The Telegraph
Tuesday , January 28 , 2014
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It is the time of the year again when Indiaís rich and powerful go to watch Europeís rich and fit slide down the pistes of snowy Davos. To go to Davos at the peak of the season without ever putting on skis would be difficult to justify, so they also attend the conclave that the World Economic Forum organizes there in this season. It is not unusual to see half a dozen Indian ministers at the get-together; but this year, the only prominence in sight was the finance minister. He inevitably had to face questions on the tax on gold imports, export obligation on gold importers, and other efforts to make gold imports more difficult. He said with a straight face that the restrictions had brought down gold imports. He is supposed to be the man who destroyed the massive gold smuggling operations of those times by removing import restrictions in 1998; before too long, he will be remembered as the man who revived gold smuggling. Some people may suspect inconsistency or amnesia, but these frailties are difficult to associate with P. Chidambaram, who is known to be one of the sharpest brains in the cabinet. A letter from his party chairperson asking for relaxation of his stringent curbs is supposed to be on the way. He denied knowledge of it. The slow grind of government machinery makes his denial plausible. But ultimately, the chairpersonís wish is the finance ministerís command. So he may have to revise his inflexible stand.

Meanwhile, another letter is on the way to him: he has been asked by the minister of power to tell his slave banks to lend money to potential electricity producers. In most countries, power production is the safest business since the market is assured; banks would vie to lend to power producers. But India is different. Here, power is produced to buy farmersí votes, so it can never make a profit. No wonder private producers have given up on power production, and the business is largely in the hands of state governments. Even setting aside power production, they are in dire financial straits. So only idiots would lend to them. Even government banks are not so idiotic. This is why Jyotiraditya Scindia has asked Mr Chidambaram to use his influence to force banks to give loans to power producers. It is, however, likely that the loans will turn sour as soon as they are given.

Power production can be made creditworthy. If only state governments would give subsidies from their own budgets to the power consumers they want to curry favour with, instead of forcing their electricity boards to do so, the latter would become financially viable and get bank loans without an order from the finance minister. But disciplining state governments is not something that comes easily to the prime minister. So power will continue to ail.