Here is a good example of the kind of implicit and unqualified faith placed in the state by apparently left-leaning liberals.
Sadanand Patwardhan appears to be a blogger with an interest in Chhattisgarh. Recently, he published the following open letter on the Chhattisgarh Net Yahoo group (membership required) from one Arun Agarwal to Prime Minister Manmohan Singh with an introductory comment of his own.
Unfortunately, we are not told what Agarwal's sources of information are. [My inquiries on the internet about Agarwal himself lead me to a PIL activist based in Bangalore, who has filed a petition in the Bangalore High Court urging that the state government be restrained from signing any further MoU's with private mining companies.] How does he arrive at his estimates of the private theft of public assets, and how does he compare the performance of the private companies with NMDC if the private balance sheets are not publicly available? However, having read elsewhere of loot on a similar scale from public resources, I do tend to give some credence to Agarwal's story.
More substantively, I agree with Agarwal's contention that the extractive industries ought not to be in private hands, since they are essentially profiting from land-based wealth that, according to the Constitution and the Supreme Court judgment that Agarwal cites, is held by the state in trust on behalf of the public. But why this faith in a state that has done so little to protect the interest of the forest tribes and other poor (as Patwardhan himself notes), but has been so anxious to sell off national assets to private interests in the name of development?
Instead of looking to either state-owned enterprises or private corportations, why not consider innovative forms of ownership and control that will give the people living on the land where the natural resources exist the dominant measure of control over their use and disposition, and a stake in their extraction so that the country as a whole could benefit?
Of course, the immediate objection I can hear is: what do scheduled tribes living in subsistence forest-based economies know about modern methods of mining? What do they know about returns on investment, cost benefit calculations, project management, global pricing of natural resources, and other sorts of knowledge that have paid such rich dividends to the enterpreneurs and investors?
This goes to the heart of the development debate: who benefits from this knowledge, and at whose cost? Why have not systems of knowledge been created that factor in the benefits to the people who live on the land from which the wealth will be extracted? The Indian state, despite constitutional obligations to the contrary, has throughout its history been wedded to a model of development that has prioritized the enrichment of the few at the cost of the bare subsistence of the many - never with as much dtermination as since the so-called neoliberal "reforms" of 1991, which has pulled some people out of poverty, accelerated the enrichment of the already wealthy middle and investor classes, and pushed many more down to levels of destitution that rival some of the poorest African countries.
The question of ownership and control of national assets therefore ought to be at the forefront of social innovation if the country has to break out of the narrow range of choices along the state-private sector continuum. But from what I can tell, this is not part of any public debate or discussion. The increasing immiserization and polarization of Indian society into the rich and poor is apparently no one's urgent concern.
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Dear friends,
The following letter from Arun Agrawal argues with remarkable cogency & with what appears to be firm hold over facts in favour of a policy that would entrust mining solely to public sector and have it rescued from the clutches of crony capitalists & robber barons. He cites the recent Supreme Court judgment over the Ambani Vs, Ambani fight for Krishna Godavari Natural Gas pricing to buttress his case. If his facts are correct about the mining practices of NMDC, then one would have to admit he makes a case that is iron clad.
Its important deficiency is that it doesn't address the special needs of tribes & other poor, who would be dispossessed of their ancestral lands & livelihoods as they always have been since legends & histories took hold of human imagination, and therefore have to be compensated first with the lion's share of any "development" of mining that takes place in their territory, and part of that share has to go to them upfront even if that means sacrifices have to be made by rest of the Indians in the short run.
Secondly, it also doesn't account for the feasibility (or its absence) of over extending the current development model, which the policy changes he has advocated will still serve but for the hopeful removal of robbing & corruption that is currently rampant in the system, and the needs of harmonising human desire for "progress" with the limitations imposed by nature.
Having said that, kudos to Agrawal for a brilliant case.
Sadanand
From Arun Agrawal
To
The Hon'ble Prime Minister of India,
Govt of India
South Block,
New Delhi
6th August 2010
Re:Nationalisation/ Resumption of Iron Ore Mining valued at over Two Trillion
Dollars
Dear Hon'ble Prime Minister,
I write as a citizen, one among the 125 crores, for whose beneficiary
interest you are the trustee in chief, for the minerals resources in general
and iron resources in particular.
That these resources are covered by the doctrine of public trust has been
clarified by the Supreme Court in RNRL vs RIL and others, (better known as
Anil Ambani vs Mukesh Ambani) . The court held: Our legal system - based on
English Common Law - includes the public trust doctrine as part of its
jurisprudence. The State is the trustee of all natural resources which are
by nature meant for public use and enjoyment. Public at large is beneficiary
of the seashore, running waters, airs, forests and ecologically fragile
lands. The State as a trustee is under a legal duty to protect the natural
resources. These resources meant for public use cannot be converted into
private ownership. This doctrine is part of Indian law and finds application
in the present case as well. It is thus the duty of the Government to
provide complete protection to the natural resources as a trustee of the
people at large.
It would therefore not be wrong to conclude that the doctrine of public
trust extended to natural gas also covers another natural resource - iron
ore- a resource that India is richly endowed with and probably is the
single largest source of mineral wealth. The Supreme Court further held that
it would be ideal for the PSU to handle such projects exclusively. In the
words of the Supreme Court: It is relevant to note that the Constitution
envisages exploration, extraction and supply of gas to be within the domain
of governmental functions. It is the duty of the Union to make sure that
these resources are used for the benefit of the citizens of this country.
Due to shortage of funds and technical know-how, the Government has
privatized such activities through the mechanism provided under the PSC. It
would have been ideal for the PSUs to handle such projects exclusively.
From the foregoing it would not be wrong to conclude that the natural
resource iron ore is covered by the doctrine of public trust, that the
ownership control and distribution of the iron ore should be done in a
manner so as to best subserve the common good ( Article 39(b) ) and that it
would be ideal for the PSU to handle such projects - exploitation of the
resources exclusively by the State.
The reason for privatizing oil industry, as stated by the Hon'ble Court,
was shortage of funds and technology knowhow. Neither of these reasons are
applicable to iron ore. The PSU engaged in exploiting iron ore is the sixty
year old NMDC. It is 90% government owned. The operating profit margin for
the last three years has been 78%,78% and 80.5%.( after treating royalty
payment of 5% of turnover as expenses for the year 09-10). It has no
debt and has not paid a rupee as interest in the last eight years. It has
reserves of over 14,000 crores. Its one rupee share was recently subscribed
for Rs300/- when the government diluted its stake from 98% to 90%. It
neither needs money from the government nor the bank to make fresh
investments, and is financially and technologically capable of mining the
entire iron ore of the country, In other words it fully meets the mandate of
the Constitution and the Supreme Court judgment, in the above mentioned
case, to exploit the natural mineral resource of iron ore for the benefit of
the people of the country. It is ironic that while iron ore worth Rs 100
crores is being pilfered and looted by private interest each day in a cosy
crony capitalistic relationship, NMDC is looking for fresh investment for
iron ore in Australia! Add to that the proposed allotment of iron ore to
private barons worth trillion of dollars for petty royalty and not to NMDC,
the tragedy of a poor nation suffering at the hands of corrupt politicians
is complete. Unlike private miners NMDC does not indulge in slaughter
mining. It has the best equipment and their method of exploiting of the
minerals are not only better than any private miners but better than that of
the captive mines of SAIL and Tisco.
Both the conditions for privatization applicable to the gas sector, as
stated in the Supreme Court judgment, is not applicable in case of iron ore
There is no other company in the entire private sector which has a higher
operating profit margin than NMDC. It is also among the top ten companies in
terms of market capitalization. In contrast, the private sector companies
engaged in mining of iron ore are over mining , under invoicing the price,
mining without license or mining plan, under reporting their turnover,
paying a small fraction as taxes or royalties (1.5 %), generating large
amounts of profits in cash for pay-offs to various interests. The annual
loot from iron ore by private miners is around 50,000 crores and involves
around 150 families in a relationship which can be best described as crony
capitalism.. If their balance sheet is made public - which it should as they
are dealing with property belonging to the people- it will show that their
profitability ratios and efficiency is one fourth that of NMDC. More
important, almost all the profit goes to the private miners. The amount of
profits on account of illegal mining runs into tens of thousand crores each
year.
For every Rs 100 that NMDC earns, Rs 90 belongs to the government while for
every Rs100 that the private miners earn less than Rs 5 comes to the
government as royalty and tax. The illegal profits of the mining industry
has been used to purchase political power either by the miner barons
themselves or by the politicians who allot the mines. Every state is heavily
into illegal mining and most of them have non congress governments. The
sterling record of NMDC, the 60 year old PSU, engaged in the mining of iron
ore is being contrasted with that of the private sector to show that there
no justification for the government, which is a trustee of the mineral
wealth, not to nationalize ( in fact the mines are owned by the government
and therefore technically cannot be nationalized) / takeover the iron mines
leased to the private barons and earn thousand of crores for the benefit of
the people of the country on whose behalf the mines are held in trust by you
as the Prime Minister of the country. It cannot be the case of the
government or the private sector that the best of the companies in the
public sector cannot be better than the worst of the companies of the
private sector and there must be privitasation of national mineral resources
belonging to the people of the country because the government should not be
in the business of business especially if it is a profitable business and
the profits are used for the benefit of the people.
Let FICCI, CII, ASSOCHAM and more important Federation of Indian Minerals
Association (FIMI ) who have hundreds of crores to lobby for policies in
their favour, show to the people of the country as to how the private miners
match upto even 30% the performance of the NMDC in terms of profitability,
price realization, royalty payment and income tax payment. This also
includes private steel mills who have been allotted captive mines. The
reason for addressing the issue of nationalization of the iron ore mines
urgently is the attempt made by the BJP government in Karnataka ( a government
by, of and for the mining lobby) to appropriate the entire iron ore wealth
of the State to private interests in perpetuity. The Government of
Karnataka has signed MOU's with various companies (ArcelorMittal , Posco,
Brahamani Industries, Hazira Steel, JSW Steel, Bhushan Steel) for setting up
steel plants of 6 million tonnes capacity each, at the Global Investors meet
on June 4 and June 5. In addition to the MOUs, other applications for
manufacture of steel pending with the government would take the total
capacity to be set up in the State to over 60 million tonnes. The proposed
production signed by GOK in a few months is in excess of the total existing
steel capacity of the country set up in the country in the last hundred
years starting from the first steel plant of Tisco set up in 1907. The
reasons for the iron rush of the state (which surpasses the gold rush) is
two fold : all the profit of iron ore of the state goes to private coffers
and not to the people, and to preempt policy and the provisions of the new
law relating to the allotment of the iron ore. The iron ore lobby knows that
the loot cannot continue indefinitely and it cannot suppress its production
and profits indefinitely. The only way to retain their standalone mines in
the future is to make them as suppliers to the integrated steel plants.
Hence the brilliant scheme to assure the steel barons of fifty percent iron
ore from captive mines on payment of token royalty of 1.5% and fifty percent
from privately leased. It is a win- win situation for everybody. Steel
producers get 50% raw material for free and the standalone mine owners get
to keep their mines and profits. Why the hurry? It is because the new MMRD
Act to be taken up by Parliament in the current session, compels competitive
bidding but exempts existing applicants from the provisions of competitive
bidding. Hence, the need to preempt the operation of the law.
60 million tonnes of steel capacity will require 3000 million tonnes of
iron ore valued at 15 lakh crores [15 trillion rupees, or 300 billion US dollars]
at current international prices. The benefit of the iron ore will go to the steel
producers and the private miners and the true owners of the mine-the people-
will have to make do with the pittance of royalty of 1.5 %. These resources are of the value of over
15 lakh crores at current prices and belong to the people of the country and
cannot be made over to the likes of Mittals, Posco etc on payment of 1.5%
of market value as royalty. It will be a total betrayal of public trust
mentioned in the abovementioned judgment of the Supreme Court. It cannot be
the case of liberalization that when people buy steel capitalistic
principles are applied and they are made to pay international price, but
when the capitalist requires raw material socialistic principles are applied
and they are given the iron ore for almost free. It is pertinent to note
that no steel producers except TISCO, SAIL,JSPL, JSW Steel (in part through
MML a PSU) have captive mines and the rest of the producers purchase their
iron ore from NMDC and some of the private mine holders.. The NMDC price is
30 to 40% cheaper than international price. In spite of the purchase of iron
ore from NMDC, the steel manufacturers make substantial profits because
steel price is linked to international price and price has been decontrolled
and removed from the list of items on essential commodity list. Essar Steel
has steel capacity of over 5 million tonnes, purchases ore from NMDC and
makes substantial profit. If the iron ore is nationalized then the steel
production will not suffer on account of paucity of iron ore. It is a bogey
that the steel producers who have sighed MOUs with various State governments
- Madhu Khoda style- will raise against nationalization (apart from the
usual foreign investment will suffer) because of their MOUs for captive
mines. There will be no scarcity of iron ore because SAIL and Tata Steel,
JSPL and JSW Steel (in part) account for 25 million steel production for
which they have captive mines. NMDC current capacity of 30 to 35 million
tonnes of iron ore is sufficient to take care of another 20 million tonnes
of steel capacity which leaves a deficit of iron ore for around 10 million
tonnes. Steel production of six million tonnes is from scrap, imported and
domestic. The balance ore for 5 million tonnes can be easily provided from
the mines taken over by the government as these mines produce over 100
million tonnes of iron ore and the balance exported for profits to the
government. On economic consideration alone there is a strong case for
nationalization of the iron ore industry. The legal and the constitutional
consideration make it obligatory, more so when you are the chief trustee for
the mineral wealth.
However, it is the political consideration which should be of the greatest
concern to the Congress government. The BJP has reportedly amassed a war
chest of 10,000 crores for the next election through its rule in the mine
rich states and proposes to spend 30 crores in each of 300 constituency. For
thirty crores, three lac votes can be purchased at the rate of Rs 1000/vote
and with 7-8 lakh votes cast per constituency it will be victory for the BJP
and curtains for the Congress. Unfortunately it is the survival of the
corruptest. (sorry for the word which does not exist in the English
dictionary for obvious reason). The manner in which the valuable mineral
resources have been plundered in various states is the greatest economic
scandal of India which includes the period under which it was under colonial
rule. The British had to conquer the country to exploit its mineral resources, the
present day robber barons have to merely pay a small bribe to do so (refer
Madhu Khoda). It may be considered inappropriate to point out to the
greatest living Indian economist of our times, that the situation in India
is no different than that of African nations which are resource rich nations
with poor people. Should we then derive satisfaction from the fact that the
developmental index for eight of our states - mostly mineral rich states- is
worse than the 22 nations of Africa for similar reasons?
I, therefore beseech you to do right by the people and the constitution
of the country and takeover all the iron ore mines in the private sector.
If you will not do it, who will?
Like the bank nationalization, it will be your legacy to the nation for
which the coming generation will be grateful.
With sincere regards
Arun Kumar Agrawal
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