Friday, November 23, 2012

Elephants, SAIL, Maoists & Mines

A battalion of CRPF para-military men took up positions this week, deep in the jungles of Chattisgarh’s Maoist-stronghold in Rowghat forests, to provide cover for building barracks  for upto 4,000 soldiers who will guard the planned 511 million tonne iron ore mine and a railway track running upto the mine.
India’s Steel Authority of India Ltd (SAIL), an under-performer in the bourses, has been forced to go in for the costly security cover in a desperate bid to keep iron ore flowing to its steel mills, after stalled environment clearances shut down two of its top mines – Bolani in Orissa and Gua in Jharkhand.
Out of the 24 million tonnes of iron ore the steel giant requires to keep its steel factorys at Bhilai, Rourkella, Bokaro, Burnpur, Durgapur and Salem running, some 7 mt used to come from these two shut mines. The shortfall, which will pinch SAIL soon as it has limited stockpiles, could translate into costly purchases in the year ahead unless either Rowghat starts producing or the shut mines restart. 
The CRPF forces who are to be deployed had demanded that barracks be built for them before the brigade strength security is sent to protect the proposed mine. However, in a chicken and egg situation, contactors tasked to build the barracks asked for at least one battalion to be posted to guard those who build the buildings!

Rowghat has long been used by the Maoist groups as a base for operations in the tribal state.
The forces would guard not only the mines which will supply upto 14 mt per annum of high grade iron ore to Bhilai steel plant but also a new railway line  -Dalli-Rajhara-Rowghat-Jagdalpur - to be built jointly by the Railways, NMDC and Chattisgarh state on a cost sharing basis.
An elephant corridor demanded by India’s strident environmentalist lobby has shut down its iron mine at Bolani in Orissa and a tussle is on over whether and when it will be re-opened. While bureaucratic red tape has delayed forestry clearances necessary to operate another mine at Gua in Chattisgarh state.
The net result is SAIL’s iron ore production from its captive mines is short by 14,000 tonnes every day. Forcing it to look towards an area frequented only by wild animals and Maoist militants till now. 
However, realistically, even after the deployment of armed para-military forces,  Rowghat mine will not start shipping its high quality iron ore for at least two to three year years. The Rs 700-crore railway line is expected to take two years to build. As for the mine, Australian consultants Hatch Associates are preparing a detailed mining report which will take some months. Bidding for a mining partner is expected to be held after that, sometime next year. Actual mining could take at least two-to three more years after the winning bidder weighs anchor.


Thursday, November 22, 2012

Kasab and The Terror Trail

Mumbai's Taj Hotel Under Attack  26/11
India has hung the infamous Kasab, sole survivor of a terrorist guerrilla team which attacked and held to ransom two 5-star hotels and a Jewish centre at Mumbai on 26th November 2008, slaughtering more than 150 Indians and foreigners. Will that act of capital punishment, end terror strikes against India?
Even when the news that Kasab, the symbol of the dastardly attack on one of India’s most lived  and loved mega-cities, was being hung  flashed on television screens, I doubted we would have any  such luck in resolving the terror threat from across the border.

Sure enough, soon afterwards, the Pakistani Taliban and Lashkar-e-Toiba, the terror organisation to which Ajmal Kasab owed  his indoctrination and training vowed to hit India and Indians back.
Pakistan Taliban has spun out of the control of its creator – the Pakistani spy agency – ISI. However, Lashkar and its new avatar Jamat ud Dawa remain tied to the spymasters who see them as valuable assets to be used against India and Afghanistan, two nations, Pakistan has traditionally considered its enemies.   

Though a few liberal newspapers in Pakistan have called out for action against the masterminds behind 26/11, the threats made this week by Pakistani terror groups have not been condoned by the Pakistani state. Which seems to indicate that the threats may have the tacit support of sections of the Pakistani establishment, if not the blessings of the state machinery as a whole.  The logic for this is convulated and hard to understand, but it exists. More on that later.

India’s borders with Pakistan, despite fencing off of large chunks remain porous; Its coasts, vulnerable to landings on lonely beaches by small craft piloted by teams of the kind which attacked Mumbai.

The country’s borders with Nepal are totally open and those with neighbouring Bangladesh far less secure than the western one. The trails which terror sellers could take are many.  Indians could also be targeted abroad or on the high seas. At particular risk, would be Indian investments in Afghanistan, which Pakistan resents intensely as it considers this mountainous highland to be its strategic backyard where it hopes to impose its will in the future.   

Indian strategic thinker and former additional secretary in the cabinet secretariat, B Raman in a clinically analytical blog, too seems to feel that the threat would be highest for Indian establishments in Afghanistan and lists LeT, the Haqqani network, the Taliban and the Hizbe Islami as groups whch have the ground capability to launch those attacks.

US leadership watch live footage from the Osama raid
To deal with such probabilities, the Indian state needs to think out responses which will stifle terror. The American, Israeli and Russian state responses to terror perhaps hold lessons from which could learn.
The policy paradigm for these responses are the same, though the exact modus operandi differs. That policy, simply stated, is to attack and diminish the capability of groups which can threaten the countries concerned. The methods differ –  covert operations in some cases, huge state led responses across borders in others.  

With Pakistan shielding its terror groups by using nuclear blackmail – threatening nuclear strikes if India attacks terror camps in Pakistan, there are just two options. The best option remains covert, deniable attacks to finish off these camps. The other, albeit risky option, is to ignore the nuclear bluff, for it is a bluff, and to go in for limited military operations.
The second kind of operation,  will have to be met by Pakistan with some kind of official retaliation, which could escalate and is hence one which should be taken as a last resort. The first, will be grudged, but can hardly be met by official, overt military retaliation. Pakistan understands this kind of covert response, for it has come up with its own covert war against India and Afghanistan, using home grown terror groups, to avoid direct confrontation by denying all that happened.

Indian soldiers celebrate taking back a hill in Kargil ranges
When Pakistani Frontier corps soldiers dug into India’s then unguarded Kargil hills in 1999 and built bunkers from where they lobbed artillery fire onto a main arterial road connecting Ladakh with the rest of India, Pakistan simply denied they were its men. Indian soldiers eventually stormed those bunkers and killed the Gilgit tribal soldiers manning the `nests’. The bodies with their identity cards were offered to Pakistan, which  refused them, denying responsibility ! Though later, Pakistani leaders and generals gloated on their success in launching the sneak attack. 
When Kasab and his mates attacked Mumbai, again Pakistan denied they were Pakistanis. When confronted by telephone taps which showed they were being controlled out of Pakistan by men like LeT chief Hafiz Saeed and ISI officers, Pakistan officially claimed these were non-state actors who acted without the knowledge of the Pakistani state! The logic for such attacks is however, more difficult to understand.

Former Pakistani dictator Gen. Pervez Musharaf was recently in India, to address a gathering organised by a Delhi-based media group. He remained unfazed by questions on Pakistan’s attack on Kargil peaks in Kashmir and seemed to indicate that it was merely a tit for tat response for India’s involvement in the independence of Bangladesh!

What that comment revealed, was the mindset of the Pakistani establishment. It is still seeking revenge against India for perceived insults without either (i) introspection into either their role in Bangladesh or (ii) realisation of the high price being paid for the hatred of India which the Pakistani ruling elite nurses.

Indian troops being welcomed by Bangladeshis

Pakistan as a nation, especially its leadership, suffers from amnesia when it comes to Bangladesh. It forgets that Indian troops were forced to intervene in a messy civil war because Pakistani soldiers carried out one of the biggest genocides in the history of mankind – killing some 2 million of their own citizens and raping 200,000 helpless civilian women. The reign of terror which the army, to which Gen Musharaf belonged,  let loose on the civilian population of what was then East Pakistan, forced some 10 million Pakistani citizens to seek refuge in India. If India had not intervened, more millions would have perished. More millions would have been pushed into India to live as penniless refugees.

Yet, the Pakistani leadership instead of introspecting on its crimes, blames India for its “loss” and still demands revenge. Kargil and Mumbai 26/11 are seen as “revenge”.

Hans Kiessling, German researcher working for the Munich based Hanns-Seidel-Foundation estimates that ISI has an annual budget of about $ 300-400 million. The budget for the entire state of Pakistan is $ 39 billion, nearly $ 6 billion or a sixth of that budget is spent on its armed forces.

This extraordinarily high proportion of budget spent on defence is because Pakistan keeps needling India and Afghanistan with sneak attacks and consequently fears retaliation.
Pakistan has since the 1950s also tried to fund and arm small rebel groups such as the Naga within India, at great cost to itself.  Pakistan’s spy agency also spend huge sums to try undermine the Indian economy by pushing narcotics and spurious India currency. This massive spending on trying to undermine the Indian state translates into that much less left for Pakistan to spend on its own citizens.

The costs are obvious – deteriorating law and order has already turned Pakistan’s largest city,  Karachi, once touted along with Beirut as the `Paris of the East’, into being one of the world’s most dangerous cities; lack of investment has made Pakistan the slowest growing nation in South Asia; lack of spending on healthcare, education, sanitation and other civic amenities has meant Pakistan has kept slipping every year on the human development index. With little money to spend on the mainstream regions of Pakistan, marginal areas on the border – Balochistan, Gilgit have received even less funds, leading to a sense of deprivation which has fuelled separatism there.   
This brings one to consider whether India’s reaction, covert or overt, will actually bring some kind of closure to Pakistan’s export of terror. It may not, till Pakistan changes fundamentally and starts believing as does a section of its intellectual elite, that peace and friendship with its neighbours is the only way forward.

But in the interim, covert action designed to diminish the capability of Pakistani groups to launch against Indian interests, should deter the Pakistani ruling elite and the terror groups it has spawned. In this world of outsourcing, even covert wars can be outsourced. There are quite a few   groups within Pakistan who are struggling against that nation. India's work could be easily outsourced to them in return for training, arms and funding.

The lesson that has to be driven across is that even covert actions begets retaliatory actions and those with more money and men, which India does have, usually win in the end.   

Monday, November 19, 2012

Ponty's `Invisible' Millions

Ponty Chadha inset in his Centrestage Mall at Noida

They used to call Gurdeep `Ponty’ Chadha by several names - `booze baron’, `the invisible man’ and lastly `Khajanchi’.

For a man whose refugee father used to run a small jaggery crusher, `Ponty’ Chadha who was shot dead by his brother Saturday over a property dispute, had done well for himself. His liquor vends to real estate to film production business was variedly estimated to be worth between Rs 15,000-20,000 crore, most of which was built over the last decade-and-a-half.

The 55-year-old Moradabad born got his first nickname soon after he gained control over some 4,000 liquor vends in Uttar Pradesh through a licensing deal with the Mayawati government which then ruled Uttar Pradesh. `Ponty’ got the rights to decide which liquor firms could sell in U.P and at what price in a market which was worth roughly Rs 6,000 crore.

The second nickname - `invisible man’ came because, though he was constantly in the company of big politicos and Bollywood names, he was rarely, if ever, caught on camera. Chadha knew how to remain in the background.

His `invisible’ name acquired a new meaning when a story started doing the rounds earlier this year. The income tax department raided his business premises at Centrestage Mall in Noida, in February this year after clearance from the very top, in an operation supposed to be top secret.

After opening a three lock vault, all that the tax sleuths managed to find were a few silver coins and three Rs 500 notes. His alleged secret stash of wealth, which many said included money given to him by North Indian politicos for safe-keeping was missing.

The series of raids, about which Chadha seems to have had prior knowledge, covered some 17 locations but yielded a mere Rs 11.61 crore, peanuts, by `Ponty’s’standards.

The last nickname name came from his reputation of being an season financier of politicians – big and small, cutting across party-lines.

His proximity with Mayawati had seen him win the liquor vends contracts, a deal to buy up 5 state-run sugar mills in U.P for a tenth of their real value. and a Rs 9,000 crore contract to supply pre-packaged meals to anagnwadis, in contravention of Supreme Court orders to get self-help groups to cook hot meals under the scheme. He also won the contract to set up a Rs 10,000 crore, mega 40 million square feet real estate including houses, hotels and malls in Noida for his firm wave infratech. The first phase of the controversial project which has been challenged in the supreme court by farmers whose land was taken away and given for the project, is expected to be finished by 2016.

When Mulayam Singh Yadav’s Samajwadi Party came to power, many expected his empire to start crumbling. It didn’t, the multi-crore anaganwadi meal programme was renewed, the liquor vends deal continues.

His proximity to politicians was said to come from his habit of giving out large donations towards election expenses. Some allege he had his wallets out in elections not only in the UP but also Punjab, Haryana and Uttarakhand.

His son `Monty’ Chadha, who is expected to take over his business empire along with his middle brother, is also supposed to be the brain behind setting up a chain of nightclubs, where many of UP’s political scions were often caught shaking a leg, and his group’s involvement in Bollywood, initially as a distributer and later as a multi-plex owner and movie financier. Kahani, khakee, Gadar, No Entry and Ready were among movies he distributed. He entered film production in 2005 by making the Sunny Deol starrer-Jo Bole So Nihal.

In the end, his story ended in a manner which begs a Bollywood storyline. What marketmen and investors will now be watching will be whether his empire ends in the same way or continues as a legacy to man who clawed his way up the tough and often murky world of North Indian business.

Wednesday, November 14, 2012

Diwali, China, India and the Asian Trading Bloc Dilemma

The lights on Delhi’s streets this Diwali were mostly shipped out of China’s Shanghai port and many of the plastic images of Goddess Lakshmi, the Hindu godess of wealth, being sold in its bazaars, were  made out of dingy factories in Guangde in South China.
The cheap lights and shiny images may bring cheer to many Indian homes, but for its policy makers led by prime minister Manmohan Singh, they are a pointer to the dilemma Singh will face in Phnom Phnem next week. Those trinkets imported from India’s largest trading partner, have already driven thousands working in small scale lighting and decorations factories in western Uttar Pradesh into the ranks of jobless over the last decade-and-a-half. 
Rising Chinese imports and falling Indian exports have meant that in the first ten months of this calendar year, India has already run up a trade deficit of $ 23 billion. India imports finished goods ranging from cheap lights and mobile phones to stainless steel and consumer durables to electricity plant gear from China, but mostly sells raw materials like iron ore, chrome, lead,  copper and cotton to its northern neighbour.
At the Cambodian capital, Singh will join leaders from China, Asean and East Asian countries in talks to create the RCEP – or Regional Comprehensive Economic Partnership – an Asia-wide trading bloc which China wants to forge as a counter to US President Barack Obama’s Trans-pacific trade bloc which shuts out China and draws Asia closer to the Americas in a trade partnership.
Till now, for nearly a decade, China had sought to keep a trading bloc it sought to create, restricted to East and South East Asia, by involving Asean, Japan and Korea, while shutting out India, Australia and New Zealand.  India and Japan on the other hand had long been resisting China’s attempt to forge a trade pact, which it would dominate, by demanding a Pan-Asian trading block of Asean + 6 (Asean, China, Japan, Korea, India, Australia & New Zealand).
Possibly to trump Obama’s proposed trade block, China has suddenly changed tack and adopted the Indo-Japanese proposal as its own. With this comes India’s and many other potential RCEP members’ dilemma.
If they do not join in, they could lose a first mover advantage to be part of the world’s most powerful trading block which would control nearly 30 per cent of the global GDP. However, joining it could mean reducing tariff walls and letting cheap Chinese imports flood local markets killing off domestic industry.
Analysts say Chinese industry benefits from dirt cheap finance, almost no labour laws, hidden subsidies by way of capital costs often underwritten by provincial or central government besides unfair price under-cutting. 
The Indian government’s  Standard Board of Safeguards will hold a meeting on November 15 to decide whether China is dumping stainless steel products in India, causing huge losses for Indian manufacturers, acting on a complaint by Jindal Stainless Steel. The Directorate General of Safeguards has already supported Jindal’s case. India had earlier too been forced to raise import duty on steel to protect domestic manufactures from dumping by Chinese steel firms.
Last year in a speech, Eximbank President Fred Hochberg had pointed out  “In India, (Chinese telecom equipment maker) Huawei grew to $2.5 billion in sales from $50 million in one year. Folks, that kind of growth takes more than just good sales and marketing strategies",  and went on to blame Chinese "state-directed capital" for that growth. It's well known that telecom operators and private power plant owners in India ordered Chinese gear after availing of extremely low cost loans from Chinese banks.
The result has been disastrous for our industry. Latest industry data shows India’s capital goods sector contracted 12.2 per cent in September, a fact which has caused considerable alarm in North Block  and Udyog Bhawan home to India’s  finance and Industry ministries which for long have been beset by representations from India’s top chambers cautioning against dumping of capital goods by China.
On the other hand, these chambers also complain of non-tariff barriers are shutting out their exports of manufactures from China’s markets. The challenge this `unfair’ trade poses was best summed up by commerce minister Anand Sharma in an interaction at last week’s World Economic Forum “We will continue trying to create a balance because there is an adverse balance of trade and we are seeking market access for Indian IT companies and pharmaceuticals and I hope it will come …  we have talked to the previous (Chinese) Prime Minister. We would continue our dialogue and engagement. China is an important partner for India."