A mountain of debt.

Suzlon Energy, a company making wind turbines for producing electricity, has defaulted on Foreign Currency Convertible Bonds of $220.8 million which matured on 11 October. The company managed to redeem bonds worth $360.2 million in July but still has debts of $2.3 billion. It had wanted to reschedule its present repayment but bondholders refused. The total foreign debt burden for India is $345.8 billion, way above our foreign currency reserves. Of this the government owes $81.9 billion while others owe $263.9 billion. Some 56 companies are expected to pay $5 billion in 2012, of which only 5 companies can pay. The rest will try to reschedule which will raise interest burden by $700 million. These are merely external debts but internal debts are much worse. Yesterday the Stand Alone Credit Ratings of SBI, India's largest bank, was downgraded from BBB to BBB- and UBI to BB+ from BBB- by S&P because of the amount of bad loans they carry. However, MD of SBI, A Krishna says that worries about the quality of its loans are overblown. He can say that because SBI is a government owned bank so he knows that it will never be allowed to fail. The government will provide as much money as it needs just as it is doing for the bankrupt and corrupt Air India. The total bad debts of banks will cross Rs 2 trillion by end of March 2013 so where the government is going to find the money is anybody's guess given that the fiscal deficit is set to cross 6% of GDP. If the government prints notes to recapitalise banks the rupee will fall and inflation will zoom even higher. In fact S&P has threatened to downgrade India's sovereign credit rating to junk grade. " A downgrade is likely if the country's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," S&P said. But trouble always comes in dollops. Children's Investment Fund ( TCI ), a hedge fund has filed a suit in front of Kolkata High Court against Coal India Ltd, a government owned company. TCI alleges that Coal India has lost a total of Rs 2.15 trillion in lost pretax profits since its Initial Public Offering and will lose Rs 8.7 billion this year because it does not sell coal at market price. TCI has about 1% shares in Coal India. This is difficult to understand. If India has an abundance of coal and our recovery costs are lower, because of cheap labor and lower costs of acquiring mines, the market price inside India will naturally be lower. In that case market price in the rest of the world becomes irrelevant. TCI reckons it is losing dividends. We do not know what the officials promised during the IPO roadshows and therein lies the nub of the problem. We Indians are so lucky to have such a load of brilliant fellows running the country led by the super brilliant World Famous Economist. If only we could export the lot.