The ineligible Bhutanese

What would you do if you found out that there’s this job opening that would pay three times more but would be less demanding than your current job? You’d probably apply for it, right? How could you pass up an opportunity to earn three times your pay for actually doing less work?

What would you expect if you found out that that job was in a government project, financed by government funds? You’d expect to get that job, right? And if you don’t, you’d expect a more qualified and experienced fellow Bhutanese to get it.

That’s exactly what happened. PHPA advertised for doctors. The doctors would be paid by the project. But they would work in the Bajo basic health unit.

Several Bhutanese doctors applied for the lucrative jobs.

But the government intervened. And that’s when things went wrong. The government decided that Bhutanese doctors would not be eligible for the PHPA jobs. They decided that PHPA could, instead, recruit doctors from India.

What is it with us? Our economy is very small. That’s why economic opportunities are few and far between. And yet, we insist on giving the best opportunities to foreigners. We insist on depriving our own people.

Discriminating industries

Excised steel

Today’s steel prices:

A ton of 10 mm TMT bar manufactured in Bhutan (by Karma Steel, for example) costs Nu 39,000 in Phuentsholing.

A ton of similar grade (Fe415) 10 mm TMT bar manufactured in India (by SRMB, for example) costs Nu 42,900 in Jaigon, outside Phuentsholing.

    If you were a contractor, which steel would you buy? Bhutanese steel, right? All else being the same, TMT bars manufactured in Bhutan would be cheaper by Nu 3,900 per ton.

    But Punatsangchu Hydropower Project Authority contractors prefer Indian steel. Why? Because for PHPA, the government refunds the excise duty levied on Indian steel (collected in India by the Indian government, then transferred to the Bhutanese government). The excise rate for steel is 10.3%. And that seems to be enough to make PHPA contractors prefer TMT bars manufactured in India over those produced in Bhutan.

    PHPA’s demand for steel is huge. And that demand will get even bigger – much bigger – as construction on the other hydropower projects also begin.

    This massive surge in demand for steel should come as good news for our industries. It doesn’t. Instead, our steel manufacturers are disappointed.

    I am disappointed too. And I am confused.

    Ideally, our government should favour our own industries over foreign ones. That, in fact, is what every country tries to do. But if, for whatever reason, that isn’t possible, our government should at least not discriminate between goods produced in our country and those that are imported.

    And under no condition – no matter what – should our government discriminate against national companies by favouring foreign products. But that, unfortunately, seems to be what’s happening at PHPA.

    Our government refunds the excise duty paid on Indian steel. But it does not refund the excise duty paid on Bhutanese steel. (Bhutanese manufacturers pay excise duty in India when buying raw material.) So Indian steel becomes much more competitive. And our own manufacturers lose out.

    If our government must refund the excise duty levied on steel manufactured in India, it should also refund the excise duty levied on the raw material that is purchased by domestic steel manufacturers. Only then will the playing field be level. Otherwise, our manufacturers don’t stand a chance. And they may eventually go out of business.

    That won’t be good for the promoters – they’d lose money.

    That won’t be good for the employees – they’d lose their jobs.

    That won’t be good for the banks – they’d lose their investments.

    That won’t be good for the government – they’d lose revenue from business and personal income taxes.

    And that won’t be good for our economy.

    But that precisely is what’s happening. Bhutan Concast is almost bankrupt. They’ve shut their factories. They’ve let go of most of their workers.  And they may be forced to default on their loans.

    I’m disappointed. And I am confused.

    Crushing stone

    Obviously wrong

    Earlier this year, in “Mining our business”, I’d explained why it would be unlawful for the government to permit L&T, Gammon and HCC to operate stone quarries for the Punatshangchhu hydropower project.

    I don’t know for sure, but it looks like L&T, Gammon and HCC are now not operating the stone quarries. That is very good.

    But what I do know for sure is that L&T, Gammon and HCC have each established stone crushing plants. That is bad. And that is illegal.

    Stone crushing is a specific business, one that requires a separate industrial license, and one that is not open for foreign direct investment. Added to that, the lucrative business is surely outside the scope of the construction contract packages that L&T, Gammon and HCC have with the Punatsangchhu hydropower project.

    So why have they been allowed to establish their own stone crushing plants?

    I’ve written to the minister for economic affairs alerting him that the plants in question may be unlawful.

    Public business

    Members of the National Assembly met last week to consider points submitted by the local governments and MNAs for inclusion in the Parliament’s 5th session.

    The so-called “pre-agenda” meeting is an important conduit for issues of national importance to receive the National Assembly’s attention. We must take the issues seriously as they are an important part of our responsibilities. Article 10.2 of the Constitution requires that:

    Parliament shall ensure that the Government safeguards the interests of the nation and fulfils the aspirations of the people through public review of policies and issues, Bills and other legislations, and scrutiny of State functions.

    During the meeting, the opposition party proposed four issues to be included in the forthcoming session. They are:

    • Review of the recently approved Economic Development Policy;
    • Review of the government’s proposed reform measures for the construction sector;
    • Review of McKinsey, especially to consider how and why they were recruited, and the work that they are doing.
    • Review of the Punatsangchhu hydropower project and especially to consider why work that can be done by nationals are being awarded to foreign contractors.

    The meeting decided against including these points in the agenda, arguing that the MPs would require a lot more time to study the issues carefully.

    Since the opposition party feels that these issues are both important and urgent, we have decided not to wait for future sessions. Instead, the opposition party will file motions to discuss these issues during the Parliament’s fifth session itself.

    The opposition party also appealed to the Honourable Speaker to permit live TV broadcast of the entire proceedings. The speaker reiterated that live TV broadcast would be allowed for all important sittings, but not for the entire session.

    Mining our business

    Most of the work at the Punatsangchu hydropower project, estimated to cost more than Nu 36 billion, is being contracted out to large Indian companies. And rightfully so. After all, we still don’t have enough in-house capacity to dig tunnels, erect dams and build powerhouses.

    But mining? For stone? Now that, I’m sure we can all agree, is something we are good at!

    Then why is the government allowing Indian companies – L&T, HCC and Gammon – to operate stone quarries for the Punatsangchu hydropower project?

    And how will L&T, HCC and Gammon operate their mines when the Mines and Minerals Management Regulations 2002 clearly defines the eligibility to obtain a mining lease as:

    Any Bhutanese individual, licensed firm or a company shall be eligible to obtain a mining lease.

    To be doubly sure that only Bhutanese companies operate our mines, the Mines and Minerals Management Regulations goes on to define “company” as:

    Any organization registered under the Companies Act of the Kingdom of Bhutan, 2000.

    I’ve reported the matter to the Anticorruption Commission.

    Mineral development policy

    According to the DGM director general the draft mineral development policy “… is for the development of the mining sector in a equitable, safe, more value added and environment friendly way.” Good.

    The draft mineral development policy proposes to allow only “one mining lease to an individual or to a company”. Very good. I’m all for a healthy reduction in the number of mines in our country.

    But wait a second, what about the Punatshangchu Hydropower Project Authority? Didn’t they recently apply for “three large quarries”? And what about Penden Cement? Surely they operate more than one mine. And Dungsum Cement? They’ll surely need more than one mine!

    Incidentally, it seems that PHPA will not operate the quarries themselves. Instead they may just transfer their mining lease to the big three Indian Contractors – L&T, HCC and Gammon.

    Which leads me to an important question: are foreign companies allowed to operate our mines?

    Dangerous work

    Gammon's bridge

    Gammon's bridge

    On September 9, 2007 a flyover that was being built in Hyderabad collapsed killing two people. The contractor, Gammon India, was charged with negligence.

    On July 12, 2009 a flyover that was being built in South Delhi collapsed killing six people. The contractor, Gammon India, was held responsible for the accident, and was banned from undertaking metro rail construction for two years.

    On December 24, 2009 a bridge that was being built in Kota, Rajasthan collapsed killing 28 people. Rescuers continue to search for about 50 workers who are missing since the accident. The contractor? Gammon India, who also happens to be one of the contractors for the Punatsangchhu-I Hydroelectric Project Authority.

    Gammon India won the contract to build the Head Race Tunnel for Punatsangchu-I. But, given their recent record, the Government would be well advised to reconsider their contract with them.