THINK. ACT. CHANGE.

Governance

Surge pricing in railways is Suresh Prabhu's deliberate self-goal

Union railways minister Suresh Prabhu’s latest move of “surge pricing fare system” is a gambit to reduce finance minister Arun Jaitley’s pain, who looks all set to soon adopt country’s messy public transport behemoth. If everything goes by the plan, the 93-year old Rail Budget would cease to exist from the next financial year i.e. FY […]Read More »

Why Vajpayee stands taller than Rao, Manmohan and Modi put together

In India, privatising a public sector company is perhaps a bigger challenge than contesting an electoral battle or even conducting a nuclear test. Don’t see it as an incongruous claim. This may well be a credible reality if one looks at the 25-year-long history of India’s economic liberalisation. In two-and-a-half decades of economic reforms, despite […]Read More »

Modi's war on black money is a let-down, amnesty schemes cheat honest taxpayers

If one pays his or her taxes honestly and does not expect any favours from the government, he or she has every right to show angst over this never-ending business of amnesties to tax swindlers. Prime Minister Narendra Modi repudiated history when he, during his last Mann Ki Baat, reminded people of the September 30 […]Read More »

Special Category for Andhra will remain elusive

In February 2016, Prime Minister Narendra Modi had assured the Andhra Pradesh Chief Minister Chandrababu Naidu that he would consider conferring the special category status to his state. Apart from this privilege, Naidu has been demanding a special package for the residuary state of Andhra Pradesh after it was carved out from the erstwhile composite […]Read More »

India needs a water-sensitive food trade policy

If one lists the nations most suited to produce wheat, sugarcane, cotton and soybean, China and Egypt will definitely stand atop on historical, geographical and climatic counts. World’s largest river Nile flows in Egypt which every year collects fertile soil from different countries in Africa and deposits it in its delta. On the other side […]Read More »

Modi sarkar and telcos have both hung up on the consumers

Do you get full signal on your mobile? Is your data speed fast enough? Have mobile companies started compensating you for call drops? If your answers are a resounding “no” (naturally, they would!) then, more than the government, we ourselves are responsible. We Indians, afflicted with a strange kind of amnesia, tend to forget the […]Read More »

Modi's foreign trips can wait. Indian trade needs emergency landing

Howsoever spectacular Prime Minister Narendra Modi’s diplomatic campaign might have been, the fact remains the void in the trade diplomacy has grown faster than ever. If the government’s own Economic Survey is to be believed, India’s foreign trade has gained momentum over the last decade with a flurry of free and preferential trade agreements signed […]Read More »

Modi sarkar should bet on services for dream growth

If one observes the samurais of growth driving the GDP rate above seven per cent, one wouldn’t find them in the swanky corporate offices of Mumbai and Delhi, but in the markets close to one’s home. These growth warriors make our lives easier by running eateries, repairing shops and providing dozens of similar services and […]Read More »

Don’t make India a circus of cartels and monopolies

Facebook’s Free Basics trial was so legendary that one Ganesh could double the yield from his fields with the knowledge FB-patented internet facilitated. While, advertisements are notorious for making lofty claims, this one goes beyond limit. Considering the state of agriculture in India, this can’t even be an exception let alone a norm. As it […]Read More »

Let’s fix the system instead of opting out

Allahabad High Court passed an interesting order last month, directing the Chief Secretary of Uttar Pradesh to ensure that from the academic year beginning 2016, children of all officials serving with the government, including judiciary, local bodies and representatives of people, must send their children to study only in government primary schools, failing which the […]Read More »

That is retrograde, Mr Jaitley

An important step in clearing our institutional financial system of the cobwebs it has gathered over the years has now been reversed, with Mr. Arun Jaitley announcing deferment of his plan to set up an independent public debt management authority, which he had promised in the budget presented earlier this year. Till now, Reserve Bank […]Read More »

Coalgate Revisited

  The auction of 33 of the 204 coal mines, whose allocations were cancelled by the Sup¬re¬me Court, has just been completed. The auction has brought the government a ‘windfall gain’ of Rs 2.07 lakh crore for 19 operational blocks and 13 about-to-open blocks which were put under the hammer, against Rs 1.86 lakh crore […]Read More »

Will Federalism at Work Let Populism Thrive ?

The just released recommendations of the Fourteenth Finance Commission’s will have far- reaching consequences for the states of the Indian Union, with 42 percent of the central divisible pool of resources now going to them, as compared to the existing 32 percent provided by the Thirteenth Finance Commission. In terms of resources now available to […]Read More »

Coalgate Revisited

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The auction of 33 of the 204 coal mines, whose allocations were cancelled by the Sup¬re¬me Court, has just been completed. The auction has brought the government a ‘windfall gain’ of Rs 2.07 lakh crore for 19 operational blocks and 13 about-to-open blocks which were put under the hammer, against Rs 1.86 lakh crore estimated by the CAG.
The phrase ‘windfall gain’, first quoted from the noting made by the then Sec¬retary of the Coal Ministry in the CAG Report No. 7 of 2012-13 on the allocation of coal blocks, had at that time caused considerable rancour in the UPA government. It had incurred the wrath of all concerned, the decisi¬on-makers as well as the beneficiaries of a totally opa¬que allotment process.
As recommended by the CAG in his report, the NDA Govern¬ment has now resorted to a completely fair and transparent e-auction process for allocation of the coal blocks. It has proved that auction is the best process, simple as well as transparent, for allocating scarce natural resour¬ces, es¬pe¬cially for coal, a polluting fossil fuel. High bid pri¬ces in¬centivise faster and higher pro¬duction for cost recovery and also serve as a carbon tax.
The CAG Report of 2012-13 had stated that since July 2004, 194 coal blocks with total reserves of 44440 million tonnes were allocated to various Government and private companies following the existing process of allocation that lacked transparency, objectivity and competition. Seventy-five of these blocks were allocated to private parties. Of these, 57 allocations were for opencast or mixed mines — partly opencast and partly underground. In the absence of reliable data for underground mines, these were excluded from the CAG’s calculations which were based on the net gain from estimated extractable reserves in respect of these mines.
The estimates came to Rs 186,591 crore. Very few of these were producing any coal by March 2011; many of them were deliberately waiting for future price gains for selling the blocks at a premium instead of producing coal and using it for power production. The entire process of allocation was mired in such opacity and arbitrariness and created such huge controversy that finally the Supreme Court had to cancel all but four of 218 coal block allocations, just as it had cancelled all the 122 spectrum licences issued earlier as “unconstitutional and arbitrary”.
The nation had to pay a heavy price for such indiscretion; the power sector suffered for want of coal, and despite sitting on one of the largest global reserves of coal estimated at more than 300 billion tonnes, the country was forced to import coal at the cost of precious foreign exchange, pushing our already high current acc¬ount deficit further into the red. Economic grow¬th was the ultimate casualty and eventually the UPA had to pay a terrible price for such gross indiscretion.
The CAG report was widely criticised by very senior functionaries of the ruling government. Their virulent criticism was relentlessly directed against the very institution of the CAG. Noted eco¬nomists also maligned the institution, calling the estimates wild. They argued that the estima-tes ignored the net present value (NPV) of the reserves that takes into account the present val¬ue of future benefits, by discounting all future be¬nefits at the prevailing interest rates and there¬by arriving at the true value of benefits calculated at today’s prices. Had this been considered, the estimates would have been significantly lower than the ‘astronomical figure’ cited. The same argument is being advanced now that this Rs 2.07 lakh crore that the bids have fetched the Government is to come over the next 30 years and its NPV would be much, much less.
Mr Vinod Rai, the then CAG, had countered this argument in his book, Not Just An Accoun¬tant by saying that estimating the NPV would have required a lot of assumptions without supporting data; in any case, it would not have made any substantial difference in the estimates because the discounting rate at which NPV is to be estimated would have been annulled by the increase in sales price of the extracted coal which is ex¬pected to go up in line with global price trends.
Even now, from time to time, the CAG is being advised not to quote ‘astronomical figures’ in his reports. As things stand now, the estimates seem not astronomical at all, but rather conservative. When all the 204 blocks go under the hammer in a transparent manner as the current process has been, it is anybody’s guess what would be the final aggregate figures collected from all bids, given that the price of coal may increase once the global economic downturn reverses, of which the signals are already emanating from the USA.
It will be instructive to recall a phase of the sordid history of coal allocations to remind ourselves about the need to follow transparent, objective policies in regard to allotment of natural resources. In 1991, Manmohan Singh and P. V. Narasimha Rao had dismantled the Licence Permit Raj, opening up the economy to entrepreneurs. But any enterprise would need land and natural resources like coal and other minerals like iron. As demands for these items went up, so did corruption.
The nexus of politicians, contractors and bureaucrats now started taking maximum advantage of the opaqueness and discretion pre¬valent in the system to misappropriate land and other national resources for their own benefits; many of them never used these resources for productive purposes, but later bartered them for ear¬n¬ing windfall gains. Raghu¬ram Rajan, RBI Gov¬ernor, rightly analysed the si¬tu¬a¬tion in an article — “India’s corrupt elites had moved from contro¬ll¬ing licences to cornering newly valuable resour¬ces like land. The Re¬s¬ource Raj rose from the ash¬es of the Licence Raj.” Exer¬cising unfettered discretion with total lack of ac¬coun¬tability and transparency was the defining chara¬cte¬ristics of this ‘Resource Raj’. The demand for coal had increased substantially after 2003, when the Govern¬ment had resolved to provide power for all by 2012 (we are light-years away from this even in 2015). Given that 70 per cent of India’s power needs are supplied by thermal plants operating on coal, assured supply of coal to all producers, public and private, was an essential prerequisite.
The domestic shortfall was estimated at 70 million ton¬nes of coal by 2011-12, and imports were costly. Under the Coal Mines Nationali¬sa¬tion Act, 1973, mining of coal was the monopoly of Coal India Limited. An am¬endment to this Act made in June 1993 allowed private companies engaged in the production of power, iron and steel the right to mine coal for captive use.
The CAG Report and Mr Vinod Rai’s book together chronicle how the PMO and the then coal secretary tried their utmost to bring in trans¬¬parency in the process by in¬troducing a transparent bid¬d¬ing process, and how all their efforts were repeatedly stonewalled, on grounds that were extremely flimsy. And they were stonewalled by the then Minister of State for Coal, Dasari Narayana Rao, and the Coal Minister, Shibu Soren.
The Prime Minister was a mute witness to the manipulative operations. No one questions his integrity, but the fact remains that he presided over a corrupt system, marked by opacity, arbitrariness and crony capitalism. He had apparently intervened in the case of allocation of Talabira II coal block, reserved for the public sector, facilitating its final allocation to Kumarmangalam Birla’s Hindalco in preference to the state-owned Neyveli Lignite Corporation. He had allegedly acted on the recommendation of Odisha Chief Minister, Navin Patnaik, thus ‘ignoring the words of caution put forth by PMO officers’, as the CBI judge had stated in his order. This indicated ‘a conscious effort on his part to somehow accommodate Hindalco in Talabira II’.
The coal-block issue has underlined the need for a transparent policy in regard to allocation of national resources. In parallel with coal-block auction, open bidding for 800, 900, 1800 and 2100 MHz spectrum is also going on, and the process has already generated Rs 1.07 lakh crore. It is imperative that the Government resorts to open and transparent bidding in respect of all minerals, not simply coal and telecom spectrum. But that is unlikely to happen anytime soon.

First Published in The Statesman, 29th March, 2015

Finance

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4 disastrous effects of demonetisation that Modi ignored

In spite of several inefficiencies, fortunately, India never witnessed a bank-run or monetary crisis parallel to the scale in Europe or America. However, the chaos and long queues that engulfed banks across India now perfectly mirror the plight the Greeks faced last year, albeit for different reasons. Demonetisation is a rudimentary monetary instrument of the […]Read More »

Modi's historic move against black money brings chaos now, gains later

While Prime Minister Narendra Modi’s unprecedented move to temporary demonetise Rs 500 and Rs 1,000 notes is expected to bring in a host of positives, it will also set off major administrative and logistical challenges at the outset, not to mention the plight of common people. The government and Reserve Bank of India (RBI) will […]Read More »

Diwali or not, India can't boycott Chinese goods

Last fortnight, close on the heels of the rise of firecracker nationalism against Chinese goods on social media, Reserve Bank of India (RBI) was busy making adjustments for yuan’s entry into India’s foreign exchange reserves. Not only RBI, most of the global central bankers too had to alter metrics of their forex reserves after yuan’s […]Read More »

Despite $10 billion in tax net, Modi sarkar's amnesty is a colossal failure

Despite the long history of failed tax amnesty schemes, the Narendra Modi government tried its luck with tax pardons, but to no avail. Howsoever pliable the statistics might be, the fact remains that declarations of Rs 65,250 crore under the black money disclosure scheme could attract just a moderate success for the NDA government. However, […]Read More »

Modi must walk the talk on GST

Even if one doesn’t buy everything that Prime Minister Narendra Modi claimed in his Parliament speech on Goods and Services Tax (GST), one should acknowledge that this is one of the most crucial structural indirect tax reforms in the last 25 years of liberalisation. This may not effectively clamp down on inspector raj, or turn […]Read More »

GST Bill an example of half-baked and vague reform

Contrary to the euphoria and costlier-cheaper headlines, the Constitution (122nd Amendment) Bill 2014 doesn’t spell out even the outline of the GST that India is expected to get in the future. The passing of the GST Bill is just the beginning of a tedious political and operational voyage that should ultimately result in the implementation […]Read More »

Raghuram Rajan, darling of Dalal Street, ‘devil’ for Delhi Durbar

  Sometimes words speak louder than actions. If nowhere, then at least in India. RBI chief Raghuram Rajan has fallen victim to his own candid words (read speeches) on issues of political import. However, his legacy doesn’t lie in his articulations as a blunt economist but as a top-class, innovative and professional central banker. And here […]Read More »

5.80 lakh crore in bad loans: Let's pray for India's bleeding banks

The Rs 13 lakh-crore pile of bad loans of India’s public sector banks now amounts to more than the GDP of countries like New Zealand, Kenya, Oman and Uruguay. A new IMF report states Indian banks are in a poor state compared to the notoriously messy banking of China.The financial results of major public sector […]Read More »

Modi government has actually worked hard to deliver on black money

  After facing severe criticism for its lofty electoral promises on bringing black money to India, Modi sarkar appears to have stuck its neck out on dealing with the issue. The Modi-led government, running past the two-year mark in office, has taken some calculated risks to go ahead on curbing black money. To promote transparency, the government […]Read More »

How India's wealthy are milking billions off subsidy

Do you think the politics of subsidy is only confined around lower and middle economic classes? If yes, then you would wonder how subsidies worth rupees one crore go into the pockets of the rich every year, and that too via merely seven products and services. The subsidy bill may notch up if one takes […]Read More »

India’s three-tiered economy needs bottoms-up approach

Has finance minister Arun Jaitley got it right? If one looks at the economy at hand, the answer would possibly be “Yes”. India is now a three-speed economy.  Double-digit growth is confined to a section that comprises sectors such as e-commerce, travel and stock markets and accounts for 30 per cent of the GDP. Another […]Read More »

India’s Trade Gloom

  Not many years have ended with gloomier prospects for Indian trade. The gloom is not just because of the contraction in exports for 12 months in a row. It is also because India’s role and participation in global trade is becoming increasingly insignificant. The insignificance was evident from the approach to the Nairobi Ministerial. […]Read More »

Budget 2016: Modernising rural economy must be Modi's mission

Last fortnight, when Prime Minister Narendra Modi mentioned crop insurance in his Maan ki Baat programme, people well aware of the state of agriculture justifiably grew anxious. This was not because government’s efforts do not inspire or encourage, but because in spite of three crop failures, Indian politicians are still handling farming with a mindset […]Read More »

Can India finally see a Modi Budget in 2016?

When existing steel companies are already reeling under distress owing to falling demand, why is the Union government going to establish new steel companies in the public sector? What is the need for forming new banks (monetary banks) to provide loans to small companies when several financial institutions of the government are already doing this? […]Read More »

How many more taxes do we need to pay?

Public memory is usually short but the memory of taxation is even shorter. Benchmark brent crude might have tested an unprecedented low of $37 per barrel, but domestic petrol and diesel prices are still ruling higher thanks to heavy taxes. If only the debate on goods and services tax (GST) revolved around explaining this dichotomy, […]Read More »

Is weak rupee still a national shame for PM?

Whether India draws an economic advantage from the ongoing global turbulence or not, a substantial political advantage can definitely be churned out at the moment. It is time for our leaders to rid themselves of their unfounded misconception on the exchange value of the domestic currency, that is, the rupee. In India, the BJP and […]Read More »

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