Vivek Kaul
Around half way through Manu Joseph’s new book The Illicit Happiness of Other People, Ousep Chacko, one of the main characters in the book, says “Don’t hate me, son. There are people in this world who set out to make an omelette but end up with scrambled eggs. I am one of them.”
I just couldn’t help comparing this statement to Manmohan Singh, the current Prime Minister of the country. When he started out in 2004 he had all the economic ingredients that could be used to make a good omelette but what he has given us instead is burnt bhurji (the closest Indian representation of scrambled eggs and with due apologies to all the vegetarians out there).
When Manmohan Singh took over as the Prime Minister on May 22, 2004, things were looking good on the economic front. Consumer price index (CPI) inflation was at a rather benign 2.83%(Source: http://www.tradingeconomics.com/india/inflation-cpi) in May 2004. Interest rates were low.
The fiscal deficit projected by the government for 2004-2005(or the period between April 1, 2004 and March 31, 2005) was at 4.4% of the gross domestic product (GDP). Fiscal deficit is the difference between what the government earns and what it spends.
The interest payments that the government had to make on previous debt formed around 94% of the fiscal deficit. Interest payments stood at Rs 1,29,500 crore whereas the fiscal deficit was at Rs 1,37,407 crore. Thus the primary deficit or the difference between expenditure and income, after leaving out the interest payments, came to just 0.3% of the GDP.
What this meant was that the government was more or less meeting its expenditure from the income that it was earning during the course of the year. Thus the deficit was on account of the past debt. It also meant that the government did not have to borrow much, which in turn kept the interest rates low, encouraging both businesses and consumers to borrow and spend, and thus helping the Indian economy grow at a fast rate.
The subsidy bill for the year stood at Rs 43,516 crore or a little over 9% of the total government expenditure.
Cut to now. The CPI inflation for July 2012 was at 9.86%. The interest rate on most retail loans is greater than 10%. And the fiscal deficit has gone through the roof. The projected fiscal deficit for the year is Rs 5,13,590 crore or around 5.1% of the GDP. The primary deficit is at 1.9% of the GDP.
Even these numbers, as I showed in a recent piece will turn out to be way off the mark. (You can read the piece here). As economist Shankar Acharya wrote in the Business Standard “A few days back the Controller General of Accounts (CGA, not CAG!) informed us that the central government’s fiscal deficit for the first four months of 2012-13 had already exceeded half of the Budget’s target for the full year.”
The way things are going currently, the fiscal deficit might touch 7% of the GDP or its roundabout by the end of this year. This is a situation which hasn’t been experienced since 1990-91, just before India liberalised and opened up the economy.
In his speech as the Finance Minister of India in July 1991 Manmohan Singh had said “The crisis of the fiscal system is a cause for serious concern. The fiscal deficit of the Central Government…is estimated at more than 8 per cent of GDP in 1990-91, as compared with 6 per cent at the beginning of the 1980s and 4 per cent in the mid-1970s.”
So the question that arises is what went wrong between 2004 and 2012? The answer is that the subsidy budget of the government went through the roof. Things started changing in 2007-2008. The projected subsidy bill for the year was Rs 54,330 crore. By the end of the year the government had spent Rs 69,742 crore or 28% more. This was in preparation for the 2009 Lok Sabha elections.
The same thing happened the next year i.e. 2008-2009. The government budgeted Rs 71,431 crore as subsidies and ended up spending Rs 1,29,243 crore, a whopping 81% more. The subsidies were primarily on account of fertiliser, oil and food.
The budgeted subsidies for the current financial year (i.e. the period between April 1, 2012 and March 31, 2013) are at Rs 1,90,015 crore or around 12.7% of the total government expenditure. But as has been the case earlier the government will end up spending much more than this. Even after the Rs 5 increase in diesel price, the oil marketing companies (OMCs) will lose more than Rs 1 lakh crore on selling diesel this year. The total loss on account of selling diesel, kerosene and cooking gas at a loss is estimated to come to Rs 1,67,000 crore.
Just this will push up the subsidy bill close to Rs 3,00,000 crore. The government is expected to cross the budgeted amount for food and fertiliser subsidy as well. All in all it’s safe to say that subsidies will account for more than 20% of the government expenditure during the course of the year, leading to greater borrowing by the government and thus higher interest rates for everybody else.
The idea behind the subsidies (or inclusive growth as the government likes to call it) is to help the poor and ensure that they are not left out of the growth process. The question is where is the money to fund these subsidies going to come from? As Ila Patnaik writes in The Indian Express “Anyone looking at the rising subsidy bill, at the size of the welfare programmes, and contrasting it with the limited tax base, can only wonder why India will not have a fiscal crisis. A continuation of the present policies cannot but land the country into a huge problem. Either before a crisis or after it, there is little doubt that the current expenditure path has to change.”
The programme at the heart of the so called inclusive growth is the National Rural Employment Guarantee Act (NREGA), under which there is a legal guarantee of 100 days of employment during the course of the financial year to adults of any rural household. The daily wage is set at Rs 120 in 2009 prices, which means it is indexed for inflation. Now only if economic and social development was as easy as getting people to dig holes and fill them up.
Also as is usual with most such schemes in India there are huge leakages in this scheme as well. Estimates suggest that leakages are as high as 70%, which means only around Rs 30 of the Rs 100, reaches those it should, while the rest is being siphoned off. This is done by fudging muster rolls, which are essentially supposed to contain the number of days a labourer has worked and the wages he or she has been paid for it.
Also these subsidy and welfare programmes were initiated when the Indian economy was growing faster than 9%. Now the economic growth has slowed down to 5% levels. As Patnaik puts it “Implicit was also the argument that NREGA will be paid for by the high tax collection that the fast growing sectors of the economy would yield. Growth was to be made inclusive through a redistribution of incomes. This was the scenario when India was growing at 10 per cent and leaving some people behind. It was a scenario that might stand the test of time if India continued to grow at a long-run steady state of 10 per cent growth. This plan did not appear to evaluate the fiscal path of such a programme when growth halved.”
Slow growth also implies a slowdown in tax collections for the government, which might lead to the government needing to borrow more to finance the subsidies and welfare programmes.
A lot of the expenditure on account of subsidies could have been met if the government had been less corrupt and not sold off the assets of the nation at rock bottom prices. The loss on account of the telecom scandal was estimated to be at Rs 1.76 lakh crore. The loss on account of the coal blocks scandal was estimated to be at Rs 1.86lakh crore.
While these scams were happening all around him, Manmohan Singh chose to look the other way. As TN Ninan wrote in the Business Standard “Corruption silenced telecom, it froze orders for defence equipment, it flared up over gas, and now it might black out the mining and power sectors. Manmohan Singh’s fatal flaw — his willingness to tolerate corruption all around him while keeping his own hands clean — has led us into a cul de sac , with the country able to neither tolerate rampant corruption nor root it out.”
Singh has tried to re-establish his reformist credentials recently by announcing a spate of economic reforms over Friday and Saturday. But none of these reforms look to control the expenditure of the government and thus bring down the fiscal deficit. If the government continues down this path the future is doomed. As Ruchir Sharma writes in Breakout Nations “If the government continues down this path, India might meet the same path as Brazil in the late 1970s, when excessive government spending set off hyperinflation, ending the country’s economic boom.”
Higher expenditure also means inflation will continue to remain high. “NREGA pushed rural wage inflation up to 15% in 2011,” writes Sharma. The fear of high inflation continues, despite the reforms announced by the government. “The government undertook long anticipated measures towards fiscal consolidation by reducing fuel subsidies and selling stakes in public enterprises. Further, steps taken to increase foreign direct investment (FDI) should contribute to both greater capital inflows and, over the long run, higher productivity, particularly in the food supply chain. Importantly, however, for the moment, inflationary pressures, both at wholesale and retail levels, are still strong,” the Reserve Bank of India said in a statement today, keeping the repo rate (or the rate at which it lends to banks) constant at 8%. This despite the fact that there was great pressure on the central bank to cut the repo rate. It is unfair to expect the RBI to make up for the mistakes of the government.
The bottomline is that if the government has to get its act right it needs to reign in its expenditure. I started this piece with eggs let me end it with chickens. As economist Bibek Debroy wrote in the Economic Times “Since 2009, UPA-II has behaved like a headless chicken. It is still headless, but the chicken at least wants to cross the road. We still don’t know whether it will be run over or cross the road and lay an egg.”
And even if eggs are laid, we might still not end up with burnt bhurji rather than omelettes.
(The article originally appeared on www.firstpost.com. http://www.firstpost.com/politics/how-manmohans-omelette-came-out-as-scrambled-egg-458242.html)
(Vivek Kaul is a writer. He can be reached at [email protected])
Congress
Mute Manmohan watches as “Coalgate” engulfs Congress from all sides
Vivek Kaul
The Great Fire of Rome started on July 19, 64AD, and burnt for six days. There are several varying accounts of it in history. One of the accounts suggests that Nero the king of Rome watched the fire destroy the city, from one of Rome’s many hills, while singing and playing the lyre, a stringed musical instrument.
India these days has its own Nero, Prime Minister Manmohan Singh. As the Congress led United Progressive Alliance (UPA) government gets engulfed in the coal-gate scam, Manmohan Singh has largely been a silent spectator watching from the stands and seeing his government being engulfed by the coal fire.
And this is not the first time. Manmohan Singh has largely been a bystander at the helm of what is turning out to be probably the most corrupt government that India has ever seen. As TN Ninan, one of the most respected business editors in the country, recently wrote in the Business Standard “Corruption silenced telecom, it froze orders for defence equipment, it flared up over gas, and now it might black out the mining and power sectors. Manmohan Singh’s fatal flaw — his willingness to tolerate corruption all around him while keeping his own hands clean — has led us into a cul de sac , with the country able to neither tolerate rampant corruption nor root it out.”
Manmohan Singh like Nero before him has been watching as institutionalised corruption burns India. The biggest of these scams has been termed “coal-gate” by the Indian media. The Comptroller and the Auditor General (CAG) of India put the losses on account of this scam at a whopping Rs 1,86,000 crore.
The background
The Planning Commission of India had estimated that the raw demand for coal in the year 2011-2012 will be at around 696 million tonnes. Of this 554 million tonnes was expected to be produced in the country by Coal India, Singareni Collieries and a host of other small companies. The remaining was expected to be met through imports.
Production of coal in 2011-2012 in million tonnes
Company Target Achievement
Coal India 447 436
Singareni Collieries 51 52
Others 56 52
Total 554 540
Source: Provisional Coal Statistics 2011-2012, Coal Controller Organisation, Ministry of Coal
As can be seen from the table above the actual production of coal at 540 million tonnes was a little less than the target. This was an increase of 1.3% over the previous year. Also since the actual demand for coal was significantly higher than the actual production, India had to import a lot of coal during the course of the year. Estimates made by the Coal Controller Organisation suggest that the country imported around 99million tonnes of coal in 2011-2012. The Planning Commission had expected around 137million tonnes to be imported in the year. So the Coal Controller’s estimate for coal imports is significantly lower than that. Also the increasing iport of coal is not a one off trend.
Coal Imports In Million tonnes In Rupees crore
1999-2000 19.7 3548
2000-2001 20.9 4053
2001-2002 20.5 4536
2002-2003 23.3 5028
2003-2004 21.7 5009
2004-2005 29 10266
2005-2006 38.6 14910
2006-2007 43.1 16689
2007-2008 49.8 20738
2008-2009 59 41341
2009-2010 73.3 39180
2010-2011 68.9 41550
2011-2012 98.9 45723*
*from April-Oct 2011
Source: Provisional Coal Statistics 2011-2012, Coal Control Organisation, Ministry of Coal
As the above table suggests India has been importing more and more coal since the turn of the century. A major reason for this has been the inability of the government owned Coal India, which is the largest producer of coal in the country, to increase production at a faster rate. Between 2004-2005 and 2011-2012 the company managed to increase its production by just 65million tonnes to 436million tonnes, an absolute increase of around 17.5%. The import of coal went up by a massive 241% to around 99 million tonnes, during the same period.
In fact, to its credit, the government of India realised the inability of the country to produce enough coal in the early 1990s. The Coal Mines (Nationalisation) Act 1973 was amended with effect from June 9, 1973, to allow the government to give away coal blocks for free for captive use of coal. The Economic Survey for 1994-95 points out the reason behind the decision: “In order to encourage private sector investment in the coal sector, the Coal Mines (Nationalisation) Act, 1973 was amended with effect from June 9, 1993 for operation of captive coal mines by companies engaged in the production of iron and steel, power generation and washing of coal in the private sector.”
The total coal production in the country in 1993-94 stood at 246.04million tonnes having grown by 3.3% from 1992-93. The government understood that the production was not going to increase at a faster rate anytime soon because the newer projects were having time delays and cost overruns. As the 1994-95 economic survey put it “As on December 31,1994, out of 71 projects under implementation in the coal sector, 22 projects are bedeviled by time and cost over-runs. On an average, the time overrun per project is about 38months.There is urgent need to improve project implementation in the coal sector”.
The last few years
The idea of giving away coal blocks for free was to encourage investment in coal by companies which were dependant on coal as an input. This included companies producing power, iron and steel and cement. Since the government couldn’t produce enough coal to meet their needs, the companies would be allowed to produce coal to meet their own needs by giving them coal blocks for free.
While the policy to give away coal blocks has been in place since 1993, it didn’t really take off till the mid 2000s. Between 1993 and 2003, the government gave away 39 coal blocks free to private companies as well as government owned companies. 20 out of the 39 blocks were allocated in 2003.
In the year 2004, the government gave away four blocks. But these were big blocks with the total geological reserves of coal amounting to 2143.5million tonnes. After this the floodgates really opened up and between 2005 and 2009, 149 coal blocks were given away for free.
Year Number of mines Geological Reserves (in million tonns)
2004 4 2143.5
2005 21 3174.3
2006 47 14424.8
2007 45 10585.8
2008 21 3423.5
2009 15 6549.2
153 40301.1
Source: Provisional Coal Statistics 2011-2012, Coal Control Organisation, Ministry of Coal
The above table makes for a very interesting reading. Between 2004 and 2009, the government of India gave away 153 coal blocks with geological reserves amounting to a little more than 40billion tonnes for free. Estimates made by the Geological Survey of India suggest that India has 293.5billon tonnes of coal reserves. This implies that the government gave away 13.7% of India’s coal reserves for free in a period of just five years.
The Congress led United Progressive Alliance was in power for most of this period with Manmohan Singh having been sworn in as the Prime Minister in May 2004. Interestingly, things reached their peak between 2006 and 2009, when the Prime Minister was also the Minister for Coal. During this period 128 coal blocks with geological reserves amounting to around 35billion tonnes were given away for free. But giving away the coal blocks for free did not solve any problem. As per the report prepared the Comptroller and Auditor General of India, as on March 31, 2011, eighty six of these blocks were supposed to produce around 73million tonnes of coal. Only 28 blocks have started production and their total production has been around 34.6million tonnes, as on March 31,2011.
The CAG and the losses
As is clearly explained above the Manmohan Singh led UPA government gave away around 14% of nation’s coal reserves away for free. Nevertheless, several senior leaders of the Congress party have told the nation that there have been no losses on account of the coal blocks being given away for free, primarily because very little coal was being produced from these blocks.
P Chidamabaram, the finance minister recently said “If coal is not mined, where is the loss? The loss will only occur if coal is sold at a certain price or undervalued.” Digvijaya Singh, a senior Congress leader targeted Vinod Rai, the Comptroller and Auditor General. Singh told The Indian Express that “the way the CAG is going, it is clear he(i.e. Vinod Rai) has political ambitions like TN Chaturvedi (a former CAG who later joined the BJP). He has been giving notional and fictional figures that have no relevance to facts. How has he computed these figures? He is talking through his hat.”
This is sheer nonsense to say the least and anyone who understands how CAG arrived at the loss number of Rs 1,86,000 crore wouldn’t say so.
The CAG reasonably assumed that the coal mined from the coal blocks given away for free could have been sold at a certain price in the market. Since the government gave away the blocks for free it lost that opportunity. This lost opportunity is what CAG has tried to quantify in terms of a number.
While calculating the loss the CAG did not take into account the coal blocks given to the government companies. Only blocks given to private companies were taken into account. Further only open cast mines were included in calculating the loss. Underground mines were not taken into account.
Also, the total coal available in a block is referred to as geological reserve. Due to several reasons including those of safely, the entire geological reserve cannot be mined. The portion that can be mined is referred to as extractable reserve. The extractable reserves for the blocks (after ignoring the blocks owned by government companies and underground mines) came to 6282.5million tonnes. This is equivalent to more than 14 times the annual production of Coal India Ltd.
The government could have sold this coal at a certain price. Also mining this coal would have involved a certain cost. The CAG first calculated the average sale price for all grades of coal sold by Coal India in 2010-2011. This came to Rs 1028.42 per tonne. Then it calculated the average cost of production for all grades of coal for the same period. This came at Rs 583.01. Other than this there was a financing cost of Rs 150 per tonne which was taken into account, as advised by the Ministry of Coal. Hence a benefit of Rs 295.41 per tonne of coal was arrived at (Rs 1028.42 – Rs 583.01 – Rs 150). The losses were thus estimated to be at Rs 1,85,591.33 crore (Rs 295.41 x 6282.5million tonnes) or around Rs 1.86lakh crore, by the CAG.
Chidambaram and Singh were basically trying to confuse us by mixing two issues here. One is the fact that the government gave away the blocks for free. And another is the inability of the companies who got these blocks to start mining coal. Just because these companies haven’t been able to mine coal doesn’t mean that the government of India did not face a loss by giving away the mines for free.
What are the problems with the CAG’s loss calculation?
The problem with CAG’s loss calculation is that it doesn’t take into account the time value of money. The government wouldn’t have been able to sell all the coal all at once. It would have only been able to do so over a period of time. The CAG doesn’t take this into account. Ideally, it should have assumed that the government earns this revenue over a certain number of years and then discounted those revenues to arrive at a present value for the losses.
This goes against the government. But there are several assumptions that favour the government. The coal blocks given away free to government companies aren’t taken into account. The transaction of handing over a coal block was between two arms of the government. The ministry of coal and a government owned public sector company (like NTPC). In the past when such transactions have happened the profit earned from such transactions have been recognised. A very good example is when the government forces the Life Insurance Corporation (LIC) of India to buy shares of public sector companies to meet its disinvestment target. One arm of the government (LIC) is buying shares of another arm of the government (for eg: ONGC). And the money received by the government is recognised as revenue in the annual financial statement. So when revenues for transactions between two arms of the government are recognised so should losses. Around half of the coal blocks were given to government owned companies.
Also, the price at which Coal India sells coal to companies it has an agreement with, is the lowest in the market. It is not linked to the international price of coal. The price of coal that is auctioned by Coal India is much higher than its normal price. As the CAG points out in its report on the ultra mega power project, the average price of coal sold by Coal India through e-auction in 2010-2011 was Rs 1782 per tonne. The average price of imported coal in November 2009 was Rs 2874 per tonne (calculated by the CAG based on NTPC data). The CAG did not take into account these prices. It took into account the lowest price of Rs 1028.42 per tonne, which was the average Coal India price.
Let’s run some numbers to try and understand what kind of losses CAG could have come up with if it wanted to. At a price of Rs 1,782, the profit per tonne would have been Rs 1050 (Rs 1782-Rs 583.01- Rs 150). If this number had been used the losses would have amounted to Rs6.6lakh crore.
At a price of Rs 2874 per tonne, the profit per tonne would have been Rs 2142(Rs 2874 – Rs 583.01 – Rs 150). If this number had been used the losses would have been Rs 13.5lakh crore. This number is a little more than the Rs 13.18 lakh crore expenditure that the government of India incurred in 2011-2012.
So there are weaknesses in the CAG’s calculation of the losses on account of coal blocks being given away free. But these weaknesses work in both the directions. The bottomline though is that the country has suffered a big loss, though the quantum of the loss is debatable.
To conclude
News reports suggest that several Congress politicians have benefitted from the coal blocks being given away for free. The companies which got coal blocks haven’t been able to produce coal. The government hasn’t been able to invoke the bank guarantees of the companies for the delay in producing coal. This is because of a flaw in the allocation letters. As the Business Standard reports “There is a technical flaw in the format of the allocation letters. As per the letters, the government can invoke the bank guarantee clause only in cases of less production, and not nil production.” Some companies have started selling power in the open market. This power is being produced from the coal they mined out of the coal blocks they got free from the government.
The situation has all the facets of turning into a big mess like the previous scams under the Congress led UPA regime. And like the previous scams, it is likely to be swept under the carpet as well. Despite all this, the Prime Minister Manmohan Singh will continue to be a mute spectator to all this, keeping the chair warm till Rahul Gandhi is ready to take over. I would be glad to be proven otherwise.
(The article originally appeared in The Seasonal Magazine on September 12,2012. http://www.seasonalmagazine.com/2012/09/mute-manmohan-watches-as-coalgate.html)
(Vivek Kaul is a writer and can be reached at [email protected])
All you wanted to know about the COAL SCAM but didn't know where to ask…
Vivek Kaul
What is the basic issue?
Between 1993 and 2011, the government of India gave away 206 coal blocks for free to government and private companies.
So if these blocks were being given away free from 1993, why so much commotion now?
The Comptroller and Regulator General(CAG) in a recent report estimated that the losses due to the policy of the government giving out coal blocks for free, amounted to Rs 1.86lakh crore.
Why is the Congress led UPA government being blamed if the policy started in 1993?
Estimates made by stock brokerage CLSA suggest that only 41 out of the 206 blocks given away for free, were allocated before the end of 2003. This means that 165 blocks were allocated between 2004 and 2011. The Congress led UPA government has been in power since May 2004. This amounts to nearly 14% Hence, a major number of coal blocks were given away free during the UPA rule.
And how is Prime Minister(PM) Manmohan Singh involved in all this?
The PM also happened to be the coal minister between 2006 and 2009. During this period 134 coal blocks were given away for free. Estimates made by Nomura Equity Research suggest that between 2006 and 2009 the coal blocks given away for free had geological reserves of around 40 billion tonnes. India has around 286billion tonnes of geological reserves of coal. This means that around 14% of total geological reserves of coal was given away free during the period Manmohan Singh was the coal minister.
What was the purported reason for giving the coal blocks for free?
This was done in order to increase the total coal production in the country. The government owned Coal India Ltd which accounts for 80% of the total coal production in the country hasn’t been able to produce enough to meet the growing energy needs of the country. Between April 1, 2004 and March 31, 2012, the production of coal by Coal India has increased by just 65million tonnes to 436million tonnes. This means a growth of a mere 2.3% per year on an average.
What is the reasoning behind CAG coming up with the Rs 1.86lakh crore number?
The CAG reasonably assumed that the coal mined from the coal blocks given away for free could have been sold at a certain price in the market. Since the government gave away the blocks for free it lost that opportunity. This lost opportunity is what CAG has tried to quantify in terms of a number.
So what were the assumptions that the CAG worked with?
While calculating the loss the CAG did not take into account the coal blocks given to the government companies. Only blocks given to private companies were taken into account. Further only open cast mines were included in calculating the loss. Underground mines were not taken into account.
How were the numbers worked out?
The total coal available in a block is referred to as geological reserve. Due to several reasons including those of safely, the entire geological reserve cannot be mined. The portion that can be mined is referred to as extractable reserve. The extractable reserves for the blocks (after ignoring the blocks owned by government companies and underground mines) came to 6282.5million tonnes. This is equivalent to more than 14 times the annual production of Coal India Ltd. And this is the amount of coal the government would have been able to sell if it had not given the blocks away for free to private companies.
But that’s just coal in tonnes, how did CAG arrive at a loss of Rs 1.86 lakh crore?
The government gave away 6282.5million tonnes of coal for free. It could have sold it at a certain price. Also mining this coal would have involved a certain cost. The CAG first calculated the average sale price for all grades of coal sold by Coal India in 2010-2011. This came to Rs 1028.42 per tonne. Then it calculated the average cost of production for all grades of coal for the same period. This came at Rs 583.01. Other than this there was a financing cost of Rs 150 per tonne which was taken into account, as advised by the Ministry of Coal. Hence a benefit of Rs 295.41 per tonne of coal was arrived at (Rs 1028.42 – Rs 583.01 – Rs 150).
The losses were thus estimated to be at Rs 1,85,591.33 crore (Rs 295.41 x 6282.5million tonnes) or around Rs 1.86lakh crore, by the CAG.
But isn’t Rs 1.86 lakh crore a very big number?
Yes it is a very big number. But still a conservative estimate. The CAG does not take into account the losses on account of blocks given away free to government companies. As I had mentioned on an earlier occasion in this newspaper, the transaction of handing over a coal block was between two arms of the government. The ministry of coal and a government owned public sector company (like NTPC). In the past when such transactions have happened revenue earned from such transactions have been recognized. A very good example is when the government forces the Life Insurance Corporation (LIC) of India to buy shares of public sector companies to meet its disinvestment target. One arm of the government (LIC) is buying shares of another arm of the government (for eg: ONGC). And the money received by the government is recognized as revenue in the annual financial statement. So when revenues for transactions between two arms of the government are recognized so should losses. Hence, the entire idea of the CAG not taking losses on account of coal blocks given to pubic sector companies does not make sense. If they had recognised these losses as well, losses would have been greater than Rs 1.86lakh crore.
So this number could have been bigger?
Yes. The other point to remember here is that the CAG had assumed extractable reserves of a conservative 73% in case of mines were mine plans were not available. Typically extractable reserves are around 80-95% of geological reserves. The CAG has also been very conservative in calculating the benefit per tonne of coal by taking the average price of coal sold by Coal India Ltd. This price is typically the lowest in the market. Coal from other sources is very expensive. Coal India also sells coal through an e-auction. The price of coal sold through this route is higher than the normal Coal India price. As the CAG has pointed out in its performance audit of ultra-mega power projects, the average e-auction price for Coal India coal was Rs 1782 per tonne in 2010-2011. Imported coal sells at an even higher price. The landed cost of imported coal was Rs 2874 per tonne (based on NTPC data for November 2009), reports CAG. If these prices had been taken into account or a weighted average price would have been created using these prices as well as the average Coal India price of Rs 1028.42 per tonne, the loss number would have been higher than Rs 1.86lakh crore.
If all this is true, so what was that Chidambaram said about zero losses?
The union Finance Minister P Chidambaram wanted us to believe that almost all companies which have been given free coal blocks have not started to mine coal till date. Hence there are no losses. This is like saying that I gave away my house for free, but since the person I gave it away to is not able to sell it, hence I did not face any losses.
What about the argument that coal is a natural resource and hence should not be auctioned?
People who have come up with this argument also need to realize that coal like air is not an unlimited natural resource. So air need not be priced because it is unlimited, but coal needs to be priced because it is limited. And if that had not been the case the government would be giving away all the coal that Coal India produces for free.
(The article originally appeared in the Daily News and Analysis on September 3,2012. http://www.dnaindia.com/india/report_all-you-wanted-to-know-about-the-coal-scam_1735936))
Vivek Kaul is a writer and can be reached at [email protected]
Ek Thi Tigress: Why Mamata tilts at every windmill
Vivek Kaul
“Mamata Banerjee ko gussa kyon aata?” is an intriguing question.
Why does she brand people who tend to disagree with her as Communists and Maoists? Very recently Shiladitya Chowdhury was arrested under non-bailable sections when he questioned the West Bengal government’s policy farmers during a rally being addressed by Banerjee. As The Hindu reported “Eyewitnesses said that Ms Banerjee was heard giving directions to isolate him from the crowd, referring to him as a “Maoist.””
A few months back she had called some students “Maoists” after they had asked her uncomfortable questions during a television interaction organised by CNN IBN. “I must tell you that you are CPI(M) cadres, Maoist cadres … I cannot reply to CPI(M) questions,” Banerjee had said on that occasion before she walked out of programme. This happened in May.
A little earlier in April Ambikesh Mohapatra, a professor at Jadhavpur University had been arrested for posting cartoons of Mamata Banerjee on the internet. “They don’t do any work but think of ways to frame me,” Banerjee had said justifying the arrest and alluding to the CPI(M) being behind the cartoons.
And now she has taken on the judicial system in this country. On the occasion of the platinum jubilee celebrations of the West Bengal assembly she recently said “at times favourable verdicts are given in return for money. There are instances when judgments have been purchased. There is corruption among a section of the judiciary. I know there can be a case against me for saying this. But this must be said and I am ready to go to jail for saying so.”
Now why does the Chief Minister whose alliance has 227 out of the 294 seats in the state assembly want to go to jail? Even if we were to leave out 43 seats which belong to the other alliance partners, her party, the All India Trinamool Congress has 184 seats in the assembly.
Why does the Chief Minister of a state whose party has absolute majority in the assembly, bother about small dissent so much so that it forces her to label the dissenters as Communists and Maoists?
The answers to all these questions lie in the 42 years that she has spent in politics.
Mamata Banerjee entered politics in 1970. As Monobina Gupta writes in Didi – A Political Biography “As an undergraduate in Kolkata’s Jogmaya Devi College, she became active in Chhatra Parishad, the Congress’s student wing. The college union was then controlled by the Democratic Socialist Organisation(DSO), students wing of the Socialist Unity Centre of India (SUCI)…Her dogged fight against the DSO drew the attention of some Congress leaders, even though she did not known them personally then.”
By the late 1970s Mamata was at the forefront of the protests happening in Kolkata (then Calcutta). “Mamata was out on Kolkata’s streets defending Indira Gandhi after the latter lost the parliamentary elections…From waving black flags at the then prime minister Moraji Desai on his visit to Kolkata to getting into a bloody fight with the Left student activists in Ashutosh College, she was gaining a reputation for being a strong combatant of the CPI-M,” writes Gupta.
Mamatas big stroke of luck came before the 1984 Lok Sabha elections. Indira Gandhi had asked Mamata’s then mentor and Congress legislator Subrata Mukherjee to find a suitable woman candidate. As Mukherjee tells Gupta in her book Didi– A Political Biography “The elections were approaching. Indira ji suddenly asked me to find a woman candidate. The Congress was in a bad shape. Finding a woman candidate was a tough job. I suggested Mamata’s name, and she got her nomination from the Jadhavpur constituency.”
Indira Gandhi was killed by her bodyguards Beant Singh and Satwant Singh on October 31, 1984. In the sympathy wave that followed, Mamata Banerjee won, becoming a Lok Sabha member at a young age of 29. She defeated CPI(M) stalwart Somnath Chatterjee. The Congress party won 16 out of the 42 Lok Sabha seats in West Bengal.
This was enough to rattle the CPI(M) led ruling Left Front government . It unleashed violence across the state and attacked Congress workers. “This was the scene Mamata entered flush with the success of her maiden electoral victory…She had courted danger right from her days as a student activist. The first in a series of trips Mamata made in this period as to Magrahat in South 24 Parganas, where a Congress worker was brutally murdered and his wife gang-raped by alleged antisocials backed by the CPI-M. Media reports spoke of the horror of the incident – the assailants ‘playing football’ with the murdered worker’s severed head. Mamata’s visit and her meeting with the family of the deceased made front page news,” writes Gupta.
Her confrontation with CPI-M continued in the years to come. In August 1990, the Kolkata police was following her 24×7 relaying her activities to the higher ups. On August 16,1990, Mamata Banerjee stepped out of her Kalighat residence and walked towards Hazra junction to be a part of the procession she had called for. The atmosphere was tense and Mamata was attacked. As Gupta writes “The attackers had come prepared. Swinging his stick, Laloo Alam, a CPI-M worker, hit Mamata hard on her head, she (i.e. Mamata) writes in her memoirs. ‘The right side of my head (just a hairline away from where the brain is) had cracked open and I was bleeding profusely. I was still undeterred…When I saw them getting ready to hit me on the head with an iron rod, strangely in that grave circumstance, I covered my head with my hand,’ Mamata narrates.”
Covering her head with hand nullified the impact of the blow on her head, and broke her wrist. Over the next few days Mamata was at a nursing home fighting for her life. She survived and thus started the second phase of her political career. It took her 21years more to beat the Left Front and form her government in West Bengal. Along the way she quit the Congress party and formed her own party, the Trinamool Congress.
Mamata Banerjee was a leader of agitations who became the Chief Minister of West Bengal on May 20,2011. All the agitations over the years ensured that confrontation became an integral part of Mamata Banerjee’s career and her nature. As Nilanjan Mukhopadhyay writes at www.asiancorrespondent.com “The bottom line is that as a leader of agitations you require to be spontaneous and have the ability to cock a snook at your adversary.” (you can read the complete column here)
This is a trait that has become in-built in her and explains to a large extent why she has been spontaneously branding her dissenters as communists and Maoists. The aggression that came out in all the protests, dharnas and bands she called for against the CPI-M, still needs to come keep coming out, but in other ways. That explains to a large extent why she is hell bent on shooting herself in the foot and is needlessly taking on the judicial system by calling it corrupt.
What also does not help is the fact that she sees herself as having been betrayed time and again. “Much of the excess of Mamata’s emotional rhetoric stems from a lifelong sense of betrayal. The hurt and anger run through most of her writings. In school, the classmates she helped stabbed her in the back; the party she grew up ruined her chances of routing the CPI-M by striking undercover electoral quid pro quo deals with the communists,” writes Gupta. She concludes that all this has led to a situation where Mamata Banerjee is “haunted by a constant apprehension of persecution and conspiracy.”
Hence, this is a major reason where even a hint of dissent gets labeled as a communist or a Maoist conspiracy.
The traits that Mamata had developed over the years held her in good stead as she fought the CPI-M rule in West Bengal. And those are the traits that she can’t seem to get rid off now. As Mukhopadhyay puts it “I have long maintained among friends that she is the Uma Bharti of West Bengal. Meaning, both – and they are inherently well-meaning leaders – can lead an agitation to its logical culmination but cannot govern in their wildest dreams. In politics you require the chutzpah to ensure that the government – or people in authority – of the day bend before your agitation. But in governance you are required to listen, think, put one against another and act.”
“In governance you need to be routine (diligent if you prefer this word), ensure that the horse comes before the cart (meaning systems are followed) and above all grant the others, the right to disagree with you and agitate if they wish to exercise their democratic right,” Mukhopadhyay adds.
But this is easier said than done because for this to happen Mamata Banerjee will have to stop being Mamata Banerjee.
To conclude, let me put it this way. Salman Khan has been labeled a tiger only in reel life. Mamata Banerjee has been a tigress in real life. But its time she stopped being one because it’s hurting her more now, than ever before.
(The article originally appeared on www.firstpost.com on August 17,2012. http://www.firstpost.com/politics/ek-thi-tigress-why-mamata-tilts-at-every-windmill-420914.html)
(Vivek Kaul is a writer and can be reached at [email protected])
Media and the art of misreading LK Advani’s blogpost
Vivek Kaul
Sunday evenings are normally difficult days for newspaper editors. There is not much happening politically. Businesses are shut and so is the government.
So unless there is a rail mishap somewhere or India happens to win bronze medal at the Olympics, bringing out the Monday edition is a major challenge in comparison to most other days.
Unless, someone like LK Advani happens to write a blog which smells of the foot in the mouth disease, and can be read between the lines.
Newspapers have gone to town highlighting that Advani has conceded to the possibility of a non BJP-non Congress government emerging after the 2014 Lok Sabha elections. “A non-Congress, non-BJP Prime Minister heading a government supported by one of these two principal parties is however feasible,” wrote Advani. This has become the headline point.
But the truth is a little more complicated than that. The word to mark in Advani’s statement is “however”. The context in which he uses the word however has been missed out by the newspapers while reporting on the blog.
Advani starts the blog with an informal chat he had had with two Senior Cabinet Ministers in the current United Progressive Alliance at a dinner hosted by the Prime Minister(PM) Manmohan Singh, for the outgoing President Pratibha Patil.
As he writes “In an informal chat with two senior Cabinet Ministers belonging to the Congress party before the formal dinner, I could clearly perceive an intense sense of concern weighing on the minds of both these Ministers. Their apprehensions were as follows: a) In the Sixteenth Elections to the Lok Sabha, neither the Congress nor the BJP may be able to forge an alliance which has a clear majority in the Lok Sabha. b) In 2013 or 2014, therefore, whenever the Lok Sabha elections take place, the Government likely to take shape can be that of the Third Front. This, according to the Congress Ministers would be extremely harmful not only for the stability of Indian politics but also for national interests.”
The blog then goes on to address the concerns of these Congress ministers. “My response to the anxiety voiced by these Congressmen was: I can understand your concern, but I do not share it. My own view is: i) The shape which national polity has acquired in the past two and a half decades makes it practically impossible for any government to be formed in New Delhi which does not have the support either of the Congress or of the BJP. A third Front Government, therefore, can be ruled out. ii) A non-Congress, non-BJP Prime Minister heading a government supported by one of these two principal parties is however feasible. This has happened in the past also. But, as the Prime Ministership of Ch. Charan Singh, Chandrashekharji, Deve Gowdaji and Inder Kumar ji Gujral (all supported by Congress) as also of Vishwanath Pratap Singhji (supported by BJP) have shown, such governments have never lasted long.”
Essentially Advani is saying three things in a very direct way. The first and foremost is that the Congress is worried after having been in power for nearly eight years at a stretch. The second thing is that he does not expect the third front to come to power, as a certain section of experts has been widely speculating. The third and the most important point is that no government in the country can be formed without the support of either the Congress or the BJP. Hence even if the Congress or the BJP do not form the government they will run the government. Given this, such a government is not expected to last long.
While Advani has said that a non-BJP non-Congress PM can emerge in the 2014 Lok Sabha election, he has also said that such a PM cannot last long as has been the case in the past. This is a very important point that has been missed out on by the media while reporting on the blog and thus creating an incomplete picture.
As expected the Congress leaders are shouting from the rooftops that Advani has already accepted defeat. “Advani has conceded defeat by saying that there can’t be a BJP prime minister in 2014. It means he has conceded defeat… After this blog, how will a BJP candidate win?” said ex journalist and now BCCI office bearer and Congress leader, Rajiv Shukla.
That feeling does not come out anywhere through a proper reading of the blog. In fact Advani clearly says that “it may be the first time when the Congress Party’s score sinks to just two digits, that is, less than one hundred!” Whether that happens or not remains to be seen, but the statement does make it clear that Advani hasn’t accepted defeat in any sort of way.
Shukla’s statement should also be seen in light of the fact that Advani attacked the Gandhi family in his blog. As he wrote “The party’s (the Congress party) miserable performance in Rae Bareilly, Amethi etc. which have long been regarded as pocket-boroughs of the first family, in the U.P. Assembly polls held recently and its dismal record in the Corporation elections of Uttar Pradesh where as against the BJP’s score of ten out of twelve Corporations, the Congress drew a big blank are clear indices of the party’s collapsing fortunes.”
The main job of any spokesperson of the Congress party is to keep the flag flying for the Gandhi family and that’s what Shukla was basically doing.
Another cocktail party theory going around is that Advani has basically used the blog to make a veiled attack at his own party, the Bhartiya Janta Party (BJP), and the senior leaders who are busy projecting Narendra Modi as the party’s Prime Ministerial candidate for the 2012 elections. The logic being that Narendra Modi cannot lead the BJP to a win in the Lok Sabha elections and so he (i.e. Advani) still remains the right candidate, his age notwithstanding.
Now that is something only Advani himself can throw light on and we can only make speculations on the same.
To conclude, let me throw in some lines from a popular reggae song called “Games People Play” first released in 1994 and sung by this group called Inner Circle. As the lines go:
All the games people play now,
Every night and every day now,
Never meaning what they say, yeah,
Never say what they mean.
Politicians are a tad like that.
(The article originally appeared on www.firstpost.com on August 6,2012. http://www.firstpost.com/politics/media-and-the-art-of-misreading-lk-advanis-blogpost-406759.html)
(Vivek Kaul is a writer and can be reached at [email protected])