economy

The Power Mafia

In a year that has been marred by scams and crises, there have been many of those which have not been come out in light. Several of these scams have been up and running since many years and yet have remained uncovered. Maybe due to political pressure, or due to lack of interest such scams have not appeared in the spotlight and hence haven’t garnered enough interest in the public to create any type of furore.

An year and a half after the death of Suresh Singh aka ‘Coal King’ , Reuters has published a special report highlighting the role of ‘Coal Mafia’ in the $35.7 billion Coal mining industry. The Coal Mafia has infiltrated almost every company’s union and controls them. The mafia is responsible for stealing coal and selling it in black market, scaring away investors at the auctions and keeping the base price low and many wrongdoings. The financial impact of all such activities are unknown and clearly nobody is even willing to find out.

It is not as if any of the above information is exclusive. Every bit of it (and most probably much more) is known to Police and Politicians alike. CEO’s of several leading companies such as Coal India have accepted that Coal Mafia does exist and that if they are removed out of the equation India’s coal output can rise as much as 15%. Yet the Coal mafia roams around at large without the police as much as trying to catch them. Hope lies with the media and the public that if the matter comes to light and enough pressure is put on the government maybe such illegal activities can be terminated.

 

29th May 2013

 

coal mine

 

 

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The 1$ a tank man

“We’re not perfect, but we do have democracy.”

– Hugo Chavez

You’ve got to admit it, a person who screws up a 100 times and still continues to rule has got to have something in him. Undoubtedly Mr. Hugo Chavez did. He was always more of an artist than a deserving democrat. This was apparent in the 15 years he ruled over Venezuela. One doesn’t need anything more than a walk in the streets of Venezuela to realize what has become of the country. Now if one looks at the oil reserves the country has, one wonders what the country could have been had the omnishambled affair not taken place. The country sold its gasoline at 1$ a tank to the public (probably the lowest in the world) resulting in unimaginable loss of revenue. The mismanaged financial affairs of the country led to huge borrowings, so much so that for every three barrels the country sold, 1 went to repay debt. The currency lost much of its value since Chavez came into power and had to be revalued as much as 5 times ever since.

The man was considered a symbol of hope, the very embodiment of transition which the country had needed only to be later tagged as an outlandish actor who ruined a country’s economy only to retain dictatorship.

Sure he had that thing going for him.

7th March 2013.

 

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Budget 2013 – hits and misses

“Kalangathu Kanda Vinaikkan ThulangkathuThookkang Kadinthu Seyal”

(What clearly eye discerns as right, with steadfast will

And mind unslumbering, that should man fulfill)

– P. Chidambaram

As it often does, the budget has garnered its share of limelight. It has left in its aftermath, admirers and haters. Of course there have been a slew of comments from the opposition party, but then that’s considered usual. What was unusual or rather peculiar about this budget was the hope Mr. P Chidambaram had generated in his recent months as the FM. He has, in his defense, tried his best to meet those expectations. It was a rather bold step to ignore populism and go in for stability and fiscal consolidation considering the upcoming elections. However, on second thoughts the decision was probably his only way out of the current crisis. Had he not focused on raising revenues and fiscal deficit, the rating agencies would probably downgrade India in a jiffy. Would the consequences of the downgrades not be much worse?
Without going much into the details of the budget let me point out a few hits and misses.

The Hits :

1. Lowering STT and introducing CTT : The securities transaction tax was reduced from 0.018 to 0.010 whereas transaction in  commodities ( excluding agricultural goods) will be taxed at 0.01 percent. This shall garner collections for the government and infuse confidence in the equity market.

2. Targeting the rich : Following America, the FM has imposed a 10 percent surcharge on people earning 1 crore or above.  Limiting the above surcharge to only 1 year, he has cleverly avoided the wrath of the riches while ensuring that he gets the funds which he needs. Also he has made the high-end cars dearer by increasing the basic customs duty from 75 percent to 100 percent.

3. Women-oriented banks :  Such banks would be run mostly by women and would be catering to clients who are mostly women. The FM has tried to address gender disparity by bringing in such reforms while trying to promote the role of women in the business sector.

The Misses :

1. The Calculations : As the name suggests, it’s a budget. The budgeted figures and the actual figures can most certainly differ as it does most of the times. The math can go wrong since there are since a lot many assumptions are taken while preparing the budget. Although assumptions cannot be avoided, it should be ensured that the figured are adopted on prudence basis. In this case, the divestment target is certainly optimistic. Also Crude considered at 110$ per barrel while calculating fuel subsidy is a bit irrational.

2. Upcoming changes : The FM states that work on the Direct Tax code and the Goods and Service tax is in progress. The IFRS was conveniently ignored during the speech. All three are much-needed reforms the country needs in order to progress and the FM doesn’t provide anything in the speech to clear out the obscure future.

3. Taxing FII’s : The FM’s comments over taxing FII’s were not taken kindly by the capital markets. The Sensex and Nifty fell over 1.5 percent on the very same day. The FM and other officials clarified that tax residency certificates would serve the purpose and FII”s wont be taxed until GAAR but the damage had been done.

2nd March 2013