Unpredictable Circulations

FROM 1965 a particular figure, the accumulated revenue deficit (the gap between net revenue profit and operating income) appeared at the end of the annual accounts of the Calcutta Port Trust. Despite its debut in 1965, this number came to dominate policy on the Hooghly only from the 1980s. Its annual return then created a year-long crisis. It had to be responded to by immediate short-term policies aimed to reduce its size during the following year. It became a financial legacy that required no analysis of the reasons for its existence. It was not attributed to specific policy actions or decisions from which different strategies could be learned. Instead, it dispersed a general responsibility throughout the Calcutta Port Trust. Gradually the bureaucracy and its highest body, the Port Trust Board, became a site of struggle over how to reduce this figure.

In this chapter I breach the status of the accumulated revenue deficit as a mathematical fact. I trace its origins in the era of centralized state planning, restoring its complex political history. I then explore the new fetishized agency that it acquired as public deficit was increasingly managed as a technocratic fiscal problem. I show how this shift created an accelerating, volatile rhythm focused on repayment of debt within the Calcutta Port Trust. This replaced an older emphasis on state debt as an endlessly deferred, long-term political obligation. I follow the unplanned alterations to relations with labor, property, nature and technology that developed out of everyday fiscal crisis. Austerity capitalism, as we will see, is characterized by increasingly unpredictable forms of capital circulation and unstable, dangerous livelihoods. It proceeds through the devaluation of labor; decentralized speculative planning; and improvised low-tech investments.

State Debt and Long-Term Political Obligation: Nationalist Capitalism on the Hooghly, 1965–84

The accumulated revenue deficit had its historical origins in ambitious political schemes for the remaking of the Hooghly through technological intervention. In the 1960s and 70s the future of the Calcutta Port Trust rested on three projects laid out in the first four five-year plans. These were top-down, centralized schemes orchestrated and financed by the Ministry of Surface Transport (MOST) and the World Bank. The first of these, the Farakka barrage, was for the benefit of the port, but was not under its control. This was under construction across the Ganges in order to regulate the flow of the river into the Padma and the Bhagirathi River (the tributary that joins the Hooghly to the Ganges). Water levels had been declining in the Hooghly since the 1930s. The plan was that the Farakka barrage would divert 40,000 cubic feet of water per second into the Bhagirathi. This would guarantee flow into the Hooghly, reviving the fortunes of the Calcutta port.

The second project, which was directly under the control of the port, was the refurbishment of the docks in Calcutta. In 1958 and 1962 two World Bank loans were negotiated by the chairman and the government of India to finance this. The total loans were for $29 million and had a long, slow repayment term of twenty years at a low interest rate. This was to be used for the expansion and modernization of the berths at Calcutta docks. It would also pay for new heavy equipment such as cranes, dredgers and pilot vessels. An infrastructure of repairing workshops and mechanical cargo-handling would also be put in place. But the majority of the loan was to set up a hydraulic survey department. This department was seen as particularly crucial, as it would remake the river into a productive artery.

The third large-scale project was the building of new docks downriver from Kolkata on the west bank of the river at Haldia, only 40 kilometers from the sea. In 1958 the port had considered introducing a deep draft anchorage at Diamond Harbour on the eastern side of the river, but the deputy conservator suggested in 1959 that a place on the opposite bank at Haldia be chosen. From this small seed the project for a satellite port to Kolkata at Haldia took on momentum. This was in spite of the fact that in the same year the channel at Haldia had become impassable. It was only reopened through twenty-four-hour dredging. Ignoring this inauspicious beginning, MOST and the port trust pressed on with this location. They were confident that the World Bank loan to support the development of the hydrographic survey department would allow them to overcome these limits to their ambitions.

The expectation of MOST and the Calcutta Port Trust was that that any debts taken on to support these three schemes would be paid off by future productivity. Bureaucrats and politicians were confident that a combination of hydraulic science and long-term investment in national prosperity would have a transforming effect. So when the amounts of loans steadily increased from 1967 onward, the central government was not concerned. Instead they kept on renewing their political commitments to the possibility of future national wealth. When the accounts of 1967–68 revealed a deficit of 3.13 million rupees, resulting from the costs of borrowing to finance Haldia, a central government Port Finances Inquiry committee was convened. This concluded that the government should keep lending over the long term to guarantee future success. As debts mounted, MOST even began to suspend the fiscal responsibilities attached to its loans and subsidized the Calcutta Port Trust. It introduced a complete moratorium on the repayment of government loans for Haldia. This continued into the 1990s, even as costs for Haldia rose. When the accumulated revenue deficit rose to Rs10.56 million by March 1972, the central government also agreed to give a retrospective subsidy of 80 percent of dredging costs in the Haldia area. Confidence in these expenditures continued because all concerned were convinced that hydraulic science and the effects of the Farakka barrage would solve current problems. In 1973 it was estimated that each year 4 million tons of cargo would move through 40-foot-deep drafts in the Hooghly near the new port. In 1976 the board confidently predicted that the full amount of the debts would be paid back to the government within eight years of the opening of Haldia.

Yet these ambitious political plans for prosperity were already looking as if they were unlikely to ever be realized. They had been sacrificed to a greater national good — the building of diplomatic relations with the new state of Bangladesh. All the hydrographic and economic modeling had been based on a particular quantity of water reaching the Hooghly on the commissioning of the Farakka barrage. Yet these amounts never flowed into it. The new Bangladeshi government were very concerned about the diversion of large amounts of water from the Padma into the Hooghly. Negotiations in 1972 ended with the board of the Calcutta port being presented with scientific evidence by the Ministry of Irrigation and Power that only 25,000 cubic meters per second would be necessary to make the Hooghly viable. Promises were made that in a few years the amount of water might rise, but they never reached the full discharge of 40,000 cubic meters per second. Debts between the central ministry and the port trust had been accrued on the expectations of Farakka's miraculous results. Now these would never be achieved because a greater national political good had intervened.

By the financial year 1978–79, when Haldia first came into operation, the debt that the port was now liable for was enormous. As would be typical of each year going forward, the accounts showed that the cargo, port and dock were making an operating net profit in both Haldia and Calcutta, but that total outstanding loans created a deficit of Rs1558.41 thousand. This debt had been built on the expectation of the productivity that would be generated by Haldia and the Farakka barrage. Faith that these would be achieved was sustained by long-term political promises of financing from MOST. It was also built on a representation of time in which the years stretched forward organized along the trajectory of five-year plans that required only political and technical will to be realized. These long-term plans were a commitment to the ever-growing future national economy. State debts created a gift of time — a pause in current processes of accumulation in which prosperity could be generated for the future. Political relationships dominated over the fiscal aspects of state debt. As long as this situation continued, the debt burden of the Calcutta Port Trust would have limited social consequences. However debt policy was about to transform radically.

State Debt and Short-Term Fiscal Obligation: Austerity Capitalism on the Hooghly, 1980–2010

The Origins of Austerity Capitalism

From the 1980s there was a dramatic shift in the practices of state debt at MOST. These followed the changing fiscal policies at the highest level of the Indian government. Public-sector austerity drives were imposed to repay the IMF loan taken in 1980 and to cover the cost of high-interest payments on the commercial loans taken from 1984 to 1990. In this environment MOST consistently reduced its subsidies and delayed payments to the Calcutta Port Trust. They also increasingly treated the port as a source from which to extract repayment revenues. For example, in 1982 MOST added a condition to their 80 percent dredging subsidy and moratorium on Haldia loans. The condition was that the dredging subsidy would be adjusted against the defaulted government debts of the port that were not under moratorium until they were liquidated. In effect this reduced the dredging subsidy to almost zero. In 1984 the ministry raised the dredging subsidy to 90 percent, but only on the condition that the amount owed to the government for dredging for 1980–81 and 1981–82 was recovered from the port. They also threatened that if the port failed to make repayments on loans from the government not covered by the Haldia moratorium, the defaulted amount would be taken out of the subsidy. As a result of these new conditions the dredging subsidy became a mechanism for moving funds centrifugally toward the center. State debt had abruptly become a punitive fiscal relationship.

Through the 1990s the financialization of state debt intensified. The new external debt management unit in the Reserve Bank of India pushed hard to limit public-sector spending and speed up repayments to the center. This was to enable the prepayment of high-interest international loans. State debt thus became a matter of austerity and repayment. In addition it became more short term and subject to the rhythms of domestic financial markets. The automatic monetizing of sovereign debt ended, along with the issuing of long-term treasury bills. This was replaced with short-term loans to the government from the Reserve Bank of India (RBI) under ways and means agreements. These had more aggressive, faster repayment cycles. In addition the newly developed bond market in sovereign debt was inaugurated. This raised the cost of central government borrowing and made it subject to the rhythms of the bond market. The effects of these measures are visible in the increasingly extractive and short-term fiscal policies of MOST. In 1994, MOST converted its old political gifts made for investment in Haldia into monetary debts. The ministry ended the moratorium on government loans made until 1977 for the construction of Haldia. The amount of Rs1.6 billion of the original loan and the interest up to 31 March 1992 of Rs2 billion would have to be repaid in twenty equal annual installments from the financial year 1993–94. To secure the return of these amounts to the center, the ministry agreed to give a 100 percent reimbursement on future expenditures on river dredging. But this move was not made to suspend the fiscal aspects of the central government relationship with the port trust as with previous subsidies. It was designed to contribute to maintaining revenues on the Hooghly, so that these could be used to repay the vast debts it owed to the central government. These moves profoundly altered the national political project on the Hooghly. It was no longer a public resource in which investment would be made to generate future prosperity for citizens. It was a fiscal resource that could be used to repay central government and, ultimately, sovereign debts swiftly. Most strangely of all, in these new measures the debts created by the decisions (and mistakes) of high-level bureaucrats were becoming a source of revenue for another generation of central government officials.

MOST did not stop here in its transformation of national political debts into fiscal ones. It began to transfer its funding responsibilities to other state and commercial agencies. From the mid-1980s it steadily devolved debt relationships at commercial rates through the lower levels of the bureaucracy. The ministry encouraged the Calcutta Port Trust to take loans directly from domestic and international banks. Beginning with the plans for the financing of the sixth five-year plan in 1985, MOST instructed the port trust to take an Rs431 thousand loan from the Bombay Port Trust in order to fund the plan of works in the Calcutta docks. The repayment of this would have no moratorium and would be at commercial rates of interest. By the seventh five-year plan, in 1989, the Calcutta Port Trust was informed by the ministry that the amount of Rs19.05 million needed would be provided in loans of 6.05 million from the government, and the balance would be funded by intercorporate loans from other port trusts and commercial banks. By 1991 the port trust had already borrowed Rs214 million of intercorporate loans to finance these schemes. Public debts were becoming decentralized and transforming into diverse commercial relationships with various institutions acting as financial creditors.

Year after year these policies brought the port finances into crisis. In 2000 the Calcutta Port Trust experienced the most severe financial crisis in its history. A similar pattern was visible right across the public sector as a result of the change in state debt funding policies (Vithal 1996). Calcutta docks would start the financial year with a cash balance of Rs40 million but would require an extra Rs164.81 million to meet establishment costs. Haldia began the year with Rs127.28 million, but all of this would be fully spent by the end of the year, leaving it without any cash balance. Part of the problem was that MOST had reimbursed only just over half of the total expenditure made for dredging maintenance, leaving the port with a shortfall of Rs229.87 million. This annual nonpayment of the full amount of the dredging subsidy continued until 2004, after which access to public records ends. The consequences of the technocratic management of state debt as a fiscal problem are starkly visible in these figures.

This repetitive, cyclical internal fiscal crisis in the Calcutta Port Trust was entirely distinct from the external face of liberalization reported to the press and public. For example, in the influential report of the interministerial group set up by MOST to examine private participation in ports, there was only mention of enterprise and efficiency. These would be achieved through the formation of partnerships with entrepreneurs to develop infrastructure and equipment, provide outsourced labor and develop land resources. Five-year plans, too, made mention only of the prosperous future of public-private partnerships. The reality of the new forms of austerity capitalism were not visible in policy statements.

It is to the characteristics of this austerity capitalism that I turn next. As we will see, it produces insecure livelihoods and unstable forms of capital circulation. It proceeds through the devaluation of labor; decentralized speculative planning; and improvised low-tech investments. It radically alters the governance of labor, property, nature and technology.

Austerity Labor: Devaluing the Working Classes and Impermanent Livelihoods

From the 1980s fiscal debts created a cyclical year-long crisis in the port trust. The question that entirely dominated the weekly board meetings was, How can we reduce our current deficit and head off the accumulation of further debts? A solution emerged early on that was returned to through subsequent decades, the reduction of manpower working on the river and in the docks. This always had two goals, a quick reduction in wage costs and a hollowing out of union activism. It also had a recurrent structure of circular argumentation. This was that the deficit in the port was caused by the politically active and unproductive working classes. It was through a restructuring of the port's relationships to its labor force that the problem of fiscal debt could be solved. In particular the solution was claimed to lie in the reduction of permanent employees and outsourcing of work. Similar efforts were not made to reduce the numbers of bureaucrats in the head office. The middle classes and working-class labor aristocracy of Kolkata began to struggle with each other over access to the state's diminishing resources.