as the basis for going ahead with the acquisition plan.

According to HNN investigations, 7 of the 9 members of Satyam’s board were physically present at the meeting, while two others were on conference call. All the independent directors said yes to the deal and only two family directors abstained because they were “ interested parties.” It is understood that the company’s board had been deliberating on this issue for the last three months. Interestingly members of the company’s audit committee were also present at the latest board meeting.

India’s fourth largest IT company’s board is star studded. Besides Ramalinga Raju, his brother and co founder Rama Raju, the board has the father of Pentium Vinod Dham, former union cabinet secretary T R Prasad, Dean of Indian School of Business (ISB) Rammohan Rao and former director of IIT Delhi U S Raju among others as members. Krishna Palepu who teaches at Harvard Business School and retired professor in many US universities Mangalam Srinivasan along with full time excutive Ram Mynampati also sit on the board.

“Forget experts, even laymen like me realise that there was something not correct with the deal. How is it that the directors did not question the deal? Do they sit on the board just to adorn the company ? “ asked an angry and dismayed corporate executive K Suresh.

“Independent directors cannot wash their hands off. It is their the duty to protect the interest of shareholders and not just that of the promoters. In this case the promoters hold less than 8 per cent of Satyam, so they should have scrutinised the proposed deal to see whether it was in the interest of other shareholders,” said Amitabha Guha, just retired deputy managing director of the State Bank of India.

“Well the case of Satyam demonstrates what corporate governance is all about in India. Company promoters want yes men and this so called independent directors agree to look the other way doing everything at the bidding of the promoters. I fail to understand how Ramalinga Raju with just 8 per cent shares was able to drive the independent board,” asked Monotosh Sinha executive director of Centrum Capital Ltd.

“It is strange that the independent board cleared such a deal. It is more strange that the deal was annulled in the wee -hours of the morning. Did the board meet again. Will Satyam tell us ?” asked Nandu Gupta, managing director of Insec Shre and Stockbroking Company.

Secretary general of Federation of Indian Chambers of Commerce and Industry (FICCI) Amit Mitra refusing to be drawn into a discussion of Satyam’s board, however says independent directors are inducted into company for their specific expertise and not for scrutinising deals. “ Different directors bring in different viewpoints and expertise. For example experts in marketing advise companies on marketing strategies, those are technology specialists bring in their technology expertise. so they can’t be blamed for everything,” Mitra said. But whatever Mitra may say the independent directors of Satyam have egg on their face. No denying that.

Recent dramatic development of Satyam calling off its $ 1.6 billion bailout bid of Maytas has put a doubt in the heads of major industry leaders keenly observing the NYSE-listed firms’ moves. They wonder if this was done to show stronger collaterals to financial institutions to raise funding for the metro rail project, given the dipping real estate valuations that Maytas Infra could have been banking on to raise money from the market to fund the project.

Senior industry persons point out that Satyam with its credentials of a major IT firm can still hope to raise more money as against an infrastructure firm in these times. Given that metro rail’s viability depends largely on real estate returns, banks could be shying away from lending for the project. “As against a land bank (the firm owns land along the three corridors of the project), a Satyam balance sheet is a stronger collateral, much more secure and more valid,’’ says a senior industry source, adding that once acquisition was in place, Maytas Infra would have been able to raise funding from financial institutions, banking heavily on the Satyam name.

“Given the subprime crisis the US faced, no bank would come forward to financially back the project. Satyam is a software company which is considered one of the finest in the country and I do wonder whether Ramalinga Raju was trying to work out something for the infra business with this deal,’’ ponders a senior official of an infrastructure major. He adds that Maytas would have become an ‘indirect’ Satyam company and posed as one during its interactions in the market for funds.

Industry observers say that the move to acquire Maytas does signal that Maytas Infra was not able to do its financial closure.

“There is a theory floating that the acquisition was perhaps aimed at funding the metro project through this route. But then, the bailout of $ 0.3 billion (for Maytas Infra) is only a fraction of the project’s cost of Rs 12,000 crore and, on the face of it, this logic doesn’t really stand,’’ says the head of a real estate firm. He, however, adds that it is only on a closer look one can realise how exactly Maytas infra would benefit from the Satyam name.

“Even without the acquisition, Maytas Infra may not have much of a standing in the market but for the common knowledge that the ‘parent’ firm is Satyam,’’ says a financial expert. Industry heads point out that metro project could well have been the reason to push the IT major into taking this messy decision.

Metro rail, the three corridor and 71 km project, is estimated to cost Rs 12,000 crore and industry experts speculate that the Maytas Infra led consortium would have to raise at least Rs 10,000 crore as debt from the market including loans from banks and financial institutions. Intriguingly, the government is not spending on the project with Maytas Infra not claiming a single penny under the ‘viability gap funding’. In fact, the consortium, which in a move not seen elsewhere in the country, will be paying the government for building the project. In return, it has got 296 acres of prime land from the government for commercial exploitation.

It made its first payment of Rs 11 crore in September this year at the time of signing the project agreement. It is now scheduled to pay Rs 50 crore in March 2009. In its fourth year, it is supposed to pay Rs 200 crore followed by Rs 100 crore in the 7th, 8th and 9th year of the project. From the project’s 17th to the 35th year, Rs 1,750 crore would be paid to the government per annum.

Indian Netway ‘Jammed’

By M H Ahssan

If there's one speedway where traffic's zipping, it's on the Indian information highway. For one, India has seen a 23% growth in new internet connections for the quarter ended October. But, what is more heartening is the fact that increasingly more consumers are now using high speed connections to plug into the global network, instead of the painfully slow, and somewhat anachronistic, dial-up system.

This last bit of news will surely gladden the hearts of content suppliers, gaming companies and, of course, those who are jostling for a piece of the lucrative ecommerce cake.

Internet connectivity has been growing apace in India for some time now. In the quarter ended October, the trend continued with research agencies observing 2.6 million new IP addresses connecting to the global network, compared to 2.1 million in the quarter ended June. This is a growth of 23%. IP address, or internet protocol address, is the unique number given to each computer when it plugs into the global internet family.

According to some estimates, India has more than 41 million internet users, making it the eighth largest internet population in the world. What's encouraging is that this number is growing every quarter. With only 4% of the country's population plugged into the net family, the headroom for growth is also enormous. But the one indicator that's blowing every one's minds is the gradual migration to high speed connectivity from the earlier dial-up situation. Currently, 74% of all internet connections in India have speeds of over 256 kbps. In fact, the number of connections with speeds of 2mbps and above is also growing fast-- from 4.6% of all connections in the second quarter to 5% in the third quarter.

China, incidentally, has only 4.3% of all connections with speeds above 2mbps. This, when combined with the growing internet penetration, is a significant indicator since it shows how high speed networks have become affordable over the

India ranks a lowly 153 in IP addresses
The growing number of consumers using highspeed internet connection also shows how eager the Indian internet audience is to engage in e-commerce and all the other amenities that high-speed connections offer.

The high-speed connections have also been made possible by the increasingly complex, and growing, grid of submarine, fibre-optic networks that now connect India with the rest of the world. For example, a consortium of 16 telecom companies is planning to build a 15,000-km submarine cable system that will link India with Europe through the Middle East. The project is expected to cost upwards of $700 million and add 3.84 tbps of capacity. Interestingly, stateowned Bharat Sanchar Nigam Ltd has plans to offer high speed internet access to 25,000 villages by the end of March 2009.

According to Sanjay Singh, managing director at Akamai Technologies, which provides a quarterly state-of-the-internet report: “In Q3, we saw a 23% growth in terms of new IPs from India. This increase may be attributed to more people turning to the world wide web for news and video content related to the Beijing Olympic Games, which took place in August. We also noted a gradual improvement in terms of IP per capita which increased to 2.3 unique IPs per 1,000 people, and believe India is poised for significant growth in internet adoption.’’

However, India ranks a low 153 in terms of number of IP addresses per capita, with 2.3 unique IPs per thousand people. In comparison, China had 30 unique IPs per thousand people and United States had 360 unique IPs per thousand people, while being ranked at No 94 and No 6 respectively

Verisign—which manages .com, .net and .tv domain names—has also come out with a domain name report that mentions a 26% increase in domain registrations in Q1 2008 over the same quarter of 2007. Domain registrations have grown by 46% in Q1 of 2008. “At the end of Q1 2008, there were 1.2 million domain name registrations in India,’’ said Verisign’s Shantha K. “This represents a 46% growth over the previous year and a 12% growth over the previous quarter. Of these registrations, approximately 6.85 lakh are .com and .net domain name registrations and 4.10 are .in domain name registrations,’’ he added.

GLOBAL ECONOMIC CRISIS - Patterns From The Past

By Sonal Rao

The current crisis has some striking similarities with the fallout in India of the Great Depression of 1929-1933. Indian farmers were pushed deep into debt, and the overall economy suffered.

The global economic crisis has been with us for 3 months now. This period has seen the rapid withdrawal of foreign investment from the stock market and the drying up of foreign direct lending to and investment in Indian companies, leading to a general credit crisis. There has also been other fallout, such as exposure of the shaky base of our real estate industry. But all this is well known.

The 'captains of industry' - the heads of large companies, banks and industrial groups - have been vocal in pointing out what the government must do to help their companies remain profitable. The mainstream media has devoted itself to espousing their cause. And the government has more or less followed the line, with policy measures to assure credit availability, lower the cost of credit and provide concessions by dabbling with excise and customs duties. All of this is well known too.

There is, however, another side to the crisis that has not received much attention, particularly in the electronic media. Exports have been steeply declining from September onwards. Exports during October 2008 were 12 per cent lower than a year ago, witnessing a decline for the first time in 5 years, due to the sharp economic slowdown in the west. A significant part of these exports are of agricultural commodities and products of labour intensive sectors - textiles, garments, handicrafts, leather goods, gems and jewellery. These falling exports affect a large number of producers.

Falling demand for traditional exports
The textile and clothing industry employs 35 million workers, second only to agriculture in terms of employment. Over 50 per cent of textile products manufactured in the country are exported. The Confederation of Indian Textile Industries reports that the decline in exports has already resulted in 7 lakh workers losing jobs, and 5 lakh more would be retrenched by end of March 2009. Currently, it is projected that exports of garments during this financial year will be 10 per cent lower than the last year.

The Gems and Jewellery Export Promotion Council reports that the total gem and jewellery exports were 16 per cent lower in October compared to the same month a year earlier. Handicraft exports have also been hit, resulting in the loss of over 5 lakh jobs. Initial estimates show that exports declined by over 30 per cent in the period April-October 2008 compared to same months last year.

These are just a few examples to illustrate the depth of the crisis. It must be remembered that these are still the early days. If the recession in the developed countries turns out to be long drawn out, as is increasingly being feared, the job losses in India will multiply. The industry associations have appealed to the government for support by making credit available on easy terms, by sale of raw materials at lower prices, by introducing favourable excise and customs duties, etc. Additionally, they have cut down production and retrenched workers.

Falling agricultural commodity prices
The crisis is not confined to industry. Agricultural exports (which formed about 12 per cent of the total exports in 2007) have been badly hit by rapidly falling prices and depressed international demand. Key agricultural commodities exported from India include rice, cotton, oil meals, sugar, spices, tea and coffee. India is also the third largest producer of cotton in the world, and exports of this too are predicted to be much lower than last year. Sluggish demand for apparel in the US and Europe has forced China (a key supplier) to cut down imports of raw cotton from India. Lower demand for cotton has resulted in lower prices in the international market.

Export of oil meal (oil cake) has shown a sudden fall beginning in September 2008 compared to a year earlier. The fall is due to lower demand from China as well as other Asian countries. Oil meal exports for the month of October fell by more than 40 per cent from the same month last year, according to the oil extraction industry association.

International rice prices have fallen by nearly 40 per cent from the April-June period till early November 2008. A further fall is expected with the arrival of the next crop in Asia in the last months of the year. Exports of non-basmati rice from India are currently prohibited.

International coffee prices fell by 17 per cent in the two months September-October 2008. The quantity of coffee exported during the year up to October 2008 is nearly 8 per cent lower than during the same period a year ago. In specific regions, the impact of this could be severe. For instance, Karnataka is the major coffee producing state in India and has 70,000 coffee planters who employ a workforce of 2.6 lakhs. Seventy per cent of the state's coffee produce is exported.

The falling exports of agricultural commodities and their falling prices in the international market have in turn resulted in falling prices in the local market too. In the case of cotton, for example, market prices have declined by around 40 per cent for some varieties in just the one month before 15 October, and are now below the minimum support prices offered by the government.

The depressed international prices also have an effect on prices of commodities that are not being exported. The price of imported RBD Palmolein is 40 per cent lower than in November 2007 and 20 per cent below the price one month back and falling week after week. Palmolein is imported in large quantities and is the common man's edible oil. A fall in its price has a depressing effect on prices of domestically produced edible oils and oilseeds as has been seen in the past. The fall in price of Palmolein is itself linked to the fall in price of crude petroleum.

The full effects of falling prices of agricultural commodities due to lower exports and cheaper imports will hit farmers over a period of time. Farmers, unlike the industrialists, have few options to cope with falling prices - they cannot scale back production at short notice. And farmers, also unlike industrialists, have no voice, with most urban focussed mainstream media ignoring their very existence.

India during the Great Depression
The current crisis has some striking similarities with the fallout in India of the Great Depression of 1929-1933. Then, as now, there was a collapse in the international prices of commodities; India's commodity exports fell sharply and local agricultural commodity prices collapsed. There was a credit crisis that propagated from the banks in the metros and spread to even the most interior villages. Labour-intensive export industries were hit.

The major immediate effect of the Great Depression in India was on commercial agriculture and the producers of cash crops - cotton, sugarcane, tobacco and jute. Between 1929 and 1932, prices of the major cash crops more than halved. But the fall was not limited to cash crops. Prices of food crops - wheat, rice and millets - also fell, trailing falling international prices and in the midst of a credit crisis that engulfed agricultural trade and reached even the remotest village in India. Food prices also fell almost as much as cash crops.

Farmers were caught between the steep fall in income and a cost of production that had not declined. Cost of credit had increased and land revenue rates were maintained. Peasants were driven deeply into debt, lost their land or sold their gold jewellery to money lenders. Huge quantities of gold in the form of jewellery - termed "distress gold" - was exported by the colonial Government from India to Britain between the years 1931-36 to balance the imports. The distress of the farmers was also reflected in the steep lowering of wages in rural areas.

Industry was also hit by this crisis but coped in different ways. The jute industry, for example, not only survived but even managed to remain profitable by resorting to retrenchment (the labour force of 340,000 in 1929 was reduced to 260,000 by 1933-34), reducing wages, improving productivity and taking advantage of lower raw material prices. Exports were lower but still remained profitable.

The colonial government was more interested in safeguarding the interests of the mother country than of the colony. It did not take measures to protect the prices of agricultural produce and the income of farmers. Far from taking up public welfare measures, the government curtailed spending, increasing only the budget for the police. Land revenue and the salt tax, accounting for one-third of the total revenue, were collected without fail in spite of the distress situation of the farmers and wage workers. The collections from the salt tax - a tax that affected even the poorest citizen - were 50 per cent higher in 1932-33 from the 1929-30 levels, a telling commentary on the callousness of the government.

Thus even 80 years ago, India, then an overwhelmingly agricultural economy, got caught up in the storms raging through the world economy. Indian farmers were pushed deep into debt and lost all their savings; agriculture - and hence the overall economy - suffered a major setback.

Many nations took measures during and after the Great Depression to protect their farmers' incomes and establish social security systems for their citizens providing for unemployment benefits, retirement pensions and comprehensive public health care - measures that signalled the arrival of the welfare state. But colonial India missed this bus.

A familiar failure
Much has changed in India in the four generations since the Great Depression. However, patterns from that past are still clearly recognizable in today's crisis. Agriculture, still supporting over 600 million Indians and already in a delicate state, is likely to be severely impacted by falling commodity prices unless timely action is taken. Unemployment is bound to go up sharply as exports, accounting for over 20 per cent of the GDP, are hit by a prolonged slump. But the voices of the foot soldiers of India, the cotton farmers of Vidarbha or the garment workers of Tirupur are once again barely to be heard by the government of the land.

Pakistan Groups Banned but not Bowed

By Syed Saleem Shahzad

Pakistan submitted to the will of the international community and cracked down on the Lashkar-e-Taiba (Army of the Pure - LET), already banned as a terror outfit and linked to the Mumbai attacks last month, and the Jamaatut Dawa, last week labeled by the United Nations Security Council as a front for the LET.

One of the more sensational arrests was that of Zakiur Rahman Lakhvi, the LET's operations chief who had been characterized as a villain in dozens of Indian Bollywood movies; his picture was released for the first time ever to the media.

The Pakistani electronic media, though, were unimpressed by the international pressure, and hit back. They showed footage of the massacre of Muslims in the Indian state of Gujarat in 2002; of atrocities committed by Indian forces against Muslims in Indian-administered Kashmir and called the Mumbai attack a reaction from within Indian society.

At the same time, on the 37th anniversary on the fall of Dhaka and the split of Pakistan that led to the creation of Bangladesh in 1971, the media played up Indian intelligence's proxy operations and the attack of the Indian armed forces that resulted in the separation of East Pakistan.

In this perspective, the media were vocal against the crackdown on the LET and the Jamaatut Dawa. They showed footage of the invaluable services rendered by these groups, especially the Jamaatut Dawa, after the devastating earthquake in Pakistan-administered Kashmir in 2005 and the one in Balochistan province in Pakistan in October.

With regards to the Kashmir quake, in which officially 79,000 people died, the media pointed out that United Nations officials and North Atlantic Treaty Organization forces working in the region coordinated with the Jamaatut Dawa and even justified its armed struggle for the "liberation" of Indian-administered Kashmir.

Zaid Zaman Hamid, head of the think-tank Brasstacks, which is considered to be very close to the Pakistani military establishment, told Asia Times Online, "There are two aspects to be understood. The people who favor Jamaatut Dawa are doing so simply in opposition to Indian and United States designs. After America moved a resolution in the [UN] Security Council [to outlaw Jamaatut Dawa] it caused a lot of embarrassment to Pakistan, therefore, there is a psychological reason and a need to counter this Indian game. Even those people, groups and parties which disagree with Jamaatut Dawa are with it only because India and America are against it. This is purely a geopolitical issue."

Zaid also hosts a television show in Pakistan and often appears as a defense analyst in other shows. He is an engineer by training and was a close aid of Northern Alliance Afghan guerrilla leader Ahmad Shah Massoud, who was assassinated in 2001. Zaid has direct connections with various players in the region.

Zaid continued, "Secondly, there is another reason [for the crackdown], and that is the government's intention to control all relief from NGOs [non-governmental organizations]. Now all relief NGOs feel threatened that they could also be targeted like Jamaatut Dawa, so people are voicing their support for the Jamaatut Dawa. Already under American pressure, Muslim charities are under fire all over the world. Forty to 50 Muslim charities have been closed down," said Zaid, who is termed a hawk by Indian newspapers.

“One reason to support Jamaatut Dawa is its clean record, whether or not it is [a front for] Lashkar-e-Taiba or Jamaatut Dawa. It was never part of domestic terrorism nor has it ever been involved in any sectarianism or sectarian violence. The main reason for the action against Jamaatut Dawa is to malign the ISI [Inter-Services Intelligence] because the ISI is said to be behind its formation. Trapping the ISI and the Pakistan army is the main objective and the Jamaatut Dawa is just the bait in the process," said Zaid.

Other prominent Pakistani electronic media celebrities, such as Kamran Khan, Hamid Mir and Mubashir Lucman, have expressed similar ideas in favor of the Jamaatut Dawa and questioned the authorities over who will fill the vacuum in the services it provides in the field of charity with its chain of schools and medical clinics - no other group has similar resources.

This sympathetic viewpoint of the Pakistani intelligentsia represents the subconsciousness of a nation that has slowly evolved after the debacle of 1971. Pakistan's breakup was fueled by Indian intelligence proxy operations under which a separatist Bengali militia was built and trained in Indian West Bengal and then launched in a war of attrition against the Pakistan army, boosted by an Indian invasion.

Pakistan lost half its territory after the Indian intervention and despite Pakistan being a signatory of Western defense pacts, such as the Central Treaty Organization and the Southeast Asia Treaty Organization, the US and other countries did not help Pakistan.

Three main lines of thought emerged in Pakistan's strategic quarters following the 1971 war:

- Winning a conventional war against India, which is several times bigger in size and resources than Pakistan, is impossible.

- Ensure that the country's national strategic interests would be given priority when signing any defense agreements with Western powers.

- The Pakistan army needed to be restructured on nationalist lines and with the promotion of Islamic values to get rid of the colonial era's traditions.

Two major events took place within a few years of the 1971 debacle which helped fine-tune these rudimentary strategies. Islamist chief of army staff General Zia ul-Haq staged a military coup in 1977 and in 1979 the Soviet Union invaded Afghanistan, which gave rise to the Western-sponsored Islamic resistance against the Soviets.

Haq handed over the task of commanding the whole resistance to the ISI and personally selected officials for this task who would be the most professional, ideologically motivated and practicing Muslims. Later, Lieutenant General Hamid Gul and Ameer Sultan, also known as the father of the Taliban, emerged as strategists for the regional Islamic guerrilla struggle.

The US Central Intelligence Agency (CIA) provided the money and resources and the ISI utilized these according to its military doctrine, which rotated around two major principles: The adoption of a forward strategy under which while fighting a guerrilla war in Afghanistan against the Soviet Union, Islamic resistance groups would also be established in the Central Asian republics to fight against communism.

The Pakistanis acknowledged that the 1,000-year Muslim rule in India was only able to last because of its strategic depth in Central Asia; when the Mughal rulers disconnected from this region after the death of the sixth Mughal ruler Aurangzeb in 1707, they lost their writ in the Indian states and eventually British rule was established.

Under these two major principles, with the American money being funneling to aid the Afghan resistance, Pakistan started building its strategic assets in Afghanistan to guarantee its dominance in South Asia.

These assets were non-state actors - the mujahideen. Kashmiris were groomed in Afghan camps and then launched into Kashmir to start an indigenous Kashmiri liberation movement in 1989. The movement was fueled by several big and small Afghan mujahideen groups disengaging from Afghanistan and going to Kashmir.

The best of these was the Lashkar-e-Taiba.

In 1988, Abu Abdur Rahman Sareehi, a Saudi and a deputy of al-Qaeda leader Osama bin Laden, founded an organization in the Afghan Kunar Valley which recruited Afghan youths and Pakistanis in Bajaur Agency to fight the Soviets. Sareehi was the brother-in-law of Zakiur Rahman Lakhvi, now named by the US Treasury and the Security Council as chief of operations for the LET. Seed money for the training camps was provided by Bin Laden.

The organization flourished in the Kunar Valley and in Bajaur. Hundreds of youths from Pakistan belonging to the Salafi school of thought joined the organization, beside hundreds of Afghans.

By 1989, Bin Laden was anxious to set an agenda for global resistance, and then in 1990 Iraq invaded Kuwait. Bin Laden offered Saudi Arabia his volunteers to defend the country, instead of taking American help, sending details of his resources. These clearly outlined Sareehi's setup in the Kunar Valley (before the Taliban, an Islamic Emirates based on Salafi tenets, supported by Kuwait and Saudi Arabia, was founded in the valley). Saudi Arabia did not take the offer seriously and signed a military agreement with the Americans to protect Kuwait and allowed US soldiers to be based in the kingdom.

Bin Laden, already angered by the Americans for their support of Israel, condemned the Saudi rulers and called on the US forces to leave the holy land or the mujahideen would carry out attacks on them. The Saudis were aware of Bin Laden's influence in Saudi Arabia and of his considerable resources so they and the CIA launched a joint operation to counter Bin Laden's network.

Mahmoud Mohammad Ahmed Bahaziq, (described by the US Treasury as the main LET financier in the 1980s and 1990s and now named by the Security Council as a terrorist) was a Saudi intelligence proxy planted in the network.

He built up his influence in the network with Saudi money and eventually established Markaz Dawa wal Irshaad. The name related to a renowned Saudi office for preaching Islam. This organization was then completely hijacked by Saudi intelligence and the CIA and later operated under the name Lashkar-e-Taiba. After the September 11, 2001, attacks on the US, it renamed itself Jamaatut Dawa and clearly distanced itself from al-Qaeda.

The ISI groomed several groups, such as the Harkat-e-Jihad-i-Islami, the Harkatul Mujahideen and the Jaish-e-Muhammad, but none was as near or as dear to the military establishment as the LET. There were several reasons for this.

First was the ethnic connection. Most of the Pakistan army comes from central Punjab, as do LET members. Second, its members were extremely disciplined, patriotic and tough fighters. In some cases, the LET was provided as good a training as the army’s elite commando force. Indeed, the LET was groomed as a paramilitary force to enable Pakistan to launch massive guerrilla operations in the event India tried to engage Pakistan in conventional warfare.

The experiment was successful and Pakistan, with the help of Kashmiri guerrillas, engaged over 800,000 Indian forces in restive Indian Kashmir. The finest contributor was the LET.

After the brief Kargil war of May-July 1999, (when Pakistani troops and insurgents, including those of the LET, were forced to withdraw from peaks on the Indian side of the Line of Control that separates the two Kashmirs), the outfit launched its suicide attacks strategy. Under this, small groups of two to five members of fidayeen (suicide squads) would storm a security camp or base. In another frequently used tactic, groups of LET insurgents, dressed in security forces fatigues, would arrive at remote hill villages, round up Hindu or Sikh civilians and massacre them. These two tactics were designed to achieve maximum publicity and to extract public allegiance, mainly out of fear.

In coordination with groups like the ones associated with revered Pakistani sufi Syed Mubarak Ali Gilani - to whom US reporter Daniel Pearl was desperate to talk and was killed in the process - whose network is deep inside southern India, the LET is the most important, unconventional strategic arm of the Pakistani armed forces which, in the event of war, will play a major role by providing frontline troops. The LET is estimated to have about 10,000 to 15,000 trained fighters.

The Western media reported that after the Mumbai attacks in late November, Indian was on the brink of conducting surgical strikes on militant camps inside Pakistan, but stayed its hand on the advice of Indian strategic institutions which were very cognizant of the reaction that could be expected from the LET and non-state actors trained by Pakistan as a lesson from the fall of Dhaka in 1971. Instead, Delhi was advised to tighten the noose around Pakistan through the United Nations.

The LET, meanwhile, though officially banned, lives on.

Pakistan Groups Banned but not Bowed

By Syed Saleem Shahzad

Pakistan submitted to the will of the international community and cracked down on the Lashkar-e-Taiba (Army of the Pure - LET), already banned as a terror outfit and linked to the Mumbai attacks last month, and the Jamaatut Dawa, last week labeled by the United Nations Security Council as a front for the LET.

One of the more sensational arrests was that of Zakiur Rahman Lakhvi, the LET's operations chief who had been characterized as a villain in dozens of Indian Bollywood movies; his picture was released for the first time ever to the media.

The Pakistani electronic media, though, were unimpressed by the international pressure, and hit back. They showed footage of the massacre of Muslims in the Indian state of Gujarat in 2002; of atrocities committed by Indian forces against Muslims in Indian-administered Kashmir and called the Mumbai attack a reaction from within Indian society.

At the same time, on the 37th anniversary on the fall of Dhaka and the split of Pakistan that led to the creation of Bangladesh in 1971, the media played up Indian intelligence's proxy operations and the attack of the Indian armed forces that resulted in the separation of East Pakistan.

In this perspective, the media were vocal against the crackdown on the LET and the Jamaatut Dawa. They showed footage of the invaluable services rendered by these groups, especially the Jamaatut Dawa, after the devastating earthquake in Pakistan-administered Kashmir in 2005 and the one in Balochistan province in Pakistan in October.

With regards to the Kashmir quake, in which officially 79,000 people died, the media pointed out that United Nations officials and North Atlantic Treaty Organization forces working in the region coordinated with the Jamaatut Dawa and even justified its armed struggle for the "liberation" of Indian-administered Kashmir.

Zaid Zaman Hamid, head of the think-tank Brasstacks, which is considered to be very close to the Pakistani military establishment, told Asia Times Online, "There are two aspects to be understood. The people who favor Jamaatut Dawa are doing so simply in opposition to Indian and United States designs. After America moved a resolution in the [UN] Security Council [to outlaw Jamaatut Dawa] it caused a lot of embarrassment to Pakistan, therefore, there is a psychological reason and a need to counter this Indian game. Even those people, groups and parties which disagree with Jamaatut Dawa are with it only because India and America are against it. This is purely a geopolitical issue."

Zaid also hosts a television show in Pakistan and often appears as a defense analyst in other shows. He is an engineer by training and was a close aid of Northern Alliance Afghan guerrilla leader Ahmad Shah Massoud, who was assassinated in 2001. Zaid has direct connections with various players in the region.

Zaid continued, "Secondly, there is another reason [for the crackdown], and that is the government's intention to control all relief from NGOs [non-governmental organizations]. Now all relief NGOs feel threatened that they could also be targeted like Jamaatut Dawa, so people are voicing their support for the Jamaatut Dawa. Already under American pressure, Muslim charities are under fire all over the world. Forty to 50 Muslim charities have been closed down," said Zaid, who is termed a hawk by Indian newspapers.

“One reason to support Jamaatut Dawa is its clean record, whether or not it is [a front for] Lashkar-e-Taiba or Jamaatut Dawa. It was never part of domestic terrorism nor has it ever been involved in any sectarianism or sectarian violence. The main reason for the action against Jamaatut Dawa is to malign the ISI [Inter-Services Intelligence] because the ISI is said to be behind its formation. Trapping the ISI and the Pakistan army is the main objective and the Jamaatut Dawa is just the bait in the process," said Zaid.

Other prominent Pakistani electronic media celebrities, such as Kamran Khan, Hamid Mir and Mubashir Lucman, have expressed similar ideas in favor of the Jamaatut Dawa and questioned the authorities over who will fill the vacuum in the services it provides in the field of charity with its chain of schools and medical clinics - no other group has similar resources.

This sympathetic viewpoint of the Pakistani intelligentsia represents the subconsciousness of a nation that has slowly evolved after the debacle of 1971. Pakistan's breakup was fueled by Indian intelligence proxy operations under which a separatist Bengali militia was built and trained in Indian West Bengal and then launched in a war of attrition against the Pakistan army, boosted by an Indian invasion.

Pakistan lost half its territory after the Indian intervention and despite Pakistan being a signatory of Western defense pacts, such as the Central Treaty Organization and the Southeast Asia Treaty Organization, the US and other countries did not help Pakistan.

Three main lines of thought emerged in Pakistan's strategic quarters following the 1971 war:

- Winning a conventional war against India, which is several times bigger in size and resources than Pakistan, is impossible.

- Ensure that the country's national strategic interests would be given priority when signing any defense agreements with Western powers.

- The Pakistan army needed to be restructured on nationalist lines and with the promotion of Islamic values to get rid of the colonial era's traditions.

Two major events took place within a few years of the 1971 debacle which helped fine-tune these rudimentary strategies. Islamist chief of army staff General Zia ul-Haq staged a military coup in 1977 and in 1979 the Soviet Union invaded Afghanistan, which gave rise to the Western-sponsored Islamic resistance against the Soviets.

Haq handed over the task of commanding the whole resistance to the ISI and personally selected officials for this task who would be the most professional, ideologically motivated and practicing Muslims. Later, Lieutenant General Hamid Gul and Ameer Sultan, also known as the father of the Taliban, emerged as strategists for the regional Islamic guerrilla struggle.

The US Central Intelligence Agency (CIA) provided the money and resources and the ISI utilized these according to its military doctrine, which rotated around two major principles: The adoption of a forward strategy under which while fighting a guerrilla war in Afghanistan against the Soviet Union, Islamic resistance groups would also be established in the Central Asian republics to fight against communism.

The Pakistanis acknowledged that the 1,000-year Muslim rule in India was only able to last because of its strategic depth in Central Asia; when the Mughal rulers disconnected from this region after the death of the sixth Mughal ruler Aurangzeb in 1707, they lost their writ in the Indian states and eventually British rule was established.

Under these two major principles, with the American money being funneling to aid the Afghan resistance, Pakistan started building its strategic assets in Afghanistan to guarantee its dominance in South Asia.

These assets were non-state actors - the mujahideen. Kashmiris were groomed in Afghan camps and then launched into Kashmir to start an indigenous Kashmiri liberation movement in 1989. The movement was fueled by several big and small Afghan mujahideen groups disengaging from Afghanistan and going to Kashmir.

The best of these was the Lashkar-e-Taiba.

In 1988, Abu Abdur Rahman Sareehi, a Saudi and a deputy of al-Qaeda leader Osama bin Laden, founded an organization in the Afghan Kunar Valley which recruited Afghan youths and Pakistanis in Bajaur Agency to fight the Soviets. Sareehi was the brother-in-law of Zakiur Rahman Lakhvi, now named by the US Treasury and the Security Council as chief of operations for the LET. Seed money for the training camps was provided by Bin Laden.

The organization flourished in the Kunar Valley and in Bajaur. Hundreds of youths from Pakistan belonging to the Salafi school of thought joined the organization, beside hundreds of Afghans.

By 1989, Bin Laden was anxious to set an agenda for global resistance, and then in 1990 Iraq invaded Kuwait. Bin Laden offered Saudi Arabia his volunteers to defend the country, instead of taking American help, sending details of his resources. These clearly outlined Sareehi's setup in the Kunar Valley (before the Taliban, an Islamic Emirates based on Salafi tenets, supported by Kuwait and Saudi Arabia, was founded in the valley). Saudi Arabia did not take the offer seriously and signed a military agreement with the Americans to protect Kuwait and allowed US soldiers to be based in the kingdom.

Bin Laden, already angered by the Americans for their support of Israel, condemned the Saudi rulers and called on the US forces to leave the holy land or the mujahideen would carry out attacks on them. The Saudis were aware of Bin Laden's influence in Saudi Arabia and of his considerable resources so they and the CIA launched a joint operation to counter Bin Laden's network.

Mahmoud Mohammad Ahmed Bahaziq, (described by the US Treasury as the main LET financier in the 1980s and 1990s and now named by the Security Council as a terrorist) was a Saudi intelligence proxy planted in the network.

He built up his influence in the network with Saudi money and eventually established Markaz Dawa wal Irshaad. The name related to a renowned Saudi office for preaching Islam. This organization was then completely hijacked by Saudi intelligence and the CIA and later operated under the name Lashkar-e-Taiba. After the September 11, 2001, attacks on the US, it renamed itself Jamaatut Dawa and clearly distanced itself from al-Qaeda.

The ISI groomed several groups, such as the Harkat-e-Jihad-i-Islami, the Harkatul Mujahideen and the Jaish-e-Muhammad, but none was as near or as dear to the military establishment as the LET. There were several reasons for this.

First was the ethnic connection. Most of the Pakistan army comes from central Punjab, as do LET members. Second, its members were extremely disciplined, patriotic and tough fighters. In some cases, the LET was provided as good a training as the army’s elite commando force. Indeed, the LET was groomed as a paramilitary force to enable Pakistan to launch massive guerrilla operations in the event India tried to engage Pakistan in conventional warfare.

The experiment was successful and Pakistan, with the help of Kashmiri guerrillas, engaged over 800,000 Indian forces in restive Indian Kashmir. The finest contributor was the LET.

After the brief Kargil war of May-July 1999, (when Pakistani troops and insurgents, including those of the LET, were forced to withdraw from peaks on the Indian side of the Line of Control that separates the two Kashmirs), the outfit launched its suicide attacks strategy. Under this, small groups of two to five members of fidayeen (suicide squads) would storm a security camp or base. In another frequently used tactic, groups of LET insurgents, dressed in security forces fatigues, would arrive at remote hill villages, round up Hindu or Sikh civilians and massacre them. These two tactics were designed to achieve maximum publicity and to extract public allegiance, mainly out of fear.

In coordination with groups like the ones associated with revered Pakistani sufi Syed Mubarak Ali Gilani - to whom US reporter Daniel Pearl was desperate to talk and was killed in the process - whose network is deep inside southern India, the LET is the most important, unconventional strategic arm of the Pakistani armed forces which, in the event of war, will play a major role by providing frontline troops. The LET is estimated to have about 10,000 to 15,000 trained fighters.

The Western media reported that after the Mumbai attacks in late November, Indian was on the brink of conducting surgical strikes on militant camps inside Pakistan, but stayed its hand on the advice of Indian strategic institutions which were very cognizant of the reaction that could be expected from the LET and non-state actors trained by Pakistan as a lesson from the fall of Dhaka in 1971. Instead, Delhi was advised to tighten the noose around Pakistan through the United Nations.

The LET, meanwhile, though officially banned, lives on.

India's Rogues' Gallery of Politicians

By M H Ahssan

"In a democracy, people get the government they deserve." American politician Adlai Stevenson's famous words may well have been penned for India - a country where a remarkable rogues' gallery of bandits, racketeers, murderers and assorted criminals crowd the corridors of power. The fact was highlighted yet again during recent assembly elections, when public records filed with the Election Commission revealed some disquieting facts about India's power aspirants.

The records showed that every third MLA (member of the legislative assembly) in the capital, Delhi, has criminal charges pending against them, that every sixth legislator in the central state of Madhya Pradesh has a criminal record, while in the western desert state of Rajasthan it is every ninth.

Undoubtedly next year, with the national election expected in April or May, more horror stories of the criminal-politician nexus will surface, as the link has become inextricable from India's democratic polity. Take a look at past examples. India's most dreaded "Bandit Queen", Phoolan Devi, became a member of parliament in 1996 after a career roaming central India's desolate valleys, allegedly stealing from and killing wealthy upper-caste landowners who according to her "exploited" the poor.

Devi's biggest crime - killing the underdogs' oppressors - gave her tremendous popularity in that region, and she used that groundswell of support to win a ticket to the Indian parliament. There she remained until she was murdered in 2001, by one of the upper-caste Hindus she had fought against.

Why only Devi? There are many examples of rogues masquerading as politicians in India. A decade ago, parliamentarian Shibu Soren was alleged to have sent henchmen to spirit a former aide to a forest, where he was killed and buried, to silence a corruption allegation against his accomplice. But this minor matter didn't get in the way of Soren becoming India's coal minister - during his trial - though he was later forced to resign after his conviction.

According to a 1997 World Bank report, "corruption" is defined as abuse of public power for private gain. In India, politicians think nothing of abusing this power as they think it comes with the territory. Sadhu Yadav, a member of the 14th Lok Sabha (India's lower house of parliament), is another case in point. His sister is a former Bihar chief minister and wife of current Railway Minister Laloo Yadav - Rabri Devi. Yadav has a long list of criminal cases - and arrest warrants - pending against him including those of bribery, forgery, intimidation, assault, rape, cheating and embezzlement. Yadav was forced to surrender to the police after a Supreme Court order in December 2006.

Perhaps one of the most high-profile cases of corruption in politics has been that of former prime minister Narasimha Rao, who was sentenced to three years in prison in 2000 for bribing lawmakers to back him on the crucial confidence vote that saved his government in July 1993. Rao, who held office from 1991 to 1996, became the first Indian prime minister to be found guilty in a criminal case. Buta Singh, who served as his home minister, received the same sentence.

Another high-profile case was that of Mohammad Shahabuddin, a fourth-term member of the Lok Sabha, who was given a life sentence for kidnapping with intent to murder, and faced trial in more than 30 criminal cases including eight of murder, 20 of attempted murder, as well as kidnapping, extortion and arms dealing.

Why does India set the bar so low for its politicians? Perhaps the fault lies with its existing anti-corruption laws. Although the Prevention Of Corruption Act, 1988, brings the offence under the courts' jurisdiction, most politicians are able to get away scot-free due to its weak enforcement. Or the case drags for so many years in court that it fades from public memory.

This has led to a criminalization of politics which has been recognized as the most dangerous facet of corruption in India. This was acknowledged by NN Vohra, the former Union home secretary, in a 1995 report which observed, "A network of mafias is virtually running a parallel government in India, pushing the state apparatus into irrelevance." The report recognized that a cancerous growth of criminal gangs, drug mafias, smuggling gangs and economic lobbies in the country had developed an intensive network of contacts with bureaucrats and politicians.

America, where a huge amount of accountability is demanded from public figures, is a study in contrast. Illinois governor Rod Blagojevich was recently arrested and forced out of office when he was charged with conspiracy and bribery for attempting to sell a Senate seat vacated by president-elect Barack Obama. Blagojevich's predecessor - George Ryan - was also convicted of corruption while two other governors - Dan Walker and Ottto Kerner - have served prison terms for bribery and fraud.

While these cases highlight the omnipresence of corruption in global politics, they also show that an efficacious criminal justice system can succeed in bringing corrupt public officials to book. By contrast, selling parliamentary seats for money, rigging elections, bribing officials, doing underhand deals with cash-lush businessmen, and unashamedly securing seats for relatives are par for the course in India.

According to Pratik Pratibimb, a professor of political history at Jawaharlal Nehru University, "Indian politics stands at a crossroads today with regional and national parties having to search for new frameworks of partnership in and outside coalitions." Due to this, Indian politics has entered a period of unforeseen and multidimensional crises. "The global integration of the Indian economy through structural changes has also unleashed various forces due to which the government set-up has come under unforeseen pressures," said the professor.

Many people feel that these pressures have dramatically altered the Indian political fabric. Ergo, in this inchoate, new brand of politics, anything goes. What matters most to a political party is the candidate's winnability. Everything else seems negotiable. In fact because criminals keep winning elections all the time, the government has been dragging its feet on long-standing demands for a ban on criminal politicians. It was this prevarication which forced the Election Commission to bring in alternative "extra-legal devices" to stop criminals during this election.

Indian law too, only bars a person from running for office once they are indicted by a court, which often happens years, even decades, after an arrest. It's even harder to dislodge someone actually holding office. In India's most populous state, Uttar Pradesh, 92 members of the current 403-member state assembly have police charges lodged against them. One politician, Ramakant Yadav, even won election from jail, while his brother, Umakant Yadav, a member of parliament, was charged with murder.

While the majority of politicians are simply corrupt, part of an endemic culture of graft, many of those charged with bigger crimes have won tickets after defying the law under the garb of "championing" the causes of smaller ethnic minorities and low-caste Hindus in a country divided along caste, religion and wealth lines.

"We'd like criminals to be debarred, but for that to happen would require an act that the government refuses to pass. Every political party has a lot of criminal candidates and every political party has a lot of winning criminal candidates, so they don't want to pass the law," said a party functionary who didn't want to be named.

According to a report prepared by an non-governmental organization, the National Social Watch Coalition, 16.28% of the candidates who stood for election to the last parliament have criminal antecedents. In the age group of 36 to 45 years, 30% of members of parliament have criminal cases pending against them.

When corrupt politicians are confronted with evidence of their wrong doing, their responses are stock. They say the cases are "false", filed by rivals with a vendetta. This specious argument of course does not answer questions about cases that involve abduction, murder, rape and assault.

However, in the wake of the Mumbai blasts, a tidal wave of angst has risen against corrupt politicians. Thousands of angry citizens spilled onto the streets with placards like "We'd rather have a dog visit our homes than a politician" and "India doesn't need politicians. Go home, minister!"

Perhaps some good will come out of this. Perhaps this newfound low threshold of tolerance for the corrupt Indian politician will force political parties to clean up their augean stables. Till then, however, the sinister minister rules.

Madrasa Reforms And Inter-Faith Dialogue

By M H Ahssan

Based in Hyderabad, Maulana Khalid Saifullah Rehmani is one of the leading present-day Indian ulema. Author of some 50 books, mainly on Islamic jurisprudence, he is a senior member of numerous important Islamic organizations, including the All-India Muslim Personal Law Board, the Islamic Fiqh Academy, the Bahrain-based Association of Islamic Banks and the Council for Inter-Sectarian Dialogue, Tehran, Iran. In this interview with HNN he talks about various issues related to madrasa education in India, particularly the question of madrasa reforms.

Q: Could you tell us something about your academic background?
A: I was born in Darbhanga in Bihar in 1957. I received my basic Islamic education at the renowned Jamia Rahmaniya in Munger, after which I went to the Dar ul-Ulum at Deoband for higher Islamic learning. Thereafter, I went to Phulwari Sharif where I completed the ifta course to become a qualified mufti under the well-known Islamic scholar Qazi Mujahidul Islam Qasmi. I was greatly influenced by Qazi Sahib’s approach and thinking. He was among the few enlightened and broadminded Indian ulema of his times, seriously committed to dialogue between the different Islamic sects and also open to adopting the benefits of modern knowledge for expressing and interpreting Islam.

From Phulwari Sharif I came to Hyderabad and taught Quran, Hadith, Islamic Jurisprudence (fiqh) and Quranic commentary (tafsir) at the Dar ul-Ulum Hyderabad and the Dar ul-Ulum Sabil us-Salaam, two leading Deobandi madrasas in the city. This I did for more than twenty years. Then, in 2000 I established the al-Mahad al-Ali al-Islami, a centre for higher Islamic learning in Hyderabad, which I still manage.

Q: What exactly are you trying to do through this centre?
A: The centre was conceived of as a means for promoting certain much-needed reforms in madrasas. As of now, it offers a two year course for senior graduates (fazils) of madrasas, where they study a host of disciplines that they might not ever have had to in their madrasas, such as English, Current Affairs, Comparative Religions and Computer Applications. Students are also made to engage in research work, something that is missing in almost all madrasas. Till now, over a hundred theses have been submitted by our students, many of them seeking to develop Islamically appropriate responses to various modern issues and concerns. The students are also taught the importance of working for communal harmony and how to properly relate to people of other faiths and to explain to them what Islam is actually about.

Q: Almost every madrasa is associated with a particular Islamic sect, and sectarian strife is rife among the ulema. What do you think is the way out?
A: I think the ulema have to realize, as indeed many already do, that these sectarian differences cannot be wished away. Each sect offers its own arguments and proofs for its position. God has given humans the capacity to think differently, and so obviously such differences will always exist. The point is to accept these differences and, despite them, to cooperate with them on common issues. This applies as much to intra-Muslim sectarian relations as it does to relations between Muslims and Hindus. We must learn to respect people of other sects and religions and to work together jointly with them on issues of common concern.

Q: What do you feel about the on-going debates on the question of madrasa reforms?
A: To properly understand the question, one has to keep the basic aim of the madrasas in mind: to produce good, learned, pious and committed Islamic scholars. It is not to produce graduates for the market whose main aim in life is to make money. So, naturally, moral training and Islamic subjects should remain the centre of the madrasa curriculum.

At the same time, we live in this world and so cannot afford to be ignorant of its issues, problems and concerns. This is why I strongly believe that madrasas need to familiarize their students with at least the basics of various forms of modern knowledge, such as English, Computer Applications, Indian History, the Indian Constitution, and natural and social sciences. Madrasas must conceive of ways to incorporate a basic modicum of these disciplines in their curriculum without this being allowed to harm its basic religious core.

Q: And how do you think this should happen? Perhaps through the Madrasa Boards?
A: I am opposed to the government interfering in the madrasas through government-appointed madrasa boards, which exist in some states. But I do admit the need for some sort of mechanism to bring about greater cooperation between the madrasas as well as to facilitate reforms. In this regard, some private madrasa boards, set up by the ulema themselves and totally independent of the government, have come up in some states. For instance, the Tahhafuz-e Madaris Committee in Gujarat and the Wafaq ul-Madaris in Bihar. In 2001 we set up the Andhra Pradesh Dini Madaris Board, of which Maulana Hamiduddin Aqil Husami of the Dar ul-Ulum Hyderabad is the President and I the General-Secretary. Through this board we are trying to bring about some changes in the madrasas in the state.

Q: What exactly are the activities of this Board?
A: The Board has basically two aims. Firstly, to preserve the autonomy of the madrasas. And secondly, to promote reforms and the moral and intellectual environment of madrasas. Around 150 madrasas in Andhra Pradesh are now affiliated with the Board. We organize teachers’ training workshops and also regular meetings where we impress upon the ulema to introduce a basic modicum of modern subjects in the curricula of their madrasas, to properly register themselves and maintain proper accounts and so on.

Q: A major part of the existing curriculum in almost all madrasas consists of the teaching of Islamic jurisprudence (fiqh). Many of these detailed rules and laws were devised centuries ago and may have lost their relevance in today’s context. As someone who has written extensively on modern fiqh issues (jadid fiqhi masail) what do you have to say about reforms in this sphere?
A: I feel madrasas must give much more attention than they presently do to the principles of jurisprudence (usul-e fiqh), because while several minor fiqh details (juzuvi masail) can and do change over time, and hence require new interpretations, these basic principles are unchanging. Knowledge of these principles is essential for engaging in ijtihad or creative reflection with regard to a host of contemporary issues that were obviously unknown to the early Islamic scholars.

In addition to this, our students, as would-be ulema, also need to have a basic knowledge of modern subjects in order to provide adequate and appropriate fiqhi perspectives on them. For instance, we don’t want to make them doctors, but surely for them to engage in ijtihad in modern medical matters they must have at least some knowledge of the human anatomy and physiology. Or, to respond to modern economic developments, they must have a basic understanding of the way modern economies function.

Another way to promote awareness of the need for ijtihad and for reflection on new jurisprudential issues within the madrasas is by promoting cooperation between the ulema of the madrasas and ‘modern’, university-educated intellectuals who are experts in particular fields. Thus, in the conferences of the Islamic Fiqh Academy, with which I am associated, we invite modern experts and professionals to provide their views and share their knowledge with the ulema, and both learn from each other. This is a way for promoting ‘collective ijtihad’ that benefits from the different forms of knowledge that these two classes of scholars possess. A large number of books on new and more contextually-relevant fiqh issues and perspectives have been printed by the Islamic Fiqh Academy as a result of this sort of joint effort.

Q: Madrasas have been given a bad press in recent years, being branded as ‘dens of terrorism’. How do you respond to this charge?
A: I would say that almost all this propaganda about the Indian madrasas at least is completely false, and has not been proved in the courts. But if you look at parts of the world where terrorism is rife, no matter what the religion of its perpetrators, you will notice that very often it is denial of justice to vulnerable and victimized groups, often by the state itself, that breeds terrorism. Obviously, then, terrorism cannot be stamped out without also working to ensure justice to people who are pushed to the wall, who are oppressed by the police and agencies of the state and who do not get any justice from the courts. Of course, I do not at all mean to condone terrorism, even as a reaction to injustice, for the Quran itself says that the enmity of any community should not lead one to swerve from the path of justice. It also says that to kill a single innocent being—and here it does not specify the religion of that person—is such a heinous crime as to be akin to slaying the whole of humankind.

I think the time has come for people of all faiths—Muslims, Hindus, Dalits, Christians, Sikhs and others—who sincerely believe in peace and justice to join hands in a joint struggle against terrorism, which threatens to destroy our beloved country. I am glad that leading Indian ulema have realized the need for this, and are, accordingly, organizing huge public rallies to condemn all forms of terror, including that engaged in by self-styled ‘Islamic’ groups that are misusing and misinterpreting Islam for their sinister purposes.

Muslims in India face numerous challenges, including mounting Islamophobia. My advice is that we should not respond to hatred with counter-hatred, but, rather, with love and concern and through sincere efforts to reach out to people of other faiths.

Loan sops: Has Govt put PSBs to Risk?

By Vijay Marke

Will the governmentbacked housing loan package push PSU banks towards an uncharted territory? Some quick back-of-theenvelope calculations bring out the unprofitable and the dark side of Monday’s government-backed home loan package.

In a situation where housing prices start falling over the next one-two years, and lenders stick to the current rules governing loans to home buyers, these loans could become headache for the banks, the government and borrowers under the new scheme, experts said.

Under the package, PSU banks will give loans of up to Rs 5 lakh at 8.5% per annum and for loans between Rs 5 lakh and Rs 20 lakh at 9.25%. The rates are fixed for five years, meaning it could change, and even go up, at the end of the five-year term. The borrowers are required to pay a 10% margin for the below Rs 5 lakh category and 15% for the higher category. Meaning, for a loan of Rs 20 lakh, the home buyer will have to contribute Rs 3 lakh and the balance will be financed by the bank.

While the government is backing this package to revive the housing sector, it is also talking tough to home builders, saying home prices are beyond realistic levels and real estate developers should cut prices. If the rollout of the package and the cut in home prices take place simultaneously, that could lead to uncomfortable situation for either the banks-government combine or the borrowers.

Consider this: Say an individual buys a home for Rs 20 lakh with a loan from a PSU bank under this package. At 15% margin, the borrower will have to bring in Rs 3 lakh and the bank will finance Rs 17 lakh. The house which the lender buys will be mortgaged to the bank against the loan.

Now suppose home prices in general fall by 20% in the next one year. Then the market value of this home would be Rs 16 lakh, that is down by 20% of the original value of Rs 20 lakh. The buyer has taken a loan of Rs 17 lakh and in the first year of re-payment of the loan, say about Rs 50,000 of the principal amount has been paid to the bank, other than the interest which together form the EMI. At the end of year one, the loan outstanding is Rs 16.50 lakh while the value of assets mortgaged, the house, is Rs 16 lakh. This would lead to a situation of insufficient security, a gap of Rs 50,000.

Under the current lending rules, in case of insufficient security, the bank could ask the borrower to make up for the gap. In this case the home owner would have to arrange for an additional Rs 50,000, even after paying his instalments regularly. The rule is if this money is not paid to the lender, the house could be foreclosed.

Even if the borrower arranges to fill the gap, it could be a severe burden on him, pointed out a mortgage market veteran. And in the event of a foreclosure, if the bank wants to dispose of the property, under normal circumstances would fetch about 20-25% less than the market price. So the bank would also take a hit of another Rs 3.2 lakh to Rs 4 lakh on its books under this scheme.

“This is a completely loss-making deal for PSU banks. With cost of funds over 10% now, PSU banks are venturing into a risky region,’’ said a top official at a private sector bank.