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To P Chidambaram: Response from a member of civil society, by AK Agrawal

May 21, 2010

By ARUN K AGRAWAL

Dear Shri Chidambaram,

This is in response to your repeated taunts on NDTV that the civil society must respond to the wanton killing by the Naxals. It appears that the interview was tailor made for getting the consent of the Cabinet for more firepower and airpower to combat the Maoist. The diabolic support of Arun Jaitly, be it by describing you an injured martyr, was designed to achieve his ambition through the support of the mining barons of the BJP ruled states.

As a member of society I hope I am being civil in disagreeing with you on your hard line approach against the innocent tribal. I also hope you will not find it too shocking for being accused of being largely responsible for the rise and growth of Naxalism, as the following happened on your watch as Finance minister.

Is it not true that Naxalism grew exponentially in the last ten years to become the present menace? In fact you have yourself identified the time frame of the last ten years in your interview with NDTV.

Is it not true that the rise in popularity of Naxalism is also coincidental with the rise in iron ore mining profits which increased from around Rs50 per tonne to over Rs5000 per tonne in the last ten years?

Is it not true that the map of Naxalism is also the map of the Indian Minerals. These minerals belong to the people of India but have been handed over to mining barons and corporate in a relationship of mutual benefit, more appropriately described as crony capitalism. It is for this reason that Arun Jaitly is your staunchest supporter because the fate of four state government ruled by BJP is dependent on the money from the mining mafia.

Is it not true that during your watch as Finance Minister for four and half years, corporate raked in a profit of over two lac crores through legal and illegal mining, mostly in the iron ore sector? How was this profit shared?

Is it not true that during your entire tenure as FM the royalty on iron ore was not revised and remained at a ridiculous Rs 7 to 27/ tonne (depending on the type and grade of iron ore) with the average of around Rs 15 per tonne. This royalty was neither made ad valorem nor was it revised from year 2000 onwards when the international price of iron ore rose to dizzy levels.

Is it not true that the minerals are owned by the people of the State? Is a meager 0.5% royalty on iron ore profits adequate compensation to the owner of the resources? Would you sell your one crore property for Rs 50,000?

Did your fulfill the oath that you took as a Minister to abide by the Constitution, in particular Article 39 (b) and (c) of the constitution which directs the government to use natural resources owned by the people of the country are used to subserve the common good?

Would the Naxal problem have been there if 25% of the mining profit was spent on the poor and the tribal living in the mining area and whose life was uprooted by the greedy corporate/mining mafia with active connivance of the law enforcers and policy makers?

What prevented the government from nationalizing the iron ore mine industry and handing it over to a PSU or NMDC whose shares of Re1/- was lapped at a premium of Rs300(30000% premium) and using the profit for benefit of the people?

Are you aware that even a resource rich and affluent country like Australia with a low population base is imposing an additional 40% windfall tax on the mining profits? Can a poor country like India afford to forgo these windfall profits?

Will you reveal as to how many times you have defended public interest through PIL and how many times you have defended corporate interest during your professional career as a lawyer? The question is relevant because of your empathy for the corporate sector is in apparent conflict with that towards the toiling masses.

Is it wrong for the civil society to conclude that both as Home Minister and Finance Minister you have been protecting the corporate profiteers (by first allowing them to loot the mineral wealth belonging to the people and now securing these mines for them) and not protecting the interest of the poor and tribal people who are victims of corporate greed and crony capitalism of the political parties? You in particular should have known better having been a Director of Vedanta Resources!

In your appearance on NDTV you talked about the two prong approach and one of them having been weakened. It is the prong of development which has been weakened and is non existent. The royalty collected is not sufficient to pay for the various types of direct damages done by the mining industry (health, environment, water, roads, rehabilitation etc) let alone the cost of security forces.

Is it not true that the killing of innocent security forces and tribal is the direct result of the policy of securing the mineral wealth for the corporate profiteers and political parties who share the loot?

It was shocking to know that you were more concerned about your CV falling short by a few months of completing five years as Finance Minister when you met your maker (refer the NDTV interview) than about the blood of the innocent that has been spilled on both sides as a consequence of corporate profiteering.

It is not surprising that all the State government which get reelected on the money of the mining mafia are interested in using air cover to make mining safe and profitable ever after. You should know better the role of money in elections after having managed to squeak past the post while the DMK MPs romped home with handsome margin. Mr Raja retained his portfolio!

What is at stake is the credibility of the State: that it is using force to benefit the mining mafia and that it has a vested interest in the profiteering of the mining mafia which is prospering because of crony capitalism.

To restore its credibility the Government should resume all the mines which in any case belong to the people and give a solemn pledge that a minimum of 25% of the mining profits will be used for the benefit of the local people. The solution is not only just but one mandated by the Constitution. It is only after restoring its credibility that the State will have the right to act. That one hopes, will not be necessary because honest development based on the resources belonging to the people is the best contraceptive against the Maoist ideology. (One is happy to note that according to newspaper report the Mining Minister has made a similar proposal and not surprisingly facing resistence.)

What happened Mr Chidambaram, you used to be a nice guy? You resigned over the Fairgrowth affair when you were not even guilty.

Life is not about arguing a brief in Court for money. It is about arguing for what is right. You have wrongly accused us being ‘clever nor being devious’ (refer interview with NDTV), because we are not capable of it. We cannot argue the way you do. Your arguments in Parliament over the oil for food programme while shielding Reliance from being referred to the Pathak Committee were indeed ‘brilliant’. Were you being clever or devious in your arguments? (Refer the book Reliance the Real Natwar written by the undersigned for deciding the issue.) Please do not use the civil society as an excuse for your omissions and commissions. We have no vested interest except that what belongs to the people should go to the people and that innocents, whether the security forces or the people forced to join the Maoist, should not die for corporate profits. We are not powerful to tie the State governments with legal cases on police excesses. Those trying to uphold human right violations do so at considerable risk to their life and liberty and deserve our respect and not condemnation as misguided romantics.

On a personal note Sir, Will you resign and argue my PIL before the High Court involving three lac crores of iron ore being gifted by the State to Posco and Arcelormittal (as Palkhivala did to argue the Minerva Mill case). It will be difficult to lose the case because law, facts and most important you will be on the same side.

If you agree to do so, Sir, I am sure He will give you far more credit than He would for the extra six months that you missed out as Finance Minister!

In case you are interested I will send you a copy of the petition.

Looking forward to hearing from you. For far too long you have been shifting the blame on the civil society. We too need answers.

With warm regards

A K Agrawal

E13/2 Vijaykiran Apartments

32 Victoria Road

Bangalore 47

11 Comments leave one →
  1. Ammu Abraham permalink
    May 21, 2010 7:24 PM

    A very good article on the issue. Hope the author does not wait for the Home Min’s resignation to go ahead with the PIL

  2. K M Venugopalan permalink
    May 21, 2010 9:11 PM

    As Arundhati has pointed out in her recent interview to Al Jezira Tv,’there is a whole bandwidth’ of democratic protests and responses in India in the context of the current policies of repression unleashed against the people by the UPA – II Govt. And yet, the entire Indian
    Parliament behaves as a single right wing block backing the UPA Govt in matters like OGH , notwithstanding the difference in colours of their flags.

    It is in this context that this open letter by A K Agarwal addressed to Mr Chidambaram makes lot of sense.

    That the state has no sense of shame in sending out threats by invoking black laws like UAPA to its critics is serious enough. Going by the indications, no distinction is made by the state between those who are engaged in direct combat and those who legitimately express their concerns about the recent escalations in
    the avoidable blood shed, as responsible citizens. The state ought to be accountable for its role in stepping up the violence.
    Let responsible representatives of the civil society array themselves in solidarity with this PIL.

  3. Jhuma Sen permalink
    May 22, 2010 11:08 AM

    Mr Chidambaram is a cynic you see. That makes it extremely easy for him to categorize people into sympathizers and non-sympathizers. Civil society dubbed as the human rights wallas (‘jholawallahs’ for Mr Chidambaram’s less suave sympathizers) to the best of Mr Chidambaram’s understanding do not form a part of the elite participants of the decision making process. How candidly he let his heart out in the NDTV talk. Civil society, it seems, is his idea of a bunch of people who are there to rant, talk, write, shout and scream to make themselves heard on ‘certain policies of the government’. But remember, the papa government knows what is best for the kid. Hence if mama government tells you not to talk to strangers please shut up and listen to your parents. That is Chidambaram democracy for you.

    Excellent letter by the way. In solidarity with your PIL,

    Another hapless jholawalla.

  4. Nesar permalink
    May 22, 2010 4:31 PM

    I copy must be sent to Ms. Barkha Dutt and NDTV… One is sick of their way of reporting and their way of presenting the whole issue…

    Nesar

  5. somnath permalink
    May 26, 2010 8:28 AM

    This is precisely the sort of tirade that makes for good media (yes, even the “corporate” media) copy, but very little for real debates and solutions..

    Sieving through the polemics, one can discern four distinct points that Arun Agarwal is making:

    1. Mining companies are not taxed enough by the government…

    2. P Chidambaram’s motives are suspect given his past association with Vedanta…

    3. The right strategy would be to nationalise all mining industries and then sell shares of the nationaised companies to raise resources..

    4. 25% of mining profits should be used for the benefit of “locals”…

    Lets test, even perfunctorily, some of the assumptions/rationale here..

    One, while the royalty on iron ore had remianed stuck at 27/ton levels for long, it doesnt mean that the royalty is the only source of taxation on mining companies..A cursory look at the financials of Vendanta and NMDC (just to pick the two names alluded to in the post) will show that they pay taxes in the range of 25-30% of their profits…Further, the royalty on iron ore has since been changed recently, and it is not an ad valorem duty of 10% – which by the way, would in time translate to another 20-30% of profits going by the profitability ratios of the two companies…therefore to conclude that companies are not being taxed at all is a non-sequitor…There is a case for windfall taxes on natural resources companies (the new royalty structure ensures that in a way), and of course more can be done, but to argue that there are no taxes on mining profits is being extremely economical with facts..

    Second, about PC’s motives given his background – how does it take the debate anywhere? Arundhati Roy’s motives having accepted the Booker PRize can also be questioned…As also her motives on using the “bad corporate” media so effectively, while at the same time railing against the state…

    Third, nationalise mining, and then selling the shares of the nationalised entity…I dont think he realises the contradiction in the proposition (first nationalise, and then privatise!?), but let that pass…For decades, coal mining has been kept nationalised..The result? India imports 40% of its coal requirements – most new power plants are using coal from Australia…Are we to keep enriching Australians with our money while resources in India are kept unutilised? Of course, selling shares in public sector companies – isnt that part of the big bad LPG phenomenon that Mr Agarwal and his ilk so vehemently oppose?

    The last point is the most tenable one…the crux of the issue is there…How much of the money genertaed out of mining is being spent on the local community? Policies and structures around that should form the crux of the debate, but usually they would be too mundane and esoteric to have “print value”…Hence Arun makes the point only in passing…But just to test him on, what does he mean by “benefits” to the local community? building a road to the tribal villages? Is that counted? But the Naxals dont allow that, scaring off contractors buildfing the roads…Telecom connectivity? Naxals blow up telecom towers when they are put up…Rail connectivity? Naxals burn down railway stations all the time…So until a sense of security is established, how can assets be created to benefit the community? Or is the definition of beneits restricted to maintaining the status quo for the tribals?

    • Arun Agrawal permalink
      May 29, 2010 12:08 AM

      Seriatm response to the points raised by you are as follows:

      1. Royalty was not revised during the period that PC was the FM. It was done on 9/8/09. The 10% royalty on iron ore is a farce. The rate for calculating the 10% royalty and is notiifed seperately by Dept of Mines. The rate for less than 62% fines , the dominant ore exported is calculated as 10% of Rs 670 ( for karnataka) which works out to 1.4%. Would you sell your family gold for 1.4% of the price merely because the buyer will pay income tax on the profit he earns after he converts it into ornaments ? Australia is imposing 40% extra windfall tax over and above the normal taxation! The low royalty at historical cost is the main reason for the mining industry being dominated by crony capitalism with every known major player aligned with one of the political parties and contributing hefty amounts which ensures the favourable outcome for the party at the hustings.Imagine that you were the owner of the mining assets. Would you sell it for 1.4% of the profits?One does not want to site judgments of the SC on the sale of public property but the State has a duty to get the maximum price except in case social objective is to be met. Kindly remember Steel is decontrolled, does not fall under essential commodities act and the price is revised according to the ruling international price. Why then give the raw material for virtually free? Socialism for the capitalist and capitalism for the poor is not the mandate of the constitution.

      2. Does not require a response as the comparison is inappropriate and does not involve
      me. PC empathy for the corporate is well known. As a political person one would have expected him to take up a few public causes to the Court in his long years of legal practice as lawyers like Shanti Bhushan have done.

      3. There is no contradiction. Either nationalise or hand it over to a successful PSU whose 90% shares are owned by the govt and is efficient in carryinf out mining activity ( NMDC gross profit is 78% of the turnover). 90% nationalisation through NMDC is as good as nationalisation and ensures efficiency. The comparison with coal is not correct. India does not have sufficient coal to provide fuel linkage for the large no of power plants under construction. It also does not have the sufficient coking coal and hence it has to be imported by steel plants..
      4.There is PESA Act under which the local people decide as to what are their development needs.
      Arun Agrawal

  6. somnath permalink
    May 29, 2010 5:59 PM

    Arun,

    For a constructive debate, it is important to not shy away from facts, or use facts selectively…Unfortunately, thats what you are at least seeming to do…

    As I mentioned in the original post itself, royalty is but one component of taxation on natural resources companies…Both Vedanta and NMDC pay 25-30% of their Profits before Tax (PBT) as taxes…This is over and above any royalty payment on specific minerals…And yes, the ad valorem duty came in only recently, and would evolve over time, and there is certainly scope for criticism in the way it is calculated..But to somehow project that only 1.4% of the profits are being taxed is gross intellectual dishonesty..

    Ditto is to somehow divorce the state of coal to the state of any other natural resource…Not just iron ore, in mineral after mineral, it has been conclusively proven that private sector involvement has led to quantum leap in performance and discovery (just look at oil&gas – fields declared fallow by ONGC are being exploited successflly by private explorers)…NMDC is a good enough company (though its gross profit margins are less than half of the 74% you quote), but to somehow assume that they will be a more “efficient” monopoly to what Coal India is or ONGC has been is to base poliocy on hope…the need is to have both privbate and public sector companies in the sector, and both subject to the same boundaries of efficient regulation – encompassing fiscal norms, land rights laws and community development obligations…

    Which brings me to the last point – so you require development paradigms as defined by a law? So does the PESA Act militate against creation of roads? Or telecom infrastructure? Or rail linkages? Each of these are on the radar screens of the Maoists…Where do you start?

  7. Arun Agrawal permalink
    May 31, 2010 12:42 AM

    Mr Somnath,

    It is inappropriate to use terms like intellectual dishonesty without addressing the issue and trying to be clever and devious like Chidambaram. Income tax is a tax that is paid on profit. Can it be an excuse to sell the raw material which is an input for any industry for 1.4% of the market price? Would you do it for your family gold or silver? If so I will buy it and assure you that i will pay income tax on it. Who is being intellectually dishonest? Part with your money as you part with your words !
    You may have a brief for big capital but then why not provide a level playing field to every artisan and small industry and manufacturer by providing them the raw material at 1.5% of the market price.
    To compare oil and gas which is discovered in deep sea and has a high exploration and extraction cost with a mineral which is found on the surface and has negligible cost of exploitation, is being dishonest. Even in the case of oil sector the the Production sharing contract entered with the bidder is far more equitable than that in the iron ore mining sector.It is another matter that the costs are inflated to 8 billion dollars from 1.5 billion when the price of oil surges! And yes, oil producing companies too have to pay income tax.
    If you are honest in debating the issue kindly act on the offer of selling your assets for 1.4% of the market value subject to payment of income tax! Otherwise do not question the bonafide of others !
    As for NMDC, please go their web site and you will find that the GPM is 78% for the years 07-08 and 08-09. I have produced the figures in Court on a sworn affidavait. For me facts are sacrosanct and I take exception to your accusation that I use them selectively.
    The only reason I replied to your response was because you had rightly pointed out that the royalty has been revised to 10% ad valorem- a matter of fact- and to show how the 10% royalty was manipulated to 1.4%. That respect for you no more exists.
    Arun Agrawal

  8. somnath permalink
    May 31, 2010 8:08 AM

    Arun,

    Apologies for the gaffe on the gross margins of NMDC – I was looking up both Vedanta and NMDC simultaeneously – Vedanta’s is worse off signifcantly (but obvioulsy, its not “just” a mining company)…Sorry for that again..

    As I said in my post earlier, there is no gainsaying the fact that more can be done to expropriate a bigger share of mining profits as taxes…the ad valorem royalty is a start – needs refining…But corporate taxes, @ 35% (plus surcharge) would typically translate to 15-20% of revenues (if you take NMDC as an example, you would arrive at the same numbers)…so its not as if the industry is not being taxed at all, or as you put it, taxed at “only 1.4%”…

    About efficiency of public sector in mining – bulk of India’s coal is open cast too – look at Coal India’s track record over the decades, and what it has led us to…Being dogmatic about public and private sector serves an ideological perspective, not a pragmatic one…The key is to have both private and public sectors, uner a consistent and fair regulatory regime..

    Which brings us back to the moot point – spending money on the local community..Now that is the prerogative of the government, and whether the govt recovers the money by taxing the mining companies or by taxing the middle calss a little more is a different question…No one has claimed that there is a lack of money for development of tribal areas, not in the last 4-5 years anyways…the problem is any development attempted meets with violent response….Telecom towers are blown up, railway stations burnt down, road contractors chased away (or fleeced) and road mined extensively….Where do you start without asserting the primacy of the state?

  9. Naveen Nagarajan permalink
    August 19, 2010 1:24 AM

    I agree with Somnath. What we need here is more transparency, competition and efficiency. We will never achieve this with nationalization and socialism. When will we as a nation learn that nationalization leads to inefficiency and corruption ?

    However, To Agarwal’s point, the current oligarchy or cartels must also be eliminated. But this needs to be done by removing any roadblocks to potential players and pass monopoly acts.

    Windfall profits are a shady and a controversial subject. If you compare Australia to India, how about the US ? Windfall taxes tend to favor certain parts of the business process compared to other.

    I do agree that the cartels related to mining need to go.

    I don’t agree with the solutions posted in your post though. This will lead to even more demand-supply inefficiencies and corruption.

    I will never support naxalites and Arundhati “I hate media but love to stand in front of TV all the time dissing the entire world” Roy. So please do not employ Arundhati Roy and NDTV as supporting characters. They are known communist/leftist sympathisers.
    By the way, being economic right wing does not imply evil as depicted in Indian movies of the 60s to 80s.

    The mining companies should be asked to buy the land outright and be secluded to those areas only. You can have an environmental tax on their profits to promote greenery and other things to reduce their impact on their environment.The mines must be initially set in a area bit removed from populace.

    I disagree that the mining companies should be responsible for alleviating the plight of the people there. You are mixing responsibilities of the private, for profit firms with that of the government, NGO, non profit organizations.

    When did Naxalites become such martyrs ?
    Bull crap. Killing everyone (even innocent tribals and even fellow “reds”) who disagrees with you can never be equated with moral power. Please don’t bring up Arundhati Roy’s support for the movement.

    In short, I agree with some of the problems you point out. However, your solutions seem to be very left wing and will result in further inefficiencies in production/supply and have disastrous results similar to that of Nehruvian socialism.

  10. debo permalink
    August 19, 2010 1:51 PM

    @ Naveen

    “So please do not employ Arundhati Roy and NDTV as supporting characters. They are known communist/leftist sympathisers”

    NDTV is a known left wing supporter? really? (trying not to laugh)

    “However, To Agarwal’s point, the current oligarchy or cartels must also be eliminated. But this needs to be done by removing any roadblocks to potential players and pass monopoly acts”

    Reading up on the history of transnational telecommunications media may be a very interesting experience for you. try it.

    “I disagree that the mining companies should be responsible for alleviating the plight of the people there. You are mixing responsibilities of the private, for profit firms with that of the government, NGO, non profit organizations”

    Yeah, leave everyone to themselves. Let the people who make profit make profit. thats their function, making profit.
    btw, you may also want to find out a little bit about the notion of common good, something for which last years Nobel prize in Economics was given.

    These are well-known notions, you know. NDTV didn’t invent them, and neither did A Roy. However, your tone of argument says that you believe you invented your arguments. sorry, thats not true either.

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