Month: August 2012

India “Mining”???

Elsewhere in the Dutch city of Rotterdam, brand strategists of Unilever, the FMCG giant are on a panic video conference call with their counterparts in India.  The key point of discussion is how to stop their main competitor in Oral care segment – ‘Colgate’ from walking away with a sudden spike in the market share in India.  Random surveys in different cities and towns in India revealed that “Coalgate” emerged on top of the mind and lips of a majority of Indians these days!

It’s not just the Unilever brand managers who were having sleepless nights. Ever since the report of the Comptroller & Auditor General (CAG) on Coal block allocation hit the public domain, it has spread insomnia among quite a few in the ruling front as well.  The opposition has smelt blood and resembles these days “The Gangs of Wasseypur”  and are doing everything but short of spilling blood on the streets or on TV. The CAG report set a new record for the number of “0”’s in a digit for a scam and proclaimed that there is a loss of Rs. 1.86 lakh crore ( US$ whatever!!! ) caused by delaying the auction route for allotment of coal blocks instead of allocation by a screening committee which was seemingly opaque.  It would seem that from a 55 cr scam (Bofors) in the 80s to 1.86 lakh cr scam now we have indeed come a long way even after adjusting for the high inflation!!!  Who said we are an emerging nation ? Guys, we have arrived!!!

I’ve not read the CAG report and hence my observations in this post are based on what I’ve been reading and watching in the media in the last 2 weeks.  It’s good to see institutions turn watch dogs and uphold the principles basis which they have been founded.  However if they become the rabble-rouser variety which is what the CAG has turned into then we have a problem.

The track record of CAG in floating purported loss figures and diluting the same as time passes has not been so impressive. Keeping that aside, the problem I’ve with this report is that it presents a purely accounting perspective (that too a faulty one) in arriving at the loss figure which is in essence an opportunity loss or a presumptive loss.

Erudite economists and columnists have found many a hole in the CAG report and they are all there in the public domain.( A good one from Surjit bhalla – “CAG,Credit & Credibility” is a good read)  I am not erudite and not an economist.  As a lesser mortal, I’ve only the following simplistic observations:

  • For a developing country like ours with growing population, infrastructure building and Job creation are critical for growing our economy and meeting the needs and aspirations of the people
  • For both these, massive investments are required and it can’t be that only the Government which will have to make these investments
  • A congenial environment needs to be created for private sector to invest in infrastructure and set up factories, facilities, … which in turn will create millions of jobs.
  • When the Govt. reaches out to the private sector to invest and when they do invest – apart from fulfilling the social obligation their look out is also return on investments and shareholder value

 Coming back to the “Coalgate” issue,

  • It’s been a while ( may be the late 80s’s) since Govt. encouraged private players to engage in mining of coal to produce fuel for power generation plants.
  • India is already short of power not to forget the grid failure which consigned 600 mn Indians to darkness a month ago.
  • Coal India which is a Govt. owned entity is unable to meet the demand of coal. Under the circumstances, if the Govt. of the day (whether the central Govt. or under advice of the State Govt.) decided against auction and went by allotment (arbitrary is what critics claim) to private as well as public sector, the Govt. cannot be blamed for not being opportunistic of earning in millions!
  • Any auction route which is competitive in nature while raking in the moolah for the Govt., it also escalates the cost for the bidder and after bidding through the nose you cannot expect the product to be priced cheap.  The cost of 3G services in India now bears testimony to it.   Hence I’m not surprised that political parties including the UPA, BJP and the left (in the states) were not pushing for the auction route in mine allocation for all this while.   Hell will break lose if the cost of power is not kept affordable.
  • So calculating a loss and putting forth an argument based on what the Govt. would have raked in if the auction route was pursued is indeed specious.
  • If you stretch the ‘presumptive loss’ logic further – whatever the Govt. does in the form of a subsidy is an opportunity loss. Like the money it spends on schools where students are being taught for free, is a drain on the exchequer  if you compare to the fees charged by a similar private school, isn’t it ???
  • If the share price of companies sky rocketed after they have been allocated coal mines, it is simply a function of how share markets function across the globe! Govt. cannot be blamed for the valuation or the market cap curves of the companies based on the vagaries of the stock market.
  • The Govt. is being faulted for allocating 145 blocks against mush lesser during the previous NDA government. Now this is stretching the limits.  If you govern and do something it’s a problem. If you don’t do anything also its governance deficit.  There is clearly a surplus of cynicism here.

I’m not a fan of this govt. and  I’m also not in agreement with the “0” loss theory foisted by the Govt. (not mined so no loss!!!)  It is clear that there needs to be a consensus among all parties on how natural resources like Spectrum, coal blocks, land,.. are used for achieving the larger economic growth irrespective of who is governing the country.  This will ensure that there is consistency in policy and no witch hunting or retrospective levys on private investors which in turn will see a spur of investments in these key areas.  The 2G scam and now the “Coalgate” scams only highlight the need for more transparency in Governance than what exists today.

 We don’t need more “Gates” or CAG reports for “*** lakh crores loss” but what we need is “open, transparent” methods and processes in Governance.

Update : I wrote this post yesterday (26th Aug). And today ( 27th Aug) there is finally a detailed response on the issue from the Prime Minister Dr Manmohan Singh. For those interested, here’s the link : PM’s statement

P.S : It seems there is a section of BJP which wants to launch a “India Mining” campaign for the next elections!!!

Amidst all this you can’t resist a hearty laugh looking at the Amul hoarding on “Coalgate”

Amul’s Coalmaal

Coming up – A “Yuva” moment for Team Anna???

In the final moments of Maniratnam’s movie “Yuva”, the protagonists played by Ajay Devgn and Vivek Oberoi along with couple of their friends (attired in denim!!!) are shown entering a Vidhan Sabha after winning the assembly elections. In the film Devgn is a student activist and Oberoi just another student who were taking on the local politicians and finally end up contesting the elections and also win.  I wonder if Team Anna was also dreaming of such a moment in real life when its members decided to abandon their agitation and took a call to wear political topis from now on.  For some time it was clear that Team Anna members were getting frustrated by the meek response they were getting from the common public to their agitation calls. This was a far cry from what they saw in August last year. From Jan this year when their second round of “fast” agitation met with a slow and thanda response, Team Anna was subject to a barrage of criticism and loads of advice from all and sundry.  As written nicely in his Op-Ed ( A for Anna, B for Baba, C for Camera) in “The Hindu”, columnist Biswanath Ghosh says and I quote “We feed on the frenzy whipped up by news channels; and, when caught in a verbal duel between distinguished panelists with colliding views, we are so confused that we end up adopting the voice and the demeanour of the excited news anchor”.  And most of the news anchors and famed columnists were of the view that Team Anna must stop this agitation business which has become a joke and fight elections to bring in the changes it desires to see.    These voices were amplified by the jibes the politicians were unleashing on Team Anna provoking them into taking the electoral plunge.   It looks like Team Anna got so incensed by these voices all over and decided to walk into the electoral land mine with eyes wide open.

For a moment let’s step back and look at the genesis of Team Anna’s movement.  The movement started as a calling card for a legislation for preventing corruption at high offices called the “Lokpal bill” (which incidentally holds the record for being brought up in parliament so many times without getting passed till date). Coming after the RTI (Right to Information) Act which again some of the members of Team Anna like Arvind Kejriwal effectively championed for and succeeded, this bill was to be a game changer in putting an end to corruption in India.  As I mentioned before, this bill has the illustrious history of circling the corridors of Indian parliament many times over without getting enacted.  Each time, when the bill was introduced to the House, it was referred to a committee for improvements or to a joint committee of parliament, or to a departmental standing committee of the Home Ministry. Exasperated at this attitude of the political class, a group of activists under India Against Corruption ( IAC) umbrella with Anna Hazare as their mascot embarked on an ‘Anshan’ which in no time captured the imagination of the public.

So it was a very legitimate movement which erupted purely due to the failure of the ruling class to bring a legislation that will prevent corruption at high places.  The common man who was paying the price of corruption day in and day out saw this as a menace and went all out in support of the same though he might not have understood the legalities of the Lokpal bill. There were and are legal luminaries who are of the view that we don’t need another law but proper implementation of existing laws to prevent corruption. Let’s keep that debate for another suprabhat.

It is quite obvious from the delaying tactics displayed in the past that the political class is not for a Lokpal bill.  So one didn’t expect anything else but continuous goading to stop fighting in the streets and urging Team Anna to get into parliament to fight for the bill.   By falling for this bait, Team Anna might have just ended up scoring a self goal.  While it is still very not clear what shape the political fantasy of Team Anna will take, it is very clear that whatever it might be, the writing is on the wall.  Why am I so skeptical?  Because, in our parliamentary democracy, a political formation can make laws or influence law making if it is a majority force (thereby ruling party) in parliament or in a coalition era, be like the Left in UPA1 or TMC in UPA2 with the jack in its hand.  For Team Anna’s movement to take a shape of a majority party is asking for India to win 20 Gold medals in the next Olympics!  The second option means it has to provide “outside” support or be a part of a coalition of one of the fronts which Team Anna has been castigating all the while for not enacting the Lokpal bill.   The third option is to be non-aligned to any front and with just a few MPs keep trying to push for the bill.  All this means- floating a political party, contesting the next Loksabha elections, win a few seats and try to get the Lokpal bill passed in Parliament is nothing but a non-starter.   All this, if you can muster a few seats.

Winning those few seats by itself could be a herculean task tougher than beating the Chinese in Badminton! I still remember the fate of T.N.Seshan who was once a Middle Class hero for bringing up a sea change in the way elections were conducted in India – ended up as a Middle Class Zero when he contested for Loksabha elections and lost.  There are other examples galore of eminent people biting the dust once they contested the elections and lost.  Because, in India contesting and winning an election is a matter of arithmetic and that too an expensive one by itself.  Many times in elections Indians don’t vote to elect their MP or MLA but elect their caste leader.  And there are other considerations as well – in short you need to be an expert in Game theory. ( A Shashi Tharoor is an exception – Admit, he’s doing a great job and is an inspiration )

In addition to the fact you have ended up killing the Lokpal goose, there are other issues which have been very well articulated by Swaminathan Aiyar in his weekly column in Times of India today. For those who missed that – here’s the link –  http://blogs.timesofindia.indiatimes.com/Swaminomics/entry/anna-s-party-would-be-a-great-blunder

A very regular argument being thrown up is that instead of fighting outside for a change in the laws of the land, Team Anna should come inside the Parliament which makes the laws and bring in those changes. This is like a film maker prodding all his critics to be filmmakers themselves before penning those critical reviews of his film!!!  One needs an outsider perspective to things and it’s good to have a movement outside the parliament constantly pushing the leaders to mend their ways when necessary. That’s what Team Anna was doing all the while.  And that’s what they should continue to do. That the Anna movement started fizzling out was mainly due to the wearing out of the novelty factor and loss of hope in people that it will succeed after that disastrous extended parliament session which ended abruptly.   Loss of hope is as much or more than a  big insinuation on the political class as much on Team Anna.

In my blog post in Jan this year after the failed Parliament session, I had humbly called for an Anti-Corruption movement Ver. 2.0.  Some of the ideas acquire more credence in today’s scenario.  As I mentioned in that post, expecting a flawless Lokpal bill first up is not realistic.  The groundswell of support for the Jan Lokpal bill rattled the politicians across the board and the ruling front in particular.  From then on till the time the fast agitation in Mumbai failed, the government was working overtime on getting a version of Lokpal bill to the parliament.  Team Anna should have shown restraint and maturity in engaging in discussions with the Government at that stage and must have gracefully agreed for the version of the bill though it might not have been the perfect bill. For that matter even the present RTI bill is not perfect yet it is already yielding results. If they had done that, we would have seen the passing of the Lokpal bill finally. Now, that seems to be distant reality.

Coming back to that climax of the film “Yuva”, the wily politician played superbly by Om Puri stops Ajay Devgn  while entering the Vidhan Sabha and says “Tum log aa to gaya idhar, Dekte hain kitna din tikta. Tumhare pahele bhi bahut log aaya idhar, duniya badalne kiliye. Kuch bhaag gaya, kuch kudh badal gaya”

(Now that you have come here, let’s see how many days you survive. Before you, there were many people you came here to change the world. Some vanished. And others have changed themselves).

It will be very ironical if this happens to Team Anna!!!

Check this link to enjoy that scene: http://www.youtube.com/watch?v=fksT0VfDKj4

I’ve been seeing similar sentiments being expressed by few columnists, check these out :

http://blogs.timesofindia.indiatimes.com/Citycitybangbang/entry/team-anna-the-need-for-strategic-clarity

http://www.thehindu.com/opinion/op-ed/article3735258.ece