The Midweek Essay: Look who's coming to India's coal party!Published by MAC on 2019-09-11
Source: Newsclick (India)
This article draws on independent research data culled from around the earth.
But, bear in mind. that its arguments pertaining to India are somewhat speculative - as are the author's conclusions - given many other, not necessarily financial, policy decisions made by the Modi regime over recent months.
Not to mention - the growth of civil society opposition to specific enterprises (such as those of Adani) which may fall on stony ground, especially if various challenges result in their cancellation by legal edict.
Additionally, they may be impacted by what appears to be an unstoppable global rush to disinvest from steaming coal, as an unacceptable, uninsurable, product.
FDI in Coal: Look who's coming to the party
Some of the world's most ruthless companies may enter India to gobble up
its priceless mineral resources
by Subodh Varma
8 September 2019
[NB: I crore amounts to 10 million; a lakh is 100,000]
With the Narendra Modi government announcing that 100% foreign direct
investment (FDI) will be allowed into the country’s coal mining sector, it
is very likely that world’s biggest mining conglomerates will eagerly step
India has an estimated 319 billion tonnes of cumulative coal reserves,
mainly in Jharkhand, West Bengal, Chhattisgarh, Odisha and Madhya Pradesh,
with more in Telangana, Andhra Pradesh, Maharashtra, and smaller deposits
in several other states, including the North-East.
At present, about 92% of the mining is done by the public sector behemoth
Coal India Limited (CIL) and the smaller public sector undertaking,
Singareni Collieries Company Limited (SCCL). In 2018-19, India produced
about 730.54 million tonnes (MT), according to provisional figures of the
coal ministry, of which 606.89 MT was produced by CIL and about 64.4 MT by
On the face of it, there appears to be no need for the government to
invite foreign companies to exploit India’s coal deposits. The public
sector undertakings are doing well, their production is growing, they have
paid almost Rs.1.27 lakh crore as dividends and reserves to the government
in the past decade, in addition to various taxes and royalties amounting
to Rs.44,000 crore last year.
They are also a source of huge employment, with some five lakh employees
working in CIL itself, although just about 2.7 lakh of them are regular
employees (the rest are on various types of contract or casual workers).
In fact, CIL is counted amongst the world’s top 10 coal mining companies.
So, it seems strange that foreign capital – that means, foreign companies
– are being invited to a invest in Indian coal mines. Why this is so has
been written about earlier in Newsclick, but here, let’s take a look at
who all are likely to join this party.
The Big Mining Companies
According to a recently published report of the global auditing company
PricewaterhouseCoopers (PwC), the revenue of the world’s top 40 mining
companies was a staggering $683 billion in 2018 and was likely to increase
to $686 billion in 2019.
Their combined profit before tax was $93 billion in 2018 and was likely to
increase to $109 billion in the current year. That’s a jump of nearly 13%!
Their net profit (after taxes and all other deductions) was $66 billion in
2018, likely to increase to $76 billion in 2019 – an increase of a
These mining conglomerates are part of the larger set of major
transnational companies (TNCs) that are today dominating the world’s
economy. As a Tufts University/UNCTAD study of 2015 showed, the top 2,000
TNCs held assets that were 229% of world GDP, while their net sales made
up nearly half (48.8%) of world GDP (gross domestic product) . The mining
companies – or more properly, the extractive industries’ companies – made
up about 5.5% of these 2,000 top TNCs. The study revealed that profits of
extractive TNCs rose from 9.3% in 1996 to 13.3% in 2015.
What about coal mining specifically? As a table, drawn from Statista,
shows, five of the top 10 coal mining giants in the world are Chinese and
one is Indian – Coal India. The Modi government is unlikely to invite the
Chinese to exploit Indian coal. So, the potential candidates are the top
three, or number five.
Note that Coal India is already among the top 10, yet the balance is being
shifted elsewhere – out of India, towards one of the British or Australian
How Do Mining TNCs Make Profit and Where Does It Go?
These giant companies are not coming to India to do charity work. They
want to make profits -- more and more. Various studies, summarised here,
have shown that these companies ensure large profits by:
* Intentionally establishing operations in countries where it is
possible to exploit low-wage workers.
* Investing in locations where it is possible to take advantage of
regressive tax codes.
* Ensuring business-friendly production-sharing agreements with local
Nate Singham, writing in Common Dreams (from where the above is drawn)
quotes empirical studies done by the Tricontinental Institute of Social
Research (TISR) in Zambia to show that Konkola Copper Mines (KCM)
corporation, a subsidiary of Vedanta, gives [gave]an average monthly wage of
$172 to local mine workers whereas the statutory monthly minimum wage in
Zambia is $176.4.
TISR reviewed wage agreements to supplement their empirical surveys and
found that the owner of Vedanta, Anil Agarwal, earned 584 times of what
the temporary contract worker was earning in copper mines.
The PwC report quoted above shows that the top 40 mining companies spent,
on an average, just 22% of the value generated by their mining business
[which] went to their employees while 25% went to shareholders. This shows that
the mining operations of these TNCs are highly exploitative of labour. It
is this key factor that will draw Big Coal to India because wages here are
quite low, especially among contract workers.
The tax part is also important. The PwC report shows that the top 40
mining companies paid $27 billion as taxes of all kinds in 2018 over
revenues of $683 billion. That’s an effective tax rate of just 3.95%! With
these kind of tax rates, it is small wonder that the mining companies are
raking in profits with both hands.
It might be argued that India will not have such low tax rates as
prevalent in very poor and weak African countries. That is possible, but
here we need to note the immense power these TNCs wield over the political
rulers of the countries they operate in.
Once they get their teeth into mining operations in a country – as Modi is
inviting them to do in India – the full force of their deep pockets, their
political clout with governments in the UK, the US or Australia, their
connections with multilateral finance agencies, such as the International
Monetary Fund and World Bank, and with financial institutions, like banks,
will become increasingly evident in India too.
They will ensure that by hook or by crook, their profit margins are not affected by anything,
So, as New India gets ready to welcome these ruthless giants to start
operating fully in the country’s natural resources sector, dark clouds are
amassing for lakhs of workers who will see retrenchments, changes in
service conditions and curtailment of benefits.
More than that, the country will be sucked dry by these companies. Keeping
this in mind, the five lakh coal workers who are going on a protest strike
on September 24 against this disastrous decision, deserve a salute – they
are not just fighting for themselves; they are fighting for the country’s