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THE ECONOMIC TIMES

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THE ECONOMIC TIMES | MUMBAI | THURSDAY | 13 JUNE 2013

End State Monopoly to Cleanse Coal

Scrap captive mining, dont make it better
The CBI has filed a first information report (FIR), formally charging Congress MP industrialist Naveen Jindal and the former junior minister for coal, Dasari Narayana Rao, in the coal mines allocation case. They are charged with fraud and corruption: the CBI alleges that Jindals firms misrepresented facts and paid an amount . 2.25 crore into Raos company to get the coal mines alof ` located to them. In the past, many coal mines have been allocated in fairly dubious circumstances by the government to private players. The governments auditor reckons that between 2005 and 2009, over 15,350 million tonnes . 1.86 lakh crore, of coal under the ground, worth about ` have been allocated. This valuation may not be accurate. But the fact remains that unless India overhauls its entire policy governing coal, such instances of arbitrary allocation will continue. Coal mining was nationalised by law in 1973, creating one state-owned behemoth Coal India (CIL) to mine and sell coal. Today , CIL is a listed company but is plagued by inefficiencies and being probed by the Competition Commission of India for abuse of its monopoly powers. Meanwhile, the government decided that to speed up growth, captive coal mines could be allocated for companies generating power or making metals or cement. Thus was born the flawed policy of arbitrary allocation of coal mines. This policy must change. The government must first scrap the Coal Mines Nationalisation Act of 1973. It should then allow qualified mining companies from India and overseas to mine coal in the country . The most transparent way of deciding who will get these licences would be to auction the revenue share or royalty that will go to the Centre and states. For each mine, the company that quotes the highest revenue share should get to exploit it. A dedicated portion of the governments share of revenues should be used to compensate locals affected by mining, rehabilitate them to lead a dignified life. This policy will bring dividends for all stakeholders in society and eliminate graft.

Things might seem bad in the US, but Indian surveillance laws and practices are far worse

Spiritual Atheist

Our Bigger, Badder Brother

Pranesh Prakash

Criminal Punishment
MUKUL SHARMA

xplosive would be just the word to describe the revelations by National Security Agency (NSA) whistleblower Edward Snowden. Now, with the American Civil Liberties Union suing the Obama administration over the NSA surveillance programme, more fireworks could be in store. Snowdens expos provides proof of what many working in the field of privacy have long known. The leaks show the NSA (through the FBI) has got a secret court order requiring telecom provider Verizon to hand over metadata, i.e., non-content data like phone numbers and call durations, relating to millions of US customers (known as dragnet or mass surveillance); that the NSA has a tool called Prism through which it queries at least nine American companies (including Google and Facebook); and that it also has a tool called Boundless Informant (a screenshot of which revealed that, in February 2013, the NSA collected 12.61 billion pieces of metadata from India).

ans is that the US government refuses to acknowledge non-Americans as people who also have a fundamental right to privacy , if not under US law, then at least under international laws like the Universal Declaration of Human Rights and the ICCPR. US companies such as Facebook and Google have had a deleterious effect on privacy . In 2004, there was a public outcry when Gmail announced it was using an algorithm to read through your emails to serve you advertisements. Facebook and Google collect massive amounts of data about you and websites you visit, and by doing so, they make themselves targets for governments wishing to snoop on you, legally or not.

Worse, Indian-Style
That said, Google and Twitter have at least challenged a few of the secretive National Security Letters requiring them to hand over data to the FBI, and have won. Yahoo India has challenged the authority of the Controller of Certifying Authorities, a technical functionary under the IT Act, to ask for user data, and the case is still going on. To the best of my knowledge, no Indian web company has ever challenged the government in court over a privacy-related matter. Actually , Indian law is far worse than American law on these matters. In the US, the NSA needed a court order to get the Verizon data. In India, the licences under which telecom companies operate require them to provide this. No need for messy court processes. During the recent IndiaUS Homeland Security Dialogue, the US cited domestic laws on privacy and freedom of speech to refuse Indian requests for real-time access to suspicious internet activity routed through US-based internet sites. We should strengthen our domesSALAM

tic laws getting a good privacy statute, in line with the Justice AP Shah Committee report, would be the first step and reciprocate. The law we currently have sections 69 and 69B of the Information Technology Act is far worse than the surveillance law the British imposed on us. Even that lax law has not been followed by our intelligence agencies.

Keeping it Safe
Recent reports reveal Indias secretive National Technical Research Organisation (NTRO) created under an executive order and not accountable to Parliament often goes beyond its mandate and, in 2006-07, tried to crack into Google and Skype servers, but failed. It succeeded in cracking Rediffmail and Sify servers, and more recently was accused by the Department of Electronics and IT in a report on unauthorised access to government officials mails. While the government argues systems like the Telephone Call Interception System (TCIS), the Central Monitoring System (CMS) and the National Intelligence Grid (Natgrid) will introduce restrictions on misuse of surveillance data, it is a flawed

Nothing Quite Private

The outrage in the US has to do with the fact that much of the data the NSA has been granted access to by the court relates to communications between US citizens, something the NSA is not authorised to gain access to. What should be of concern to Indi-

In the US, the NSA needed a court order to get Verizon customer data. Here, the licences telcos operate under require them to provide this. No need for courts

claim. Mass surveillance only increases the size of the haystack, which doesnt help in finding the needle. Targeted surveillance, when necessary and proportional, is required. And no such systems should be introduced without public debate and a legal regime in place for public and parliamentary accountability . The government should also encourage the usage of end-to-end encryption, ensuring Indian citizens data remains safe even if stored on foreign servers. Merely requiring those servers to be located in India will not help, since that information is still accessible to American agencies if it is not encrypted. Also, the currentlylax Indian laws will also apply , degrading users privacy even more. Indians need to be aware they have virtually no privacy when communicating online unless they take proactive measures. Free or open-source software and technologies like OpenPGP can make emails secure, OffThe-Record can secure instant messages, TextSecure for SMSes, and Tor can anonymise internet traffic.
The writer is policy director , Centre for Internet and Society, Bangalore

Food Security Jacks Up Food Prices

Consumer price inflation for May is 9.31%. The biggest driver has been food inflation, of which the biggest contributor is cereals and products: 14.74% in rural areas, a whopping 21.25% in urban areas, together working out to 16.29% overall. This is unpardonable. The government has in its stocks 77 million tonnes of grain right now. If grain prices are still soaring above the birds of the sky , there can only be one explanation: mismanagement. Those in charge of managing our food stocks have demonstrated utter incompetence or criminal negligence. In either case, all those in charge minister and babus should be sacked and, in case of negligence, prosecuted for causing hunger, malnutrition, scaring an already timid RBI off reducing interest rates and, thus, contributing to economic slowdown. One excuse the babus have for not getting rid of surplus stocks in relation to a buffer stocking norm of 31.9 million tonnes as of July 1 is their dread of not being able to show sufficient grain to feed the gargantuan requirements of the food security law being forced through, at the instance of the UPA chairperson. Hell hath no fury like a UPA chairperson scorned, the babus tell their insipid minister in charge of food, and, together, they do nothing, either to estimate the likely requirement of grain as per the food security law or to sell their stocks in the market to increase availability and reduce the price or at least the rate of price rise in the case of grain. The Commission for Agricultural Costs and Prices has done an estimate of the revised buffer stocking norms. The July target, it estimates, would be 41 million tonnes. Which still leaves the government with huge surpluses. And this is a danger of the food security law: of making the government the largest hoarder and pushing up food prices.

Blinkers Off

Salam

Right to Education: Denied

The world is unlikely to full a basic commitment: to get every child into school by 2015. More than 57 million children are still denied the right to primary education, and many will never enter a classroom

Father of modern sociology , mile Durkheim, wrote in his seminal book Suicide that suicide should be treated sociologically as a societal failure and not medico-legally or criminally . To an extent, he was talking about suicidal people contemplating the act, but mostly , what he had in mind were unsuccessful suicides: people who had not been able to kill themselves even though they tried. Durkheim was also talking about normal suicides where his observation may have been correct. But how is a particular society supposed to treat practitioners of its own socially-sanctified customs such as seppuku or hara-kiri, kamikaze, self-immolating monks, suicide bombers and the tricky case of the Hindu rituals of prayopravesa, which is suicide by fasting and mahasamadhi where death occurs as a result of consciously and intentionally leaving ones body behind at the time of enlightenment. Most of these are highly formalised customs and have been acceptable on and off for a long time because of their religious or semi-religious context even though a few have run afoul of the law and have become criminalised. Yet, failure to complete the ritual successfully does not result in something that calls for treatment because it automatically endows a default dishonour on the person concerned that, in most cases, is punishment enough. Perhaps thats the real reason why an unsuccessful suicide is still a punishable offence in India when most western countries have decriminalised it years ago: one is expected to go through with it, and the resultant prison term is for failing to do so!

Letters

Im oddlooking. Sometimes I think I look like a funny muppet.

Angelina Jolie, American actress

Out-of-School Children, 2011 (in thousands)

Yemen Thailand# Philippines# INDIA* Pakistan Ghana^ South Africa# Mali Niger^ Kenya# Burkina Faso^ Cte dIvoire# Ethiopia Nigeria*
*2010 data #2009 data ^2012 data

949 611 1,460 1,674 5,436 641 679 850 957 1,010 1,015 1,161 1,703 10,542
SOURCE: Unesco Institute for Statistics database

All Divided, we Stand Together

This refers to Round One Goes to Advani, More to Go (ET, Jun 12). It was a victory for LK Advani that RSS chief Mohan Bhagwat, who had ordained his dethroning in 2009, has asked him to withdraw his resignations and guide the BJP. But it is unlikely Advani would be in a position to go beyond the dictates of the RSS in future, as Vajpayee did when required. This is because Advani does not command the respect of all party members the way Vajpayee did. Narendra Modi has succeeded in dividing the party loyalty .
YG CHOUKSEY Pune

To make matters worse, six (Canada, France, Japan, the Netherlands, Norway and the US) out of 10 major bilateral donors reduced their aid for basic education between 2010 and 2011

Youve always been my favourite Im very pleased to award you this certicate

CBI FIR IN COAL SCAM

Citings

Real Coalgate: Too Much Coal in Too Few Hands

M Rajshekhar
the PSU asked for 93 billion tonnes of coal reserves to produce 731 million tonnes a year till 2036. However, the government gave CIL only as many blocks as it was planning to develop by 2012, and diverted the rest about 44 billion tonnes to the captive route. As a result, when 2012 came around, CIL had no new explored mines where it could start coal production. The UPA also gave out many more captive blocks than it needed to: 3-4 times the requirement expected in 2016-17, according to the Coal Controllers data. The combined outcome of assetstripping CIL and allocating coal blocks to a handful of companies has been predictable. Take Chhattisgarh, again. At the peak of the electricity boom, over 60 companies wanted to set up thermal power plants in the state. When they did not get a coal block, they tried for a coal linkage. However, with CIL no longer able to meet everyones demand, coal linkages, originally signed as 100% supply agreements, became 65% supply agreements. The outcome? Most power plants are unviable. After importing 35% coal, they cannot compete with power plants with captive blocks. Abandoned projects and impending consolidation look likely . Such is the fallout of Coalgate. By concentrating the ownership of coal reserves in a handful of companies, it has distorted competitive advantage in the power generation market. It has compromised Indias energy security and pushed the country towards an oligarchic future. It has also accelerated the loss of Indias central forests and imperilled the rivers that originate there. CIL, with a range of coal blocks to mine in, could defer mining in forests. But a power plant, allotted one coal block in a forest, has no such discretion. When we talk about correctives, the first step is to reverse this concentration of ownership. Blocks should be taken back from companies that cannot convincingly explain why they have not started mining, from those who misrepresented facts to get blocks, and from those whose end-use projects are nowhere in sight yet. Next, address the coal shortage. We should amend the Coal Mines (Nationalisation) Act, allowing international companies to enter India. They should be allotted blocks (transparently , please) and made to sell the coal they extract in the open market competing with CIL. This also creates a level playing field for all power plants. Failing that, give these blocks to CIL and instruct it to subcontract coal extraction to private companies. These subcontracting agreements exist. Corruption is endemic, so most contracts are engineered to favour private parties. But this is a fixable problem. However, most discussions inside the government have pivoted around price-pooling, auctions, splitting up CIL and so on. Thats perhaps because the real solutions punishing unworthy private miners and letting in foreign capital will upset too many cosy arrangements.

Lacking Right Connections

PANKAJ GHEMAWAT & STEVEN A ALTMAN

Get Geared, Save More

Indias economic push of the last two decades is largely due to our savings rate that is higher than that of several countries with AAA rating. But, of late, Indias household savings dropped to below 10% of GDP. Moreover, the financial savings of the nation, mostly government-owned, are deployed inefficiently . They often provide an average rate of return that barely covers the inflation rate. Even as the much-vaunted FDI and portfolio investments constitute just 5% of the nations gross savings, there is a disproportionate stress to attract external money flow. It is good that we are relearning the values of savings, that too in the more productive and growth-enabling mutual funds. A renewed push for savings is overdue.
R NARAYANAN Ghaziabad

Accepting wine as collateral can help banks diversify, if needed

Banking on a Certain Kind of Liquidity

Accepting 15,000 bottles of fine French wines from a Wall Street trader as a multi-million-dollar loan collateral is a spirited risk, but one that time may vin(e)dicate. There is a certain logic, after all, in pawning liquor for liquidity . Besides, top-class wines have outperformed the stock market consistently for the past decade, though as an asset class, it has been susceptible to fraud just like the other classy collateral, art. Goldman Sachs vinous venture has a bolder precedent of sorts in Italy anyway , where Parmesan cheese has been accepted by banks as collateral in rural areas complete with appropriate storage facilities so that the assets mature in value properly . A prominent Italian banker even mooted a proposal in 2009 to accept prosciutto ham and wine as collateral for loans. Nor is this a new idea as some private British banks in the 18th century regularly accepted valuables such as Westphalian ham and Tuscan wine as collateral from their aristocratic clients. Today , monetising such assets in case banks go bust would be simple too: they could reinvent themselves as trendy delicatessens or wine bars and, in the process, even find an alternate calling. Considering the issue of collateral scarcity has been gnawing bankers in the eurozone, they should not baulk if high-quality comestibles can fill the gap.

So far, debates over Coalgate have been an exercise in selective attention. In the early days, most discussion pivoted around the UPAs decision to allot blocks through the screening committee, and not auctions. The spotlight then settled on politicians whose family members got coal blocks, before moving to the UPAs inspired attempts to vet what the CBI tells the Supreme Court. It is now refocusing on Naveen Jindal and Dasari Narayana Rao. The focus was, and is, mainly on morality . In the process, the discourse has neglected two important questions. One, it has not understood the real fallouts of Coalgate. Two, the related question on how to fix this mess has received hardly any attention. According to the UPA, the captive block policy was adopted because India was preparing for massive jumps in thermal power generation capacity . And, since Coal India (CIL) was incapable of expanding production, we needed to bring the private sector into coal production. In practice, most captive blocks went to sponge iron plants, not power plants. Among the lucky power plants, very few of the serious ones got any . Take Chhattisgarh. During 2003-11, 32 captive blocks were allocated in the state. Of these, just 14 went to thermal plants, seven of which were power PSUs. As for the 11 private companies that got captive blocks, just five are on track with their projects. Or take CIL. According to the CAG,

South and central Asia lags across nearly all aspects of global connectedness. This region ranks last on depth and third from last on breadth. Furthermore, its relatively higher breadth than depth is a reflection of the poor levels of integration within the region, depressed in particular by the animosity between the regions two largest economies, India and Pakistan. This region has the lowest proportion of intra-regional merchandise exports: only 7% during 2005-11. Given south and central Asias low level of global connectedness in 2010, it is more worrisome to note that the connectedness of countries in this region, on average, remained basically stagnant from 2010 to 2011. There was a small rise in depth, a small fall in breadth, and a middling performance across the pillars East Asia and Pacific averaged the third-highest level of overall global connectedness and was the region with the second-largest rise in connectedness from 2010 to 2011. Countries in the region have largely pursued export-oriented development strategies East Asia and Pacifics achievement of the worlds secondlargest increase in connectedness from 2010 to 2011 was driven in large part by the fact that it was the only region to increase its connectedness on the capital pillar, while the average country in every other region saw its connectedness on this pillar decline.
From How Globalized are Individual Countries and Regions?

Let the Banks Take Due Care

The RBI has done well to pull up Axis Bank, HDFC and ICICI Bank for violating KYC norms and anti-money laundering laws. The penalty imposed should be an eye-opener for other banks. But personal responsibility should have been fixed to recover at least some portion of the penalty from officers. If the violations continue, the government must take steps to nationalise these banks.
KV SEETHARAMAIAH Hassan