Behind the plunging rupee is the story of how the UPA-Congress leadership killed mining, exploration, industry.
Last Saturday (August 16), at a dignified little ceremony at 7, Race Course Road, the prime minister released the fourth volume of the history of the Reserve Bank of India. There was, however, a certain apologetic mournfulness in that select gathering of no more than 30 of India's topmost economic and monetary policymakers. It did, at times look so much like a chamber of vanquished generals. It had to, given the state of India's economy, you might say, considering that the group included almost all economic leaders of UPA 2, except Finance Minister P. Chidambaram who was away in his constituency. RBI Governor D. Subbarao's own speech was more in the nature of anticipatory bail: you have to give history time to assess the wisdom of some of the central bank's key actions. But history has little patience, and a long, unforgiving memory. So it is unlikely that it will easily overlook or forget the fact that the Indian growth story collapsed so dramatically under the leadership in the room.
Anticipatory bail, therefore, will not work. What may be more useful, however, is to search for others to blame. And if you were not so panicked, and not so spineless to ever question any policy that could reach the very top of the Congress, you could find at least one party more guilty than all of you. That guilt has to lie with the political leadership of this government and the Congress party, whose second reign will go down in India's history as one that devastated its mining and manufacturing, destroyed its balance of payments, debilitated its industry and deprived lakhs and lakhs of poorest Indians, mostly tribal, of basic employment and livelihood.
The graphic accompanying this article by itself tells this story. From the first year of UPA 2, when it grew at a brilliant 7.9 per cent, overall mining collapsed year after year, to reach minus 2.3 per cent in 2011-12. In fact, of the 24 months ending June this year, mining logged negative growth for 21. And even for the three months that it was in positive territory, it was barely to the left of the decimal. No wonder the mining growth rate of the past three financial years, from 2010-11, has been 5.2, minus 2.1 and minus 2.3 per cent, respectively. And while under the new regime, it is considered so amoral to feel sorry for Indian industry and entrepreneurs, you need to note how it has stressed our factories. Take steel. India's iron ore production, 218 million tonnes in 2009-10, is now just over half of that. Steel mills are starved of ore and many, in UPA's believe-it-or-not, are surviving on imported scrap. You want more striking figures? In 2009-10, we exported 117.37 million tonnes of iron ore. Last year, it was down about 87 per cent of that figure and today we import five million tonnes of iron ore. And even that does not tell the full story because of the amount of scrap we import. In the last financial year, our imports of ores and scrap was at $14.99 billion, almost twice the 2010 figure of 7.7. Now you know where your CAD is coming from? Our iron ore production is now less than a fourth of Brazil or Australia even though we have matching reserves. We know that many object to raw materials like ore being exported. So have we helped the situation by blocking almost all steel capacity expansion on some ground or the other? Our current steel production is 80 million tonnes compared to China's 780 million tonnes, even if some of this was built around ore imported from India. Now, we do not sell the ore. And to twist (sadly) that old Tata Steel line, we also do not make steel.
What about coal, which we have such an abundance of? We always imported coal of some grades and quality. But once again, under UPA 2, held to ransom by Coal India and policy freeze, the imports have nearly doubled to $16 billion. Another 20 billion is locked up because of the UPA's nine-year log-jam in petroleum (gas and crude) exploration policies. I know that it is brave to say this these days, but Reliance and Cairn are both victims of this, sitting on proven reserves and unable to drill or move. The oil ministry has refused to recognise or clear two of Reliance's gas-fields (NEC-25 and R series, adding up 30 mmscmd), and blocked Cairn's Rs 13,000-crore investment that can produce another one lakh barrels of oil a day. Now how much is that worth at today's price of a hundred dollars per barrel? And this, when under the production sharing agreements, the exchequer will get 80-85 per cent of this gas and crude. So you add the self-inflicted net deficit on steel (15), coal (16) and petroleum (20) and you get to 51 billion of the current year CAD estimate of 70.
The same incredible story continues with other minerals. At 3.5 billion tonnes, India has the third largest bauxite reserves in the world. India is now likely to become a bauxite importer to feed its refineries that produce a bare 1.5 million tonnes of aluminium while China,with no bauxite, produces 20 million tonnes. We have become so paranoid and judgemental about mining and minerals that today even basic construction materials like sand, stones and ordinary soil to bake into bricks have become scarce. All of India's activists have now become defenders of its sand. Never mind that national highway contractors have landed in courts pleading that they cannot build with the non-availability of these basic materials and when the price of an ordinary brick has touched Rs 15. If you think mining is so immoral, do ban it by all means. But then accept the dollar at a hundred rupees. Or get Greenpeace to fund your CAD.
Surely, some of this stall and decline is because of judicial intervention. This applies particularly to iron ore. But did the government make a good enough case to continue production even while those guilty of illegalities were punished? In Karnataka and Goa, it was blinded by the prospect of targeting the BJP governments. Vedanta's aluminium plant in Orissa has been laid waste with denial of bauxite after nearly Rs 30,000 crore had been invested there, POSCO has been delayed endlessly. After more than a decade of legal battle, the Supreme Court has finally permitted the Centre to auction India's oldest (and long defunct) gold mines, Kolar and Hutti, to the private sector, But there hasn't been a stirring of action from the government yet. You can go on.
It is not as if the government does not have people paid to look after India's mining. There is a mining minister. But he is so inconsequential, and so incompetent, I bet most of you cannot even tell me his name. If you ever heard Dinsha Patel say or do anything of consequence about mining, I will be happy to be corrected. See his track record, and you can understand two things: the health of Indian mining, and the Congress in his home state of Gujarat. And he is not the only minister watching Indian mining. There are also ministers for oil, coal and most notably, steel, Beni Prasad Verma, the chief joker in the pack.
But why just blame the Mr Nobody Dinshabhai and others. In fairness to them, you have to record that somehow, as it entered its second year, the leadership of UPA 2 concluded that mining was immoral, unethical and unnecessary. That it was responsible for all kinds of problems in east-central tribal India, from environmental degradation to tribal destitution and Maoism. So stop mining, shut down this wretched extractive industry, and these problems will disappear. Or, as they would say in the Hindi heartland: na rahega baans, na bajegi baansuri (who will play the flute when there is no bamboo left?)
And what have we achieved? This humongous CAD, precipitous industrial, manufacturing decline and fiscal deficit on the economic front. Our environment has deteriorated. Lakhs of tribals have lost their livelihood — at least 50,000 of them in and around Kalahandi, Bolangir and Koraput (the notorious KBK, India's poorest tribal districts) where the Vedanta plant has been shut, and chances are many of them will land up in our cities and on our highways, hammering and rolling stones and sand into our roads and construction sites. That is, provided you can get soil, stones and sand in the first place. And Maoism? Has it declined, or risen under UPA 2? I can rest my case.
Postscript: Here is a conversation not long ago with a well-informed global tycoon with large business interests in China and India. What is the difference between doing business in the two, I asked. In China, he said, once they decide to do something, they do it, no second thoughts, no retreats. Deng, he said, said 30 years ago, that within 25 years China should control 90 per cent of the world's rare metals and minerals (gadolinite, cerium, plus scandium and yttrium, etc) without which no modern electronic or telecom gadget can be produced. By now, they control at least 80 per cent of these. And when the Japanese "misbehaved", the Chinese squeezed these supplies and all of them, from Panasonic to Sony, went down on their knees. "And you know what," he said, "of the remaining 20 per cent in the entire world, India has more than half. And if you cannot access most of it, because of people you call as Maoists or Naxalites or their intellectual backers, and you think the Chinese have nothing to do with it, you know where you live. On cloud cuckooland."