Thursday, July 06, 2006

Coalition Government = Economic Doom

As if the problems with divestment were not enough already, now Dravida Munnetra Kazhagam (DMK) has threatened to pull out of the United Progressive Alliance (UPA) if the Neyveli Lignite Corporation (NLC) divestment goes through. Its not a joke that Tamil Nadu now has a significant say in national politics. Jayalalithaa successfully brought one Vajpayee government down, by pulling out of the coalition. All of these political power play is only wrecking havoc on the economy. The current strike by the employees is costing the government Rs 6 Crores (USD 1.34 million) per day. This is an agitation egged on by the state government. The southern states are known for their bad power situation. An example in contrast would be Mumbai and Gujarat which are powered by private power companies (Tata and Reliance), which power cuts are rare.

Here is the report of the Disinvestment Commission about NLC. Although they start off shaky saying disinvestment is not appropriate, the rest of the study points clearly to disinvestment. 64% of sales revenue is outstanding from State Electricity Boards(SEBs). No private company would operate in such conditions. The recommendations are to improve the power tariff structure, which again is politically suicidal. Andra Pradesh under the leadership of Chandrababhu Naidu and with World Bank aid did just that, the result, he was voted out of the government by people who wanted free power and did not want to pay for it. Nine years of power reforms down the drain overnight.

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