Business

The Problem With L&T Chairman S.N. Subrahmanyan’s 90-Hour Workweek Advice

Data proves that countries with higher average working hours are not necessarily economically advanced.

Infosys chairman Narayana Murthy recently suggested working 70 hours a week to take the country to the top. Now, L&T chairman S.N. Subrahmanyan has taken it a step further, recommending 90 hours of work per week with the same promise of national progress. This video discusses the subject, highlighting that there is no direct correlation between excessively long working hours and a country’s economic growth. Data proves that countries with higher average working hours are not necessarily economically advanced.

The Reality of Maruti Suzuki’s Employment Practices

The non-permanent workers of Maruti Suzuki have a charter of demands, which includes that the principle of equal pay for equal work must be implemented and that they must be able to represent their interests.

In a few days, we will celebrate Republic Day. This is a good time to reflect on the meaning of the opening words of our Constitution: “We, the People of India.”

In the early days of our independence, there was so much talk of “the People” and when the words “development” or “progress” were mentioned, they were meant for the people. Now, less than a century after independence, the lives of the people no longer matter to our development and the policies which are designed to take us on the path of economic progress.

The Automotive Mission Plan and job creation

If we look at the automobile industry, the Ministry of Heavy Industries is working with auto industry associations, Society of Indian Automobile Manufacturers and the Automotive Component Manufacturers Association on the Automotive Mission Plan (AMP) for 2047; a plan which is expected to pave the way for India to become an advanced industrial power. The AMP 2016-26 is the collective vision of the government and the automotive industry.

Of course, the spokesmen for the industry could point out that the AMP 2026 aims to make the automotive industry a significant contributor to “skill India” programme and make it one of the largest job creating engines in the economy; the potential for incremental number of both direct and indirect jobs to be created by the automotive industry over the next decade is 65 million. This is over and above the additional 25 million jobs created in the previous decade.

The creation of jobs is surely a reflection of a concern for the people?

If we look at the history of job creation by Maruti Suzuki India Limited, a subsidiary of Japan’s Suzuki Motor Corporation, which is India’s biggest car maker with more than 43.94% market share in the passenger vehicles segment in January 2024. The company recorded passenger vehicle sales of 1,72,813 units in January 2024, according to the India Brand Equity Foundation.

By 2030, the government has committed that 30% of the new vehicle sales in India would be electric.

The struggles of non-permanent workers in the aftermath of the 2012 Manesar agitation

But what kind of jobs is Maruti Suzuki creating?

The answer to the question was given at a meeting in Gurugram on Sunday, January 5, of more than 3,000 non-permanent (contract, trainee, apprentice, temporary etc) workers who have worked and are working in Maruti Suzuki plants in Gurugram-Manesar to demand permanent jobs.

In 2012, the Manesar plant of Maruti Suzuki saw an outpouring of rage by workers after intense struggles which included the occupation of the plant and on July 18 that year, the plant was set on fire and in the ensuing violence, nearly 100 managers were beaten up and one manager died. That was the starting point, in a way, for the systematic destruction of effective trade union movement in the automobile belt and the demonisation of the Maruti Suzuki workers.

The trade union leaders were put on trial during which they were framed in the case of the murder of the manager and given life imprisonment; other workers were thrown out, including more than 500 permanent workers without a domestic enquiry, which is against the labour laws.

The workers who were thrown out moved the labour courts, where their cases have been pending since 2012. The workers under the leadership of the Maruti Suzuki Struggle Committee has been pursuing the cases since then. They have also recently filed a complaint before the labour commissioner on behalf of the non-permanent workers.

The committee has helped the non-permanent workers of Maruti Suzuki organise themselves. The non-permanent workers have formed a working committee, Maruti Suzuki Asthayi Mazdoor Sangh.

But who are these “non-permanent” workers?

After the 2012 agitation, Maruti Suzuki announced that it abolished contract labour system and introduced what is called fixed term employment or contractual work.

The management created various categories of workers: apprentice, temporary workers (TW 1, 2 and 3), casual workers (CW 1 and 2) and Multi-Skilled Technical Workers (MST).

These categories of workers form the bulk of the Maruti Suzuki workforce. According to Amit Chakrakraborty, a trade union leader involved with the Maruti Suzuki workers’ struggles, the total number of workers employed by Maruti Suzuki is around 36,000 of which 83% are non-permanent workers and only 17% are permanent workers.

Gautam’s journey: A case study in inequality

Gautam, a graduate of Industrial Training Institute, Narnaul in Haryana explained to me how the system of non-permanent workers functioned and how absolutely unfair and unjust it was.

Gautam was recruited on the campus after he passed a written exam and taken in as an apprentice in 2018. He was sent to the Maruti training school where they did a document verification, biometric identification and issued him an identity card and did his medical examination.

Then began a week of training. The first day was spent in telling the batch of apprentices the history of Maruti from the time it started and produced its first Maruti 800 car and how the Maruti Suzuki partnership began.

Then, for three days, they gave oral lectures and showed videos of the car manufacturing process. They emphasised the importance of working in accordance with the strict timing and by the stopwatch. They also explained the safety precautions the worker should take.

After that, he was sent to the Manesar plant and put in the casting workshop. For the first two or three days, he was shown how to work by another non-permanent worker, whose contract was ending.

He was not taught how the robots or the other machines worked; those skills were left to a permanent worker. The actual work was done by three workers who were all non-permanent workers, either TW 1 or 2 and he being the apprentice.

His salary was Rs 13,000 of which the government gives Rs 10,000. He was not given any Provident Fund (PF) or Employees’ State Insurance (ESI) benefits. After one year, he was given a letter wishing him a “bright future” and sent home.

Also read: The Life of Labour: Maruti Suzuki Violence in Manesar – a Retrospective

Gautam was not given an assurance of being called again and he just waited for a call or message. After three months of sitting idle, he was told to join the weld shop in Gurugram. This time, he worked in the assembly line and his work was to fix the hinge in the door of the cars.

Once again, he was told how to work by a temporary worker.

Gautam learnt to work and think in seconds because he had to fix the hinge every 30 seconds. He also got used to having a tea break of seven and a half minutes in which he had to have tea and a snack, rush to the toilet and come back in time to put on his safety gear and get back to work.

As a temporary worker, he got Rs 26,00 but since the PF and ESI was deducted, he got Rs 24,000 in hand.

After working for seven months, his contract ended and he was given a letter stating that he had worked for seven months. Once again, Gautam was back at home and jobless, waiting and hoping he would get a permanent job in Maruti Suzuki. There was no feedback on his performance or how they had judged him.

After an excruciating wait of four months, he was sent a message that he could join the company as a temporary worker, this time as TW 2.

Not told whether it would lead to a permanent job, he had no idea. If your performance is good, then they will call you. Once again, the work was done by temporary workers and they had the same shifts as the permanent workers.

Once again, his contract ended after seven months.

This time, he waited for one year. He got a call asking him to take the examination for the post of a permanent worker. He gave the exam which he said was quite easy. But to his utter disappointment, he was not selected, not told how well or poorly he had done in the exam, or what his score or the cut off score was. He was just told he had not passed the exam.

According to Maruti Suzuki records, they had employed three workers when, in fact, they had employed one worker three times over as non-permanent worker.

Gautam went around looking for another job in another company, showing them his certificates from Maruti Suzuki and each company said that those certificates were worthless. Finally, he got a job at a factory called Gronz with a salary of Rs 13,610. He left because he could not live on the salary. Gautam is now 27 years old with no job.

Demands for justice and upholding constitutional values

There are some 30,000 workers like Gautam who have worked in Maruti Suzuki as non-permanent workers. And now Maruti Suzuki is opening a new factory in Kharkhoda, Sonipat. The Maruti Suzuki non-permanent workers are demanding that the permanent workers to be taken to the Kharkhoda factory should be taken from the pool of some 30,000 workers who have worked as non-permanent workers with them already.

While the Japanese managing director Hisashi Takeuchi earns an annual salary of more than Rs 51 crore, the non-permanent workers earn anywhere between Rs 12,000 to Rs 30,000 monthly. After the struggles, the permanent workers earn around Rs 1.3 lakh.

It would be entirely in the spirit of the Constitution that the voices of the people be heard by the government and that transnational companies like Maruti Suzuki be bound by constitutional values. If the just and fair demands of “the People” are not heard, then the people will have the right to assert their rights and enforce them by means available to them. For the time being, the Maruti Suzuki non-permanent workers’ union has announced that they will struggle for their rights through legal and constitutional means, respecting the law and hoping the government will respond.

Nandita Haksar is a human rights lawyer and an award-winning author.

‘Will Fight Tooth and Nail’: Why Farmers in Punjab Are Against the Draft Agriculture Marketing Policy

Farmers and agriculture experts have said that if implemented, Punjab will lose its agricultural and financial autonomy to corporates.

Jalandhar: Amidst the ongoing 10-month long protest at Shambu border in which farmers are pushing for a Minimum Support Price (MSP), the Union government’s ‘National Policy Framework on Agriculture Marketing’ has raised concerns among farmers that a “back door entry” of three farm laws, which were repealed in 2021, is being created.

The draft policy which was released on November 25, 2024, talks about dismantling Agriculture Produce Marketing Committee (APMC) markets and promoting contract farming, which was one of the key points in the three farm laws that farmers had protested against.

Up in arms against the draft policy, the farmers said that while they were fighting for MSP, the Union government was all set to uproot the APMC market system in Punjab, which was the best in the country, take away the financial autonomy of the state and push the farming sector into privatisation.

Farmers have also questioned the timing of the draft policy, as the Modi government has given just two-weeks’ time to the states to respond.

The document has brought the Samyukt Kisan Morcha (SKM), which led the farmers’ agitation in 2020-21 and the Kisan Mazdoor Morcha (KMM) leading the Shambhu and Khanauri sit-ins for MSP, on one platform. Both SKM and KKM held a joint meeting in Chandigarh and asked Punjab’s AAP government to call a special session of the Vidhan Sabha and pass a resolution against the draft policy.

Farmers protest near the Shambhu border on December 8. Photo by arrangement.

What is the draft agricultural marketing policy?

Released by the Department of Agriculture and Farmers’ Welfare under Ministry of Agriculture and Farmers’ Welfare, the draft agricultural marketing policy talks about 12 reforms, which include allowing private wholesale markets to be set up, and permitting the direct wholesale purchase by processors, exporters, organised retailers and bulk buyers. The policy document also declares warehouses, silos and cold storages as deemed markets, calls for an e-trading platform, a single point levy of market fee, a single unified licence, rationalisation of market fee and commission charges.

The major concern among farmers is contract farming, a subject which was a part of the three repealed farm laws, equipping APMC markets with specific infrastructure and services in Public Private Partnership (PPP) mode and the push for reforms in the state’s agricultural marketing laws and policies.

Emphasising on privatisation, chapter 7 of the draft reads:

“Private markets are required to create competition among them and with other channels of marketing including APMC markets. Establishing private markets improves farmers-market linkages. As a fulcrum, private markets would enhance the farmers net income. Though the majority of states have made enabling provision for setting up of private wholesale markets, yet private markets have come up in only a few states like Maharashtra, Gujarat, Rajasthan, Karnataka, and Uttar Pradesh.”

Modi government wants to dismantle APMC markets: SKM and KMM leaders

Talking to The Wire, senior SKM leader Balbir Singh Rajewal said there was absolutely no doubt that the new draft agricultural policy was a “back door entry” of the three repealed farm laws.

“The Modi government’s message is clear that they want to break the APMC mandis in Punjab and bring corporate monopoly in agriculture. PM Modi is adamant to take revenge on Punjab, as we had led the farmers protest in Delhi. Since agriculture is a state subject, we have asked Punjab agriculture minister Gurmeet Singh Khuddian to bring a resolution in the Punjab assembly and oppose the new draft policy.”

Rajewal claimed that the new draft agricultural policy would erode Punjab’s stake over its own resources and agrarian economy in the same way in which the Goods and Services Tax (GST) has “broken the backbone of federal states’ financial autonomy.”

“The new agriculture draft clearly talks about private players setting up silos, which is totally unacceptable when Punjab already has a successful model of APMC Mandis in place. If the Modi government wants to set up silos, then they should give this task to the Punjab Mandi Board under the Punjab government which procures food grains through state agencies like Markfed, Punsup, Pungrain and others,” Rajewal said.

Agitating farmers at the Shambhu border on December 8, 2024. Photo: Special arrangement.

The SKM leader emphasised, “We will oppose the new agricultural policy tooth and nail. Once again farmers unions will have to come together to fight a tough and a long battle with the central government.”

Rajewal said that rather Punjab’s AAP government should demand the opening of the Pakistan border for trade. “It is high time the Punjab government speaks for its rights before it’s too late. Under its Hindutva agenda, the Modi government’s message is clear that they want to sell the country’s agriculture to the corporates severely affecting farmers and the consumers. It will push the country in a spiral of chaos”, he added.

Kisan Mazdoor Morcha (KMM) coordinator leading Delhi Chalo morcha at Shambu border, Sarvan Singh Pandher also said both KMM and SKM are united against the new draft policy.

“While we are fighting for MSP, the Union government has brought yet another pro-corporate policy clearly signalling that it has no interest in addressing farmers’ woes. The government is more concerned about promoting privatization and the big corporations in agriculture,” he said.

Farmer leader Shingara Singh Mann from BKU (Ekta Ugrahan) union also said, “Read the new draft policy, it has clearly mentioned that its agenda was to promote contract farming, privatisation of mandis and an end to APMC mandis,” he said.

Mann also questioned the silence of chief minister Bhagwant Mann’s AAP government and said that they should hurriedly act against it. “Earlier also the Modi government had tried to impose the three farm laws during the COVID-19 pandemic but we fought against them. Now again, farmers will have to fight for their rights and Punjab would not be alone in this agitation. Soon Haryana, Uttar Pradesh, Rajasthan and other states would join too,” he added.

He also asked the Modi government that if dismantling APMC mandis was such a success, then why labourers from Uttar Pradesh and Bihar were working in Punjab. “The farm labourers from these states have been telling us to save the APMC mandis, else Punjab’s farmers would also be ruined,” he said.

Agriculture economist speaks

Questioning the urgency of the agricultural marketing draft, renowned economist Ranjit Singh Ghuman from Punjabi University, Patiala said that the Union government highlighted the timing – the government has given just two-weeks’ time to state governments to respond to the policy.

“What was the urgency? Farmers’ fears are right because it talks about contract farming, private mandis and one nation, one market. The draft policy was raising questions over the intentions of the Union government for all the valid reasons,” he said.

Ghuman said that while the farmers were protesting for MSP for the last 10 months, there was no mention of MSP in the new draft policy.

“Rather, if the new draft policy comes into effect, APMC mandis and MSP will get diluted over the period of time,” he added.

The economist also said that MSP was the floor price or bench mark of crops. “If the new draft policy is implemented, it will lead to the mushrooming of the cartel system of corporations. Punjab will lose financial and agricultural autonomy, leading to massive loss of revenue through 3% each going as mandi fees and Rural Development Fund (RDF), respectively. If Punjab ends up losing 6% of its revenue earning, it will ruin Punjab’s economy. This also means that farmers would be forced to sow crops demanded by corporates, hence pushing the nation into food scarcity and a possible international crisis,” he said.

The economist advocated the need for a big discourse between state, farmers, and the consumers on the policy. “The Union government should understand that policies of this magnitude cannot be decided and imposed within two weeks’ time. India survives on agriculture and a decision related to it cannot be taken in haste,” he added.

Agitating farmers near the Shambhu border between Punjab and Haryana on December 14. Photo by arrangement.

Punjab agriculture minister’s meeting

On a joint call given by SKM and KKM, farmer leaders from various unions held a meeting with agriculture minister Gurmeet Singh Khuddian and Punjab government officials on December 19 at Chandigarh.

Discussing the agriculture marketing draft, farmer union leaders said that if the Union government was claiming that there was a need to increase the number of mandis, then they should construct more APMC markets and not bulldoze private markets.

Khuddian assured the farmers that he will discuss the policy with government officials and other stakeholders. “If imposed, the new agriculture marketing policy will uproot the APMC mandi system in Punjab. We will support our farmers,” the minister said.

Terming the draft agricultural policy as anti-farmer, anti-federalism, and anti-people Rajinder Singh Deep Singhwala from Kirti Kisan Union (KKU), said that MSP, which was the key demand of farmers, was missing from this policy.

“Under the garb of one nation, one market, the Modi government’s agenda is to push privatisation in agriculture. The 12 reforms mentioned in the policy talks about private market, direct marketing, PPP mode and declaring silos as deemed yards, which was nothing but a way to bring the three farm laws back,” he added.

The Puzzling Divestment of Ferro Scrap Nigam

After Pawan Hans and Central Electronics, another PSU’s divestment raises questions.

On September 19, the government approved the sale of Ferro Scrap Nigam Limited (FSNL). For Rs 320 crore, a Japanese firm called Konoike Transport would get 100% equity in the firm.

The news didn’t create too many ripples. Headquartered in Bhilai, FSNL, a subsidiary of state-owned Metal Scrap Trade Corporation (MSTC), is one of India’s lesser-known Public Sector Undertakings (PSUs). In addition, unlike the abortive divestments of Central Electronics and Pawan Hans where the buyers had questionable antecedents, Konoike Transport is an established Japanese firm with investments from global Foreign Institutional Investors (FIIs) like Vanguard and BlackRock.

And yet, the sale needed greater attention than it has received. FSNL’s valuation, given its assets, profitability and ability to diversify into sectors set for rapid growth, seems to be low.

Top Line Profits After Tax (in crores)

Year	Total Revenue	Profits After Tax
2017	328.30	23.75
2018	340.30	8.07
2019	378.41	26.69
2020	409.90	30.58
2021	364.97	22.75
2022	415.38	40.36*
2023	414.16	38.37*
2024	467.72	64.92*

*Had FSNL not paid high dividends to its shareholders including MSTC – Rs 11.2 crore in 2022, Rs 9 crore in 2023 and Rs 12.80 crore in 2024 – its cash holdings would have been higher yet.

(Source: FSNL annual report 2023-24; Preliminary Information Memorandum, Department of Investment & Public Asset Management (DIPAM)

In the past, asset valuers appointed by the Department of Investment and Public Asset Management (DIPAM) have combined methodologies like Asset Valuation and Discounted Cash Flow to appraise the worth of state assets.

On the first of these, despite having over Rs 400 crore in cash and hard assets – trade receivables of Rs 202 crore, a bank balance of Rs 124 crore, plant and machinery worth Rs 81 crore and zero debt – against total liabilities of Rs 184 crore, FSNL ended up with a reserve price of Rs 262 crore.

Discounted Cash Flow, which estimates the current value of a firm’s future earnings, throws up even more puzzling numbers. “Our work orders for the next two years stand at Rs 1,000 crore,” said an FSNL employee on the condition of anonymity. “Our pre-tax profits from these alone will be Rs 300 crore.”

Even these numbers are an underestimation. Given its expertise in steel slag reprocessing, FSNL can tap three emerging opportunities – vehicle scrappage, steel scrap for small and medium steelmakers struggling with carbon border taxes, and steel slag for highway construction. The reserve price doesn’t seem to factor in those potential gains to Konoike either.

These questions over valuation, however, are just the tip of the proverbial iceberg. There are other puzzling dimensions to this sale which have not received attention.

A firm which gets work because it’s a PSU

FSNL mainly works with state-owned steel manufacturers.

It gets steel slag from Steel Authority of India Limited (SAIL), Mishra Dhatu Nigam, Rashtriya Ispat Nigam and National Mineral Development Corporation. It leases land inside these plants and separates slag into steel scrap (which goes back into furnaces) and slag aggregates (which are used by steel plants for construction).

The steelmakers gain greater efficiencies due to recycling. As FSNL’s website says, “the recovered metallics are used in place of externally purchased scrap which saves their costs substantially.” As for FSNL, it gets a service charge from these firms.

Hardwired into these supply and sale relationships is a catch. Once divested, FSNL will get steel slag from steel PSUs for just two more years. It will also lose its capacity to sell reprocessed slag to these firms. “This is a production unit which gets raw material because it is a PSU,” said a senior manager in FSNL on the condition of anonymity. “Once it becomes a private firm, slag won’t come to it on nomination basis. India’s steel firms might not buy its reprocessed steel either.”

For this reason, an earlier plan, mooted in 2016, to divest the firm was cancelled. That October, the cabinet committee on economic affairs had given an “in-principle” nod to sell the firm. The very next year, the government scrapped those plans saying the entity has no tangible assets barring machinery. “We are removing FSNL… from disinvestment list because it does not have anything. No land. It just has equipment,” Aruna Sharma, who was steel secretary at the time, told PTI that July. “SAIL permits them to do the scrap sale or making its pellets as it is a PSU,” she said. “So it does not make any sense for a buyer because SAIL cannot give it to a private person for conversion. So what will anybody do by taking scrap machinery,” she added.

This aspect of the firm’s business is why bidders wanted slag contracts, especially those given by SAIL, to be extended by at least 5 years. They were eventually extended for two years.

The first two questions arise here. If FSNL will lose its raison d’etre in just two years, why did the Centre cancel its previous decision to not sell this profitable firm? Also, why would Konoike want such a firm?

A firm which straddles large market opportunities

In its Preliminary Investment Memorandum for FSNL, DIPAM makes an uncomplicated sales pitch. It talks about opportunities in the scrap handling and slag management sector and pitches FSNL as a beachhead for firms looking to serve the steel sector.

Along the way, it misses three potential areas FSNL can diversify into.

The first is within the global steel industry. Spurred by carbon taxes, the sector is trying to go green. Steel can be produced from ore and from steel scrap. The first of these is energy-intensive and, ergo, only large firms are in a position to invest in decarbonised forms of energy like hydrogen and small and modular nuclear reactors as they try to stave off carbon taxes.

Steel produced from scrap, however, is less energy-intensive and polluting. “As the steel industry decarbonises, firms can either decarbonise by investing in hydrogen or other modes of green steel – or they can buy scrap steel and use that for their furnaces,” said a senior manager at Vizag steel plant in Visakhapatnam, on the condition of anonymity. “For mid-rung firms, the latter is an easier option.”

In other words, if FSNL can diversify its slag supply beyond state-run PSUs, it will find customers. As things stand, the firm already works with Arcelor Mittal.

There is also rising interest, from Nitin Gadkari’s Ministry of Road Transport and Highways, to use steel slag for highway-building. Vijay Joshi, the founder of an Australian firm called Dr Slag, which advocates the use of slag for highway construction, is working with Gadkari as an advisor. “On August 7, Gadkari wrote to steel minister H.D. Kumaraswamy asking if the steel ministry can start a pilot project under the supervision of Dr Joshi for commercial use of waste slag in highway construction,” the senior FSNL manager told The Wire. “A month later, on September 18, the top brass of FSNL were called by the Steel Ministry to Delhi where they were told to develop ways to use steel slag for roads. The next day, however, FSNL’s sale was announced.”

The third area FSNL can move into is vehicle scrappage. Also led by Gadkari, India has launched a vehicle scrappage policy which wants to scrap all vehicles – whether private or commercial – that are over 15 years old. Apart from boosting vehicle sales, the policy is also expected to dramatically reduce scrap imports and raw material costs for manufacturers. In 2021, the eventual size of this market was pegged at $6 billion . An observer of Indo-Japan trade relationships pegged this number even higher. “Steel scrap will be a $50 billion business in India over the next 25 years,” he said on the condition of anonymity. As firms vie to dominate this sector, FSNL appears to be a prime catch. “It has the infrastructure and the technology,” the observer said. “Owning this firm will cut the buyer’s lead time for entering the segment.”

In essence, FSNL seems to have two potential revenue streams. It can charge for reprocessing steel (from steel-makers and scrapped vehicles) and sell the reprocessed steel to small and medium steel-makers, and leftover slag to highway builders.

A third question lies here. If FSNL can diversify into new markets – green steel; highway aggregates, scrapping vehicles – shouldn’t its reserve price capture some of that value?

According to the Preliminary Information Memorandum for FSNL, the firm’s valuation was done by Delhi-based AAA Valuation Professionals LLP. The transaction advisor was Mumbai-based BDO India LLP. The Wire wrote to officials in all three organisations – secretary Tuhin Kanta Pandey, financial advisor Amit Ray and joint secretary Manoj Kumar at DIPAM; Maulik Sanghavi, a partner at BDO India and Ankit Goel, a designated partner at AAA Valuation Professionals – asking them to explain the Rs 262 crore valuation.

The fourth question lies here. FSNL could have just as easily diversified into these segments even without divestment. So, why is it being sold?

This question was posed to the three DIPAM officials as well as Union steel secretary Sandeep Poundrik. They didn’t respond. This article will be updated when they do.

The centrality of FSNL to MSTC’s financials

In the days after the sale, India’s financial dailies alluded to the country’s disinvestment targets while reporting on FSNL’s sale.

As justifications go, this one was poorly thought-out. The Rs 320 crore from Konoike will go to MSTC – not the Centre. Given that 35% of MSTC’s shares are publicly held, even if MSTC transfers sale proceeds to the government as a dividend, the latter will net Rs 208 crore.

Each divestment is a cost-benefit exercise. In this case, the Union might get Rs 208 crore. But what about the costs?

MSTC is a starting point. In 2023-24, it posted a consolidated revenue of Rs 750 crore – and profits after tax (PAT) of Rs 204 crore. To put these numbers in context, FSNL’s top line profits stood at Rs 467.72 crore – and its PAT at Rs 64.92 crore. This point came up in a MSTC investors call in November 2023. “If I’m not mistaken, (FSNL) contribute(s)… about 30% in our topline and about the same in our bottom line,” one analyst asked MSTC’s management. “So, then whether it is in our interest to divest that stake?”

In response, the MSTC’s management said: “FSNL disinvestment is being done by the government of India itself, DIPAM specifically,” said Bhanu Kumar, an MSTC director (commercial). “We are also just a party to the entire process, and when we are not in a decision-making position, there is no point in saying whether it is good for the company, bad for the company, only time will tell.”

What is incontrovertible, however, is that MSTC’s dividends from FSNL will stop and its top line and bottom line profits will both shrink. MSTC’s share price is likely to fall as well, with its own attendant implications. This is the fifth question. How does the Centre’s potential Rs 208 crore gain compare with the wider losses to MSTC?

There are yet wider costs. Firms like SAIL have to make alternative arrangements for slag disposal and reprocessing.

The Wire posed this question of larger costs – the corollary to the government’s gain of Rs 208 crore – to Pandey, Ray, Kumar and Poundrik. This article will be updated should they respond.

Why is a profitable PSU being divested?
Given zero debt, assets of over 400 crore and an order book of Rs 1,000 crore, is Rs 320 crore a fair valuation for FSNL?
Were revenues from potential diversification into vehicle scrappage, steel scrap sales to steelmakers and slag sales to highway builders considered while arriving at the reserve price of Rs 262 crore?
Why is FSNL being sold instead of being allowed to diversify, as a PSU, into these sectors?
Why was the 2016 decision against selling the firm reversed?
The centre might make Rs 208 crore. How much will the MSTC, which gets a third of its revenues from FSNL, lose?

Who is Konoike Transport?

As global firms go, Konoike is not especially large.

Its group sales for FY24 stood at 315,029 million yen, or over17,000 crore. Its profits stood at 11,462 million yen, or around Rs 640 crore.

It’s a diversified group with interests spanning logistics, healthcare and steel – a point that was emphasised by the finance ministry while announcing the sale. “Konoike’s steel division is a long-established segment of the company, with over 140 years of experience in steelworks operations,” said the finance ministry in a statement about the approval granted by a government panel comprising Gadkari, Kumaraswamy, and finance minister Nirmala Sitharaman.

The firm is not new to India. It entered the country in 2008 through a subsidiary called Konoike Asia (India), which has now been renamed Konoike India. It’s a small firm. Its revenues from operations in FY24 stood at Rs 14.82 crore and its PAT at Rs 38 lakh.

In India, Konoike India has focused on international forwarding, installation of machinery and equipment, and plant relocation, and is expanding its logistics and packaging business. Apart from this firm, Konoike has three more firms in India. Two of these – SPD India Healthcare, which provides sterilisation services to over 150 hospitals in and around Delhi; and Carna Medical Database, which works with Japanese firms eyeing India’s healthcare market – focus on healthcare. The third firm, Joshi Konoike Transport and Infrastructure (JKTI), works as a container train operator between Delhi and three ports on India’s west coast – Pipavav, Nhava Sheva and Mundra.

Ministry of Corporate Affairs (MCA) filings show that JKTI is a 51:49 joint venture between Konoike Transport and New Delhi-based Associated Container Terminals Limited (ACTL) with Konoike holding the majority stake.

In its response to The Wire, Konoike Transport said it is “currently in the process of share transfer of FSNL. We plan to issue a news release after the share transfer (scheduled for January 2025), so we would like to respond in accordance with the contents of this news release.”

In the meantime, however, FSNL’s divestment remains a welter of unexamined questions.

At this time, the only pushback to the sale is coming from FSNL’s employee unions. They have challenged the divestment in the Delhi High Court.

M. Rajshekhar is an independent reporter writing on energy, climate and kleptocracy. His book, Despite The State: Why India Lets Its People Down and How They Cope, was published by Westland Books in 2020.

Mehul Choksi’s Gitanjali Gems, ABG Shipyard Among Biggest ‘Wilful Defaulters’ in 2024: RBI

According to an RTI response, Mehul Choksi’s Gitanjali Gems tops the list of wilful defaulters and owes Rs 8,516 crore to the banks.

New Delhi: As many as 2,664 corporates, including fugitive diamantaire Mehul Choksi-owned Gitanjali Gems on top of the list, have been classified as wilful defaulters classified by the Reserve Bank of India (RBI) for failing to repay bank loans despite having the adequate means to. These defaulters, in total, owed Rs 1,96,441 crore to the banks.

According to the response to Right to Information (RTI) queries filed by The Indian Express, in which the RBI released the names of top 100 wilful defaulters, it was found that as of June 2024, Gitanjali Gems owes Rs 8,516 crore to the banks, highest on the list.

Choksi and his nephew Nirav Modi had fled India in 2018 after an FIR was filed against for committing loan fraud involving the Punjab National Bank.

The second biggest defaulter on the list is ABG Shipyard, which owes Rs 4,684 crore to banks. Promoted by Rishi Agarwal, a major player in the shipbuilding industry, ABG Shipyard defrauded 28 banks to the tune of over Rs 22,800 crore. The scam came to light during an audit by E&Y, mandated by the SBI. In September 2022, Agarwal was arrested by the Central Bureau of Investigation (CBI). It is one of the biggest bank fraud case in the country.

Also read: Wilful Defaulter Dues Rose by a Whopping Rs 100 Crore Per Day Since March 2019: Report

Among other top 10 defaulters include Concast Steel & Power (Rs 3,557 crore), Era Infra Engineering (Rs 3,507 crore), SEL Agro (Rs 3,367 crore), Winsome Diamonds & Jewellery (Rs 3,356 crore), Transstroy (India) (Rs 3,261 crore), Rotomac Global (Rs 2,894 crore), Zoom Developers (Rs 2,217 crore), and Unity Infraprojects (Rs 1,987 crore).

The data also revealed that the number of wilful defaulters has steadily gone up from 2,154 in March 2020 to 2,664 in March 2024, and the amount they owed rose from Rs 1,52,860 crore to Rs 1,96,441 crore during the period.

Accordingto the RBI, a ‘wilful defaulter’ is a borrower or guarantor who has the means to pay but has not honoured the repayment obligation by deliberate non-payment, diverting and siphoning funds, or disposed of assets.

Earlier this year, the RBI issued new norms for wilful defaulters, in effect since November, in which it asked lenders to examine such defaulters in all Non-Performing Assets (NPA) accounts with an outstanding amount of Rs 25 lakh and above, and complete the process within six months.

The investigations into the borrowers on the list are ongoing and agencies such as the Serious Fraud Investigation Office (SFIO), the Enforcement Directorate (ED) and the CBI, are involved, expecially in cases involving fraudulant practices and diversion of funds.

Amid Chill in India-Bangladesh Ties, Uncertainty for Businesses in Kolkata

The bustling New Market, a popular shopping destination where a lot of Bangladesh residents visit, is now eerily quiet. The economic strain on Kolkata’s tourism, medical, and retail sectors continues to intensify.

Kolkata: The bustling area of Free School Street, Sudder Street, and Marquis Street in central Kolkata, often called “Mini Bangladesh”, resembles a ghost town, with businesses struggling to survive. For over five decades, these streets have been a hub for Bangladeshi visitors traveling to India for medical treatment, education, business, or family visits. However, the once-vibrant locale is now witnessing a severe economic downturn, with drastically reduced footfall from its primary clientele.

The issuance of medical visas for Bangladeshi patients has been sporadic, with the last batch issued in August. A Bangladeshi family, speaking anonymously, revealed, “Now, the process of obtaining visas, arranging finances and transportation, and securing doctor’s appointments is extremely challenging. By January, there may not be any patients or tourists from Bangladesh coming to India.”

In recent years, Bangladeshi patients often sought medical treatment across India, with Kolkata acting as a crucial entry point and, for some, a base for their medical journeys. Hospitals and nursing homes in the city are now experiencing a significant drop in patient numbers. Amelia, public relations officer at Ruby General Hospital in South Kolkata, confirmed the downward trend, “We have seen a noticeable decrease in patients from Bangladesh.” She, however, declined to provide precise figures.

Also read: Dhakai Jamdani Sarees Torched at Kolkata Protest Against Alleged Atrocities on Hindus in Bangladesh

Pharmacies near New Market, a popular shopping destination for Bangladeshi visitors, where they often go seeking specific medications, have also seen a drastic fall in the number of customers. “We used to serve long queues of Bangladeshi patients every day. Now, we barely see six or seven. That number is also decreasing. The situation on the other side has affected our business,” said Sanjay Dey, owner of Lindsay Blue Print pharmacy in central Kolkata.

A view of Marquis Street in central Kolkata. Photo: Joydeep Sarkar

At a well-known super-specialty hospital in the southern parts of the city, several Bangladeshi patients expressed concern about future check-ups, unsure if they would be able to obtain the necessary medical visas for their appointments, scheduled three months out. While they considered online consultations, they acknowledged the necessity of in-person examinations.

Bangladesh accounts for the largest share of medical tourists to India, with numbers rising 48% from 304,067 in 2022 to 449,570 in 2023. The majority of these patients travel to West Bengal, using land connectivity between Kolkata and Dhaka.

Also read: Petrapole Sees Sharp Decline in Trade as Bangladesh Unrest Continues

There were about 22 daily buses that ran between the two cities last year. Shyamoli Paribahan, a bus service that once operated multiple daily trips between Dhaka and Kolkata, has drastically reduced its services as a result of the ongoing unrest.

“We used to run four buses full of passengers to Dhaka every day from this location. Now, only one bus makes the trip, and we may have to halt even that service due to lack of passengers,” said Kartik Ghosh, a director at Shyamoli’s Marquis Street office.

Local hotel businesses have also been severely impacted. “Every winter, thousands of hotels in this area were fully booked. Now, we’ve had to send employees on leave, and the lights in many hotels remain off. Politics around religion has severely impacted our livelihood,” lamented Mohammad Yusuf, owner of a BnB in central Kolkata.

“Clients booked tickets six months ago for tours across India. Now, they’ve cancelled, and I’m unable to provide full refunds. It’s a crisis for them and for me,” said Kolkata based travel agent Naim Sheikh.

A view of New Market in Kolkata which usually see a lot of commerce from Bangladesh residents. Photo: Joydeep Sarkar

With New Market now eerily quiet, the economic strain on Kolkata’s tourism, medical, and retail sectors continues to intensify. The crisis poses significant challenges for West Bengal’s economy, leaving local businesses and residents uncertain about the prospects for recovery.

Haidar Khan Bhutto, secretary of the Central Kolkata Business Association, has called for urgent intervention from authorities in both India and Bangladesh. “For decades, 15,000 families here have thrived on businesses related to hotels, transport, and money exchange,” Bhutto said.

“Now, political tensions have rendered many unemployed. We urge authorities in India and Bangladesh to resolve this situation,” he added.

Popular tourist destinations frequented by Bangladeshi residents, including Darjeeling, Sikkim and Siliguri, are also feeling the pinch. Subrata Saha, president of the Siliguri Hotel Owners’ Association, lamented, “Our hotels are empty this winter due to the absence of Bangladeshi tourists.”

Translated from the Bengali original by Aparna Bhattacharya.

Several Companies in US Paid Hefty Penalty For Bribing Indian Officials: Report

The development comes amid a row involving the indictment of billionaire industrialist Gautam Adani and his companies by the US authorities over bribery charges.

New Delhi: Amid the indictment of industrialist Gautam Adani and his businesses in the United States over bribery charges against Adani Green Energy Ltd, several other companies with bases and operations in India have turned up on the list. These US firms which have been accused of bribing officials in India and other countries, have settled the cases by paying more than 300% penalty to avoid prosecution, according to a report first published by The Pioneer,

Just a few weeks before moving against the Adani Group, the US Securities and Exchange Commission (SEC) announced that Moog Inc — a New York-based global manufacturer of motion controls systems for aerospace, defense, industrial and medical markets — was caught bribing more than half a million to the Hindustan Aeronautics Limited (HAL).

In an order dated October 11, 2024, the SEC said that employees of Moog Motion Controls Private Limited, a subsidiary of Moog Inc, bribed Indian officials to win businesses.

“Between 2020 and 2022, employees of the subsidiary bribed a variety of Indian foreign officials to win business. These same employees also offered bribes to Indian foreign officials in an attempt to cause public tenders in India to favor Moog’s products and exclude competitors,” it stated.

The SEC’s order found that Moog violated the recordkeeping and internal accounting controls provisions of the FCPA.

Also read: Contract Cancellations, Probes, Investment Suspensions: The Global Fallout of the Adani Indictment

“A variety of schemes were used to funnel the improper payments, including through third-party agents and distributors. The improper payments were falsely recorded as legitimate business expenses in Moog’s books and records, and the conduct went undetected as a result of deficient internal accounting controls. As a result, Moog was unjustly enriched by approximately $504,926,” it stated.

The firm agreed to “cease and desist from committing or causing any future violations” and agreed to pay disgorgement and prejudgment interest totaling nearly $600,000 salong with a civil penalty of $1.1 million, a press release stated.

In another case, IT giant Oracle Corporation was also caught for bribery of more than $ 6.8 million in Indian Railways, UAE and Turkey, as reported by The Pioneer. It settled the case by paying a penalty of $23 million to the US treasury.

A third case refers to Albemarle Corporation, a major chemical supplier with businesses with around 700 refineries in the world, including with Indian Oil. According to the SEC, Albemarle bagged several contracts in Indian Oil Corporation and companies in Indonesia and Vietnam by corrupt practices and bribery of more than 63.5 million dollars.

“Albemarle paid approximately $1.14 Million in commission to India intermediary company relating to Indian Oil Corporation business and obtained approximately $11.14 million in profits on that business between approximately 2009 and 2011,” according to an order dated September 28, 2023.

The company was caught for bribery by the US authorities in 2017 and then settled the case in September 2023 by paying a hefty fine of more than $198 million to avoid prosecution.

Also read: SECI’s Silence Conspicuous Amid Din of Adani Bribery Allegations

Gautam Adani’s indictment

The Adani Group’s indictment refers to the allegations regarding the processes followed by executives of Adani Green Energy Ltd and Azure Power Global Ltd, a renewable energy firm headquartered in New Delhi, resulting in a $265 million bribery scheme.

The indictment accuses Gautam Adani himself, his nephew Sagar Adani, and Adani Green managing director Vneet Jaain, of orchestrating a scheme to bribe Indian officials for power contracts and mislead US investors.

It has been alleged that the company bribed Indian government officials to secure lucrative solar power contracts. The scandal caught the attention of US authorities when the Adani Group was raising funds from US-based investors in 2021.

Responding to the US SEC allegations, the Adani Group chairman, at an event in Jaipur, said, “Less than two weeks back, we faced a set of allegations from the US about compliance practices at Adani Green Energy. This is not the first time we have faced such challenges.”

While the Adani Group clarified that the charges were baseless, the political fallout of it in India has been intense.

Opposition parties in India have raised the issue in parliament and demanded a probe into allegations of wrongdoing.

How Microfinance and Data Capture Pushed Tamil Nadu’s Most Disadvantaged Into Debt Distress

Debt distress is most severe in hamlets with Adi Dravidar, Arundatiyar, and Dalit Christian majority populations, and has only grown since COVID-19.

Debt to microfinance providers resulted in widespread distress in northeastern Tamil Nadu, where we conducted research through the time of the COVID-19 pandemic. We found that the situation was most severe in hamlets with Adi Dravidar, Arundatiyar, and Dalit Christian majority populations.

The study started in January 2020. By July 2022, several women from these historically oppressed caste groups told us about their spiralling debt to banks and non-banking financial companies (NBFCs) that issue microfinance loans. Microfinance providers issue collateral-free loans to sets of five women who function as joint liability groups, with each responsible for the dues of any member who defaults. Microfinance providers charged these women up to 24% interest per annum on the loans they issued. They continued to levy this interest through the state-mandated moratorium and for any delays beyond.

Debts had naturally grown to unmanageable levels. Many of the women we spoke to lamented the harsh consequences that they faced. Ambigai, an Adi Dravidar agricultural daily wage worker in an arid village called Manathur, told us: “The microfinance loan officers are threatening us, saying that they will call the police and file cases against us, that they will seal our houses and prevent us from entering them, that they will lock our Aadhaar cards. Not only will we be denied loans from other companies and banks, the rice and dal we get every month from the ration shop will also be blocked.”

She was not alone; hundreds of others who had taken these loans said a loan provider had warned them of similar penalties.

A locked house in the brick kiln. Photo: Chinar Shah.

Who borrows from microfinance providers?

Microfinance aims to empower women to start their own businesses. Yet, contrary to the portrayal of microfinance borrowers as entrepreneurs, many loan recipients are debt-bonded daily wage workers. In our study region, it was women in landless households from historically lowered castes who borrowed from microfinance providers. The majority of them either did agricultural daily wage work in the village or migrated to work in brick kilns and sugarcane fields (Figure 1). They used microfinance loans to meet their basic needs. The high interest that the women paid came not from profitable small businesses, but from their low and uncertain incomes, and often, from additional borrowing.

Our quantitative surveys with 406 households in 2021-2022 show that close to 70% of lowered caste households and 40% of women from intermediate caste households had taken microfinance loans, compared with only 16% of dominant caste households (Figure 2).

The borrowers used the loans to buy food and pay for healthcare, dedicating 51% and 29% of the loans in part to these uses. Almost half, 45%, of the loans were also used in part to pay off past debts (Figure 3). This proportion rises to almost 80% for women belonging to lowered caste groups.

Another indicator of financial stress is the debt-to-income ratio. It stood at 179% on average, and is higher for lowered caste and landless households, at 210% and 190%. This means that household debt was twice as much as annual income, while debts are short-term and must be repaid within the year for the most part. The disaggregation by gender is alarming. The debt service ratio is 13 for men, meaning that for every 100 they earn, they must repay 13, and for women it is 115. While women can call on men in the household for help to pay loans, they still bear the mental, physical, and sometimes sexual burden of repayment obligations.

How did the situation get so bad?

Women struggled to repay their loans, often borrowing from moneylenders to be able to do so. Even before the pandemic, the women we spoke to said that they faced sleepless nights as microfinance loan collection day approached. They said they would regularly borrow from moneylenders to make their repayments. They had no option but to pay on the stipulated day irrespective of circumstances. Women emphasised the extent of non-negotiability saying that loan officers would insist on repayment even if there was a death in the family. Amudha Mary, a Dalit Christian woman from Selvanagar told us: “They collect their money over the corpse, saying ‘first you pay this and then you cry’.”

When the COVID-19 pandemic began, microfinance operations came to a complete standstill in India. The state issued a mandate requiring lenders to offer a moratorium that allowed borrowers the option not to make loan repayments for five months. This offered relief in the short term. Some households reported eating better than before despite the lockdowns, since they weren’t required to make microfinance repayments. However, lenders were allowed to levy interest at the regular rate of 24% per annum on the principal outstanding on the loans. Debt thus multiplied during a period when incomes came to a standstill. At first, the Reserve Bank of India (RBI) had permitted microfinance providers to charge interest on the interest outstanding to them as well as on the principal. The Supreme Court later reversed this decision, and microfinance providers refunded the compound interest collected.

After the moratorium ended lenders rescheduled loans, but with opaque terms which were not shared with the borrowers. The borrowers said they had no idea how the amount due each month was being calculated or how many instalments they finally would have to pay. In the weeks before the second surge in COVID-19, when it had seemed like normalcy was returning in India, microfinance providers had started netting off loans. They offered larger loans to borrowers and deducted previous dues at the time of disbursal. Those who had availed themselves of this then discovered in a short while that they had much higher debt and microfinance providers did not offer a moratorium when lockdowns were enforced again.

Spiralling debt after the pandemic

Microfinance companies instructed loan officers to continue permitting delays on a case-by-case basis in order to prevent mass default. At the same time, they stressed to clients that interest would be levied for any delay. Women who had borrowed from microfinance providers explained that they had no choice but to agree to this. For instance, soon after the moratorium ended, Parvati, a Dalit woman from the colony in Pudur, said: “I told them to charge as much interest as they want, I will pay it later. I have no money at all now.” By the end of 2021, many borrowers to whom we spoke had missed some monthly payments. Borrowers who belonged to dominant and intermediate caste groups were more likely to own land and livestock, and they had been able to repay loans with income from cattle rearing and by borrowing from other sources.

Borrowers who belonged to lowered caste groups and landless households, who migrated to brick kilns and had missed work seasons for two years, were unable to pay their dues.

A woman shows her microfinance loan repayment record. Photo: Nithya Joseph.

By the end of 2021, for many women, the interest pending on unpaid loans exceeded the principal loan amount and ran into thousands of rupees, the equivalent of income they would earn over several months. In early 2022, Parvati said, “I had Rs 11,000 outstanding in March of 2020. The loan officer came yesterday and told me that now I owe Rs 19,000 in interest alone. There is no way at all for me to get so much money. I am sitting here waiting to find a way out.”

Loan officers from several microfinance institutions working in the area confirmed that their branches faced overwhelming defaults. The majority of their pre-pandemic clients had stopped paying dues despite repeated visits by them. Microfinance providers had also sub-contracted collections to companies who employed loan recovery agents. Loan officers and recovery agents reminded borrowers that companies could use the credit bureau infrastructures to blacklist any defaulters, barring them from all sources of formal credit. Many women told us that loan officers told them: “Don’t pay us, but remember you won’t be able to get a loan from a single other source.”

The gendered financial exclusion as a result of the credit bureau and JAM infrastructure linkage.

Indeed, the registration of loans on the credit bureau and the Jan Dhan-Aadhaar-Mobile (JAM) linkage have made it impossible for clients to negotiate relief without severe repercussions. Microfinance providers can blacklist defaulters using their biometric identification, barring them from all formal loans until they clear their dues, effectively holding them hostage till they are repaid. Microfinance providers had been instructed to stop collecting Aadhaar data in 2018 and to delete records of numbers they had previously collected. However, reports have shown how the credit bureaus to whom they had submitted the data were able to match women to their Aadhaar and send the data back to the microfinance providers. Some women borrowed at even higher interest rates from other sources to repay loans to microfinance providers; others returned to borrowing exclusively from moneylenders.

MFI automatic deduction notification by SMS. Photo: Chinar Shah

Meenakshi, a widowed female agricultural wage worker from a village called Pudur, stated: “A few months ago I tried to get a loan from another microfinance company, but they checked their system and said that they can’t lend to me until I repay the amount outstanding on my loan and come to them with an NOC [no-objection certificate]… I had to pay my daughter’s school fees, so I went to a money lender and borrowed from him at 4% interest per month.”

This cycle of gendered financial exclusion of the most vulnerable was ubiquitous.

Till the end of 2021, the management of these companies had instructed loan officers not to enforce the joint liability clause when women struggled to pay their own dues, knowing from past experience that this could trigger resistance. By mid-2022, they were using the credit bureau linkage to hold women collectively accountable. A woman called Vasuprabha explained microfinance companies club five to six groups together and call them a centre. These centres, comprising up to 30 members, were being held jointly liable. “Earlier they put OD (overdue) only for one person,” she said in April of 2022, “now they are putting centre-OD; if even one person hasn’t repaid, no one can borrow from any company.”

Supporting lending institutions and not the poor during the pandemic

Microfinance providers received the support of the state in the form of low interest loans and credit guarantees during the pandemic. Microfinance lenders were offered loans at the repo rate of 4% per year against securities. The government assured banks that they would cover up to 75% of any defaults on loans that microfinance providers had taken from them to on-lend to their clients. At the same time the Union government cash and food aid to poor households during the pandemic was paltry. Cash transfers of Rs 500 were offered to one woman in each household for the first three months of the pandemic, while incomes were disrupted for two years. Five kilograms of additional grain was provided free to poor households for the duration of the pandemic along with the subsidised food rations already being offered. Households had to borrow to meet all other basic needs – or went without them.

A member of our team conducts the Depleted by Debt quantitative survey. Photo: Chitra S.

Microfinance sector reforms dismantled protections for poor women

In March of 2022, the RBI announced a revised regulatory framework for the microfinance sector that incorporated many changes that microfinance providers had demanded. The RBI agreed to many of their requests, announcing a revised regulatory framework for the sector In March 2022. The changes included removal of the cap on interest rates, an increase in the lending limit, and permission for risk-based pricing. This effectively meant removal of protections put in place after the microfinance crises in 2009-2010 when aggressive lending had spurred a crisis of over-indebtedness. Following the reforms, the microfinance sector has seen rapid growth. The higher interest rates charged to clients made it easier for them to attract them. The raised lending limit meant that they could lend more to each client. Microfinance providers have expanded operations in new regions, which have higher poverty levels and more economic uncertainty. Following these changes, the RBI repeatedly expressed concern that microfinance providers are charging interest at usurious rates and raised alarm that the rapid growth is causing defaults and borrower distress. Recently, regulators have declared that the sector is now facing a crisis caused by the reforms.

Self-help group bank linkage for equitable financial inclusion

Another mode for issuing small loans to women, called the self-help group bank linkage programme, preceded microfinance lending in India. In this model, groups of women come together agreeing to pool savings each month and make loans to each other from the corpus of funds. They share the interest earned. When they are able to show effective functioning, banks sanction them loans at an interest rate of around 12% per annum. This is the same rate charged to other borrowers and half the rate of microfinance loans. Self-help groups continue to operate across the country; but this programme now competes with microfinance providers for bank funds. In India the majority of capital for microfinance loans come from public and private sector banks. Starting in 2011, banks have been permitted to count microfinance loans as part of their priority sector lending targets. Banks meet these targets by issuing loans to microfinance providers to on-lend to their clients, entering into co-lending agreements, or even acquiring MFIs. The higher interest charged to clients and higher collections efficiency from door-to-door visits by loan officers make microfinance loans more profitable than self-help group loans.

In our study region, as elsewhere, women from dominant caste households were much more likely to be members of self-help groups (Figure 4).

While the Union government aid promised to self-help groups at the onset of the pandemic was not provided to them, self-help group members were able to take loans from within the group and from the bank to invest in agriculture, livestock, and small enterprise. Self-help group members were generally more able to negotiate delays and concessions following the pandemic. This was both on internal loans and on loans from banks. Self-help group loans are not registered on the credit bureau, and bank managers have more flexibility in granting waivers. Adi Dravidar, Arundatiyar, and Dalit Christian women were much less likely to be members of self-help groups, and so most didn’t have the option of accessing this credit. Even the few self-help groups with lowered caste group members that did exist were being denied new loans from private sector banks after the pandemic began. This was because of defaults on microfinance loans by others in their joint liability group. The same banks engage in joint liability microfinance provision and self-help group lending, and they could use data from one part of their operations to make decisions about the other.

Microfinance borrowers doing construction wage work. Photo: Sowparnika G.

A pandemic-accelerated process

For the past 20 years, we have been exploring the profound transformation of village economies as members of the Observatory of Rural Dynamics and Social Inequalities in Southern India. We have followed the increasing expansion of financial markets. We have seen how debt compensates for insufficient and irregular incomes from wage labour as well as inadequate social transfers, subsidising private capital and compensating for a failing welfare state. The pandemic accelerated this process.

The state supported microfinance providers during the pandemic at the cost of poor women. The reforms to the microfinance sector enforced by the RBI in 2022 allowed changes that are counter to the interests of the women who take these loans. Microfinance loans have become more expensive, and the revised lending limit means there is more danger of pushing borrowers into unmanageable levels of debt. Strengthening mainstream bank lending to self-help groups would have been a way for policymakers to aid pandemic recovery through equitable financial inclusion. Even now, the priority for financial inclusion in India should be to include more landless women from lower caste groups, who are employed in precarious work, in the self-help group bank linkage programme. This would grant women access to lower interest loans that offer more flexibility in times of crisis and be less likely to cause debt distress.

Nithya Joseph, Venkatasubramanian Govindan, Isabelle Guérin, and Sébastien Michiels are scholars at the French Institute Pondicherry.

Adani Solar Deal: Andhra Leaders Overruled Officials’ Concerns to Greenlight Project

The $490-million annual contract, signed in late 2021, has sparked questions about rushed approvals, potential financial strain on the state and alleged corruption.

New Delhi: A controversial solar power deal in Andhra Pradesh involving billionaire Gautam Adani’s renewables company is currently under the spotlight after US prosecutors indicted Adani and seven others for alleged bribery and securities fraud. The $490-million annual contract, signed in late 2021, has sparked questions about rushed approvals, potential financial strain on the state and alleged corruption.

The contract was finalised in just 57 days – a timeframe energy experts and former regulators describe as unusually fast. Documents reveal that political leaders in Andhra Pradesh overruled concerns raised by finance and energy officials to greenlight the agreement, Reuters reported. The deal, which spans 7,000 megawatts, could see as much as 97% of the energy supplied by Adani Green, the renewable energy arm of the Adani Group conglomerate.

A deal pushed through in record time

The Solar Energy Corporation of India (SECI), a federal agency tasked with developing renewable energy, first approached the Andhra Pradesh government on September 15, 2021, with a proposal to sign India’s largest renewable energy contract. SECI’s letter did not name the supplier, but at the time, Adani Green was publicly known as the largest contractor for SECI.

Within a day, Andhra Pradesh’s 26-member cabinet, led by then-chief minister YS Jagan Mohan Reddy, granted preliminary approval for the deal. The Andhra Pradesh Electricity Regulatory Commission followed suit, clearing the agreement by November 11. By December 1, the state signed a procurement deal with SECI, committing to a 25-year contract for solar power priced at Rs 2.49 per kilowatt-hour.

Allegations of bribery and legal fallout

US prosecutors allege that Adani and other defendants offered $228 million in bribes to an unnamed Andhra Pradesh official to facilitate the deal. The indictment accuses the defendants of directing the state’s power distribution companies to purchase the solar power supplied by Adani Green.

The Adani Group has dismissed the allegations as “baseless,” while Adani Green declined to respond to Reuters‘ queries about the corruption claims. SECI stated that states and their regulators decide how much power to purchase but did not address further questions.

Reddy, who lost power in this year’s elections, denied any wrongdoing in a November 28 statement, claiming the deal aimed to provide free power to farmers. His office declined to comment further, Reuters reported.

Concerns over financial impact

Documents and interviews reveal that the Andhra Pradesh finance and energy departments advised against the deal, citing falling solar prices and the likelihood of cheaper agreements in the future, according to the Reuters report. The finance department also questioned the contract’s 25-year duration, given that power supply was scheduled to begin only in 2024. Treasury officials suggested that Andhra Pradesh had leverage as the buyer and could secure better terms.

These concerns were dismissed during a cabinet meeting on October 28, 2021. The minutes note that the cabinet “duly overruled” the finance department’s recommendations without substantial discussion.

A recent analysis by the N. Chandrababu Naidu government found that additional taxes and duties could inflate costs by 23%, pushing the state’s annual payments to Adani Green even higher.

Questionable decision-making

Then-Energy Minister Balineni Srinivasa Reddy told Reuters that he was unaware of the proposal until late on September 15, 2021, when he received a call seeking his signature. He said he was rushed to approve the file without adequate time to study the matter. “Never before” had he been so rushed to approve files, he said, adding that he was unaware Adani was the supplier.

By October 21, the Andhra Pradesh Power Coordination Committee, tasked with evaluating the deal, recommended it proceed. Seven days later, the cabinet officially committed to the agreement, overriding objections from finance and energy officials.

Also read: Gautam Adani as Narendra Modi’s Elon Musk?

The state treasury is now grappling with the financial ramifications. Annual payments for the solar deal, once fully operational, are projected to rival the state’s social security and nutrition programme budgets. The deal risks saddling Andhra Pradesh with financial burdens for decades.

Following the US indictment, Andhra Pradesh’s new government is seeking to suspend the deal, with a decision expected by the end of the year.

Adani Exits $553M US Loan Deal for Sri Lanka Port

New Delhi: Billionaire Gautam Adani has withdrawn from a $553 million loan agreement with the US International Development Finance Corporation (DFC) to fund a port terminal project in Sri Lanka’s capital, Colombo. This development follows allegations of bribery against Adani and other executives of the Adani Group, which surfaced in US courts last month.

In a filing on Tuesday, Adani Ports and Special Economic Zone Ltd., the entity overseeing the Colombo port terminal project, announced that the financing would now be managed through internal accruals and capital management. The company also confirmed it had withdrawn its request for DFC financing but made no mention of the bribery indictment in the US, Bloomberg reported.

The loan deal, signed last year, was a significant milestone in Indo-US collaboration to counter China’s growing influence in the Indo-Pacific region. The deepwater West Container Terminal in Colombo, set to be operational this month, was expected to be DFC’s largest infrastructure investment in Asia.

Scott Nathan, DFC’s chief executive, had praised the project during his visit to Colombo in November 2023, emphasising the US’s strategic interest in the region. Karan Adani, CEO of Adani Ports, had called the deal an endorsement of the group’s vision and governance despite the controversies surrounding it.

However, the US agency later stated that it was still conducting due diligence on the loan when the bribery allegations emerged, preventing the deal from advancing further.

The Adani Group, under scrutiny following allegations that it paid over $250 million in bribes to Indian officials for solar energy contracts, has denied the charges and vowed to fight the claims in court. These accusations have added to the conglomerate’s troubles, including Kenya’s cancellation of $2.6 billion in infrastructure contracts and ongoing financial challenges in other projects.

Construction of the Colombo terminal continues with local Sri Lankan partners, according to the Sri Lanka Ports Authority. The Adani Group has committed to bringing in foreign direct investment for the project as originally planned.

The port, strategically located near international shipping routes, remains a critical asset for regional trade. Sri Lankan officials have indicated that the absence of US funding will not disrupt progress.

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Meanwhile, Adani Power Ltd., part of the Adani Group, faces issues with its $2 billion coal-fired power plant in eastern India. The plant, which supplies a tenth of Bangladesh’s power, is struggling with a $790 million payment backlog from Dhaka. The new government in Bangladesh is reviewing the terms of the power-purchase agreement signed by its predecessor amid allegations of corruption, according to a report in the Economic Times.

Adani Power is lobbying the government for concessions to sell electricity domestically, including waivers on customs duties for imported coal. Without these measures, the plant’s viability is at risk, given India’s price-sensitive power market.

The plant’s location within a Special Economic Zone (SEZ) adds another layer of complexity. SEZ regulations currently treat power generated there as imported, subjecting it to taxes that render domestic sales uncompetitive.

This issue echoes broader concerns among manufacturers operating in SEZs, who have lobbied for relief from import taxes on goods meant for domestic consumption.

Despite mounting pressures, the Adani Group has sought to project resilience. Nishit Dave, head of investor relations, stated in an October call that linking the Bangladesh plant to India’s power grid remains an option if the payment crisis persists.