The coal block verdict, a new law and the concerns ahead

Pratim Ranjan Bose

The picture isn't quite clear.

Four months is too early to asses a government, especially the one that has shown sufficient enthusiasm to bring the growth momentum back.

Yet, the recent course of events following cancellation of 204 captive coal block allotments, by the Supreme Court of India, leaves some doubt about the intentions of the Narendra Modi government.

The coal block verdict

In a two-part judgement (August 25 and September 24 ) the apex court held that:

(a) The government arbitrarily allotted assets to the private sector (captive dispensation or screening committee route) since 1993. All such allotments stands cancelled with effect from April 1, 2015.

(b) Commercial mining by State or provincial government-run companies was contrary to the provisions of Coal Mines (Nationalisation) Act 1973. Also, the prevailing practice of State-owned companies transferring ownership of mineral assets to private miners, through joint ventures, was ‘illegal’.

The net result: All but two allocations, in government sector, are cancelled.

(c) The de-allocated captive miners – either in private or the State sector – are asked to refund the government Rs 295 for every tonne of mineral extracted from these assets.

Taking a leaf from the milestone report by the Comptroller and Auditor General of India (CAG) in 2012, the court held that this is the windfall gain pocketed by the private sector captive miners or passed on them by the State sector through JVs.

Justice prevailed

There are couple of issues with the actions taken on coal block allotment scandal, so far.

Penalties were imposed rather arbitrarily. Even the court was aware of it. But it failed to probe the issue in detail as the government was insisting on early resolution to the impasse. 

More importantly, the political class remained unpunished for flouting rules (in connivance with the industry) and creating such a mess.

We have seen India’s IT minister landing up in jail in 2G-scam. Can’t we expect the same treatment to the culprits of the Coalgate scandal? 

True, a CBI enquiry is on, to take the conspirators to task. But, it is not yet clear if the investigators are out there to nab the culprits or to protect them?  

Limitations apart, there is no denying that the verdict (and the series of verdicts over last couple of years), is a watershed. It sent a shock wave to the unholy nexus between India’s highly corrupt political class and crony capitalists.

I rejoiced the judgement.

New laws for what?

It was now the job of the government to ensure transparent distribution of captive resources, and bring the economy back on the rails.

The government responded by framing a new law – The Coal Mines (Special Provisions) Ordinance, 2014 - on October 21. 

An ordinance is a law, enacted by the government without prior discussion (or permission) in the Parliament.

The government cannot be faulted for this emergency measure, as it had only six months to settle the issue, before the existing captive miners are forced to stop operations. 

But why should the new act challenge the exclusive domain of State in commercial mining of coal? Section 4(2)(b) of the new act clearly gives the government administrative power to offer blocks to any company for commercial exploitation.

On behalf of the Modi government, the finance minister Arun Jaitley described it as an enabling provision but, not for immediate use. 

But that hardly answers the question.

The issue is not merely about liberalisation of the coal sector – no matter, how debatable the issue is. The concern is if the government is attempting privatisation of the sector through the backdoor.

A bill to open up the coal sector is pending at the upper house (Rajya Sabha, the council of states) of the Parliament since 2000. The government had the option to deal with the issue separately. It didn't.

Incidentally, despite winning the 2014 generation election with a thumping margin, Narendra Modi’s BJP is a minority in the Rajya Sabha.

Evidently the government is trying to first create a case, avoiding public debate, and hoping to achieve ‘political consensus’, by the time the Ordinance comes up for discussion in the Parliament.

How the government achieves this goal, is yet to be seen. Will they try to win over the Opposition by debating the issue on the floor of the Parliament or by striking political deals by pushing its opponents on the back foot, as has been the practice for last couple of decades?

I don’t have ready answer to these questions. But a couple of issues are intriguing.

Tricky issues

One such issue is the deafening silence about the fate of industries worth billions of dollars earned in the past, through allotment of captive resources that were unlawfully awarded by the government.

The Supreme Court verdict created space for transferring the assets to the national miner, with an underlying clause to ensure supply of fuel to the linked industries. The government didn’t exercise the option.

The ordinance also offered scope for transferring assets to the concerned state-level miners for due supplies to the affected industries. But, if the country’s coal secretary is to be believed, this option is not considered either. 

The impasse will surely hit the industrialisation agenda of coal rich states – especially Odisha, West Bengal, Jharkhand, Chhatishgarh and MP – which counted on availability of fuel to attract industries.

Many will love to believe that the Narendra Modi government will use the opportunity to corner its political opponents in two large coal-bearing states – Odisha and West Bengal.

This is of course not the only possibility.

A couple (3 to 4) business groups cornered nearly 15 per cent of the assets distributed by the former Congress-led UPA (2004-2014), to private sector, without competitive bidding.

One of such groups, led by a Congressman, today contributes a lion’s share of the captive production and is probably the single largest investor in linked end-use plants, during the last decade. A majority of this investments went to Odisha.

With the change of guard in Delhi, this group is now accused of many irregularities.

Heard it through the grapevine, the government is not keen to offer them an easy lifeline, by announcing a programme to rescue the captive mine operators.

The same old vindictive politics?

There is little doubt that the guilty should be booked. The nation is tired of watching business-politics nexus looting its resources.

But, it is also true that the nation is sick of vindictive politics that puts political agenda ahead of the growth and development.

The UPA government, for example, was tough against a business group (which is also accused of irregularities) that made the most of the disinvestment programme of the previous BJP-led NDA regime (1998-2004).

The situation went to such a passé that top congress leaders were found openly raising concerns against a multi-billion dollar project pursued by the group, in Odisha.

Hopefully, the Prime Minister Narendra Modi will free the nation from the legacy of vindictive politics.

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(Disclaimer: Graphics are collected from the web. Will be removed in case of any objection)

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B2B relationships hold key for optimisation of Indo-Bangla economic ties

(The following post is a reproduction of my guest article in October 19, 2014, issue of the FirstNews, Dhaka )  

Pratim Ranjan Bose 

The small island nation of Taiwan (Republic of China) was separated from mainland China (People’s Republic of China) in 1949.

And, since then the political relationship between democratically elected leadership at Taipei and a totalitarian regime in Beijing remained sore.

The mutual distrust was evident in August, when the Taiwanese President sacked a senior minister, who was negotiating free trade agreement (FTA) with Beijing, describing him as a “spy of China”.

Such frivolous allegations should have stalled trade talks for years, in the Indian subcontinent. But, this week, China and Taiwan were back to the negotiation table.

The reason lies in business-to-business (B2B) relation. The industries in two nations are so integrated that China’s exports to Europe are often dependent on imports from Taiwan.

This is definitely not the ideal ground for political acrobatics.

Lack of B2B initiative

 

The argument holds good in explaining India’s improving economic ties with neighbouring China.

Politically there are many differences between these two rivalling superstars of Asia. But, the business in either nation is integrated. And that ensures that no one will rock the boat.

But, why such B2B relations do not flourish between next door neighbours India and Bangladesh, which were part of the same nation till 1947, and share the longest land-border with each other?

The question is intriguing.

Officially, Bangladesh was liberalised in 1982, a decade before India opened up its economy in 1991. Ideally this should have changed the dynamics of business-politics relationship in the region, over the last quarter of a century.

The change is visible in India. While business now has greater say on the country’s politics, either in domestic or international arena; the growing pressure from voters has also forced the politics to pay heed to economic realities.

The changing economic environment is reflected in India’s drastic one-sided reduction in tariff barriers between 2007 and 2011. The reduction is so sharp, that India hardly has any negative list of imports from Bangladesh.

Politically there are movements too, from either side.

India offered $ 1 billion line of credit to meet infrastructure gaps in Bangladesh. But what is more significant is Delhi’s decision to sell cheap thermal power to Dhaka.

The electricity - now flowing to Dhaka - is produced on subsidised fuel that was mined displacing Indian citizens and, causing environmental damage both on account of mining as well electricity generation.

To put it straight; the true economic value of this deal is far higher than what Bangladesh pays and, will be paying over years or decades.

I do not mean everything is hunky-dory on political front. But, politically China and Taiwan are not friends, either.

Its true that India is slow in implementing some purely political deals like water sharing agreement or land boundary agreement.

But, it is also true that things are moving in a positive direction. Ganga water is now shared. Tin-Bigha corridor is a reality.

The complex federal structure of India has surely come in the way of faster implementation of some agreements struck in 2011. But, that is perhaps a necessary evil of democracy and, even Barrack Obama is faced with such obstacles from the US Congress.

The point is: Developments since 2007 has surely created an environment for greater economic integration between the two neighbours. Yet, we don’t see much action on B2B front that is the real driver for movement of capital and goods.

As a smaller economy with limited product bouquet, Dhaka surely is not in a position to access the Indian market in a big way. Which means, the trade balance may remain positive in India’s favour (Dhaka has a bigger trade deficit with China), in the foreseeable future.

But Dhaka can turn it to its advantage by inviting Indian capital in setting up shop in Bangladesh, either for sourcing products, or to use it as an a gateway to access other South Asian markets. This will reduce the gap in Dhaka’s overall trade balance and ease balance of payment scenario.

Unfortunately though, things are yet to gain pace in that direction.

Exide Industries, India’s top automotive battery maker, planned a JV in Bangladesh more than a decade ago. A much bigger investment was proposed by Tata Group, one of the largest and most admired Indian conglomerates. Both were called off, for reasons beyond business.

And, that is irrespective of the fact that during this period Indian corporate sector was found investing in large numbers across the world.

Automobile a classic example

A classic example of the missed opportunity is visible in Automobile sector.

India is hub of extremely fuel efficient small car production.

And, Dhaka surely needs small cars to decongest its disastrously slow traffic and put a check on consumption of fuel.  

The economic significance is tremendous. Petroleum products are the single largest import item of both India and Bangladesh. Any savings on fuel therefore is a boon to the economy.

(Dhaka tried to replace demand for petroleum products by subsidised domestic natural gas, as auto-fuel. The policy led to a bigger economic drain.)

Yet, I find automakers in India are hardly enthusiastic about the prospect of Bangladeshi market. They have surely entered there to maintain a footprint. But, the scale is too low to set up even an assembling unit, meaning such cars are now disproportionately costly in Dhaka.

The cost is more disproportionate because Dhaka imposes same import duty on the used cars and new cars. The end result is: Bangladesh has become an importer of large second-hand fuel-inefficient cars, mostly from Japan.

The government is not merely missing the opportunity to help grow domestic auto industry, that is considered a major employment generator, but is probably also earning less on import duty, due to under-invoicing of the second hand cars.

Economics will come first

The distinctive feature of Indo-Bangla economic relation is: Half of it is largely informal in nature.

While the formal trade is estimated at $ 6.6 billion in 2013-14; the actual trade volume is as high as $ 14 billion (Muchkund Dubey, former foreign secretary of India, “Indo-Bangladesh, Economic Relations”, Mainstream, March 23, 2013). The estimates are more or less in line with an ADB report, issued earlier.

The close co-relation between the two sides at the grass root levels can be understood from two specific examples.

The estimated $ 4-5 billion informal cattle trade is a lifeline for Bangladesh’s meat processing and leather industry. Similarly, Indian private healthcare sector earns significant revenue from medical tourists from Bangladesh.

While official records quote an inflow of 10,000-12,000 patients (from Dhaka) a year; unofficial estimates suggest a substantial majority of over 7 lakh Bangladeshi tourists, visiting India annually, avail healthcare facilities.

The aim should be to add legitimacy to this mutual dependence by enhancing the share of the formal trade and encouraging more B2B activities.

***

(Disclaimer: Graphics are collected from the web, may be removed in case of any objection)

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India of our times: The books that brought the skeletons out of the cupboard

Pratim Ranjan Bose

 “Some books should be tasted, some devoured, but only a few should be chewed and digested thoroughly.” ― Francis Bacon

Writing memoirs with explosive “stories” is an established trend in the West for many years now. 

The wave has hit the Indian shores, in 2014. 

The list includes some high-profile names – from Sanjaya Baru, celebrity editor and media adviser to the former Prime Minister Manmohan Singh between 2004 and 2008, former bureaucrat P C Parakh, career diplomat-turned-politician K Natwar Singh to former CAG Vinod Rai.

Baru’s The Accidental Prime Minister: Making and Unmaking of Manmohan Singh and Parakh’s Crusader or Conspirator? Coalgate and Other Truths hit the stands in April this year, followed by Natwar Singh’s One Life is not Enough and, Not Just an Accountant: The Diary of the Nation’s Conscience Keeper by Rai.

The common thread between them is the no-holds-barred broadside against the former Congress-led UPA government (2004 -2014). Unsurprisingly, these books kicked up widespread controversies, and, as a corollary, attracted considerable media attention.

On the brighter side, these inspired many – including Manmohan Singh, former Supreme Court judge and chairman of the toothless Press Council of India, Markandey Katju, and last but not the least, the Italian-born Congress President Sonia Gandhi – to write their own accounts sooner or later. 

Katju, often in the news for controversial remarks, is expected to talk on corruption in the high levels of the judiciary.

Singh is apparently provoked by Baru’s portrayal of a “defanged” Prime Minister.

And, Sonia is upset because Natwar, who had once enjoyed easy access to her household, has now turned against her, virulently castigating her for her autocratic style of functioning. 

Totalitarianism in the guise of democracy

 I haven’t read Rai’s memoir yet.

Baru is an accomplished writer and his book is a nice read indeed.

But, the show is definitely stolen, or a little more than that, by Parakh and Natwar.

As the former coal secretary (2004-2005) Parakh left all those import marks on government files that helped Rai stitch together a case, in 2012, against the Manmohan Singh government for arbitrarily distributing hundreds of coal mining assets, free of cost, to private parties.

The scandal not merely paved the way for the corrupt Congress-led government’s exit from power earlier this year but also had a crippling effect on the Indian economy. It was in 2012 that Rai brought the skeletons out of the cupboard in his audit report.

Their efforts have not gone in vain. The corruption ridden UPA was shown the doors by voters in May this year. And, in September, the Supreme Court cancelled all coal block allotments.

Parakh in his book has not only reflected on the making of the scandal but, he went much beyond that.

It is a handbook to understand how Indian democracy is transforming itself into a banana republic - where unscrupulous politicians are increasingly trying to grab every opportunity to fulfil their narrow interests.

Take tour through his 36-year long career, from a sub-collector of Asifabad in Andhra Pradesh to the coal secretary in Delhi, you realise how deep corruption has spread its roots, especially since the 1980s.

That corruption breached the tolerable limits is known to every Indian. But not many had the guts to chronicle it, with specific details.

He guides you to look at the “the other side of simplicity” of BJP-led NDA government’s (1998-2004) coal minister Mamata Banerjee (now Chief Minister of West Bengal), forcing the national miner to recruit her party-men, donate generously to choicest NGOs.

UPA coal ministers – Sibu Soren and Dasari Narayana Rao – were demanding graft from coal officials. An MP from Jharkhand is a coal mafia. Parliamentary committee head, Ananth Kumar, (now fertiliser minister in the Narendra Modi government) was holding the brief of an errant junior officer in Coal India.

The message is loud and clear. In modern India, totalitarianism is taking shape in the guise of electoral democracy wiping out the constitutional gap between bureaucracy and political administration. They have started working in common interest – corruption.

The man who walked the lions

Parakh is an outsider in politics. He talks about issues concerning basic governance that directly touches the lives of the commonest of common Indian citizens.

But, the octogenarian Natwar belongs to a world which was known for class, charm and elegance.

Son of a Maharaja (prince), Natwar grew up in the company of the high and mighty, and always remained close to them. He enjoyed walking with lions and lionesses of this world.

Husband of a Princess; Natwar knew India’s first Prime Minister Jawarharlal Nehru’s sister Krishna Nehru Hutheesing from close quarters, before he joined the Foreign Service, on a cold morning of January 1953.

For the next five decades, he not merely worked in the Indian missions in China, the UN, USA, Poland, Africa and so on; but also struck up a warm relationship with the Nehru-Gandhi dynasty.

As a diplomat, Natwar was one of the closest aides of Indira Gandhi, arguably the most powerful and charismatic Prime Minister Independent India has seen. He had quit diplomatic career to join the Rajiv Gandhi cabinet in 1984, and was a close confidante of Sonia Gandhi, till 2005.

He would discuss literature with Jawaharlal and E M Forster with as equal ease, as he guided Rajiv in striking a landmark treaty with China in 1988 or accompanied Sonia in a boat ride with Russian President Vladimir Putin.

His book has little to do with corrupt district magistrates or MPs.

It’s about the untold stories of Prime Ministers and Presidents, top leaders intellectuals.

His book poignantly captures, how silly decisions by Morarji Desai almost jeopardised India’s long-term interests in Africa, or why Sonia picked P V Narsimha Rao as the country’s Prime Minister in 1991 and eventually fell out with him.

It gives deep insights into India’s diplomatic successes and faux pas – while dealing with Beijing, Islamabad, Washington, Moscow or Colombo.

The best part is it offers a 360-degree tour of the issues that dominated global politics for five decades - the stories concerning the decolonisation of Africa or sabotaging of Pakistan’s interests in East Pakistan (now Bangladesh), by its own diplomats in 1971.

It’s an effortless narrative adroitly filled with nuggets of humour. I will rate it as an almanac of India’s foreign policy down the years. 

On the same boat

Parakh and Natwar’s views on life are as different as chalk and cheese. Yet there is one commonality between the two.

Parakh took up writing, after the country’s investigating agency (CBI) accused him of involvement in coal block allotment scam in October 2013 

The accusation didn’t quite stand. But Parakh saw it, rightly so, as an attempt to victimise him for playing a whistleblower.

One Life is not Enough generated media attention chiefly because of Natwar’s takes on Sonia and the Paul Volcker Report on the “Oil-for-food scandal” in Iraq in 2005.

The UN enquiry panel concluded that the erstwhile Iraqi dictator Saddam Hussein bribed many influential people across the world with barrels of oil worth millions of dollars.

From India, Congress party, Bhim Singh of Panther Party of Kashmir and Natwar, the then external affairs minister in the Manmohan Singh cabinet, were named “non-contractual beneficiaries”.

Everyone, but Natwar, was spared the rod. Subsequently, he lost his portfolio, and was eventually found himself hounded by central investigative agencies.

Natwar now blames Sonia for making him a scapegoat!

Volcker Report, he says, primarily accused the Congress. Natwar’s name was included at the later stage.

The Congress-led government set up an inquiry commission to probe the validity of Volcker’s claims. But, he says, the documents on the case, as collected by Indian mission in the UN were not submitted to the commission.

The hint is clear. The administration worked overtime to bail the Congress out. And to make sure its public image unsullied, they needed a scapegoat.

Natwar says it was him.

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