Indian ports and the new Supreme Court risk

Consumed by the Indian Supreme Court's ruling on the telecom scandal and its aftermath, what passes for the media in this country has ignored the recommendations of the same court's Central Empowered Committee (CEC) that were made public almost concurrently. If  accepted, the recommendations of the panel- set up to probe illegal mining that, combined with the disgraceful chicanery associated with 'legal' mining, make even the astronomical figures associated with the telecom scam pale in comparison- will have a immense negative impact on the shipping and port sectors. Not just profitability, but the viability of some ports may end up being called into question. 

While asking for the suspension of 49 iron ore miners from Karnataka and saying that 72 others should be severely fined, the CEC has asked that the annual production from that State be capped at 30 million tonnes. The language of the report is indicting. “The extent and level of unauthorised, unregulated, environmentally unsustainable and illegal mining in its various facets has no other parallel in the country,” the CEC is quoted as saying. 

It is not just the CEC; India seems to be slowly waking up to the mother of all scandals that is year's old- the fire sale of its mineral resources. Except that most of the proceeds of the sale go into the usual private and public pockets (in partnership, of course), with the country itself getting next to zilch. This is the second East India Company.

 Orissa has, in recent times after a mini crackdown, barred its ore from being shipped out through Vizag and Kakinada because, according to Orissa's mines ministry, those ports failed to cooperate with inquiries into illegal mining. The Madhu Koda fraud- where the then allegedly honourable Chief Minister of Jharkhand allegedly siphoned off a fifth of that State's annual revenue- may have been buried by you know who, but the US$12 billion Belekeri port scam thereafter has brought down a Chief Minister- and resulted in a (since lifted, although exports have not resumed) Supreme Court ban on mining from the Bellary region. Three and a half million tonnes of ore were reportedly exported without a rupee of royalty paid to the exchequer before the ban. One report said that only 200 trucks were officially reported as against 4000 plying everyday. Goa is another hotspot, with powerful people involved.

Despite its huge internal steel demand, most of India's iron ore has been-legally and illegally- exported to China through ports like Paradip, Haldia, Vizag, Kakinada and Gangavaram. Two of these are now blacklisted; Paradip saw a halving in the number of rakes coming in after the Orissa crackdown began. However, the economic threat to these ports is not just because of central and State agencies being forced to take action after the spotlight has shone on illegal mining. It is not just, as we will see, a problem of reducing cargo volumes that will threaten ports. 

The fact is that the list of companies involved in mining are established leaders of the corporate world. Indian companies- including Tata Steel, Essar and Larsen and Toubro- are major participants in mining or ports in the region. Mining companies are going to see their profitability badly hit, should the CEC's recommendations be accepted. NMDC, the country's largest iron ore producer, and JSW will pay a higher price for iron ore. (NMDC would also lose 10% of its revenue to an infrastructure development fund recommended by the CEC). Sesa Goa's plans to enhance capacity in Chitradurga would grind to a halt. Mysore Minerals and MSPL would have to shut down a mine each. Some smaller companies may have to quit completely.  "Mining could well see negative growth of 2.2% versus 5%,'' says commodities analyst Santosh Bagchi.

Supreme Court committee recommendations are important, but it would naive- even foolish- to see the system's response to corruption as the only threat to the ports in the region. The fact is that the human cost of the corruption in mining is massive in terms of the torture, rape and widespread oppression of local villagers and tribals in states like Chattisgarah, Jharkhand and Orissa. The fact is also that mining companies and those pillars-of-the- corporate world are paying extortion (up to 5 percent of revenues in case of illegal mining) to 'Naxalites' for the privilege of operating in these areas today. The fact is that one can superimpose a map of India's mining districts onto a map of naxalite areas and find complete coincidence. A third of Indian districts are naxalite affected. Many of those districts are powder kegs with a lit fuse; how long before they explode? How long before horrendous tales of the custodial sexual torture of the Soni Sori's- and her cold-blooded abuse by the system in Delhi that sent her back to her torturers while awarding one of them a gallantry award- results in a conflagration that will pose an existential threat to mining? How long will ports- especially on the east coast- escape the financial and security backlash, should this happen? 

Interestingly, just a few days after the CEC report, Shipping Minister Vasan announced his firm commitment to the Public Private Partnership model for port development. According to him, "it is necessary to increase the overall capacity of Indian ports to 3,230 million tonnes by 2020 from the current 963 million tonnes".  The Government of India is planning to encourage private investment in the port sector. All kinds of sops and tax holidays will be rolled out to promote that PPP, I am told.

The threat of civil unrest is an old one. However, I am afraid that until the existing PPP is dissolved- the one that the bureaucrats and politicians have going on with mining companies across India- I won't be investing my hard earned seagoing wages in that sector just yet. At least not on the eastern and the southern west coasts. Mainly because it is a tinderbox waiting for a match, but also because- as we saw in the telecom scandal- there is a new risk to doing business in India: the Supreme Court risk. 

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The Dead Corridor

Can the maritime related industries in India’s eastern ‘Red Corridor’ thrive under the barrel of the gun? What happens to major port expansion plans when the underlying economy is in chaos? Will we see in the near future- like in tin pot dictatorships in Africa and banana republics in Latin America- ships loading and discharging in Orissa while heavily armed paramilitary forces guard gangways, ports, pipelines and conveyor belts?

I think that the possibility of major disruption in Indian maritime trade because of Maoist or Naxal events is a clear and present danger to the entire logistics sector on the east coast. In fact, it is so clear and present that some of it is already happening.

The reality today is that even as a gaggle of ports are being planned- and constructed- down the eastern Indian coastline, from the silted Hooghly in West Bengal down to Orissa and Andhra Pradesh, goods trains are being regularly derailed in parts of the Corridor. Or they are just not plying. Don’t believe me; believe Tata Steel Managing Director H.M. Nerurkar. "For nearly 50 days, train services between Kolkata and Jamshedpur have remained irregular, with night services totally suspended due to the Maoist problem... How long can this continue?" he asked recently. Nerurkar also says that Maoist activity is “impacting the business”. Guns have a tendency to do that.

A few days ago, State-owned National Mineral Development Corporation’s Finance Director said, in typically understated babutalk, that its Chhattisgarh unit could see ‘some production loss’ after a Naxal attack on its complex. This was a day after 50 armed Naxals attacked a NMDC setup that held large quantities of explosives, getting into a running gun battle with the CISF guarding the facility.

The Maoists are today routinely attacking mining outfits to disrupt operations and for the RDX and other explosives that those firms store for use. This includes organisations such as NALCO; the RDX is sold throughout South Asia (including, my not so wild guess, to terrorist outfits) in a trade that is worth millions.

Nine tonnes was stolen in one such Maoist raid earlier this month.

The Maoists also extort (300 crore annually in Jharkhand alone), threaten and collect taxes. The Indian State’s writ does not run in these areas. Worse, it is unable to find a solution – the armed one is not working. Ask the CRPF in Dantewada, where a second Maoist attack killing three dozen of their personnel passed off almost unnoticed (the Home Minister didn’t threaten to resign this time, like he did after a first attack that killed almost eighty. Wonder why).

Interestingly, “Maoists are engaged in illegal mining with the tacit support of the political dispensations in some areas,'' according to R S N Singh of the India Defence Review publication. Singh says that minerals like iron ore, illegally mined by the Maoists, are being transported to China via Haldia, allegedly after threatening bonafide mining companies who generate the required documentation. Ore laundering, one could call this. One can be sure another flock of babus and politicians are making a killing out of this, as did the erstwhile Jharkhand Chief Minister Koda (I wonder why there is no news of him and his 4000 crores. Sometimes I wonder too much).

Yet another worrying reality is that analysts are increasingly pointing at China as the devil behind the Maoists. ``For China, the Maoists are the most reliable tool in the proxy war that it is waging against India,'' Singh says. Others analysts agree off the record, saying that much of the illegally mined ore from India is sent to commodity hungry China.

Things have reached such a stage that the Maharashtra state home minister R R Patil recently demanded that the Directorate of Revenue Intelligence investigate links between Naxalites and the mining lobby. (Reports suggest than 700,000 tonnes of coal are mined illegally from Jharkhand alone every year, and the recent mining scandal in Karnataka has thrown up figures -circa 2007/08- of 5 million tonnes of iron ore that were illegally exported from Karnataka.


Since 2003, 3.04 crore tonnes of iron ore have been illegally shipped out of Karnataka alone. At today’s prices, the value of this ore is Rs 152 billion. .


So, as I understand it, (probably) Chinese backed armed Maoists are holding a massive chunk of Indian territory to ransom. They steal enough explosives regularly to manufacture a zillion landmines and IEDs. Additionally, they sell explosives to any wannabe terrorist in the neighbourhood. Meanwhile, goods trains are derailed or do not run in a part of the Corridor- and neither does road traffic run unhindered, by the way. The government cannot administer even a public toilet in some of these areas. And this is a region where a large chunk of Indian mineral deposits lie (which are 10% of the world's bauxite, 276 billion tonnes of coal and 23 billion tons of iron ore), much to the salivating delight of corporate looters and their political and bureaucratic henchmen.

Expecting shipping not to be hit in these circumstances is like expecting Charlize Theron to go out for a second date with me.


Meanwhile, this fracas is a milch cow for everybody. The politicians and the babus, the multinationals and domestic companies (all immoral, only some illegal, because they control our legislators) the Naxalites and their henchmen, the illegal mining industry and their shady logistics arms.... this conflict is making all of them rich or powerful, usually both.

Also meanwhile, quoting from Mineweb, the South African mining publication, “As a consequence of Naxal activism, several major projects have come to a virtual standstill. ArcelorMittal's $9 billion steel projects in Jharkhand and Orissa and South Korean company POSCO's $32 billion steel project at Jagatsinghpur district in Orissa are stalled due to Maoist violence. A similar situation was witnessed in Jindal Steel Works' $7 billion steel plant at Salboni in West Bengal”.



I believe that the shipping, ports and logistics industries cannot escape the commercial consequences of these killing fields. They will be hard hit down the line because they are, in a way, downstream industries and because a) I don’t expect this conflict to go away anytime soon – in fact, I expect the army to get in there sometime, which will make things messier b) I expect severe financial and other pressure on some eastern ports; some of these terminals were planned with ore exports in mind c) I expect the government will have to start cracking down on illegal mining, which will make the situation more explosive ( though I am a little sceptical that politicians or babus will have the guts to go up against their own). d) I expect the Maoists, especially if they are backed by China, to escalate violence if they can.


None of this will help the maritime industries. I don’t know how they will react- the list of firms involved in building infrastructure and ports down the eastern coast reads like a who’s who of corporate India- but I know this much; making money is not going to be easy in parts of the east. Some will be already looking at exit strategies, I bet, or at least slowing down their investments.


Even if the Maoists are somehow defeated, the underlying causes that give them widespread local support will not go away. The Indian State can hardly shoot the Adivasis and other locals to extinction; it will have to, sometime, assuage their rage.


The only good news that can I see, cynical as this may sound, is that I expect that things will finally get better, if only from a law and order point of view. There is, simply, too much money involved for the State to ignore the circumstances of near civil war that exists in the Corridor, whether one calls it Red or Dead.
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Bleeding on the Styx

We do not build ports of optimum sizes at optimum places; we build them for political and commercial patronage, election gains and kickbacks. We extend this sickness into every aspect of maritime life. We do not train enough seafarers and we don't train them well enough because some of our institutions are riddled with what we Indians love to call 'vested interests'. We don't build road and rail connectivity to ports appropriately because the status quo suits the transport contractor who gives us nice Diwali presents. We plan to build a huge canal of the wrong depth and for the wrong reasons against sage advice.

We blame a former Shipping Minister for a lot of rotten behaviour that is still ongoing and hamstrings progress even today. In addition, our maritime security has been repeatedly compromised because some of the people in the institutions that are supposed to protect us allowed material and trained terrorists to land on our shores in exchange for thirty pieces of silver. I bet some still do. Astoundingly and along with the rest of the commercial world, the shipping industry does not seem bothered about the malaise of corruption that continues to rot our commercial and spiritual soul.

Amazingly, we continue to ignore the true cost of our pussyfooting around the 'c' word. That the economy hemorrhages by such behaviour is a given; that this bleeding gives rise to gross injustice and consequent frustration, despair and anger is dismissed; that the Naxalite violence now affecting almost a third of our 604 districts is a direct consequence of more than a half century of corruption and consequent frustration is discounted. This violence, or social unrest, depending on one's prism, can easily bring our economy (and our shipping infrastructure along with it) to a grinding halt pretty quickly. As I write this, the government is planning to send in 35,000 paramilitary forces over 11 'theatres of operation' across a vast swath of the country; they say this will be a two or three year operation. Nobody can tell me movement of goods, trade and shipping will not be adversely hit, particularly on the East Coast 'Red Corridor' (see map).

I would like to see the maritime fraternity doing less fraternising, for once, and take the lead in fighting corruption wherever it occurs within it. This is not a utopian pipe dream but a prerequisite for survival: the natives are already restless, and they are armed. We ostriches are running out of time.

What would really happen, I wonder, if industry bodies and associations representing shipowners and others issued a joint statement appealing to their members not to cough up speed money? What would really happen if individual shipowners in India advertised in the newspapers of their decision to stop paying up at almost every industry/government interface? What if, in addition, a part of this industry made the cause of fighting corruption public? What would really happen? It would be tough for the honest, at least initially, yes, but somehow I doubt that shipping would grind to a halt or be cripplingly targeted, especially if full media glare is actively solicited.

Not easy, sure. Requiring individual commitment, certainly. Assuming an industry wide integrity and homogeneity where none exists, yes. Tilting at windmills, perhaps. Critically required? Absolutely. Imagine, in my utopian delusion, what would happen if we actually made sufficient headway in cleaning up the industry and the government bodies associated with it. By showing the country the way to start ridding itself of arguably the biggest festering sore on its body, we will, like the Information Technology industry, acquire a progressive persona at one fell swoop. We will have contributed colossally to changing the face of India, and we would have leapfrogged our industry into greatly enhanced efficiency and profitability.

 A little math before I end. Since large numbers usually blind me to their impact on real people, a reminder: a billion is a thousand million. A trillion is a thousand billion. (Those, folks, are a lot of zeros after the one). Statistics, as Michelle Pfeiffer will undoubtedly tell you, should conceal more than they reveal. Pamela Anderson will probably disagree, but it doesn't matter. Indian vital statistics are staggering on both counts; besides being in your face, they often require to be reduced and put into perspective to be understood.

Consider this one: Although numbers as high as 1.7 trillion are bandied about by many others, the Economic Times says that wealth stashed away by Indians in offshore banks could be as much as US $1 or 1.5 trillion. That is 1.5 thousand thousand million. United States Dollars. All of this money is undeclared; much of it is cached, we can guess, by corrupt babus and politicians, although it belongs to you and me. More numbers: Indian Gross Domestic Product (the total market values of goods and services produced by workers and capital within a nation's borders) stood at $1.2 trillion last year. Then, the Reserve Bank of India pegs the Indian external debt at $227.7 billion as of June '09. India's internal public debt (including market borrowings, external debt and other liabilities like small savings and provident funds), on the other hand, is approximately three times this number, at roughly $600 billion. I have totalled up and rounded off both external and internal debt, for the sake of simplicity, to $830 billion.

Finally, widely available figures tell me that India's population stands (or staggers, depending on your point of view) at 1.15 billion. Therefore, unless I have botched up the calculations again, all this means is that a) Indian iffy money held in offshore banks was worth around a year’s total of all goods and services produced by the entire country in 2008; b) Indian money stashed abroad could pay off the entire Indian external and internal debt and the country would still be left with some loose change. c) Each Indian is indebted to the tune of (dividing 830 by 1.15) more than 720 dollars, or 30,000 rupees, give or take. Given that our per capita income is only about 37,000 rupees, this statistic (that an average Indian is in debt for up to ten months of his full wages) is almost the most astonishing of them all. Almost, but not quite.

Public indifference, the confederate of corruption, tops this list, the same as it tops so many other infamous ones in this great (and greatly plagued) nation. Time to change that?

At least I think so; some utopian dreams are worth blood and sweat, especially when the alternative is continued existence on the banks of the river Styx. Right between the Earth and the Underworld, or between Earth and Hell, depending on which mythology one follows: Greek or Christian.
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