Tuesday, December 11, 2007

Unless the current MOU terms are nixed and Royalty raised, our goose will be cooked - by Sandip K. Dasverma

Having lived in USA for nearly 3 decades and having worked in the large Engineering companies, it has become clear to me, that the purpose of India's planning should be different and the model used in Western countries particularly USA, not followed. This is because I also worked a decade and a half in India for Govt. of Orissa(GOO), too.

USA's population density is 31 vs. 366/Sq.mile is India's,i.e. population density is about 11.5 times lower. The western countries always go for technologies that are high on capital and low in labor because they always had a huge shortage of skilled labor.
I remember in a seminar in 1970s at The Institute of Engineers, BBSR one of the invitees, a planning commission member stating that employment potential in agriculture is 23 times more than in Industry, for the same investment. Today, with more automation, the ratio must have further increased. Though mechanization in agriculture would move this multiplier in the opposite direction, has it?

But until today India's main problem(and more so Orissa's) has been, how to generate employment/work for the large working age population among our 1.2 billion people. Unfortunately, we give all kinds of incentive to the industry and very little to the larger employment generating industry, the agriculture is. The very fact that we write off 1000s of crores of loans from public sector banks to various industries and yet in 60 years, we have not been able to set up a mechanism for short term loan to our farmers, (who commit suicide in thousands), tells the story of our wrong bias. Eminent journalist P. Sainath has extensively written and documented on this issue.

We have largely neglected major employment generating areas, thus bringing misery and destitution to our people, namely:

1. Education
2. Health
3. Agriculture
4. Animal Husbandary
5. Infrastructure - Road, residential houses, Railways, transportation et el.

The pretext since the 1960s has been that Govt does not have money. Yet the give aways to industries, have continued, perpetually. The sale of electricity cheap to Hirakud Aluminum Co(Hindalco), Hirakud and Orient Paper Mill, Brajaraj nagar, are case in point. Due huge undue incentives and bad contract with these private industries, the Orissa State Electricity Board was perennially at loss, while these Hindalco and Orient Paper Mills, made huge profits. The give away to these industries were not even compensated by the taxes they paid, draining the Orissa state coffer, perpetually. I remember, we were selling power at one paisa/unit to Hindalco, while producing it at more than 15 paisa/unit, in then new Talcher Thermal Power Plant. This was in late 1960s and early 70s.

We are in the process of signing of a second set of such contracts soon, when POSCOs, Vedantas, Mittals set up their plants in Orissa and convert their MOUs to Contracts. I have noted that as per the present MOUs free water, practically free Iron Ore, practically free coal, no taxes for 1st 5 years(when all the equipment will come in so no taxes) and then another 5 years 50% taxes, almost free land (now getting changed to some extent) etc etc. The true value of these inputs is staggering and mind boggling.

In my blog, I have only calculated what it will be costing GOO to go ahead as is, for the currently mined Iron Ore and POSCO's up coming plant. The blog on the subject is self explanatory. I conclude that, unless the current MOU terms are nixed and Royalty raised, our goose will be cooked.