Tuesday, 29 January 2013

Outrageous (RICH Goa made Poor)

Dear Goans, Today Goa/Goans could have been the richest in the world. But please see how our state is looted by the state and local mining lobbies. It is really strange that we are accepting all this nonsense. There would have been no need to many Goans to migrate for better opportunities. Arwin http://www.heraldgoa.in/newpage.php?month=1&day=14&year=2013&catid=14 Renewal of Mining Leases Rajendra Kakodkar It has been reported in the press that the Parrikar government is planning to renew iron ore mining leases. Most of these leases had expired in 2007. The Digamber Kamat government did not renew them because questions were being raised as to why a mine should be given “free” to certain private parties, when others are prepared to pay hundreds of crores of rupees for the same? Digamber Kamat instead of renewing the mines after collecting the price thereof or stopping the mine; allowed private profit-making parties to mine and loot the public iron ore. Public Trust Doctrine holds that minerals belong to the people and the government is merely a trustee holding custody of the minerals. When our trustee (government) gives any of our minerals to a private party for profit making; Article 14 of the Constitution makes it compulsory for the government to adopt methods that are transparent, competitive and revenue maximizing. Transparency requires the process of allotment to be well publicized. Competitive means every citizen is eligible to apply for the lease. Revenue maximizing means the one who desires the lease must pay the highest price. The method, which the Parrikar government is planning to employ, does not satisfy any of the criteria prescribed by the Constitution. This is exactly the reason why the Supreme Court had cancelled 122 licences for 2G spectrum given by Telecom Minister, A Raja, who still languishes in Tihar Jail. The Supreme Court further ordered compulsory “public auction” for giving out licences for 2G spectrum. In the case of coal allocations as well, the central government has henceforth decided to allot mines via competitive bidding. When the President of India approached the Supreme Court, this is what the Supreme Court ordered on 27 September, 2012…. “ when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing private entrepreneurs, adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Article 14 of the Constitution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution.” All the mining lessees (not mine owners) in Goa are private entrepreneurs and are seeking renewal of leases for commercial pursuits of profit maximization. None of the renewals are backed by a social or welfare purpose and therefore the renewal of leases to these parties to mine precious and scarce natural resources, without an auction is arbitrary and will face the wrath of Article 14 of the Constitution. Moreover almost all the ore is being exported mainly to China. The notification dated 22.12.2000, by the Goa Government, empowers the Director of Mines to refuse renewal of a mining lease. Therefore it is the responsibility of the Director to ensure that Article 14 of the Constitution is not violated while renewing the leases. It may be noted here that the Constitution of India supersedes the Acts (Mines & Minerals Development & Regulation Act, 1957, etc) and Rules (Mineral Concession Rules, 1960, etc) made by the Legislature and the Executive respectively. Let us now calculate the revenue Goa can accrue if the 91 operational mines are “auctioned” or “leased at a price”. Recently Chief Minister Manohar Parrikar when in New Delhi told Prime Minister Dr Manmohan Singh: “The Goan mining industry exports ore worth $ 5 billion (Rs 27,000 cr). Of this the Centre gets Rs 7000 cr and the State gets Rs 1000 cr”. This means Rs 19,000 cr is earned by the miners collectively. From this, around Rs 4000 cr is paid to truckers, barge-owners, contractors etc. Thus the retained profits of a handful of miners works upto Rs 15,000 cr in a year. This profit comes from minerals owned by the people of Goa. The act of renewing 91 mines on 20-year leases, without charging a reasonable price, is thus tantamount to doling out public wealth of Rs 300,000 cr to a few rich and powerful private parties. This amount would go up with the rise in the price of iron ore in the future. Valuers and accountants have enough techniques to compute the present value of annual profits of Rs 15,000 cr, that will accrue in the subsequent 20 years. The IAS officers working with the Parrikar government are well conversant with these methods. The Government in the past has also employed the services of such experts in this field to value such assets. These experts not only evaluate the expected upfront value of a mine, but also suggest the optimum timing for such “auctions,” based on business and liquidity cycles ~ so that revenues are maximized. To compute the present value of 91 mines, a simple discounted cash flow method taught to commerce students, can be employed. At a discount rate of 5% (interest rate of 14% less inflation of 9%) per annum, the present value of all the 91 leases works out to Rs 113,000 cr. This amount is huge compared to Goa’s annual revenue of Rs 4000 cr and budget outlay of Rs 9000 cr. With Rs 113,000 cr available upfront to the Goa government, Parrikar can convert Goa’s infrastructure, education and industry into the best in the world. Alternately, just by investing Rs 113,000 cr in sovereign guaranteed gilts or RBI bonds, the Goa government could earn an interest of Rs 9000 cr every year. The entire Goa budget can be met from this interest. There need be no imposition of sales tax, service tax, electricity or water charges ~ no debt on the exchequer. Central grants can be the icing on the cake. Imagine the phenomenal growth in the local tourism industry, sans service and luxury taxes. The manufacturing industry could get a real push. Employment would surge. Does forgoing such a huge revenue source, auger well for the clean image of Manohar Parrikar? Every Goan should realize that they are the mine owners. Rs 15,000 cr pocketed by a few families is actually Rs 6 lakh per family per year of the 2.5 lakh Goan families. Though a bit late, Goans must at least now wake up and claim their mineral right.

1 comment:

Devdatta said...

Very nice thought provoking article. What are your views on the state itself getting involved in mining activities. Instead of giving the mines on lease to private parties, the state can hire them (current mine lessees) as contractors to extract the ore and get paid for their work.