Good for some, but not for all

Mineral concessions

By Noel G De SoUZA

When public decisions are made often under great pressure from one or more interested parties, the outcome may not be favourable for all the affected parties. Some may be favoured by the decision, whilst others could be adversely affected.

Reduction of interest rates

A very good example is the lowering of the interest rate by 0.25% to 3.25% on October 2 by the Reserve Bank of Australia (RBA). This reduction was not expected by either economists or currency traders. There had been much pressure on the RBA to stimulate the economy by the real estate sector, in particular. The housing sector wanted an even greater cut, but the RBA had several other important considerations to take into account.

The move undoubtedly favoured home buyers because an average home loan mortgage of $300,000, if reduced by 0.25%, would save around $50 a month. But at the other end of the economic spectrum, pensioners and others who depend on their savings can expect banks to simultaneously reduce rates on term deposits. This means that pensioners are going to earn less, and this in turn puts pressure on the government to increase part pensions to retirees.

High interest rates have kept the Australian dollar high and this has adversely affected Australia’s manufacturing industries which cannot compete with cheaper imported products. Even Australia’s agricultural sector, once its economic backbone, has become, as a result, uncompetitive in the world market. The reduction in interest rates led to an immediate fall of 0.7cents against the US dollar, which is possibly a desirable outcome to the RBA.

Price of iron ore and coal

Following the nowunravelling new Global Financial Crisis (GFC) in European economies, the price of coal and iron ore has fallen. This has resulted in mineral assets being sold in Australia at reduced prices. The buyers who want to grab such bargains come mainly from Asia, principally from China and India.

Mineral concessions can make the owners megarich, often resulting in litigation. The granting of mineral concessions in Australia can depend very much on decisions in the hands of the state governments, state mining ministers and at times, with the federal government.

The situation is similar in India where there are currently on-going battles regarding the grants of mining leases. Governments on both sides of the political fence have been made to answer questions regarding the granting or cancelling of mineral concessions.

A good example is the mineral-rich small state of Goa. There were so many issues involved that a royal commission, led by Justice Shah, was instituted to probe into the matter. There were allegations of improperly granted concessions, of illegal mining in places where there were no concessions at all, and finally of royalties not being paid. Not paying government tax dues meant the people of the state are being denied revenue.

To add to the above illegalities, there were questions of environmental spoilage, damage to agriculture, dust pollution and traffic congestion, and of dangerously driven ore carrying trucks.

The Supreme Court, in October 2012, suddenly clamped down on this sorry state of affairs by banning all mining in Goa. This abrupt event has had varying reactions from different groups in the state, depending on their interest in the mining sector. The miners themselves have reacted with disbelief as they had counted on the State Government to save them.

There were allegations of improperly granted concessions, of illegal mining in places where there were no concessions at all, and finally of royalties not being paid.

Besides the miners themselves, the affected people include mining contractors, truck owners and barge operators who employ thousands of people. Barge owners alone are said to employ 6000 people. All these groups create indirect employment for a great number of people.

Constructing a mega highway

There was recently astounding news for residents in Western Sydney: the highway to Parramatta is proposed to be dug up and replaced by an eight-lane motorway, using a new technique of “cut-and-cover” which would entail ripping up parts of the existing road and building a new road underneath.

Coal is a prized asset as coal-fired electricity plants are the norm in India and China, despite the growth of alternative energy sources. Coal generates half of Asia’s energy needs. Besides, high quality coal is used to produce steel. These mining deals total a sizeable $47 billion which prevents the Australian dollar from declining too rapidly.

One can imagine the panic of residents and businesses along the proposed route as it could take years to build.

The cost of this amazing proposal is an astronomical $10-15billion! For a figure this high, there are certainly going to be tolls, possibly to attract private entrepreneurs so as to make the venture a private-public partnership.