Month: August 2014 | Vivek Kaul

29 August, 2014

Best growth in 9 quarters: Election effect or real recovery?

The GDP growth for the period April to June 2014 has come in at 5.7%. This is the fastest economic growth that India has seen in the last nine quarters. During the period of three months ending in March 2014, the GDP had grown by 4.6%. Between April to June 2013, the GDP had grown by 4.7%.
This growth was on back of ‘electricity, gas & water supply’ which grew by 10.2 per cent , ‘financing, insurance, real estate and business services’ which grew by 10.4 per cent and ‘community, social and personal services’ which grew by 9.1 per cent.
Manufacturing which is one of the bigger components of the GDP grew by 3.5% during the quarter. It had contracted by 1.1% between April and June 2013. Manufacturing has grown even on a quarter to quarter basis. During the period January to March 2014, it had contracted by 0.7%.
Trade, hotels, transport & communication which forms the biggest component of the GDP at a little over 25%, also did well relatively better and grew by 2.8% during the period. Between April and June 2013, it had grown by 1.6%. The agriculture sector grew by 3.8% during the period, in comparison to 4% last year and 4.7% between January and March 2013.
All in all most sectors have done better than they had in comparison to last year. What are the reasons for the same? Supporters of Narendra Modi are likely to suggest that this is a clear impact of Modi taking over. But Modi took over as the Prime Minister of the country only on May 26, 2014, and by that nearly two-thirds of the three month period under consideration was already over. So his impact cannot be really great.
Nevertheless at the start of April 2014 it was clear that the Modi led National Democratic Alliance would dislodge the Congress led United Progressive Alliance from power. Hence that could have played some role in the increased activity in the manufacturing sector. Most business houses before the Lok Sabha elections had become pro-Modi. There was a belief that after Modi was elected to power the business and economic environment in the country would improve and that could have led to increased activity in the manufacturing sector. At the consumer level one important reason for the growth in the manufacturing sector could be improving car sales. Take the case of Maruti Suzuki, India’s largest car maker. For the period April to June 2014, the car sales for the company stood at 270,643 units, up 10.3 percent from April-June 2013. This after car sales had more or less stagnated for close to one year.
Car sales are a reasonably good economic indicator. Floyd Norris writing in The New York Times explains it best: “New-car sales can be a particularly sensitive economic indicator because few people really need to buy a new car, and thus tend not to do so when they feel uncertain about their economic prospects. Even if a car purchase can no longer be delayed, a used car is an alternative.”
Postponing the purchase of a car obviously has an impact on the car company. But it also has an impact on a host of other companies. As T N Ninan wrote in a column in Business Standard in January 2013 “The car industry is a key economic marker, because of its unmatched backward linkages – to component manufacturers, tyre companies, steel producers, battery makers, glass manufacturers, paint companies, and so on – and forward linkages to energy demand, sales and servicing outlets, et al.” And car sales growth leads to a growth of a lot of other sectors as well, and ultimately shows up in manufacturing growth as well.
While car sales growth is a very good economic indicator in developed countries, the same cannot be said totally about a developing country like India. There are other important factors at play when it comes to economic growth.
Another important factor which led to better economic growth in April-June 2014 was the fact that the sixteenth Lok Sabha elections were conducted during the period. One estimate suggested that the total expenditure on the elections would come to close to Rs 30,000 crore, including the Rs 7,000-8,000 crore spent by the government to carry out the elections.
A sudden increase in spending gets the multiplier effect into play. Money spent ultimately lands up as income in the hands of someone. He or she then spends that money again and that in turn lands up as income in the hands of someone else. This is how the multiplier effect comes into play and leads to faster economic growth. It is interesting to see that the services part of the economy grew significantly faster during this period, in comparison to the same period last year. This could clearly be because of all the money that was pumped into the economy by the government, political parties and candidates, during the course of the Lok Sabha elections.
This is an important factor that needs to be kept in mind while analysing these GDP numbers and the best economic growth in nine quarters. The GDP numbers for the period to July to September 2014, will clearly tell us whether economic growth has really revived to some extent or was the 5.7% growth a blip due to the Lok Sabha elections?
Also, the Monsoon this year hasn’t been normal. Data from the India Meteorological Department shows that Monsoon this year has been 18% below normal. If you look at the data in a little more detail, Monsoon in the North West region (basically Punjab, Haryana and Rajasthan) has been 34% below normal. Even though large parts of land in Punjab and Haryana is irrigated, there is bound to be some impact on agricultural growth.
Further, Central India which produces pulses and oil-seeds has seen a Monsoon deficiency of 17%. This part of the country is largely unirrigated and depends on rainfall for agricultural produce. A deficient Monsoon is bound to have an impact on agricultural in this region. And that will translate into lower spending and thus have an impact on other sectors as well.
To cut a long story short
, Indian economic growth hasn’t come out of the woods as yet. And the GDP data for the period July to September 2014 should give us a clearer picture.

The article originally appeared on www.Firstbiz.com on August 29, 2014

(Vivek Kaul is the writer of the Easy Money trilogy. He tweets @kaul_vivek)

29 August, 2014

Why Advani must sometimes wish that he was a Nehru-Gandhi

Lal Krishna Advani in his dreams must sometimes wish that he should have belonged to the Nehru-Gandhi family. Irrespective of what happens to the political fortunes of the Congress, the Nehru-Gandhis remain at the top.
Even when the party is not under the control of a Nehru-Gandhi, the Congress politicians keep conspiring endlessly till they have managed to install a Nehru-Gandhi at the helm of affairs. This was clearly the case between 1991-1996, after Rajiv Gandhi was assassinated and his widow Sonia refused to take over. Nevertheless the Congress installed Sonia as the president of the party as soon as she was ready.
As Rasheed Kidwai writes in Sonia – A Biography “Throughout the Narsimha Rao regime, 10 Janpath[where Sonia continues to stay] served as an alternative power centre or listening post against him.” In December 1997, Sonia Gandhi indicated that she wanted to play a more active role in Congress politics. It took the party less than three months to throw out Sitaram Kesri, the then President of the party and put Sonia in charge in his place.
Advani has not been anywhere as lucky as Sonia. In fact, he has constantly been sidelined in the Bhartiya Janata Party (BJP) over the last five years. And unlike Sonia, who continues to enjoy the spoils of the hard-work of her husband’s ancestors, Advani built the BJP right from scratch.
The final nail in the coffin for Advani was the decision by the newly appointed BJP president Amit Shah to drop him from the 12-member Parliamentary Board of the Party. Advani though has been included in the newly created margadarshak mandal, where he is unlikely to have any decision-making powers.
In fact, Advani had to recently go through the ignominy of his nameplate being removed from his room in Parliament (the nameplate was put back later). This after being denied the post of the Lok Sabha Speaker, which he wanted. All this must be too much to handle for a man who is BJP’s senior most active leader, and refuses to retire.
The BJP was formed on April 5-6, 1980, after it broke away from the Janata Party. The Janata Party had been formed a few years earlier in 1977, with the merger of Congress O, Bhartiya Lok Dal, the Socialist Party and the Jana Sangh (the BJP’s earlier avatar), with the idea of taking on Indira Gandhi and her Congress party in the 1977 Lok Sabha elections.
The Janata Party won 295 seats in the elections, with 93 MPs coming from the erstwhile Jana Sangh. But trouble soon broke out and different constituents of the party could not get along with each other. This experiment against the Congress ended in 1980, and the BJP was formed. Atal Bihari Vajpayee became the president of the BJP, and Advani was its general secretary.
Interestingly, the party chose “Gandhian socialism” as its credo. Kingshuk Nag writes in The Saffron Tide—The Rise of the BJP that a “consensus emerged…on Gandhian socialism being the credo of the new party; in other words, it would fashion itself like the Janata Party.”
Advani explains this in his autobiography My Country, My Life: “The stress from the beginning was not on harking back to our Jana Sangh past but on making a new beginning.” The new beginning happened primarily because both Vajpayee and Advani had been influenced a lot by Jaiprakash Narayan, who was the main architect behind the Janata Party.
Also, what did not help was the fact that Indira Gandhi in her second avatar as the Prime Minister had in a way hijacked the “Hindutva” agenda, which the Jan Sangha had stood for. “Indira Gandhi had become religious with vengeance after coming to power in 1980 and began visiting temples with fervour. In public imagination, the impression created was that of a Hindu lady seeking the benefaction of the Gods. The policies in her tenure were also interpreted as being pro Hindu,” writes Nag.
This newly discovered “Gandhian socialism” did not work for the BJP in the Lok Sabha elections that happened in December 1984, after the assassination of Indira Gandhi by her bodyguard. The party won just two seats in this election. A committee was formed to try and understand the reasons for the electoral debacle.
As Nag writes “The committee…found a lot of lacunae in the working of the BJP. The committee also commented on the lack of political training of workers on political, economic, idealogical and organizational matters.” Or as a BJP insider told Nag “Basically, the committee politely said the party was going nowhere.”
Vajpayee resigned in the aftermath of the debacle and Advani took over as the president of the party. With Advani at the helm, the relations with the Rashtriya Swayemsevak Sangh(RSS) also improved significantly. In the years to come, the BJP went back to Hindutva and gradually junked “Gandhian Socialism” as its main credo. In fact, in 1990, Advani launched a rath yatra in which he wanted to travel in a motorized van from Somanth in Gujarat to Ayodhya in Uttar Pradesh.
But before he could enter Uttar Pradesh, Lalu Prasad Yadav got Advani arrested in Bihar. As Advani recounts in his autobiography “My yatra was scheduled to enter Deoria in Uttar Pradesh on 24 October. However, as I had anticipated, it was stopped at Samastipur in Bihar on 23 October and I was arrested by the Janata Dal government in the state then headed by Laloo Prasad Yadav (sic). I was taken to an inspection bungalow of the irrigation department at a place called Massanjore near Dumka on the Bihar-Bengal border [Dumka now comes under the state of Jharkhand].”
Even though Advani could not complete the yatra it was a huge success and Advani was greeted by huge crowds wherever he went. “At some places, charged-up followers applied tilak to the Ram rath while at other places, those moved by the movement smeared dust from the path of the rath on their forehead,” writes Nag.
Advani went around building the party on the ideology of hardcore Hindutva, taking the number of seats that the party had in the Lok Sabha to 85 in 1989 and 120 in the 1991. This fast rise of the party was built on slogans like “saugandh Ram ki khaate hain mandir wohin (i.e. Ayodhya) banayenge” and “ye to kewal jhanki hai Kashi Mathura baaki hai”. As Advani went about his job, Vajpayee took a back-seat for a while.
Nevertheless, Advani soon realized that temple and Hindutva politics could only get the party to a certain level. He also realized that he was looked at as a Hindu hardliner and as long as he led the party, it would never be in a position to form the government. Hence, in November 1995, at the end of his presidential address at the BJP national council meet held in Mumbai, he announced that “We will fight the next elections under the leadership of A.B.Vajpayee and he will be our candiate for a prime minister…For many years, not only our party leaders but also the common people have been chanting the slogan, “Agli baari, Atal Bihari”.”
This was a political master stroke. At the same time it needs to be said that not many people would have been able to make the decision that Advani did, if they had been in his position. It is never easy to build an organisation right from scratch and then hand it over to someone else, to lead it.
With Vajpayee at the helm, other poltical parties were ready to ally with the BJP. The BJP led National Democratic Alliance first came to power in 1998. They were in power till 2004, when they lost the Lok Sabha elections. After the 2004 Lok Sabha elections, Vajpayee gradually faded from the limelight.
In these years, the spin-doctors of Advani had managed to tone down his image as a Hindu hardliner. This can be very gauged from the fact that Nitish Kumar had no problem with being in alliance with an Advani led BJP, but he wasn’t ready to work with a Narendra Modi led BJP.
The NDA fought the 2009 Lok Sabha elections under the leadership of Advani and lost. And from then on, the stock of Advani has constantly fallen in the BJP. The decision to drop him from the Parliamentary Board of the party, as mentioned earlier, is probably the last nail in the coffin of his political career.
Interestingly, Narendra Modi was also handpicked by Advani to play a greater role in the BJP. As Nilanjan Mukhopadhyay writes in Narendra Modi – The Man. The Times “From the beginning it was evident that Modi was Advani’s personal choice and he was keen to strengthen the unit in Gujarat because the state was identified as a potential citadel in the future.”
Advani also mentored Modi during his early days in politics. “It was Advani who mentored Modi when he virtually handpicked him into his team of state apparatchiks after recommendations from a few trusted peers in the late 1980s. Advani also gave Modi early lessons in how to convert the mosque-temple dispute into one of national identity,” writes Mukhopadhyay.
But in the recent years while Advani’s stock within the BJP and the RSS has fallen dramatically, Modi’s stock has been on a bull run. The shishya has become the guru. The trouble is that the guru does not want to retire, and is probably still itching for a one-last-fight.
But there is not much that he can do about it. Advani’s side-lining is an excellent lesson of what happens when one overstays one’s welcome in politics as well as life. There is a time to work. And there is time to retire and move on.
To conclude, Advani’s one remaining political ambition would have been to become the prime minister of India. But that somehow did not happen. As Salamn Rushdie aptly put in Midnight’s Children “This is not what I had planned; but perhaps the story you finish is never the one you begin.”
The article originally appeared on www.firstpost.com on August 29, 2014

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

26 August, 2014

How Nitish's pragmatic politics beat brand Modi in Bihar

In the recently concluded bye-election in Bihar, the Bhartiya Janata Party (BJP) won only four out of the 10 seats that went to the polls. The alliance of Rashtriya Janata Dal (RJD), Janata Dal United (JD(U)) and Indian National Congress won six seats.
It was widely expected that BJP would do well in these polls given that in the Lok Sabha elections along with Ram Vilas Paswan’s Lok Janshakti Party(LJP) it had won 28 out of the 40 Lok Sabha seats in the state. The LJP won six out of the 28 seats.
In the aftermath of this débâcle a lot of analysis has been put out on why the BJP lost. Some analysts pointed out that the Modi magic did not work in the same way during the bye-poll as it did during the Lok Sabha polls, a few months back. Some others said that Modi did not manage these polls on his own and it was the Bihar unit of the party that managed the polls, and hence the BJP+LJP combine lost.
As veteran political journalist Ajoy Bose writes in The Economic Times “Narendra Modi’s spectacular triumph in the Lok Sabha polls three months ago may not signal a tectonic shift in Indian politics as many political pundits predicted. Nor does the BJP seem poised to become the predominant party in the country despite forming the first single-party majority government in New Delhi after three decades.” Still others have said that people tend to vote differently in Lok Sabha and state assembly elections.
The trouble is none of these analysts have bothered to look at the voting pattern. If they had done that, they would have known that there is just one reason behind the BJP not doing well in Bihar and that is the “first past the post system”.
In the Indian political system, the candidate who wins the most number of votes wins the election, even though a major part of the electorate maybe against him. It is not the perfect way to elect leaders, but that is what we have got.
Election commission data shows that in the Lok Sabha elections, the BJP+LJP combine had got 35.8% of the votes polled. The RJD and the Congress had an alliance during the Lok Sabha polls. The JD(U) had fought the polls on its own. The RJD got 20.1%, the Congress got 8.4% and the JD(U) got 15.8% of the votes polled. In total, this amounted to 44.3% of the total votes polled.
So RJD+Congress+JD(U) got more votes than BJP+LJP. Nevertheless, since RJD+ Congress and JD(U) were not in alliance, these votes did not translate into Lok Sabha seats.
Now what happened in the recent bye-election? Data from the election commission shows that the RJD+Congress+JD(U) got 45.6% of the total votes polled. The BJP+LJP got 37.9% of the votes polled. Given that, this time JD(U) was not fighting the elections separately, the votes polled translated into assembly seats as well, unlike the Lok Sabha polls.
Further, the vote percentages have not changed majorly since the Lok Sabha elections, as a lot of analysis seems to suggest. In fact, the vote share of both the RJD+Congress+JD(U)alliance and the BJP+LJP has improved marginally at the cost of other parties.
The BJP+LJP combine lost simply because Lalu Prasad Yadav and Nitish Kumar decided to come together. What it tells us very clearly is that in the first past the post system, tactical political alliances can clearly neutralize the impact of brand Modi. Both Nitish and Lalu realised this the second time around and came together to form an alliance, despite having been sworn political enemies for nearly two decades.
In fact, early in his political career Nitish had decided to be pragmatic about his politics. Sankarshan Thakur descirbes a very interesting incident in the Single Man: The Life & Times of Nitish Kumar of Bihar. This incident happened sometime in the late 1970s, after the Emergency had been lifted.
Karpuri Thakur became the Chief Minister of Bihar in December 1977. Nitish quickly became disillusioned with this government. As Sankarshan Thakur writes “He thought it had betrayed the promise of the JP movement, strayed from Lohia…He had turned a critic and went about addressing seminars and meetings on how and why this was not the dispensation he had fought for.”
One day, while at the India Coffee House, a scrap at another table, got Niish going. As Thakur writes “He banged the table with his fist and announced: ‘Satta prapt karoonga, by hook or by crook, lekin satta leke acha kaam karoonga.’ (I shall get power, by hook or by crook, but once I have got power I will do good work.”
Nitish became the Chief Minister of Bihar nearly three decades later in 2005. And for the first half of his political career, he propped up Lalu Prasad Yadav even though he knew that Lalu wasn’t fit to govern. Thakur puts this question to Nitish in the Single Man: “Why did you promote Laloo Yadav so actively in your early years?” he asked.
And surprisingly, Nitish gave an honest answer. As Thakur writes “’But where was there ever even the question of promoting Laloo Yadav?’ he mumbled…’We always knew what quality of man he was, utterly unfit to govern, totally lacking vision or focus.”
So why then did Nitish decide to support him? “’There wasn’t any other choice at that time,’ Nitish countered…’We came from a certain kind of politics. Backward communities had to be given prime space and Laloo belonged to the most powerful section of Backwards, politically and numerically.” And thus Nitish ended up supporting Lalu for nearly the first two decades of his political career.
Nitish finally decided to go on his own at the Kurmi Chetna Rally [Nitish belongs to the Kurmi caste] in February 1994. At this rally he roared “Bheekh nahin hissedari chahiye..Jo sarkar hamare hiton ko nazarandaz karti hai who sarkar satta mein reh nahi sakti (We seek our rightful share, not charity, a government that ignores our interests cannot be allowed to remain in power).”
Nevertheless, Nitish had to wait for 11 more years to finally come to power in Bihar. An
d this finally happened after he entered into a pragmatic alliance with the “communal” Bhartiya Janata Party (BJP) (As most of the other parties tend to look at the BJP). After more than eight years, Nitish decided to break this alliance once it was more or less clear that Narendra Modi would be BJP’s prime ministerial candidate.
Given this background, it is not surprising that Nitish decided to ally with Lalu even though he thought that Lalu was “utterly unfit to govern”. It was a pragmatic decision to get power by hook or by crook, as Nitish put it many years back.
This pragmatism worked in the recent bye-election. Now Nitish is trying to build an even more formidable alliance by getting the left parties together as well. And this alliance, if it comes together, will be even more difficult to beat, the brand Modi notwithstanding.

The article was published on www.Firstpost.com on August 26, 2014

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

26 August, 2014

How Nitish's pragmatic politics beat brand Modi in Bihar

The article was published on www.Firstpost.com on August 26, 2014

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

26 August, 2014

From India Inc to UPA: Manmohan Singh is not the only one to be blamed for Coalgate

Vivek Kaul

In it’s judgement yesterday, the Supreme Court came down heavily on the central government on how it went about giving away “coal blocks” free to private and public sector companies between 1993 and 2011. The central government during the period gave away 195 coal block with geological reserves amounting to 44.8 billion tonnes.
The decision to give away “coal blocks” was taken through a screening committee. The Supreme Court in its judgement clearly says that “no objective criteria for evaluation of comparative merits” of companies to which these coal blocks were allocated, was followed by the Screening Committee. And hence it declared all the coal blocks that were given away for free as “illegal”.
As the Supreme Court puts it in its judgement “The entire exercise of allocation through Screening Committee route…appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected. There is no evaluation of merit and no inter se comparison of the applicants. No chart of evaluation was prepared. The determination of the Screening Committee is apparently subjective as the minutes of the Screening Committee meetings do not show that selection was made after proper assessment. The project preparedness, track record etc., of the applicant company were not objectively kept in view.”
These are basic steps that need to be followed in case of allocation of any project. The Supreme Court judgement goes on to point out several examples where the exercise of allotting coal blocks through the Screening Committee seems to be arbitrary.
In fact, former coal secretary P C Parakh (who took over as coal secretary in the second week of March 2004) writes in Crusader or Conspirator—Coalgate and Other Truths that as the number of applicants for coal blocks kept growing beyond a point being objective about the allotment was simply not possible.
As he writes “by the time I took charge of the ministry, the number of applicants for each block had increased considerably although still in single digits. I found a number of applicants fulfilling the criteria specified for allocation of each block on offer. This made objective selection extremely difficult.”
He further writes “According to CAG’s report, 108 applications were received for Rampia and Dip Side of Rampia Block [names of two coal blocks]. I found it difficult to make an objective selection when the number of applicants was in single digits. How could the Screening Committee take objective decisions when the number of applicants per block had run into three digits?”
Also, it is worth remembering here that all coal blocks were not the same. Coal could be mined at a cost of Rs 300 per tonne in a good open cost mine. On the other hand it could cost as high as Rs 2000 per tonne in an underground mine. The quality of coal would also vary. Hence there was an “enormous scope for favouritism and corruption” when allocating the block.
In fact, Parakh goes on to list several reasons on why giving away coal blocks free for captive mining by companies just did not make sense. By giving away coal blocks for free, companies which had no experience in coal mining were getting into a totally unrelated field. The government had no way of monitoring whether the captive mine was being used for captive use. Or was the company, which had got the coal block, selling the coal it was producing in the open market and thus “promoting corruption and black money”. Further, the system of allocation of coal blocks for free was discriminatory. It offered a huge premium to companies which managed to get a free coal block, in comparison to ones that did not.
Given these reasons, in August 2004, Parakh proposed to Manmohan Singh (who had taken over as coal minister after Shibu Soren resigned) that the allocation of coal blocks should be done through competitive bidding. In fact, even before Manmohan Singh had taken over as coal minister from Soren, Parekh had called for open house discussion of the stakeholders in June 2004. This included the business lobbies FICCI, CII and Assocham. Several other ministries whose companies had applied for coal blocks were invited. So were private companies.
Parakh writes that most of the invitees were not in favour of competitive bidding for coal blocks. As he writes “not many participants were enthusiastic about open bidding. Their main argument was that the cost of coal to be mined would go up if coal blocks were auctioned.” This is an argument still made every time someone suggests that the government should auction natural resources and not give them away for free.
Assuming that business men bidding for coal blocks (if such a process were to be introduced) would drive up the price of coal to astronomical levels is suggesting that they are stupid. As Parakh writes “Participants at open auctions are hard-headed businessmen with an acute sense of profitability. They do not make irrationally high bids. The price at which coal from CIL[Coal India Ltd] was available would automatically put a cap on the bid amount.”
The industry ultimately resisted open bidding simply because until then they had been getting coal blocks for free. And if something is available for free why pay for it. “To an extent, it was a reflection of corporate India’s aversion to transparency,” writes Parakh.
Nevertheless, Manmohan Singh approved allocation of coal blocks through competitive bidding on August 20, 2004. Immediately, the protests started. Letters started pouring in from MPs opposing the competitive bidding process.
Among those who opposed the process was Naveen Jindal, “who had considerable interests in coal mining”. In a television interview Jindal argued that all over the world mining properties are given away for free. The government then earns money through royalty and taxes. Parakh explains why this is bunkum: “I am not aware of any country where fully explored mining properties are given free. What are being given away free are virgin areas with minimal geological information where large amounts of money has to be sunk as risk capital in carrying out exploration, which may or may not result in a commercially minable discovery.”
Parakh writes that Dasari Narayana Rao, the Telgu film director, who was then the minister of state for coal, also tried his best to scuttle the move. He was helped in this by Shibu Soren, who was also coal minister for a brief period. Finally, after several ups and downs the proposal of open bidding for coal blocks did not see the light of day.
Parakh concedes that there was no political will in pushing through a transparent process for allocation of coal blocks. Manmohan Singh had his hands tied to some extent due to the compromises that a coalition government has to make. But if he could push through the Indo-US nuclear deal despite the opposition and open up FDI in retail, he could have also pushed through the opening up of the coal sector, which he did not. Given that and the fact that he was the leader of the Congress led UPA government, when the most free coal blocks were given out, the ultimate responsibility for the current mess in the coal sector, lies with him. But the blame cannot completely lie with him, as
we have seen earlier in this article.
Also, the government told the Supreme Court during the course of proceedings that “the auction of coal blocks could not have been possible when the power generation and, consequently, coal mining sectors were first opened up to private participants as the private sector needed to be encouraged at that time to come forward and invest. Allocation of coal blocks through competitive bidding in such a scenario would have been impractical and unrealistic.”
By the same logic telecom companies should have got the spectrum for free, which they did not, when mobile telephony was first introduced in the mid 1990s. As Parakh writes “Had we opened up coal mining to private sector for commercial mining, along with power sector, in the early 1990s, we would by now have at least half a dozen large coal mining companies in the private sector. This is what happened in the telecom sector.”
What we have instead is a huge coal shortage. In 2014-2015, India’s coal demand is expected to rise to 787 million tonnes. The supply is around 200 million tonnes lower. And this is something that cannot be solved overnight.

The article was published on August 26, 2014 on www.Firstbiz.com

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)