India! I dare you to be rich

Category Archive: India

The cost of Modi’s ostentatious suit – and a DEMAND that he prove this is not corruption.

A debate is raging re: the cost of Modi's suit.

Estimates range from Rs.5 lakhs to Rs.10 lakhs.

India is a poor country and pays its politicians DESPERATELY LITTLE. That's one reason why they are corrupt.

I DEMAND that Modi provide FULL receipts of payment and full record of his earnings by which he paid for this suit (and the MANY others he owns).

THIS MAN IS NOT ONLY A CRIMINAL, HE IS KING OF CORRUPTION.

 

 

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Why has the Gujarat government not yet published the fake Nanavati “final” report?

It has been more than two months since Nanavati submitted his fake "final" report to the Gujarat CM. The report is fake since it wilfully absolves Modi of direct accountability for the Ahmedabad murder of hundreds of innocents.

I was hoping to find time to review it, and comment on its merit. But I find it is not available online.

How can the Gujarat government NOT have published the report? A matter as significant as the Navati report should be published AT ONCE.

Let those of us who pay attention to such details determine its value and validity.

I need to read the report for myself and form my own views. I do NOT form views based on other people's views.

There should there be public pressure to get it tabled. After all, taxpayers have paid a big amount for this report and are entitled to see the details.

Moreover, MODI has escaped largely due to the shoddy work and doctoring of data found in this report. This report is of international significance.

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Fundamental design flaws in the Modi government’s mining ordinance

These are my preliminary notes on the Mines and Minerals (Development and Regulation) Amendment Ordinance,2015. These should be read along with my blog posts here, here and here.

Prospecting mixed up with mining lease

The Ordinance introduces prospecting license-cum-mining leases (PL-cum-ML). This could be considered to be an improvement IF this implies an assurance of property rights after prospecting.  On the other hand, there is no assurance of any priority in renewal of mining lease. Mining leases will lapse after 50 years and go to a full auction. Unlike in the 1957 Act, there is no renewal of any mining concession. Mines already granted leases before the ordinance, would be deemed to have been given for a period of 50 years. Earlier renewals of lease were required after every 10 years. That was terribly bad policy, since no mining business can operate under such short time frames. But to have these leases permanently lapse after 50 years is equally bad. (The extension is not uniform and discriminates between different types of mines:  Mining leases would be deemed to be extended from the date of their last renewal to March 31, 2030, in the case of captive mines and till March 31, 2020, in the case of non-captive mines.)

This is appropriate policy on two grounds:

- Very few prospecting licences will ever go to become a full mining lease, since most will find nothing. Good policy requires the area for prospecting to be smaller than the mining lease. That allows the government to have multiple prospectors on a particular block of land, and give the mining lease to a larger area to that prospector who finds minerals. Keeping the two (prospecting and mining) separate is the right way to maximize discovery and extraction.

- The problem with mining lease expiring and being auctioned is even more severe. All good practice requires the government to give priority to existing mining lease holder, so he/she can continue to invest in necessary machinery for extraction. By sharply ending the licence after 50 years investors will be reluctant to maintain necessary machinery after the 40th year, thereby reducing the extraction from the mine. They may also be incentivized to build lower quality mines that are of no use to any other person after 50 years, but which can significantly risk the lives of workers.

Flaw 1) The prospecting licence and mining lease should have been kept separate.

Flaw 2) The idea of lapsing of a mining lease after 50 years is extremely bad policy.

Lack of full transferability

All over the world, and based on a basic understanding of property rights, it is clear that market TRANSFERABILITY of the prospecting licence/ mining lease is the best way to ensure maximum extraction by the most efficient miner.

This Ordinance allows some tradeability, although permissions are needed for transfer. Under 12(A)(6) transferability of any licence will only be valid for those granted under auctions. This seems highly regressive. This is a serious flaw. There should be no permission needed, just notification of the new owner’s details. FULL tradeability of the mining lease is absolutely critical.

Auction of uncertain and unknown deposits

Section 10(b) applies to auctions for land with certainty of deposits. In principle, this is not an issue, for such lands would be extremely limited in area. It is hard to think of many examples where this could apply.

However, Section 11 applies auctions to even uncertain mineral deposits. This is a serious design flaw. As already indicated earlier, the auction system is not an efficient system when there is significant uncertainty of deposits. The auction system for uncertain deposits will further reduce prospecting and mining in India.

Cancelling tens of thousands of pre-Ordinance applications

Section 10(A)(1) rejects all applications made prior to this ordinance. This is truly bad policy. Imagine the effort and time put in by thousands of prospectors to make these applications. The fact that these take tens of years to be approved is a disastrous idea. But cancelling them is much worse.

There are many other flaws I won’t go into, but these are the main ones from the design perspective. [I’m not even getting into the issue of whether a democratically elected government should use ordinances]

As a result I expect there will be almost no investment into the mining sector (except where there is already a well-known deposit). It is unfortunate that India will continue to sit on a HUGE pile of gold and other minerals which will remain untapped.

Note that these are my preliminary notes, and I'd be happy to have a discussion re: any error of anaysis.

Keywords

Problems defects with the Indian Modi mining ordinance. 

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I call upon the Lok Satta party to dissolve itself as it serves no purpose except to suck up to BJP

First JP started sucking up to Modi – before the May 2014 elections. Now Surendra Srivastava is sucking up to Kiran Bedi (cf. his email sent out today).

The Freedom Team of India removed Lok Satta from the list of approved parties for its members.

I was hoping Surendra would change the situation, but he is a BJP toady as well. 

We need a LIBERAL PARTY IN INDIA, not a bunch of toadies of a corrupt, communal, illiberal outfit. 

I call upon Surendra and JP to dissolve Lok Satta which serves NO useful purpose now but to suck up to BJP.

BJP is mega CORRUPT and anyone who supports it directly is tainted. I'm sorry but Lok Satta is now in shambles and must wind up, or join BJP. I don't care, but don't mislead people like me – and god knows how many others.

BTW, despite 100s of reminders to JP and LSP etc. these people didn't think ONCE about endorsing the SKC agenda.

But they bend over backwards to endorse MEGA CORRUPT ILLIBERAL BJP!!!!!!

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India is failing to exploit its hidden wealth by choking its mining industry (#3)

These are my notes on international best practice. These supplement notes here and here.

I am focusing on Exploration Licences (ELs) since this is the most crucial part of the mining regulatory regime.

I’ve consulted An Overview of the Australian Legal Framework for Mining Projects in Australia by Robin Chambers (available online) and another document.

1) AUSTRALIAN SYSTEM

This is probably the best or close to the world’s best.  Australia was named as the world's most secure location for mining investment in the Behre Dolbear 2005 survey.

The processes surrounding the allocation of ELs in Australian States and Territories are similar.

1) ELs are allocated on a first-come first-served basis (with some relative minor exceptions, mostly related to knowledge available with a government regarding the quality and quantity of a resource). The processes for the allocation of ELs generally require: environmental, heritage and native title approvals; work plan approvals; land access agreements; public notification and comment with Ministers retaining discretionary decision making powers.

2) ELs typically have a duration of five years, with different renewal and relinquishment processes applying across jurisdictions.

3) ELs can be transferred between parties.

4) If more than one application for an EL is received for the same plot on the same day, the first application received is considered for the licence.

5) ELs are subject to reductions in area (“relinquishments”) from the third year onwards where no progress is made in moving to develop an area for mining.

6) Priority for further work: Exploration and then mineral extraction are regarded as part of the overall mining process, with exploration licence holders given priority to move to formal mining leases on proving up a reserve. State laws prescribe the manner in which miners are able to protect an interest in land from the exploration to operational phases (with miners effectively guaranteed further rights in land).

7) Mining leases (MLs) are granted for substantial periods with extensive rights of renewal; usually over a much larger area than is initially claimed.

2) CANADIAN EXAMPLE

In Alberta, things are broadly similar to the Australian model, above, but there is a provision for auction of ELs income cases.  For instance, in the case of coal, Alberta is divided into four ‘environmental areas’:

  • Category 1: Parks and protected areas. No coal rights are issued.
  • Category 2: Sensitive areas. Coal exploration is permitted, and underground mining may be permitted. Surface mining not permitted.
  • Category 3: Coal exploration permitted. Surface and underground mining may be permitted.
  • Category 4: Coal exploration, surface mining, and underground mining permitted.

Applications for coal leases in Category 2 and 3 are accepted on a first-come first-served basis.

Category 4 areas are not necessarily most prospective areas, i.e., it is not necessarily the case that the areas with greatest demand are auctioned.

Coal leases in Category 4 are issued through an auction.

ROLE OF AUCTIONS IN INTERNATIONAL BEST-PRACTICE

Auctions are becoming more widely used by governments to allocate rights to mobile phone frequencies, airport landing slots, public infrastructure, land, fishing and hunting rights, high-voltage electricity cables and electricity generation capacity. Auctions are also used to allocate exploration rights for offshore petroleum in Australia. Auctions are of interest for the simple reason that they resolve key decisions about who wins and what price is paid, through competition between those interested in the asset or rights rather than through negotiation between the contestants and government. Auctions harness competition among informed mining companies to reveal which firm can create most value from the resource.

Revenue from minerals in can be collected in two ways—from royalties and from revenue raised through allocating ELs. To a large extent, the mechanisms substitute for each other, since decreases in the royalty rate will increase bidders’ willingness to pay at the auction, and thereby increase the expected revenue from the auction. From a theoretical perspective, it is preferable to collect revenue from an auction because bids represent the share of the resource rent (profit) that bidders are prepared to pay for access to the resource. There are also potential advantages of an auction-based revenue strategy in terms of limiting holdup and reducing opportunities for corruption, of requiring a single, one-time payment for the EL at the time it is granted.

The mix of revenue from an auction of ELs and royalty payments also changes the distribution of risk between government and the exploration and/or mining firm, timing of government revenue, the quantum of funds collected and participation by small firms. The mix of revenue can also increase the scope for holdup strategies to be engaged by either side. Royalties should not be set so high that they leave no residual profits (rents) to attract bids in the auction—this will disguise information needed to determine which firm can create most value from the resource.

BIG PROBLEM WITH AUCTIONS

Relying only on the auction of licences will diminish revenue if the resource and approval processes are uncertain. This is consistent with the finding of the  NMP-2008 (which recommended auctioning only of fully proven mineral deposits).

WHICH AUCTION TO USE?

I won’t go into this for now. That’s only contingent on certainty. I’ll now move into the analysis of the recently issued Indian mining Ordinance.

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Arvind Kejriwal’s AAP party using vast amounts of black money in elections

I had VERY FIRM reports regarding use of black money in elections by AAP. Here's proof. Distributing money, food and alcohol to build numbers for its rallies. Clearly this money is not accounted. Must be black money.

Not only is AAP socialist, it is also corrupt. EXACTLY the same as BJP and Congress. The Delhi voter is without choice, once again.

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