Govindraj Ethiraj: New reforms for the era of shortages

DOUBLE EDGE

How is it that we were planning to feed all these ambitious, upcoming steel, cement and power plants if we are facing such massive coal shortages? I put this question to the head of a “natural resources” company last week.

“Did Ratan Tata estimate how long it takes to drive from Nariman Point to Mumbai airport (where we were seated) when he planned the Nano?” was the response. Interesting, I thought. He was juxtaposing man-determined shortages in infrastructure with a man-made oversupply of product, in this case affordable cars.

The latter has a lot to do with what some of us call first-generation reforms: The process which saw tariffs coming down, imports of everything down to consumer products being opened up, industrial licensing being scrapped in many cases and government participation in the market being diluted if not done away with.

The result has been that as a consumer I have legitimate access to first world products, ranging from an Italian cooking pan to a German Porsche car, a far cry from the still vivid days of smuggled cans of Coke, Camay soaps and Panasonic two-in-ones. The two-in-ones in case you forgot where cassette tape recorders combined with radios, though we had more use for the former.

On the other hand, the same burst of continued reforms has brought into my hands a mobile phone that makes me the king of mobility as it does a taxi driver in Mumbai, a fisherman in Kerala and a carpenter in New Delhi. Furthermore, it allows all of us to access our savings accounts in banks — both nationalised and privately run — via ATMs and transfer money effortlessly to our hometowns or elsewhere.

There is of course much more that first-generation reforms have brought and will bring to my existence, including quality air travel, television and filmed entertainment, education, healthcare and hopefully better roads, bridges, ports and airports. And I am saying this because I am one of those who have clear memories of the past and can now see the present.

But I increasingly wonder, while the reforms are doing a good job of addressing the shortages that I faced before the 1990s, they are and were not built to address the new era of shortages — minerals for manufacturing or energy generation, natural resources like water for human consumption and of course land that is needed for everything that we aspire for — from building homes to industry.

The next generation of reforms for the next generation of shortages which the former has helped create (or exacerbate) does not exist, as far as I can see, even in concept. What I see is a combination of the “Oh it will get sorted out,” reaction, which is usually right, to “we will moderate and then find a solution”. Translated, that means slower growth should automatically resolve the problems. That too is right, but only partially.

For example, in coal-dependent sectors like power, we are still lagging consumption numbers. Close to 70 per cent of power is thermally produced and for all the bluster about nuclear energy, that number ain’t going to be touched for a long while. Industries like steel are heavily coal-intensive but you can argue that you can import steel. But you can’t import power.

Let’s assume for a moment that most next-generation shortages would be energy-related and thus can be managed by adjusting consumption, through price signals or some other deterrent. That does not account for, let’s say, water. Capital investment can bridge the gap but that’s not happened in the best years of growth or the worst years. So that’s if government were to step up expenditure, which it could and might but has not.

Nor, most importantly, will capital really ever address the shortages of land. Actually is there a shortage of land? Well, no, if you take a map and start dissecting. But there is no land a farmer or villager wants to give up, practically anywhere in the country, without a good fight. Because he does not believe that your special economic zone or factory or small car will do him much good. Not will he allow you to mine coal, uranium or iron ore with the same willingness he did earlier. And that won’t change.

Engineering giant L&T Chairman A M Naik told me last week that industrial development should ideally take place on uninhabited or arid land. Then he added, “Where possible.” I was asking him about how industry would ever manage to invest, given land shortages. And I am not sure we have too many Bugsy Siegels, waiting to build the Indian industrial version of Las Vegas. L N Mittal may buy up all the world’s steel capacity but every acre of land acquisition in India will be a mettle testing process. Sure, Coal India Limited can acquire mines in Indonesia, Australia and Mozambique. China went to Africa some years ago precisely for this reason.

Will that be India’s comprehensive approach to tackling shortages, not just here but globally? And how long will these mines supply, assuming we beat China or L N Mittal to the race for these mines? Do shortages mean a return to the dreaded P (planning) word? What about resources within India, what are our chances like? I am not sure about any of these answers but I don’t think we can wait for a gold-pledging event like the early 1990s to wake up to this generation of shortages with the next generation of reforms.