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  • India's Latest Scandal: $210 Billion of Nonsense

    Two years ago, the United States Department of Defense “discovered” mineral deposits in Afghanistan—gold, iron, copper, cobalt—that it claimed were worth almost $1 trillion. Actually, the deposits were worth almost nothing, they had previously been worth almost nothing, and they are still worth almost nothing. They will have value only when someone wants them.

    The newest scandal in India involves sweetheart concessions involving the country’s nationalized coal industry—assets sold due to personal relationships or perhaps even outright graft. This is an important issue, well worth discussing. But the $210 billion tag that was attached to the scandal by the government itself is off by probably $200 billion. Worse, it is deflecting attention from problems costing India far more than $200 billion.

    Consider three related questions. First, where is this money? Which companies have it? What individuals? Does anyone actually think there is $1 trillion about to be invested in Afghanistan minerals or $210 billion waiting desperately to enter the Indian coal industry? The $210 billion is fiction. It’s what someone with no understanding of how markets work thinks the assets should be worth.

    Second, why isn’t the money there? Why would local conglomerates and global energy giants laugh, privately, at the idea of truly spending $200 billion on Indian coal? The answer does actually represent huge sums lost—in coal and many other sectors.

    The answer is tied to graft and sweetheart deals, but it is more strongly tied to government monopolization and lack of secure rights to land. In other words, reform. An Indian coal sector where companies can freely compete and the right to economic assets are quickly and clearly bought and sold may be worth $210 billion. This Indian coal sector doesn’t exist, which is why the $210 billion doesn’t (yet) exist.

    The third question is: Who’s the money for? As in the 2G telecom scandal, the conventional wisdom is completely wrong. The disaster isn’t that the government lost revenue; the disaster is that the country lost prosperity. An open, competitive, secure Indian coal sector would transform the power industry and thus the whole economy. Less environmental damage but more power generation. Fewer blackouts, faster economic growth. That’s truly what’s being lost here.

    Posted in Featured, Ongoing Priorities [slideshow_deploy]

    4 Responses to India's Latest Scandal: $210 Billion of Nonsense

    1. Anonymous says:

      I agree with what you say when you talk about the lack of reform in the coal and power sector. Nevertheless , you go on to say that this hullabaloo around the CAG report is much ado about nothing and grossly downplay the significance of this.

      This is a very serious turn of events and will cost India much more dearly than $ 200 billion in the next decade or so. As for someone "wanting" coal , to give it value , the Indian power sector is falling apart as I type , with daily power-cuts ranging from 2 to 8 hrs in cities, towns and villages (due to the lack of power generated , not a faulty power-grid) and 60000 MW capacity of thermal power equipment lying idle due to lack of coal to get up and running : http://www.indianexpress.com/news/power-crisis-60… .

      Still don't think there's demand ?? Yes , lack of free-market participation is the cause of all this. But one cannot simply say that there is no demand ! Also , don't you think that faulty allocation of coalmine blocks over the past several years is a possible cause ? Isn't the very collapse of the National power sector a serious enough problem that would be a sheer travesty to merely laugh away as "210 billion of nonsense" , sitting right there from your armchair ??

      You are also, being disingenuous when you extrapolate the same observations to the 2G scam. There is a very open and competitive telecom market in India with a user-base of over 700 million people.

      This very market is much more competitive than the telecom market in the US, with AT&T and Verizon dominating the competition by striking deals with the phone makers , the result being slower progress in the introduction of next-generation networking , the persistence of outdated post-paid billing schemes (post-paid cellphone plans are a joke in India ; contract-less prepaid plans cost less per year than a modest handset ) , exorbitant monthly bills , ponderously long contracts to entrench customers and outrageous data caps given the speed of 3G / 4G networking on phones today.

    2. bullswin says:

      I don't understand the issue. Did the Indian governement pay billions to landowners and developers? The story isn't very clear in this regard. Hopefully the US isn't involved.

    3. wjc says:

      I read this article and have know idea what he's talking about . Is he to smart to compose in simple to understand logic or am I to dumb to understand what it is?

    4. allen says:

      Straighten your own COUNTRY first than worry about being Big Brother we have our own Energy Problem with the Liar, Why can't you people see what this Marxist is doing to your COUNTRY.

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