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Let’s have a Coal Mela

Even those who were allocated blocks of coal could not extract it. What we need a strong move to get coal out of the mines
No one has a clear cut response to the Comptroller & Auditor General of India’s (CAG) googly on the coal block allocations, ultra mega power projects (UMPP) and the Indira Gandhi International (IGI) airport implementation.
Frankly, we do not know when the CAG began its study on the above and how long it took to make these observations before sending down this googly.
Prima facie, however, the purported loss of Rs1.86 lakh crore to the exchequer or the ‘gain’ by private companies, simply put, is really ‘notional’. In as much as only one mine is operative and 56 others are in the unending queue to get various clearances from the states concerned and the ministry of environment & forests (MoEF). In fact, 25 of these blocks have been de-allocated, which can now be offered to others. But, then, assuming standard bidding procedures are adopted, the successful bidders for these 25 blocks will only join the queue to obtain clearances!
It’s a pity that not even the media has been able to identify the incredible single performer under difficult circumstances. They need to be identified, congratulated and a close watch kept on their progress. If anything, the coal ministry must extend all possible support for that company to perform well and to exceed the targets of production envisaged by them.

The crucial question is whether we need power and what exactly are the stumbling blocks that hinder the progress?  Even if there were the original 57 out-of-turn allottees, no business house would sit on ‘wealth’ without extracting the coal for years on end, as it happened in this case. Clearance of one kind or another stopped them from making any step to start the mining operations.
Instead of harping on the issue of reiterating the stand that the allottees were (and are) stuck in the quagmire of clearance delays and simply apportioning the blames on one another, and, as time is the essence of contract, let the coal ministry call for a joint meeting of the MOEF, the relevant states involved along with the allottees for tripartite discussions to resolve the issues. The ministries concerned, including the PMO, must identify the major items of compliance needed, for work to commence. If the allottee is able to satisfy 85% (or the unanimously agreed quantum) of the requirements, permission should be given on the spot, in we would call a “Coal Mela”.
We recommend strongly the call for a “Coal Mela”, spread over a week to 10 working days. All the sides involved be asked to present full details. The methodology may be announced by the government independently off the coal ministry or MOEF and the 31 allottees, who have apparently made snail’s progress so far be asked to present the case to an independent authority, who will conduct this Coal Mela. The decision made in this meeting should be final and binding.
Those allottees, who obtain the “green signal” in this Coal Mela must be given a time-frame within which work must start and production to commence. No excuse leading to encashment of guarantees should be given by the concerned allottee.
Also, in the meantime, Coal India need not necessarily depend upon MMTC alone to do their imports of coal. It must encourage others to do the resourcing so that production does not suffer.
In carrying out his enormous duties under difficult circumstances, we do hope that Narasing Rao, Coal India’s chairman and managing director has no other internal issues or external pressures that prevent him from carrying out the tasks in front of him?

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)


Betting against China

Capitalist investors from developed countries who decry government regulators maintain an unshaken and devout faith in the power of Chinese state intervention to stimulate growth. I believe they would have more luck at the gaming tables in Macau

I gave one of my best pieces of investment advice over five years ago. In a letter to the Financial Times published on 6 October 2006, I wrote “the best investment in China will be the casinos of Macau, not state-owned banks.” The letter was certainly prescient. Revenue from Macau casinos has risen 700% since then. Shares in the largest state-owned bank, Industrial and Commercial Bank of China have risen only 30%. Sadly the best way for investors to profit from those casinos came in the fall of 2009 after the IPOs of Wynn Macau and Sands China.
These stocks came out at a fortuitous time. China was beginning a massive stimulus package. With such a flash flood of money, it was no surprise that a lot of it leaked out on to the gambling tables of Macau. These leaks were reflected in the casinos’ profits and share prices.  Wynn rose 170% by 2011. The Sands did even better. Its shares increased 200% by May of 2012.
As I pointed out in my piece published last January, much of this money was flight capital. During the stimulus induced boom years from 2009 to the beginning of this year many wealthy Chinese used Macau to move their profits out of the country. In 2011 mainlanders set a new record for visits to Macau. The total number of Chinese visitors rose 22% to 16.1 million making up almost 60% of visitors. Once in Macau there are many different ways to launder money, according to one local professor, “more than we can think of”. But things are changing.
There are many indicators used for the Chinese economy. The problem is that the official numbers can be a bit dodgy. Even the heir apparent to become the next premier of China, Li Keqiang, has stated that China’s broad measures of economic growth are “ ‘man-made’ and therefore unreliable.” Li and many other economists like to rely on other indicators like electricity consumption, volume of rail cargo and the disbursement of bank loans.
The problem with these indicators in an economy that is heavily controlled by the state is that they can be manipulated. The numbers are created by state-controlled institutions. In a country where information is tightly controlled, the published numbers can be easily changed to suit appearances.
Macau is different. The revenue numbers are available from publically listed companies often controlled by American firms. They are all but beyond the reach of the Chinese authorities and they show something very interesting. Basically gaming revenue growth has been declining for the past two years. Revenue growth hit a high of over 80% in early 2010. Since then it has been falling. In July, 2012 it rose only 1.7% down from 7% as recently as May. Visitor growth has also been declining and this year it actually started falling. The casinos share prices have been falling as well. Sands China is down 30% since April. MGM is down 20% since May.
Most economists and analysts are not worried about this dramatic slowdown. In a world hooked on government stimulus, they believe this is good news, because it will lead to government action. The irony is that the government has been acting. The central bank lowered interest rates and made the third reserve cut in six months. The Chinese government’s lending goal of 8 to 8.5 trillion yuan for 2012 is about the same as the amount of new loans in 2010 and 2011, but the banks are missing their targets because of weak demand.
Although the economy of China and Macau are declining, there is still a boom in wealthy Chinese leaving the country along with large amounts of their money. China has over one million citizens with assets over 10 million yuan ($1.6 million). Like Brazil, Venezuela, Argentina, Russia, Spain and Greece, they are exporting themselves and their money. Over 16% have immigrated, 44% plan to do so and 85% have sent their children abroad for education. Unlike many western commentators, they are very gloomy on China’s prospect. Only 28% believe in China’s prospects over the next two years half the number of last year.
In fact so much money is now leaving China that the country reported a deficit in its balance of payments in the second quarter for the first time in 14 years. This occurred despite the fact that the current account is still in surplus, because China’s exports exceed its imports. Foreign direct investment (FDI) also remained strong, but not strong enough to balance the $110 billion that left.
There is a certain irony here. The capitalist investors from developed countries, who decry government regulators, maintain an unshaken and devout faith in the power of state intervention to stimulate growth. Personally I believe they would have more luck at the gaming tables in Macau.

(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at [email protected] or [email protected].)


Section of Kingfisher pilots strike work on salary dues of March

Some Kingfisher flights from Mumbai have already been cancelled due to the pilots strike and many more cancellations are to follow

Mumbai: A section of pilots of near-bankrupt Kingfisher Airlines on Saturday went on strike, second time in the month, demanding immediate payment of March salaries, leading to cancellation of seven flights from Mumbai, reports PTI.
"A section of Mumbai-based pilots have gone on strike due to repeated failure to keep up with the promises (made by the airline management)," airline sources told PTI.
Some flights from Mumbai have already been cancelled due to the pilots strike and many more cancellations are to follow, they said.
Seven Kingfisjer Airlines flights from Mumbai have been cancelled, a Mumbai International Airport Limited (MIAL) spokesperson said.
The strike comes after a meeting between a group of pilots and airline Chief Executive Sanjay Aggarwal in the city to enquire about the March salaries, ended without yielding any results, sources said.
"About 15 pilots had gone to meet the CEO to enquire about the March salary since the pilots were promised by the managment that every one would be paid by 17th August. They were made to wait for an hour and half and then told that the chairman (Vijay Mallya) has said they will be paid by Tuesday," they said.
The pilots did not accept the assurance as the Chairman has repeatedly backtracked on his earlier commitments on payment of salary dues and, therefore, decided to strike work, sources said.
Kingfisher Airlines, whose accounts are under Corporate Affairs Ministry's scanner, has not made payments to majority of its employees since March.
The corporate affairs ministry has recently ordered an inspection of the account books of debt-ridden airline after receiving complaints from stakeholders alleging violation of certain provisons of company law.
Kingisher spokesperson was unavailable for comment.


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