life in financial markets: (part 2) how companies manipulate government authorities

In part 1 of this post series dated January 3, 2008 (http://natant.blogspot.com/2008/01/life-in-financial-markets-how-companies.html), I had shared a classic example of how Bombay's construction companies and local government authorities including municipal corporation and state government departments get together to twist rules to benefit the builders and enable kickbacks to politicians, bureaucrats and government officers. That example was about Hiranandani Builders. (the image to the right is of the area in Powai, Bombay where Hiranandani Builders' construction took place. the image is courtesy a news story on rentals at http://www.livemint.com/2009/02/06213646/Home-rentals-property-rates-f.html)

Below is a news update relating to that very case. 

http://www.mumbaimirror.com/article/2/20111220201112200203399377519d2eb/Petitioners-reject-Hiranandanis%E2%80%99-%E2%80%98cheap%E2%80%99-offer.html

Petitioners reject Hiranandanis’ ‘cheap’ offer

The builder agrees to build affordable houses provided PILs are squashed, petitioners insist they should follow original agreement or return Powai land to govt

Mumbai Mirror Bureau

Posted On Tuesday, December 20, 2011 at 02:03:25 AM

In a bid to buy “peace”, the Hiranandani Developers on Monday told the Bombay High Court (HC) that they are willing to build affordable houses on the remaining plot in Powai, allotted to them by the State provided all PILs against them are squashed. In 1986, the Hiranandanis entered into a tripartite agreement with the owners of the land, MMRDA and the State to develop a 230-acre plot in Powai. The developers were supposed to build affordable houses measuring approximately 430 sq feet and 861 sq ft for those from the economically weaker section. However, PILs filed by three social activists - Kamlakar Satve, Medha Patkar and Rajendra Thacker allege that the builder violated the tripartite agreement and constructed luxurious flats costing Rs 5 crore and above for wealthy people. On Monday, the Hiranandanis told the court that they are willing to construct 225 houses of 430.5 square feet and 225 houses of 861.1 sq feet on the remaining 2,90,625.5 sq ft plot provided all the PILs against them are disposed off. “We agree to construct affordable houses on remaining land but this should put an end to the matter and not open a can of worms. We are doing this as we want to buy peace,” said Hiranandani’s counsel. Petitioners reject proposal However, the three petitioners rejected the proposal, saying, the flats should be built as per the original tripartite agreement or else the land should be returned to the government. The division bench of Chief Justice Mohit Shah and Justice Roshan Dalvi asked Hiranandani Developers if they were going to utilise the remainder of the plot to construct affordable homes. “We are not inclined to make our judgement on the basis of arbitration petition,” the HC bench observed. The court also asked the developers to tell them how many buildings were constructed after the interim order passed in 2008, directing them to construct tenements as per the tripartite agreement. The petitioners alleged that the developer had amalgamated two or three flats and converted them into one big flat ranging between 2,000 and 3,000 sq ft. However, Hiranandani’s counsel argued that they had sought permission from the MMRDA to amalgamate flats and convert them into bigger houses in 1989. At this point, MMRDA’s counsel told the HC that as per a clause in the agreement, the permission to amalgamate houses was given for only one year. The HC has adjourned the matter to Tuesday.

life in financial markets & general: the many isms

Communism, capitalism, socialism, fascism, libertarianism, ancharism are all isms that many of us choose to categorise themselves in. As an aside, even criticism has an ism but it is not a category we would like to impose on ourselves!.

Anyway, when I was in my early 20s (during the early 1990s), I was recommended, like hundreds of young adults before me also were recommended, to read Ayn Rand's two radical novels, 'Fountainhead' and 'Atlas Shrugged'.

In her time, Rand popularised the essential principles of capitalism, like no one had ever done before, through her fictional and non-fictional works. To be sure, capitalism has dominated the working of most countries on our planet in the past 100 years.

They were works of fictions and I, like many others before me, was highly inspired by the heroism of the characters and ended up empathising with their disdain for government regulations.

Immediately thereafter, I read about and understood more other isms and became clear that communism was the biggest enemy of capitalism while the middle path seen in socialism was seen by capitalist more as a terrible nuisance than an enemy.

Over the years, however, another ism creeped up on me and this time it was realism. Today, I do not see the core principles of capitalism being followed in their sincerity in capitalistic economies across the planet. The lovers of capitalism do not blink an eyelid when they support government bailouts of private companies. It never occurs to them that forced, or manipulated, acquisition of privately-owned lands by governments, on behalf of non-government industrialists and entities, from remote or semi-urban areas for private industrialisation and development violate the core capitalism principle of 'right to property'.

This realism comes when you dig deeper into the real-life happenings around you and seek to sift the chaff from the wheat. Of course, there are justifications for everything and there is no universal consensus on any ism.

Personally, now, I believe that ultimately its about the greed and excessive ego of people in power and people with influence that determines whether this ism or that ism will bring more good or more harm to Earth and its inhabitants. Which means it boils down to humanism!

life in financial markets: massive hypocrisy when it comes to property rights

There is much hypocrisy among the educated affluent of India when it comes to the issue of property rights. When they talk of industrialisation and 'development' they are desperate to snatch away the property rights of individuals, families and tribes residing in the remote areas and villages of India so that their kind of 'development' happens. But if at all their own homes and offices were to be snatched away for the same purpose they will cry themselves hoarse about their property rights not being respected.

In my 14Oct09 blog post on the dangerous hypocrisies of capitalists I had written that:

"Development is just an excuse to grab land for companies who will then make electricity, goods etc which will be consumed in urban India and other countries. Such capitalists are an insult to true capitalism that says that governments should not interfere in the free play of property rights and competition in trade. Why then do companies worldwide manipulate governments to seek tax favours and other cruel interventions against poor people living in remote areas?
Why aren't the property rights of these poor & un-influential, whether individual or collective (of a community or a tribe) respected by industrialists, politicians and civil-service-bureaucrats? Their machinations and double-standards disgust me completely. As a journalist, I know, for a fact, that they also manipulate very senior editors in the media (print, TV and internet) to carry forward their ugly agenda. The affluent citizenry, in the meanwhile, continue to remain steeped in their excessive consumerism."

Currently, the government of India, that is supposed to be beholden to democracy, is using excessive, even brutal, force against the villagers and tribals of Orissa who are protesting against the illegal and forced acquisition of their land for steel company Posco.

Below is a copy of an email I received from an internet-based group called 'Orissa Concerns' (I am on its mailing list) that gives details of more violations going beyond land acquisition ones:

From: Anivar Aravind
Date: 15 May 2010 22:19
Subject: [OrissaConcerns] Police Open Fire for Illegal Mineral Robbers: The Real Story of the POSCO Project
To: connect , Invitesplus , common-concern

Police Open Fire for Illegal Mineral Robbers: The Real Story of the POSCO Project

From Forest Rights act

Today, Orissa police opened fire on peaceful protesters sitting on dharna for their lands and livelihoods. We join other democratic forces in condemning this atrocious brutality, in which at least 50 people have been injured, markets have been burned and many more are likely to be wounded or killed. We also wish to draw attention to the following facts:

This is not just a “dispute over land acquisition for development.” The POSCO project is illegal and will not bring any benefits for the local population or the country's economy. Rather, it is simply plunder of lives and resources:

• The POSCO project is illegal as it violates the Forest Rights Act of 2006. Under that law, no forest land can be given to anyone until 1) all the rights of the people in the area are recognised and 2) their consent is given to the project. This is the requirement of the law, acknowledged further by an Environment Ministry order of August 3, 2009. This has never been done in the area despite the people demanding it. The Central and State governments have no legal right to hand over this land to POSCO. In law, not just in public view, this is daylight robbery. Please see the attached timeline for more details.

• The project is nothing less than a robbery of the country's natural resources by a multinational. There is no conflict between people's rights and “development” here. Despite grand talk of 51,000 crores of foreign investment, what is not mentioned is that POSCO is getting a huge amount of:
  
  • land: 4,000 acres for the plant, 2,000 acres for a “township”, 25 acres in Bhubaneshwar for their office, plus an unknown amount in the mining and port areas;
  • water: an estimated 12,000 crore liters from the river Mahanadi, threatening the water supply of Bhubaneshwar and Cuttack;
  • iron ore: 600 million tonnes in the form of captive mines, and a further 400 million tonnes will be “allocated';
• in exchange for which it will:
  
  • pay essentially nothing for the water and the land;
  • pay a pittance as royalty, allowing it to make tens of thousands of crores in profits just by the difference between market prices and extraction costs (one 2005 estimate put the net profits at 96,000 crores from extraction alone);
  • practically no income and other direct taxes, as it is seeking SEZ status;
  • provide 13,000 jobs – by their own estimates, which in the case of all industrial projects have proven to be gross overestimates – while displacing around 40,000 people in the plant and port sites alone (not including the mines). More than 20,000 people will lose employment in the plant site alone.

In sum, no tax revenue, net loss of employment, no royalties, loss of 15% of India's proven ore reserves, environmental devastation and the forced displacement of 40,000 people. This is what our government considers “development.”

Today's police action shows better than any other that the government is neither concerned about law nor resources nor development – it is interested in daylight robbery. We stand by the POSCO Pratirodh Sangram Samiti, who are among the many unsung heroes of our country today, fighting not only for themselves and their homes but for the idea of true democracy in India.

Timeline of Events in POSCO Project Area Relating to Forest Rights

From Forest Rights Act

June 22, 2005: MoU signed between Orissa government and POSCO-India, subsidiary of the POSCO Corporation of South Korea. MoU pertains to an integrated iron ore mine – steel plant – private port project. Rs. 51,000 crore investment is spoken of. Critics point out that there are almost no linkages with local or national economy; operation consists of extracting iron ore while paying extremely low rates of royalty, processing into steel without paying full land, electricity, water or tax costs (due to SEZ status and use of State government's powers for all these resources), and exporting it.

MoU allocates an area of 4,004 acres for the steel plant in Jagatsinghpur District. Of this, 1,253 hectares (approximately 3,000 acres) are officially classified as forest land. However, this “forest land” is largely under cultivation by various betel vine, cashew nut and other cash crop cultivators as well as people engaged in aquaculture. Some of these people have lived in the area for over a century and most have been there for several decades. The land was classified as forest land as a result of an agitation in the 1950's demanding afforestation in the area. The main actual forests of the area are mangroves, which occupy only a small part of the “forest” land.

Due to absence of title, out of an estimated 4,000 families that will be physically displaced by the steel plant, only 270 odd are officially entitled to compensation.

August / September 2005: POSCO Pratirodh Sangram Samiti formed to oppose project. A people's blockade declared in three gram panchayat areas affected by plant. The blockade allows all persons entry and exit except government officials and POSCO employees. The Samiti calls for negotiations. No negotiations have been held till date.

December 18, 2006: Forest Rights Act passed by Parliament. Some sections that are relevant:

2(o) declares that all those living on forest land for at least three generations (75 years), as well as forest dwelling scheduled tribes, have rights under the Act

3(1)(a) recognises right to land under occupation and/or cultivation in forest areas

3(1)(c) recognises right to own, use, collect, dispose of minor forest produce

4(5) bars removal of any forest dweller without recognition of rights

5 empowers gram sabha to protect and manage forests as a statutory authority

November 29, 2007: Police and hired goondas attack PPSS dharna at one entry point with bombs – more than 50 people injured – dharna tent demolished. The protesters are driven back into one gram panchayat (Dhinkia). Police set up camps in the schools of the other two villages, deploy in heavy force.

January 1, 2008: Forest Rights Act notified into force.

August 8, 2008: Supreme Court upholds “in principle” clearance for use of forest land but directs Environment Ministry to proceed “in accordance with law.” No final clearance granted. The case is only between Orissa government, Central governent and POSCO; no opponents to the project are represented.

March 23, 2008: Gram sabha of Dhinkia passes resolution electing a Forest Rights Committee and starting process of inviting claims under the Forest Rights Act. Resolution also states the gram sabha's decision to protect the surrounding area from environmental destruction in exercise of its powers under section 5. Claism are filed, but Sub-Divisional Officer illegally refuses to accept them. The State government takes no steps to implement Act in the area. Claims are till this date with the gram sabha.

August 3, 2009: Following prolonged protest, Environment Ministry issues circular clearly stating that no application for “diversion” (i.e. clearance for non-forest use) can be made without inter alia certificates from gram sabhas of the affected area stating that:

1. The process of implementation of the Forest Rights Act is complete and all rights have been recognised
2. That they consent to the diversion after being informed of the nature and details of the project and rehabilitation project.

50% quorum is required. Without these requirements, the Ministry says, no final clearance can be granted.

December 29, 2009: In violation of its own circular and the Forest Rights Act, Ministry grants final clearance for diversion of forest land.

January 5, 2010: POSCO Pratirodh Sangram Samiti writes to Ministry against illegal action. CPI also raises issue, and various people's organisations protest.

January 8, 2010: Environment Ministry “clarifies” that clearance is subject to the August 3^rd, 2009 circular, including “informed consent of the tribal people” (emphasis added). There are no tribals in the area, but there are people eligible as other traditional forest dwellers, who are also protected to the same extent by the Forest Rights Act. Taking advantage of this obvious and illegal loophole, POSCO responds within a few days that there are no tribals in the area. Despite the “clarification”, illegal final clearance is not withdrawn and all government officials are treating it as final.

First week of February, 2010: In response to a request from the Collector for the opinion of the gram sabhas, all three in the steel plant area pass resolutions refusing consent for diversion of forest land and demanding recognitin of their rights and power to protect forests. As per law, the forest clearance is now clearly illegal and has to be withdrawn. Despite this, till date MoEF has done nothing and the clearance is standing.

February 2010: PPSS begins a three month dharna at main entry point at Balitutha.

May 11 2010: 25 platoons of police deploy in the area. Attack on protesters expected at any moment.

May 15 2010: Attack begins.  At least 50 people injured, market areas and protest camps burned, police attacking people.

life in financial markets: when government manipulates equity markets

Its a ridiculous drama being enacted by the champions of capitalism. India's finance minister, P. Chidambaram was telling television news reporters today that the foreign institutional investors (FIIs) are being directed to reverse their short-sales positions. Such a step should be an anathema to free markets but when were the financial markers were every truly from cronyism. Even C.B.Bhave, who otherwise is calm and collected, is unable to resist pressure from above and comes down heavily on FIIs lending stock to each other through private contracts.

I would like to say this to market participants, investors, regulators as well as media editors/correspondents covering markets:

When the market shoots up rapidly, as it was during 2005-07, there was no clamour from you for a ban on long purchases or reversal of long purchase positions. But when the markets are going down rapidly, as it is this month, you want to ban short sales or ask for it to be reversed? You can't have it both ways. If that does make you a hypocrite then nothing much else will! It is also government-sponsored manipulation of the markets. Who will regulate the regulators?

Earlier it was the banks and companies in distress that were being shamelessly bailed out by governments and cronyists. Now, they want to bail out the equity markets.

life in general: (part 2) the myth of rehabiliation

In November last year I had blogged about how I felt that rehabilation in development projects was nothing but a myth. I had visited some villages in the Narmada valley in December 2005 and in my few interactions with the villagers I was pretty much sure that the so-called rehab of people getting displaced by the mighty Narmada Dam was only on paper.

Imagine this: There are, say, 15 planets like Earth in our universe where there is life form similar to humans. Now, say, 2-3 of them have become very powerful and they can do inter-galactical travel fairly easily. Now, suppose that these 2-3 find their existing habitats very restricting -- they want to grow and develop further and believe it is only good for other living planets also that such growth and development takes place. But for that they would want some large companies that have massive industrial complexes to vacate their lands because these lands would be needed for that inter-galactic development project. So, say, they select the Surat-Hazira industrial belt in India where you have major industrial houses like Essar, Reliance, ONGC, Kripco, Gujarat Fertilser, L&T and others. Say, they also select some areas in the US where Dupont and Exxon have their factories.

Now, how would these companies feel? Say, those planets' rulers create some rules concerning rehab and tell the companies that they will be given some alternate land in the Sahara Desert and for some even on the Moon. When they find it difficult to even do that they will just give some piddly few dollars and tell these companies 'Thats it, now the chapter is closed." How would these massive industrial houses react? No doubt, they will be furious about it and tell in a court in those planets that their property rights should be respected and they should not be forced out of their lands. But the judges in those inter-galactic planets' courts won't be sympathetic to their arguments.

I would like the big industrialists to think about how they would feel if they are on the receiving end of the same thing they inflict on others.

Anyway, back here in our country, a current court case initiated by the Narmada Bachao Andolan highlights the issues of myth of rehab and brings out the massive corruption involved.

See this press release:

NARMADA BACHAO ANDOLAN
62 Mahatma Gandhi Marg, Badwani, M.P. Ph. 07290-222464, 09424855042,
nba.badwani@gmail.com
Maitri Niwas, Tembewadi, Dhadgaon, Nandurbar, Maharashtra. Ph: 02595-220620

Press Release: 8th May 2008

CHIEF JUSTICE OF THE HIGH COURT OF MADHYA PRADESH, AT JABALPUR, TO HEAR CASE OF CORRUPTION WORTH CRORES OF RUPEES IN REHABILITATION OF FAMILIES AFFECTED BY THE SARDAR SAROVAR PROJECT ON THE 13TH OF MAY, 2008

The Chief Justice of Madhya Pradesh High Court, at Jabalpur would hear the case of corruption worth crores of rupees in the rehabilitation of the families affected by the Sardar Sarovar Project on the 13th of May, 2008, in which notices and interim orders were issued by the Chief Justice on March 3rd 2008 and was yet to come for hearing. The Govt. of M.P. is yet to file a reply petition and documents.

On behalf of NBA, it was, therefore, pleaded that the matter was very urgent as lakhs of rupees worth rehabilitation funds are being misappropriated by the officers of the NVDA and their touts. The corruption is also rampant through manipulated records of oustees and in allotment of house plots.

The Govt. of M.P., NVDA, NCA and none of the other respondents, seven in all, submitted reply within 4 weeks, the time stipulated by the Chief Justice, while issuing the notices in March.

Yesterday on May 7th, NBA urged for an early hearing and in spite of the Deputy Advocate General, M.P. requesting for further time and hearing after the May vacation, upon submission of few more documents, and describing the fiery situation, NBA, through Medha Patkar, stated the fear of the affected persons cheated, yet recorded as rehabilitated and submergence of thousands of families would be imposed, if an early hearing is not held.

The CJ fixed the hearing of the case on May 13th, 2008 at Madhya Pradesh High Court, at Jabalpur.

FOR FURTHER DETAILED READING:

The Public Interest Litigation filed by NBA, Writ Petition No: 14765/2007 filed on 15th October 2007 in Jabalpur High Court, was again heard on 7th May 2008. The Case is regarding the huge and unprecedented Corruption in all aspects of Rehabilitation process of Sardar Sarovar Dam affected families in Madhya Pradesh.

During the last hearing on March 3rd, the bench consisting of Chief Justice A K Patnaik and Justice Prakash Shrivastava had heard the plea by Medha Patkar and gave the order, issuing notices to the respondents which included Chief Secretary, State of Madhya Pradesh, Chairman, Narmada Valley Development Authority, Chairman, Narmada Control Authority (NCA) (who is also Secretary to the Ministry of Water Resources, Secretary, Revenue Department, GoMP, Director General of Police, M.P., Inspector General, Stamps and Registration, M.P., District collectors of 5 districts such as Badwani, Dhar, Jhabua, Khargone and Dewas, to file their replies within a month.

But since that has not happened even after two months, Medha Patkar raised a question regarding this. Mr. Shukla, the Deputy Advocate General of Madhya Pradesh, who pleaded for the respondents informed the court that the government will soon file the reply petition!

Meanwhile NBA has submitted more documents to substantiate the lack of rehabilitation as well as the unprecedented corruption by officials and dalals, on the rehabilitation front. This includes the Report of the Public Hearing by Anna Hazare, Arvind Kejriwal, S M Mushrif and Anand Kothadia during February 2008, the latest Minutes of the NCA and R&R Subgroup and other materials.

Though the Madhya Pradesh Government pleaded to postpone the next hearing till after the vacation, the Court has ordered to have the next hearing on May 13th, admitting the plea from Medha Patkar that the issue demands urgency and cannot be postponed that long.

The nexus between the Narmada Valley Development Authority (NVDA) officials and contractors in the establishment of the rehabilitation sites has resulted in shoddy and uninhabitable preparation of R&R sites, thousands of eligible PAFs are left undeclared where as a few fraudulent persons got declared, the nexus between officials, agents and advocates leading to huge corruption and swindling of Public money meant for rehabilitation were pertinent issues raised by NBA.

The Madhya Pradesh government policy has twisted and subverted the land and house based rehabilitation directives of the Narmada Water Disputes Tribunal Award (NWDTA) and made room for huge corruption. While there is no formal approval from Narmada Control Authority for the so called SRP, the NVDA proceeded with absolute neglect and contempt for legal and constitutional norms and rights of the PAFs.

The case was filed through Senior Adv. N S Kale, who is the same person who pleaded the case of the illegal arrest of the Taloon Satyagrahis, where on 25th September 2007, the Jabalpur High court ordered the Govt. of M.P. to pay compensation of Rs.10,000/each to all the 91 activists arrested. Till date the government has not obeyed that order. In the current case, Medha Patkar herself is standing, pleading for Justice.

The SRP-induced fake registries, where PAFs who were given cash for buying lands actually ended up giving commission to officials and dalals (middlemen), signing fake registries, facilitated a process where crores of rupees were amassed by officials and agents as commission, depriving PAFs of basic resource security and a better living condition after resettlement. The alarming fact is that all this money is from public exchequer and hence this illegal enrichment of government officials is not just a matter of routine corruption, but crime against the People and State both.

While FIRs were filed against PAFs and about 35 of them were arrested and later bailed out, except one, no action was taken against officials and their stooges, though notices were issued to 30 NVDA officials early on, but no action taken till date.

Out of a total of 2600 land registries claimed by NVDA as part of SRP, 758 are already officially accepted by the government as fake registries, after preliminary enquiry by special departmental officers. NBA has demanded a CBI enquiry into the same.

However both NCA and NVDA have not yet understood the gravity of the situation as hundreds of fake registries are yet to see light. Out of the 2600 plus claims of land registries by NVDA only a few hundred are factually correct and legally valid ones. This means that SRP was an absolute failure with only a few hundred PAFs actually purchasing land with SRP. This is the reason why NBA always opposed SRP and demand land for land rehabilitation.

There are more stories of corruption in House Plot distribution as well as in the procedure of declaring PAFs. Thousands of genuine PAFs are still not declared while some illegal and fraud persons were declared and got PAF benefits.

This huge and unprecedented corruption is deplorable and is in utter violation of the Article 21 of the Constitution as also the NWDTA and Supreme Court orders. We pledge to continue to expose and tackle any form of corruption or misappropriation of public funds earmarked for rehabilitation of the PAFs.

Ashish Mandloi, Clifton Rozario, Kamla Yadav