Mysteries of India.

An activist UK based fund, The Children's Investment Fund or TCI has accused the government of India and directors of Coal India of not looking after the interests of minority shareholders. ET, March 29. TCI has 1.01% in the world's largest coal miner. According to TCI Coal India produces 450-500 million tonnes of coal every year. Cash costs are $20 per tonne while the market price is $70/tonne but it is selling to power companies at $20/tonne, thus incurring a loss of $50/tonne or $20 billion every year. This benefits a few politically connected industrialists but hurts minority shareholders. Apparently during the IPO roadshow the government had promised that prices will be normalised but has given written instructions to Coal India to keep the price at $20. TCI has obtained this letter under RTI rules and is threatening to go to arbitration and has also written to the board of directors of taking legal action against them individually. That has so worried the directors that they have held full day meetings on 2 successive days without arriving at any decision. The government levies a service tax of 12.5% on electricity and has replaced old meters with new electronic ones which give much higher readings, whether true or falsified is not known. About 50% of electricity is not paid for. Farmers and slum dwellers get free electricity while many businesses, with blessings of politicians, also avoid payment. State electricity boards are all running debts of hundreds of billions of rupees. A similar situation obtains in petroleum products. The government collects its taxes at source and then compels oil companies to hold prices causing minority shareholders to lose out. Why no one has gone to court before now is a mystery. Meanwhile, efforts at supporting house and share prices seem to be successful. The Sensex is comfortably above 17,000 and property prices are 15% higher in Mumbai and 30% higher in MMR region compared to peak prices in 2008. The Sensex was falling because of the new General Anti Avoidance Rules or GAAR, which sounds like an ominous growl, in the budget, under which tax officials were given unlimited powers to retroactively levy taxes on business deals concluded decades ago. But our most revered Finance Minster has clarified that Participatory Notes, under which foreigners can invest in the stock market without revealing their identities, will not be touched. Naturally the Sensex has rebounded today. The government is thus actively building gigantic bubbles in property and share markets to somehow keep foreign investors from selling out with the consequent crash in the rupee. We hope this works or the crash will be spectacular when the bubbles pop. Thankfully we are so lucky in having the World Famous Economist running the asylum.