On the mechanics of Gautam Adani’s extraordinary expansion across India

For a long while now — ever since my colleagues at Economic Times and I profiled Gautam Adani in 2013 — some of my friends and I have been wondering how the Adani Group funds its growth. Is there a mismatch between the quantum of its balance sheet and the quantum of its investments?

That question resurfaced late last year while reporting on India’s insolvency proceedings. As Scroll.in reported at the time, the Adani Group was one of the biggest buyers of stranded assets. These purchases, notably, were a part of a larger burst of growth which has seen the group rapidly expand across India. Not only have its existing businesses continued to grow, the group has also expanded into several new businesses. As we noted, with some head-scratching, one of those new businesses was sewage treatment under the aegis of the Namami Gange programme. Others included data centres, defense and more.

A couple of months ago, as my stint at Scroll.in began drawing to a close, my colleagues and I took a closer look at this question. Our first report described the company’s expansion — and contrasted that with the group’s balance sheet. The second report, published a day later, took a deeper look. Here is what we found.

Not only does the group raise money from overseas, it also raises a lot of money within India – in the form of bank loans, borrowing against shares and pledging assets. This money circulates within the group through a high-density of related party transactions. Adani Group subsidiaries borrow money by offering the shares they hold in listed group companies as security. Sometimes, they use these borrowings to purchase equity in sister companies – even those in unrelated businesses. Or they lend this money to group companies. Step-down subsidiaries – or the subsidiaries of group companies – pledge assets and raise money, which is then loaned or invested in group companies.

Put together, these patterns tell me how companies close to power grow — they gamble on growth, scrambling to become as large as they can while favourable conditions last. Working on this story, I think I also deepened my understanding re the risks such firms run — this extends beyond on the trope of political risk; chasing growth, these companies take risky bets, partly due to their own unique compulsions, and partly because they figure the policy environment can be used to push even unviable projects into viability. This raises questions on whether the projected cash flows will fructify, especially if the favourable conditions changes.

Such groups also engender complex outcomes for an economy. An infrastructure consultant I spoke to in Delhi was sanguine, seeking Adani’s rise as another point in a very familiar trajectory of economic growth. Every economic era, he said, has been dominated by a few companies which had proximity to power, access to capital and technical expertise. “In the US and Russia, abuse of power by large corporation is far bigger than what you see in India,” he said. “As long as good assets are created, efficiently run and capital pulled in from the world over and put to use in India, I welcome it.”

But it’s not that simple. Because of its connections to power and finance, a dominant player might indeed be able to build infrastructure, Michael Walton, a senior professor in public policy at Harvard’s Kennedy School of Governance, emailed. “In an economy that is a hybrid of rules and deals, with major infrastructure backlogs, this may bring real social and economic benefits,” he said.

However, he added, such companies also comes with costs. “On the economic side, a dominant player is highly likely to use their monopoly power to extract rents, to build at high cost and close down competition.” Indeed, the growth of Adani ports has been accompanied by complaints that the government is weakening state-owned ports like Kandla and Paradeep.

There are also political costs, said Walton, who is currently studying Latin America’s Odebrecht. “Such dominance can distort politics, though legal or illegal electoral finance, and directly and indirectly public deliberation over policies.”

The fallout is a market loaded against less politically-connected companies. After all, such firms can take bets other companies cannot. Such an instance comes from Adani Power (Mundra). Even as other companies put their power projects on sale, the Adani group doubled down and kept infusing cash into Mundra. In tandem, as Scroll.in reported this March, the group tried to get approval to pass higher coal prices to end customers — and eventually prevailed after the Bharatiya Janata Party governments in Gujarat and the centre stepped in.

The fallout is also a vulnerable economy. Given huge amount of borrowings, if the projected cash flows do not materialise, lending sectors will get affected too. At the same time, if the group in question is a monolith lording over most of the public utility space in infrastructure, consequences of it landing in trouble are likely to radiate outwards and touch other parts of the economy as well.

All of which makes me wonder what the coming months will hold — especially with the slowing economy.

ps: And yes, that is it. The Scroll stint is over. I reached Mizoram in the third week of February, 2015. Worked on Ear To The Ground till November, 2017. And worked again on the central government from 15 August, 2018 till now. It has been a good run. I have learnt a lot. Made a lot of new friends. Lost some illusions about the country and several about myself. The plan is to now switch off for a bit, finish writing a book, and get back to cycling.

More on the asymmetry that rules India’s business insolvency process

Since October last year, Scroll has been (intermittently) reporting on how India’s insolvency proceedings are coming along. Cumulatively, these reports flag a couple of peculiar patterns.

A lot of companies are up for sale — In a country with 7500 companies with a topline over Rs 250 crore, 2511 companies are slated for insolvency proceedings. There are very few buyers. Ergo, companies are changing hands at very low rates, creating in effect a giant fire-sale of Indian companies. This asymmetry between buyers and sellers is interesting. Even as most debt-saddled companies find themselves in insolvency courts, others (a very small set) continue on an acquisition spree.

An example here is Adani Enterprises. One of the most debt-saddled companies in the country, it continues to acquire companies and announce new projects with gusto. One answer why lies in today’s report.

Do please take a look.

Five reasons why claims by forest dwellers for their land are low – and rejections are high

On February 13, the Supreme Court ordered the eviction of more than 10 lakh families of Adivasis and other forest-dwellers from forestlands across 16 states. The order came while the court was hearing petitions challenging the constitutional validity of the Forest Rights Act, 2006. The petitioners had demanded that state governments evict those forest dwellers whose claims over traditional forestlands under the landmark law had been rejected.

…In the days since the ruling, tribal activists have denounced the order while some conservationists and bureaucrats in the forest service have welcomed it. A key part of their defence? According to the judgement, a total of 18.8 lakh titles have been granted under the Forest Rights Act, while 19 lakh claims have been rejected. In a statement released on Thursday, Wildlife First said all 19 lakh rejected claims were bogus. It said: “The Supreme Court is focusing only on recovery of forest land from bogus claimants whose claims stand rejected.”

The answer to these contrasting perspectives lies in how the forest rights act is being implemented — how are claims submitted and how are they processed? This report, a followup to what I filed shortly after the judgement was posted online, takes a closer look at those processes. The answer, in short, is that all rejected claims do not indicate bogus claimants. Do read.

Interview: ‘We have underestimated the extent of India’s jobs crisis. It is far more serious’

and gosh. one more frikking q&a.

On Thursday, a political storm boiled over after Business Standard reported that, between 2017-’18, unemployment numbers in India reached a 45-year high. The newspaper based its report on a survey, conducted by the National Sample Survey Organisation, called the Periodic Labour Force Survey that the government had not made public. 

According to the report, the country’s unemployment rate climbed from 2.2% in 2011-’12 to 6.1% in 2018-’18. Once disaggregated, these numbers look even worse. Joblessness is higher in urban areas than rural areas – 7.8% versus 5.3%. For instance, unemployment among rural men in the age group of 15-29 years rose from 5% in 2011-’12 to 17.4%. 

The report corroborated what the government’s critics have been saying – that demonetisation and the ham-handed rollout of the Goods and Services Tax have resulted in large job losses. In a press conference called on Thursday evening, the government hit back. It claimed other datasets – like that of Employees’ Provident Fund Organisation – show employment in the economy is rising. At the event, Amitabh Kant, the chief executive officer of Niti Aayog, also suggested results of the Periodic Labour Force Survey, based on a new methodology which conducts quarterly surveys, is not comparable with older NSSO surveys.

Do these various reasons offered as defence hold up to scrutiny? Scroll.in asked Himanshu, an associate professor at Jawaharlal Nehru University.

Excerpts from an interview.

Reviving the Ganga #3. Three ways in which the Modi government is adding fresh stresses to the river

A century ago, the gharial could be found all the way from the Indus to the Irrawady. The thin-snouted, fish-eating member of the crocodile family was spread out over 20,000 sq km at the time, studies estimate, and numbered between 5,000 and 10,000. Now, no more than 200 breeding adults survive in the wild.

The gharial is not the only Gangetic species at risk of extinction. The Gangetic dolphin is endangered as well. Catches of fish from rivers of the Ganga basin have declined 90% in the last 40 years, while otter numbers have dropped by a third over the last 30 years.

The well-being of these species, as also the lives of 400 million people inhabiting the Indo-Gangetic plain, depends on the revival of the polluted, erratically flowing Ganga and its tributaries. That’s what the Bharatiya Janata Party government promised to do when it announced the Rs 20,000-crore Namami Gange shortly after coming to power in 2014. The programme aimed to ensure nirmalta (purity) and aviralta (continuous flow) of the river.

Yet, four-and-a-half years later, the Ganga’s future appears more dire than ever. As the first two parts of this series reported, the efforts to control pollution in the river hinge on a public private partnership model that is untested. At the same time, rampant construction of environmentally suspect hydroelectric power projects in Uttarakhand’s Ganga basin is hampering the flow of the river.

Adding to the problems are three infrastructure projects being rolled out by the government. The Char Dham Pariyojana, a 10-metre wide all-weather road, will connect the four pilgrimage centres of Yamunotri, Gangotri, Kedarnath and Badrinath. The Inland Waterways project intends to use 106 rivers and creeks for moving cargo, while the Ken-Betwa river linking project in the Ganga basin will divert water from the Ken, a tributary of the Yamuna that feeds the Ganga, to the Betwa for irrigation and drinking water. All three projects come with heavy environmental costs.

Two of these projects – the Char Dham road and the Inland Waterways – have escaped any environmental scrutiny. The Ken-Betwa link is coming up despite warnings about environmental damage. Between these projects, falling river flows due to climate change and, as the first two reports in this series described, Namami Gange focusing much more on nirmalta than aviralta, the river’s future looks more uncertain than before.

Out today, the third — and concluding — part of our series on how the Ganga is faring. Some parts of this reporting was relatively easy — like seeing the river as an integrated whole and mulling about the cumulative impacts of all these projects on it. What is harder is this: how does one understand the curious paradox of a hindu majoritarian government which comes to power promising to revive the river but leaves it worse off than before?

Is it ecological ignorance, which leaves them unable to see the river as an integrated whole? In which case, how did they arrive at this view of nature which is so shorn of any ecological understanding? Is it cynical politics where they just rode on the issue (as they seem to have done on the Ram mandir)? In which case, what are the compulsions contributing to that cynicism? This is a question we try to answer, especially in the Uttarakhand report, where we look at why the party is pushing dams despite knowing they are harmful for the river.

But there is something else here — and you see my thoughts turning more and more inchoate with each passing word — about a politics which seems to be so unmindful of the gap between promises and actions. I find it hard to understand that too. This gap makes me think of a book I just finished reading — and need to re-read. This is Lewis Lapham’s ‘Age Of Folly‘, where he talks about how democracy in America lost its vitality.

In his analysis, a large part of the answer lies in a society which turns cynical and stops discussing these matters.

For the better part of 200 years it was the particular genius of the American democracy to compromise its differences within the context of an open debate. For the most part (i.e., with the tragic exception of the Civil War), the society managed to assimilate and smooth out the edges of its antagonisms and by so doing to check the violence bent on its destruction. The success of the enterprise derived from the rancor of the nation’s loudmouthed politics — on the willingness of its citizens and their elected representatives to defend their interests, argue their case, and say what they meant. But if the politicians keep silent, and if the citizenry no longer cares to engage in what it regards as the distasteful business of debate, then the American dialectic cannot attain a synthesis or resolution. The democratic initiative passes to the demogogues in the streets, and society falls prey to the ravening minorities in league with the extremists of all denominations who claim alliance with the higher consciousness and the absolute truth.

Easier, he writes later in the book, for politicians to sway masses by claiming virtue than by engaging on a range of questions to which they often won’t have all the answers.

But that is an impulse which is always around. Bigotry, for instance, is always around and so too the impulse to ride on it. And so perhaps the question is: how do democracies come to this sorry pass?

Reviving the Ganga #2 Modi said he would revive Ganga but his government is doing the opposite by reviving dams

The focus of their anger lay 400 kilometres to the north. Since 2002, Uttarakhand, where the Ganga originates, has been on a drive to build hydel power projects. The state, which currently produces 4,000 MW of hydel power from 98-odd projects, has since 2009 signed agreements to build another 350 dams.

Most of these are diversion dams, which block the river and divert its water through tunnels to turbines that generate electricity. The river rejoins its original course only after passing over the turbines, leaving riverbeds dry between the dam wall and the tunnel’s outlet. For instance, the Bhagirathi, one of the sources of the Ganga, runs through tunnels for half its 220-km length.

One result has been a spike in anti-dam movements in Uttarakhand, including the one by the sadhus. Maintaining that the Ganga is holy, they want it to flow without interruptions. In 2014, the BJP’s election manifesto took note of this and promised to ensure “the cleanliness, purity and uninterrupted flow of the Ganga on priority”.

Shortly after the party won the 2014 election, it announced a Rs 20,000-crore project to revive the river. Namami Gange was intended to ensure nirmalta (purity) and aviralta (continuous flow) of the river.

In Uttarakhand, ensuring aviralta was the priority. As the state’s rivers, which feed the Ganga, ran through tunnels for hydel power projects, both the rivers and the aquifers they recharged had dried up. Blasting to build dams and tunnels created new fissures into which mountain aquifers disappeared. Communities living by the river found local water sources drying up and had to walk longer distances to fetch their supplies. As dams fragmented rivers, fish such as the golden mahseer began dying out.

In addition, the new hydroelectric power projects run the risk of cataclysm. The Himalayas see both earthquakes and cloudbursts, like the one in 2013 at Kedarnath which killed over 5,000 people and damaged 4,500 villages. After the cloudburst, several hydel projects failed to hold their surging reservoirs. As they gave way, downstream valleys saw walls of water bearing down on them.

On November 1, 2010, heeding some of these concerns, the Congress-led United Progressive Alliance cancelled three hydel projects in Uttarakhand. It also declared a 100-km stretch of the Bhagirathi – from Gaumukh to Uttarkashi – an eco-sensitive zone. Two years later, environmental studies ordered by the Uttarakhand High Court proposed a minimum distance between hydel projects and suggested that each dam be required to release enough water for a river to perform its ecological functions. This is called “environmental flow”, or e-flow. One of these studies, by the Wildlife Institute of India, recommended that 24 proposed projects on the Alaknanda and the Bhagirathi be scrapped….

Oddly, after coming to power in 2014, the BJP-led NDA government rolled back all these protections. The second part of our series looks at the reasons why.

Reviving the Ganga #1. Modi’s clean Ganga plan hinges on private companies tackling sewage. Will it work?

In September 2014, shortly after coming to power, Prime Minister Narendra Modi held his first meeting on the Ganga. The river had featured prominently in the Bharatiya Janata Party’s election manifesto. The Ganga was both jeevan dayini, the giver of life, and mukti dayini, which sets the soul free, the document said.

But all was not well. “Even after decades of independence, the Ganga continues to be polluted and is drying,” said the manifesto. It went on to assert that the BJP was committed to ensuring “the cleanliness, purity and uninterrupted flow of the Ganga on priority”.

The Indo-Gangetic plain is home to a little over 5% of the world’s population. The Ganga and its tributaries bring in fresh water, recharge groundwater aquifers and drain wastewater. The survival of an estimated 400 million people – and the biodiversity amidst them – hinges on the health of the Ganga.

Modi’s meeting in September 2014 was one of the first signs the BJP intended to make good its election promise… Four-and-a-half years later, however, contradictory decisions by the government have pushed the Ganga into deeper trouble than before. On one hand, the government has moved to reduce river pollution, mainly by privatising sewage collection and treatment in 97 cities and towns along the river…

At the same time, the government has launched a set of other projects that further erode the river’s ecological foundations. Environmentalists have already expressed doubts about the Char Dham Pariyojana, a 10-metre-wide road between the temple towns of Badrinath, Kedarnath, Yamunotri and Gangotri, which is being built in the landslide-prone Garhwal Himalayas.

They have also criticised the large-scale dredging for the Inland Waterways project to ferry cargo on the river. Besides, environmentalists say, flows in the river will be hurt by the Ken Betwa river-linking initiative and the 450 hydel power projects being built on the river in Uttarakhand.

Last November, I reported on this three-part series on how our Hindu majoritarian government’s promise to revive the Ganga are coming along. Part one looked at the government’s work on pollution abatement.

Biggest winner of Modi’s loan-in-59-minutes plan for small companies is an Ahmedabad fintech startup

On November 2, Prime Minister Narendra Modi made a slew of announcements aimed at reviving India’s faltering micro, small and medium enterprises. One of these was about a dedicated digital platform – www.psbloansin59minutes.com – to enable them to access loans of upto Rs 1 crore in just 59 minutes.

Unlike their larger counterparts, India’s smaller companies have long faced difficulty in accessing bank loans. The psbloansin59minutes website was presented as the solution. Once a firm uploads key information such as tax returns and ownership details, proprietary algorithms on the website appraise the application, determine the loan amount that can be given and then connect the applicant to a bank branch – all in under 59 minutes.

As it turns out, the website mirrors the aims outlined in a tender issued by the state-owned Small Industries Development Bank of India on January 22, seeking to hire a consultant to set up a new legal entity that would facilitate contactless lending.

“The solution will use algorithms and techniques to read complex balance sheets, IT returns and bank statements in a very short time,” said the tender. “These solutions can easily capture the basic details of the applicant from present documents. Smart analytics will enable the proposed solution to find discrepancies and automatically pull information from credit bureaus. More importantly the decision-making process for a loan officer can become simpler as the solution provides a summary of credit, valuation and verification on a user-friendly dashboard.”

The tender went on to define eligibility requirements. To qualify, consultants needed to have earned a fee of at least Rs 50 crore from management consulting during the three preceding years. “The consultant should have been in existence in India since April 01, 2012,” it stipulated.

Once a consultant was shortlisted, said the tender, a new legal entity would be formed, in the form of a company with SIDBI and other banks as shareholders.

However, a closer look at psbloansin59minutes shows that the company behind it does not quite meet the tender stipualtions. The website is not run by a new legal entity as envisioned by the SIDBI tender. Instead, it is run by a Ahmedabad-headquartered fintech company called CapitaWorld Platform, which was set up in 2015.

Arun Jaitley is being disingenuous in blaming RBI for the troubles of India’s small and medium firms

What India’s Finance Minister says…

The finance minister this week criticised the central bank for failing to check indiscriminate bank lending from 2008 to 2014 which has now ripened into a bad loan crisis. The attack was accompanied by the government invoking never-used powers under the Reserve Bank Act to issue directions to the bank’s governor, Urjit Patel.

What he stays mum on…

If the MSME sector was tottering by the time Arun Jaitley became India’s finance minister, the next four and a half years felled it.

First came demonetisation. On November 8, 2016, the government suddenly announced that Rs 500 and Rs 1,000 notes were no longer legal tender. This created an unprecedented cash shortage in the country. As economic activity dropped, households and small businesses took a beating.

Less than a year later, on July 1, 2017, came another shock. The Goods and Services Tax was introduced even before the MSMEs’ turnovers had returned to pre-demonetisation levels. As Scroll.in reported from Gujarat at the time, India’s new tax regime for businesses favours formal economy players more than those in the informal economy – which is entirely made up of MSMEs. In South India, high tax slabs pushed MSMEs in the automotive cluster of Hosur into the red, forcing them to take bank loans to pay taxes.

While firms were still grappling with the new tax regime and figuring how to survive, there came the cash crunch of December 2017. As Scroll.in reported, multiple reasons were at work, including a collapse of the government’s cash distribution protocols.

From a quick comment published today on the government’s attempt to pin blame on MSME distress on the RBI.

On the six factors which cumulatively added up to India’s unprecedented cash squeeze

India’s current cash crunch is a real enigma.

To begin with, there is its sheer unprecedented nature. In all the years since Independence, India has never seen something like it. “We have heard of coin shortages but never a cash shortage,” said MS Sriram, visiting faculty at the Indian Institute of Management-Bangalore’s Centre for Public Policy. “I certainly have not in my life. This is new.”

How the shortage played out is odd too. It is acute in some states but not in others. For instance, in Tura, the largest town in Meghalaya’s Garo Hills, an official at the main State Bank of India office, which disburses cash to the bank’s other branches in the region, told Scroll.in that cash reserves had dwindled to almost a fifth of the required amount. “There is pressure from other branches to release money, but we have not been able to give even half of what they have been demanding,” the official said.

A clutch of other states – including Bihar, Assam, Maharashtra, Telangana and Karnataka – are facing shortages too. But states like Delhi are less affected.

The discrepancy is visible within states too. In Maharashtra, Mumbai is fine but Nashik is not. In Tamil Nadu, big banks in Hosur say they are getting all the money they need but their counterparts in surrounding villages say the situation is bad. “We contact our sister branches to see if any of them has surplus cash,” said the manager of a public-sector bank in Belathur, a village about 20 km west of Hosur.

There are other puzzles. The cash squeeze showed up not gradually but suddenly. Reports began coming in from several states from February. If the cash squeeze was only due to a growing mismatch between cash supply and the demands of the growing economy, it should have shown up gradually, experts say.

As a report in Scroll.in noted earlier this month, several theories emerged to explain the shortage, covering the gamut from obvious to plausible to off-the-wall. Shortly afterwards, several Scroll.in reporters fanned out across the country, speaking to people in both cities and villages, to try to identify the genesis of this shortage.

Here is what we found.

Out today, with my colleagues Abhishek Dey, Mridula Chari, Vinita Govindrajan and Arunabh Saikia, a more deeply reported piece (than the previous one) which seeks to trace this cash squeeze back to its (idiotic) origins. Do read.

Aadhaar shows India’s governance is susceptible to poorly tested ideas pushed by powerful people

This series has flagged a puzzling trend. State governments are struggling to use Aadhaar-based fingerprint authentication in ration shops. At the same time, a rising number of companies are integrating Aadhaar into their databases.

This is puzzling because from its inception, Aadhaar, India’s Unique Identification project, was pitched as integral to the modernisation of social welfare delivery in India.

Why is it failing at the job it was created for while proving useful elsewhere?

The answers vary depending on whom you ask. Former officials of the Unique Identification Authority of India, the government agency which issues Aadhaar numbers and manages the database, blame state governments and banks for poor execution of Aadhaar-based welfare delivery. State governments in turn blame banks and poor internet connectivity and the failures of biometrics-based technology.

These are – at best – incomplete explanations.

The roots of Aadhaar’s mission drift lie deeper.

why people in Nagaland and Manipur are responding cautiously to the new Naga peace accord

A day after the NDA announced its “historic” peace accord with the National Socialist Council of Nagaland (Isak-Muivah), speculation is rife in the two states affected most by the agreement – Nagaland and Manipur. What is the shape of the agreement hammered out by government and the rebel group?

After all, the NSCN was formed in the aftermath of the Shillong Accord of 1975, signed between the government of India and the Naga National Council, which soon faded into irrelevance. The terms of this agreement had stipulated that underground Naga organisations would give up arms and “formulate other issues for discussion for final settlement”. This accord was rejected as a sell-out to the Indian government.

Will the terms of the new agreement go any further?

See the story here.

Mr Environment Minister, India is carrying out deforestation, not reforestation

On Wednesday morning, Environment Minister Prakash Javadekar gave India one more reason to think of him as among the country’s worst environment ministers till date.

As the Indian Express reported, the minister sent out an intra-ministry letter on July 16 asking bureaucrats to replace the term “diversion” of forest land with “reforestation” in their communications. When asked about this, Javadekar told the Express: “For every diversion of forest land for a project… compensatory afforestation on equal area of non-forest land is a must. So ultimately, it is reforestation only. This is all about thinking positive and using the right expression.”

The power of positive thinking apart, what Javadekar said is wrong. Compensatory afforestation is not working in India.

Will India’s recent coal block auctions actually burden banks and skew the fuel market?

The first part of Scroll’s analysis of the coal block auctions took a close look at the auctions for the steel, cement and aluminium sectors. It found an extremely wide divergence in the winning bids. Some blocks went for twice the notified price of coal, or the price at which the bulk of India’s coal is sold, while others fetched a quarter of it. A similar divergence is also visible in the auctions of coal blocks for the power sector. Here, the concern is over the viability of the some of the bids. In a report published on March 16, which analysed the second round of auctions for the power sector, stock brokerage firm HDFC Securities said, “We believe there is a high probability of end use plants becoming unviable, even after factoring in merchant sales.”

the second part of our two-part story on the ongoing coalblock auctions. See previous post.

Are the coal block auctions as successful as the Modi government claims?

At a gathering in Paris last month, drawing attention to the coal block auctions that have taken place under his government, Prime Minister Narendra Modi boasted, “Twenty coal blocks out of 204 have been auctioned so far and we got more than Rs. 2 lakh crore from them.” The factual error in the statement – 31 blocks, not 20, have been auctioned in two rounds – might be the least of the problems with the government’s triumphal sentiment.

To start with, as a report in Business Standard explains, the Rs 200,000 crore is not a one-time payment flowing into government coffers, but revenues that are likely to accrue over the lifetime of the mines. These revenues include royalties that states would have earned regardless of whether the mines had been allotted or auctioned.

While auctions are an improvement over the discretionary allotments of the past, and the government has shown swiftness in moving ahead with them, what isn’t well understood is that the design of the auctions has a significant impact on their transparency and outcomes. Competitive auctions are meant to provide a market-based mechanism to discover the value of a resource. But poor design could impede price discovery.

As the government prepares for a third round of auctions, Scroll in a two-part series, takes a closer look at the first two rounds. Our analysis raises worrying questions about both the design of the auctions and their outcomes.

Mizoram governor’s sacking is BJP’s latest misstep in a state it is trying to woo

When Bharatiya Janata Party president Amit Shah makes his planned visit to Mizoram this month, officials of his organisation’s state unit have arranged for him to meet with church elders and receive a memorandum from them. Their note will remind the BJP that “India is a secular state, that the people of Mizoram are against the beef ban, and that we protest the anti-conversion bill”, said a senior official in the party’s Aizawl office.

The memo, which challenges some of the Sangh Parivar’s most prized axioms, is the brainchild of the party’s own state unit. A senior party leader contacted church elders and asked them to prepare it. Mizoram, which is 85% Christian has long been wary of the BJP’s Hindutva preoccupations. Party leaders were hoping that the Modi effect will neutralise some of that suspicion. However, recent steps by the BJP have made matters worse.

The latest source of anger for the state’s people is the sacking of Mizoram governor Aziz Qureshi on Saturday. He is the sixth governor to leave the state since the Modi government took charge in May. He was the second governor to be sacked – after Kamla Beniwal.

Ambiguous drafting continues to dog the NDA’s coalblock auction plans

an iffy clause in India’s new coal bill

the coal bill was passed by the lok sabha yesterday. it now goes to the rajya sabha. the auctions will start soon. and i am waiting to see how fair the auctions are. and whether oligarchs again manage to corner the damn blocks.

modi sarkar and its env/dev record

and then, there is this story on its environmental track record till now.

If environment minister Prakash Javadekar’s tweets are anything to go by, India is treading a fine balance between development and environmental protection. For instance, on May 31, shortly after taking charge at Paryavaran Bhawan, he tweeted: “The government believes in #environment and #development, and not environment vs development.” However, a look at the ministry’s major decisions between then and now suggests that in the NDA, much like the UPA, the conflict is real.

is the forest rights act being implemented well? (the answer is ‘no’)

Last month, union tribal Minister Jual Oram told the Lok Sabha that India is making “satisfactory progress” implementing the “Forest Rights Act” (FRA). However, a closer look at the numbers he submitted in the house indicates otherwise.
my story on how the government’s claims about “satisfactory” implementation of the forest rights act are garbage. what is underway is a game with statistics.

a big setback for aadhaar

The finance ministry has decided to limit Aadhaar’s role in its welfare scheme payments and, instead, use ATM-enabled RuPay cards for last-mile authentication to withdraw money. While it will continue to use Aadhaar for opening accounts and to eliminate ghosts and duplicates from beneficiary rolls, the ministry has decided to give RuPay ATM cards with bank accounts being opened under to-be-announced financial inclusion drive, Sampoorn Vittiyea Samaveshan, government officials told ET. “We do not want that an account holder should be restricted on a particular technology platform. By providing RuPay powered ATM card the account holder can transact on multiple platforms,” a senior finance ministry official said on the condition of anonymity. This is a large blow to the Unique Identification Authority of India (UIDAI) which has, till now, regarded authentication services as one of its principal functions.
ps: for context on the quote, see this post (and the accompanying article).

RBI opposes NDA financial inclusion plan

The new financial inclusion push, Sampoorn Vittiyea Samaveshan, which Prime Minister Narendra Modi is widely expected to unveil on August 15 does not quite have the central bank on its side. Top government sources told ET that the Reserve Bank of India (RBI) was in disagreement with three critical elements of the drive.

it opposed the Rs 5,000 overdraft, the credit guarentee fund, and the aggressive timelines. on all three counts, it was over-ruled. a quick story with my colleague dheeraj tiwari, this one.

the latest question on aadhaar

…While researching this story, ET reviewed two drafts produced by the Department of Financial Services – one in June, and the second in July. The draft dated 8 July, 2014, says: “This account would be linked with the Aadhaar number of the account holder and would become the single point for receipt of Direct Benefit Transfers (DBT) from Government/Local Bodies.”

According to a source close to the UIDAI, who spoke to ET on the condition of anonymity, this phrasing suggests that while Aadhaar numbers might be seeded into bank accounts, it might not be used for authentication. In other words, once the cash flows into the Aadhaar-linked bank account, last-mile authentication when the money is being withdrawn will be done using the authentication systems of either the relevant bank or the last-mile service provider – like a Banking Correspondent (BC) company.

Not using Aadhaar for last mile authentication has significant fallouts for the UIDAI. Which, among other things, has the Aadhaar-enabled Payment System as one of its key components, and sees authentication services as one of its principal functions and revenue streams.

a small update on the ongoing churn over aadhaar and dbt. a purely online story, this.

nilekani meets modi, saves aadhaar

There is enough evidence to suggest that the crucial July 1 meeting between Nilekani, the prime minister and the FM, brought forth a volte face in the government stand on UIDAI. Only two days before this, on July 3, Home Minister Rajnath Singh, Telecom, IT and Law Minister Ravi Shankar Prasad and Planning Minister Rao Inderjeet Singh had met with top officials to discuss UIDAI versus the National Population Register (NPR), an entity under the home ministry that conducts the decadal census. The conclusions did not favour UIDAI in the form it was running till then.

a story by my colleague vikas dhoot and me which goes some way in explaining a surprising about-turn by the government re the aadhaar project.

MGNREGA ver 2.0

out today, this story on the changes planned by the nda for nrega.

Sanitation projects to reduce open defecation, increasing green cover and emphasis on creating assets form the crux of the Narendra Modi-led government’s blueprint for redeploying UPA’s flagship social sector programme — the Mahatma Gandhi National Rural Employment Guarantee Act or MGNREGA.Top officials aware of the government’s re-orientation roadmap for the rural employment guarantee scheme, being steered by rural development minister Nitin Gadkari, told ET that assessment of its outcome would go beyond number of man days of work offered to tangible ground-level changes it achieved.

For instance, people digging a pond will have to mention the storage capacity being created, its impact on groundwater level, and so on. Similarly, folks digging compost pits will have to outline the quantum of compost they will generate. According to the officials, it is proposed that about half of the scheme’s fund allocations will be earmarked for rural sanitation projects and plantation of trees along highways and rural roads.

is this a good idea? on one level, yes. rural india’s tree cover is falling. as are its groundwater levels and organic carbon in its soils. at another level, however, are these changes good for nrega?

The question is whether these problems should be fixed using MGNREGA. Corruption and payment delays have shrunk the number of people seeking work under the NREGA, said Himanshu, assistant professor in economics at JNU’s Centre for Informal Sector and Labour Studies.”MGNREGA is not a sanitation programme, but a safety net for people who can demand work whenever they need it. In the process, some assets also get created,” he told ET, adding that the Act ceases to deliver ‘work available on demand’ the moment it gets linked to another program like sanitation. “What if the money for sanitation is not released? Then NREGA, with 20% of its budget earmarked for sanitation, will suffer,” he added.

on aadhaar, npr and the nda

my colleague and friend vikas dhoot and i have this update on the continuing aadhaar and npr saga.

Prime Minister Narendra Modi has backed the UPA’s Aadhaar programme for now, but that may not be the final word on whether it will be retained. The government has asked the Unique Identification Authority of India (UIDAI), which runs Aadhaar, and the census office under the home ministry to test their databases against beneficiary lists of schemes such as the LPG subsidy programme as well as documents such as passports to determine which one is more accurate, said senior government officials aware of the development. “Line ministries in charge of different schemes like education subsidy, LPG cylinders and identity documents such as passports, have been requested to share data to enable this matching exercise,” said one of the officials.