Tuesday, May 6, 2014

Struggling to survive, smaller cement firms look for buyers

Sluggish economic growth and the absence of new infrastructure projects, along with a difference in prices across regions, are forcing a number of smaller cement companies, mostly in South India, to consider a sale of their facilities.
Bhavya Cements LtdParasakti Cement Industries Ltd and JSW Cementare three such firms that intend to sell some of their assets but are finding it difficult to get buyers, according to two people familiar with the developments, who requested anonymity.
One of the two people cited above belongs to a large cement manufacturer who has inspected these assets, while the second is a top official at one of the companies looking to sell assets.
“Many of these companies haven’t been able to build a strong brand and are facing increased competition from larger players like UltraTechACCand Ambuja,” said one of the people cited above. He requested anonymity since he belongs to one of the top three cement firms.
The bigger firms, however, are not keen on acquiring these assets, mainly because of their geographical location, he added.
Hyderabad-based Parasakti Cement was established in 1998, and currently has a capacity of 1.5 million tonnes (mt) per annum. The brand is available in Andhra Pradesh, Tamil Nadu, Kerala and Karnataka.
Bhavya Cements, another Hyderabad-based company, was incorporated in April 2007 and has an annual capacity of 1.4 mt. It has approvals to increase the plant to 4 mt capacity.
JSW Cement, a part of the Sajjan Jindal-controlled JSW Group, started operations in 2009. It has the capacity to produce more than 5.4 mt per year.
Emails sent to Bhavya, Parasakti and JSW Cement did not elicit any response. However an official at JSW Cement, on condition of anonymity, said the company is considering a sale of its cement assets since it is one of the group’s non-core businesses.
These companies are struggling to survive at a time when cement demand remains muted; logistics, transportation and raw material costs remain high, and prices are under pressure, particularly in the southern parts of the country.
The average prices as on 11 April for the southern region rose 2.2% from a year ago, while the prices for all regions in India rose 8.3%, while that for the northern region increased 17%, the highest among all regions, according to a report Centrum Broking Pvt. Ltd, dated 15 April.
In the fourth quarter of fiscal 2014, all-India average cement prices rose 4.5% to Rs.305 per 50kg bag on a year-on-year basis, according to a 16 April report by HDFC Securities.
According to Nitin Bhasin, an infrastructure analyst at Ambit Capital Pvt. Ltd, a lot of companies in South India are in distress because not enough projects are coming up, and at a time like this, the smaller groups will suffer the most because they had never invested in marketing and branding.
“Many of the smaller companies in South India continue to be highly leveraged and are barely able to meet their interest payments; this distress could lead to some of them closing down or selling out,” Bhasin said.
In the South, factors such as poor infrastructure project execution, lack of new projects, and tepid real estate construction are proving to be major challenges for these companies.
A 24 March report by Ambit Capital highlights that some South India-based companies such as Sagar Cements LtdAndhra Cements LtdKCP Ltd,Keerthi Industries Ltd and Anjani Portland Cement Ltd, had in fiscal year 2014 an interest expense that eroded most of the earnings before interest, tax, depreciation and amortization, while most of them had a debt-to-equity ratio of more than 1.
To be sure, the southern region also has the lowest capacity utilization rate, a metric used to measure the rate at which potential output levels are being met or used. The utilization rate in the region for fiscal 2014 was at 59%.
Consolidation of cement capacities in the hands of larger firms such as theAditya Birla Group-owned UltraTech Cement Ltd, the Holcim-ACC-Ambuja combine and Jaypee Cements has also made it tougher for smaller companies to compete. The top three companies already control around 30% of the approximately 370 mt per annum total capacity in the country. 
Analysts say the recent Holcim-Lafarge merger will further concentrate capacities in the hands of the top companies and lead to more consolidation in the industry. In fiscal 2013, the Indian cement industry saw deals adding up to around $3.3 billion, according to a January report byIndia Ratings and Research Pvt. Ltd. The agency expects the consolidation to continue in fiscal 2015 due to regional imbalances and cost inflation.
(Source: LiveMint)

China’s crisis is coming – the only question is how big it will be

A financial crisis in China has become inevitable. If it happens soon, its effects can be contained. But, if policy makers use further doses of stimulus to postpone the day of reckoning, a severe collapse will become unavoidable within a few years.
The country is in the middle of by far the largest monetary expansion in history. On one widely used measure, M2, its money supply has tripled in the past six years, an expansion four times as large as that of the US over the same period.

This unprecedented expansion is at least partly responsible for China’s extraordinary growth rate, which is now running up against a demographic constraint. Last year, for the first time, the working-age population declined, a trend set to continue for the next two decades. Unless the country can keep lifting the labour force participation rate (for example by getting more women into the workforce or persuading older people not to retire), China will struggle to expand its labour force by even 1 per cent per year. To sustain economic growth of more than 7 per cent, productivity would need to grow by 6-7 per cent a year across the entire economy. This would be a tall order in any country. In China, where the labour-intensive services and agriculture sectors make up half the economy, it is well-nigh impossible.
The country suffers from excess capacity in most industrial sectors. Yet investment in fixed assets continues to grow at double-digit rates. The steel sector is a case in point. China has about 1bn tonnes of annual steel-production capacity; about a third of it sits idle. Consequently, the growth statistics present a misleading figure. Output is being produced, sometimes even in the absence of any demand. A continuing burst of credit is needed to help fuel new capital spending to keep the factories busy – but that only adds to the stock of unused capital. It is a similar story with property investment. China is brimming with high-quality housing that is unaffordable. Sharp price declines are needed to clear the market. That will involve severe pain for banks that participated in the monetary expansion.
Observers often cite China’s closed capital account as a blessing that will stave off capital flight. But one consequence is a huge and persistent balance of payments surplus. Foreign money flows into the country to pay for exported goods and investment, and much less flows back out since there are few legal avenues for exit. China’s surplus over the past 10 years has been far larger than Japan’s was in the 1980s – the years when its disastrous asset price bubble was being inflated. This should have caused the currency to rise rapidly. But the renminbi has been pegged to the dollar for most of that period, accumulating a big pile of foreign reserves.
Observers often cite China’s closed capital account as a blessing that will stave off capital flight. But one consequence is a huge and persistent balance of payments surplus
Compounding it all, Chinese investors believe that none of the country’s banks or financial products will go bust because the government stands behind them all. This is partly the legacy of the banking rescue mounted a decade ago, when about 40 per cent of loans belonging to four big government-owned banks were transferred (at face value) to asset-management companies. But the broader problem is the tendency of the party leadership to provide a policy stimulus every time growth dips.
Financial controls are gradually being relaxed. But the offshore market on which the renminbi is now allowed to trade is tiny – less than 5 per cent of the value of China’s foreign reserves. Opening the capital account fully is impossible; it would result in large flows of funds and a loss of control that policy makers cannot countenance.
In a country that already accounts for half of all capital-intensive production globally, and nearly a fifth of all US imports, the growth of manufacturing will inevitably slow. A thriving service sector could pick up some of the slack. But building more houses and railways is not the way to encourage it.
China’s economy is in an unbalanced state. It can stay that way for some time – but the longer it does, the worse the eventual outcome will be. The industrial sector is already plagued by falling prices. To avert a wider deflationary spiral, the country needs to wean itself off the false cure of perpetual policy stimulus.

China poised to pass US as world’s leading economic power this year

The US is on the brink of losing its status as the world’s largest economy, and is likely to slip behind China this year, sooner than widely anticipated, according to the world’s leading statistical agencies.
The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.

The figures, compiled by the International Comparison Program hosted by the World Bank, are the most authoritative estimates of what money can buy in different countries and are used by most public and private sector organisations, such as the International Monetary Fund. This is the first time they have been updated since 2005.
After extensive research on the prices of goods and services, the ICP concluded that money goes further in poorer countries than it previously thought, prompting it to increase the relative size of emerging market economies.
The estimates of the real cost of living, known as purchasing power parity or PPPs, are recognised as the best way to compare the size of economies rather than using volatile exchange rates, which rarely reflect the true cost of goods and services: on this measure the IMF put US GDP in 2012 at $16.2tn, and China’s at $8.2tn.
In 2005, the ICP thought China’s economy was less than half the size of the US, accounting for only 43 per cent of America’s total. Because of the new methodology – and the fact that China’s economy has grown much more quickly – the research placed China’s GDP at 87 per cent of the US in 2011.
For 2011, the report says: “The US remained the world’s largest economy, but it was closely followed by China when measured using PPPs.”

The figures revolutionise the picture of the world’s economic landscape, boosting the importance of large middle-income countries. India becomes the third-largest economy having previously been in tenth place. The size of its economy almost doubled from 19 per cent of the US in 2005 to 37 per cent in 2011.With the IMF expecting China’s economy to have grown 24 per cent between 2011 and 2014 while the US is expected to expand only 7.6 per cent, China is likely to overtake the US this year.

Russia, Brazil, Indonesia and Mexico make the top 12 in the global table. In contrast, high costs and lower growth push the UK and Japan further behind the US than in the 2005 tables while Germany improved its relative position a little and Italy remained the same.
The findings will intensify arguments about control over global international organisations such as the World Bank and IMF, which are increasingly out of line with the balance of global economic power.
When looking at the actual consumption per head, the report found the new methodology as well as faster growth in poor countries have “greatly reduced” the gap between rich and poor, “suggesting that the world has become more equal”.
The world’s rich countries still account for 50 per cent of global GDP while containing only 17 per cent of the world’s population.
Having compared the actual cost of living in different countries, the report also found that the four most expensive countries to live in are Switzerland, Norway, Bermuda and Australia, with the cheapest being Egypt, Pakistan, Myanmar and Ethiopia.

Bayer expected to focus on life sciences

A rebound in German conglomerate Bayer’s plastics business has fuelled speculation that the division could be sold as part of a strategy to focus on life sciences.
The drugs and chemicals group’s first quarter core earnings rose from €2.45bn a year earlier to €2.74bn, following strong growth in its plastics division MaterialScience.
Earnings before interest, depreciation and amortisation at MaterialScience, which makes polycarbonate plastics for use in car parts and Blu-ray discs, rose by 79 per cent from €204m in the first quarter of 2013 to €366m.
Analysts have long expected Bayer to dispose of its plastics division to streamline the company. Over the weekend, the company was reported to be exploring a sale.
The German group has just completed the takeover of Algeta, the Norwegian cancer drug company, the latest indication of a shift towards life sciences.
However, in an investors’ conference call on Monday, Bayer’s chief executive Marijn Dekkers damped speculation of a sale, saying there had been no approaches over the division.
Mr Dekkers said: “Our most important goal is to drive organic growth. Take pharma we are very well on the way there, [with] 15 per cent growth. We don’t feel we have our back against the wall in terms of having to do acquisitions to drive growth.”
The 15 per cent sales growth in pharmaceuticals was led by Xarelto, an anticoagulant which is Bayer’s best-selling pharmaceutical product.
The rebound in earnings at the plastics division in the first quarter follows a difficult year. Sales of high-tech plastics were down in 2013 due to weaker global demand, while prices fell in the Asia/Pacific region due to an excess of production.
Alistair Campbell, an analyst at Berenberg bank, said that a sale of MaterialScience was “very logical”.
Mr Campbell said: “The trajectory for Bayer over the last five to seven years has definitely been towards more healthcare and less chemicals, buying Algeta, buying Schering and selling Lanxess.”
Under its current chief executive, Bayer has shifted away from its traditional three pillars of chemicals, crop science and healthcare to align itself around “understanding biology for the benefit of plants, humans and animals”, Mr Campbell said.
The analyst valued the plastics unit at approximately €9bn or seven-and-a-half times forward ebitda, based on its recovering profitability.
Bayer confirmed its 2014 outlook for currency-adjusted sales of around €41bn to €42bn, compared with €40.16bn last year. It said it continued to expect a “low-to-medium single-digit” percentage increase in adjusted ebitda for the year.

Global ageing: A billion shades of grey

WARREN BUFFETT, who on May 3rd hosts the folksy extravaganza that is Berkshire Hathaway’s annual shareholders’ meeting, is an icon of American capitalism (see article). At 83, he also epitomises a striking demographic trend: for highly skilled people to go on working well into what was once thought to be old age. Across the rich world, well-educated people increasingly work longer than the less-skilled. Some 65% of American men aged 62-74 with a professional degree are in the workforce, compared with 32% of men with only a high-school certificate. In the European Union the pattern is similar.
This gap is part of a deepening divide between the well-educated well-off and the unskilled poor that is slicing through all age groups. Rapid innovation has raised the incomes of the highly skilled while squeezing those of the unskilled. Those at the top are working longer hours each year than those at the bottom. And the well-qualified are extending their working lives, compared with those of less-educated people (see article). The consequences, for individuals and society, are profound.
Older, wiser and a lot of them
The world is on the cusp of a staggering rise in the number of old people, and they will live longer than ever before. Over the next 20 years the global population of those aged 65 or more will almost double, from 600m to 1.1 billion. The experience of the 20th century, when greater longevity translated into more years in retirement rather than more years at work, has persuaded many observers that this shift will lead to slower economic growth and “secular stagnation”, while the swelling ranks of pensioners will bust government budgets.
But the notion of a sharp division between the working young and the idle old misses a new trend, the growing gap between the skilled and the unskilled. Employment rates are falling among younger unskilled people, whereas older skilled folk are working longer. The divide is most extreme in America, where well-educated baby-boomers are putting off retirement while many less-skilled younger people have dropped out of the workforce.
Policy is partly responsible. Many European governments have abandoned policies that used to encourage people to retire early. Rising life expectancy, combined with the replacement of generous defined-benefit pension plans with stingier defined-contribution ones, means that even the better-off must work longer to have a comfortable retirement. But the changing nature of work also plays a big role. Pay has risen sharply for the highly educated, and those people continue to reap rich rewards into old age because these days the educated elderly are more productive than their predecessors. Technological change may well reinforce that shift: the skills that complement computers, from management expertise to creativity, do not necessarily decline with age.
This trend will benefit not just fortunate oldies but also, in some ways, society as a whole. Growth will slow less dramatically than expected; government budgets will be in better shape, as high earners pay taxes for longer. Rich countries with lots of well-educated older people will find the burden of ageing easier to bear than places like China, where half of all 50-to-64-year-olds did not complete primary-school education.
At the other end of the social scale, however, things look grim. Manual work gets harder as people get older, and public pensions look more attractive to those on low wages and the unemployed. In the lexicon of popular hate-figures, work-shirking welfare queens breeding at the taxpayer’s expense may be replaced by deadbeat grandads collecting taxpayer handouts while their hard-working contemporaries strive on.
Nor are all the effects on the economy beneficial. Wealthy old people will accumulate more savings, which will weaken demand. Inequality will increase and a growing share of wealth will eventually be transferred to the next generation via inheritance, entrenching the division between winners and losers still further.
One likely response is to impose higher inheritance taxes. So long as they replaced less-fair taxes, that might make sense. They would probably encourage old people to spend their cash rather than salt it away. But governments should focus not on redistributing income but on generating more of it by reforming retirement and education.
Age should no longer determine the appropriate end of a working life. Mandatory retirement ages and pension rules that discourage people from working longer should go. Welfare should reflect the greater opportunities open to the higher-skilled. Pensions should become more progressive (ie, less generous to the rich). At the same time, this trend underlines the importance of increasing public investment in education at all stages of life, so that more people acquire the skills they need to thrive in the modern labour market. Today, many governments are understandably loth to spend money retraining older folk who are likely to retire soon. But if people can work for longer, that investment makes much more sense. Deadbeat 60-year-olds are unlikely to become computer scientists, but they could learn useful vocational skills, such as caring for the growing number of very old people.
Old power
How likely are governments to make these changes? Look around the rich world today, and it is hard to be optimistic. The swelling ranks of older voters, and their disproportionate propensity to vote, have left politicians keener to pander to them than to implement disruptive reforms. Germany, despite being the fastest-ageing country in Europe, plans to cut the statutory retirement age for some people (see article). In America both Social Security (the public pension scheme) and the fast-growing system of disability benefits remain untouched by reform. Politicians need to convince less-skilled older voters that it is in their interests to go on working. Doing so will not be easy. But the alternative—economic stagnation and even greater inequality—is worse.
(Source: The Economist)

Coal: The fuel of the future, unfortunately

WHAT more could one want? It is cheap and simple to extract, ship and burn. It is abundant: proven reserves amount to 109 years of current consumption, reckons BP, a British energy giant. They are mostly in politically stable places. There is a wide choice of dependable sellers, such as BHP Billiton (Anglo-Australian), Glencore (Anglo-Swiss), Peabody Energy and Arch Coal (both American).
Other fuels are beset by state interference and cartels, but in this industry consumers—in heating, power generation and metallurgy—are firmly in charge, keeping prices low. Just as this wonder-fuel once powered the industrial revolution, it now offers the best chance for poor countries wanting to get rich.
Such arguments are the basis of a new PR campaign launched by Peabody, the world’s largest private coal company (which unlike some rivals is profitable, thanks to its low-cost Australian mines). And coal would indeed be a boon, were it not for one small problem: it is devastatingly dirty. Mining, transport, storage and burning are fraught with mess, as well as danger. Deep mines put workers in intolerably filthy and dangerous conditions. But opencast mining, now the source of much of the world’s coal, rips away topsoil and gobbles water. Transporting coal brings a host of environmental problems.
The increased emissions of carbon dioxide from soaring coal consumption threaten to fry the planet, as the Intergovernmental Panel on Climate Change reminded everyone in a new report this week (see article). The CO2makes the oceans acid; burning coal also produces sulphur dioxide, which makes buildings crumble and lungs sting, and other toxic chemicals. By some counts, coal-fired power stations emit more radioactivity than nuclear ones. They release tiny, lethal particulates. Per unit generated, coal-fired stations cause far more deaths than nuclear ones, and more even than oil-fired ones.
But poverty kills people too, and slow growth can cost politicians their jobs. Two decades of environmental worries are proving only a marginal constraint on the global coal industry. Some are trying to get out: in America Consol Energy is selling five mines in West Virginia to concentrate on shale gas. Big coal-burners such as American Electric Power and Duke Energy are shutting coal-fired plants. Yet despite America’s shale-gas boom, the federal Energy Information Administration reckons that by 2040 the country will still be generating 32% of its electricity from coal (compared with nearly 42% now).* The International Energy Agency has even predicted that, barring policy changes, coal may rival oil in importance by 2017. As countries get richer they tend to look for alternatives—China is scrambling to curb its rising consumption. But others, such as India and Africa, are set to take up the slack (see chart).
America’s gas boom has prompted its coal miners to seek new export markets, sending prices plunging on world markets. So long as consumers do not pay for coal’s horrible side-effects, that makes it irresistibly cheap. In Germany power from coal now costs half the price of watts from a gas-fired power station. It is a paradox that coal is booming in a country that in other respects is the greenest in Europe. Its production of power from cheap, dirty brown coal (lignite) is now at 162 billion kilowatt hours, the highest since the days of the decrepit East Germany.
Japan, too, is turning to coal in the wake of the Fukushima nuclear disaster. On April 11th the government approved a new energy plan entrenching its role as a long-term electricity source.
International coal companies face two worries. One is that governments may eventually impose punitive levies, tariffs and restrictions on their mucky product. The other is the global glut. Prices for thermal coal (the kind used for power and heating) are at $80-85 a tonne, which barely covers the cost of capital. Some Australian producers are even mining at a loss, having signed freight contracts with railways and ports that make them pay for capacity whether they use it or not.
One answer to that is cost-cutting and efficiency, much stressed by companies such as BHP Billiton. Unlike oil and gas, coal is geologically simple and does not require a costly array of drills, platforms and pipes. If the price is too low, companies can decide to stop production and await better times. But thriftiness with capital has its limits: the cost of mining is going up, as the easiest coal seams are worked out.
Some companies have tried to switch efforts to “met” (metallurgical) coal, which fuels smelters. This was thought to be scarcer and more profitable. But that theory has suffered. Supplies of met coal have proved more abundant than expected.
Perhaps the biggest hope for all involved in the coal industry is technology. Mining and transporting coal will always be messy, but this could be overlooked were it burned cheaply and cleanly. Promising technologies abound: pulverising coal, extracting gas from it, scrubbing emissions and capturing the CO2. But none of these seems scalable in the way needed to dent the colossal damage done by coal. And all require large subsidies—from consumers, shareholders or taxpayers.
A $5.2 billion taxpayer-supported clean-coal plant in Mississippi incorporates all the latest technology. But at $6,800 per kilowatt, it will be the costliest power plant yet built (a gas-fired power station in America costs $1,000 per kW). At those prices, coal is going to stay dirty.
(Source: The Economist)

Thorium reactors: Asgard's fire

WELL begun; half done. That proverb—or, rather, its obverse—encapsulates the problems which have dogged civil nuclear power since its inception. Atomic energy is seen by many, and with reason, as the misbegotten stepchild of the world’s atom-bomb programmes: ill begun and badly done. But a clean slate is a wonderful thing. And that might soon be provided by two of the world’s rising industrial powers, India and China, whose demand for energy is leading them to look at the idea of building reactors that run on thorium.
Existing reactors use uranium or plutonium—the stuff of bombs. Uranium reactors need the same fuel-enrichment technology that bomb-makers employ, and can thus give cover for clandestine weapons programmes. Plutonium is made from unenriched uranium in reactors whose purpose can easily be switched to bomb-making. Thorium, though, is hard to turn into a bomb; not impossible, but sufficiently uninviting a prospect that America axed thorium research in the 1970s. It is also three or four times as abundant as uranium. In a world where nuclear energy was a primary goal of research, rather than a military spin-off, it would certainly look worthy of investigation. And it is, indeed, being investigated.
China’s thorium programme looks bigger. The Chinese Academy of Sciences claims the country now has “the world’s largest national effort on thorium”, employing a team of 430 scientists and engineers, a number planned to rise to 750 by 2015. This team, moreover, is headed by Jiang Mianheng, an engineering graduate of Drexel University in the United States who is the son of China’s former leader, Jiang Zemin (himself an engineer). Some may question whether Mr Jiang got his job strictly on merit. His appointment, though, does suggest the project has political clout. The team plan to fire up a prototype thorium reactor in 2015. Like India’s, this will use solid fuel. But by 2017 the Shanghai Institute of Applied Physics expects to have one that uses a trickier but better fuel, molten thorium fluoride.India has abundant thorium reserves, and the country’s nuclear-power programme, which is intended, eventually, to supply a quarter of the country’s electricity (up from 3% at the moment), plans to use these for fuel. This will take time. The Indira Gandhi Centre for Atomic Research already runs a small research reactor in Kalpakkam, Tamil Nadu, and the Bhabha Atomic Research Centre in Mumbai plans to follow this up with a thorium-powered heavy-water reactor that will, it hopes, be ready early next decade.
Thorium itself is not fissile. If bombarded by neutrons, though, it turns into an isotope of uranium, 233U, which is. Thorium can thus be burned in a conventional reactor along with enriched uranium or plutonium to provide the necessary neutrons. But a better way is to turn the element into its fluoride, mix that with fluorides of beryllium and lithium to bring its melting-point down from 1,110ºC to a more tractable 360ºC, and melt the mixture. The resulting liquid can be pumped into a specially designed reactor core, where fission raises its temperature to 700ºC or so. It then moves on to a heat exchanger, to transfer its newly acquired heat to a gas (usually carbon dioxide or helium) which is employed to drive turbines that generate electricity. That done, the now-cooled fluoride mixture returns to the core to be recharged with heat.
This is roughly how America’s experimental thorium reactor, at Oak Ridge National Laboratory, worked in the 1960s. Its modern incarnation is known as an LFTR (liquid-fluoride thorium reactor).
The benefits of fluoridation
One of the cleverest things about LFTRs is that they work at atmospheric pressure. This changes the economics of nuclear power. In a light-water reactor, the type most commonly deployed at the moment, the cooling water is under extremely high pressure. As a consequence, light-water reactors need to be sheathed in steel pressure vessels and housed in fortress-like containment buildings in case their cooling systems fail and radioactive steam is released. An LFTR needs none of these.
Thorium is also easier to prepare than its rivals. Only 0.7% of natural uranium is the fissionable isotope 235U. The rest is 238U, which is heavier because it has three more neutrons, and does not undergo fission because of the stability these neutrons bring. This is why uranium has to be enriched by the complicated process of centrifugation. Plutonium is made by bombarding 238U with neutrons in a manner similar to the conversion of thorium into 233U. In its case, however, this requires a separate reactor from the one the plutonium is eventually burned in. By contrast thorium, once extracted from its ore, is reactor-ready.
It does, it is true, need a seed of uranium or plutonium to provide neutrons to start the ball rolling. Once enough of it has been converted into 233U, though, the process becomes self-sustaining, with neutrons from the fission of 233U transmuting sufficient thorium to replace the 233U as it is consumed. The seed material then becomes superfluous and can, because the fuel is liquid, be flushed out of the reactor along with the fission products generated when 233U atoms split up. Similarly, more thorium fluoride can be bled in as needed. The consequence is that thorium reactors can run non-stop for years, unlike light-water reactors. These have to be shut down every 18 months to replace batches of fuel rods.
Bombs away?
Thorium has other advantages, too. Even the waste products of LFTRs are less hazardous than those of a light-water reactor. There is less than a hundredth of the quantity and its radioactivity falls to safe levels within centuries, instead of the tens of millennia for light-water waste.
Paradoxically, though, given thorium’s history, it is the difficulty of weaponising thorium which many see (as it were) as its killer app in civil power stations. One or two 233U bombs were tested in the Nevada desert during the 1950s and, perhaps ominously, another was detonated by India in the late 1990s. But if the American experience is anything to go by, such bombs are temperamental and susceptible to premature detonation because the intense gamma radiation 233U produces fries the triggering circuitry and makes handling the weapons hazardous. The American effort was abandoned after the Nevada tests.
The gamma-ray problem is created by a quirk of the process that turns thorium into 233U. A small amount takes a different path and ends up as radioactive thallium—which is very radioactive indeed. Its gamma rays are so powerful that they can penetrate concrete a metre thick. Extracting, smelting and machining material containing even trace amounts of it is beyond the scope of all but a handful of national weapons laboratories. Rogue nations interested in an atom bomb are thus likely to leave thorium reactors well alone when there is so much poorly policed plutonium scattered around the world. So a technology abandoned because it could not be turned into weapons may now, in part for that very reason, be about to resurface.
(Source: The Economist)

Why India is so good at organising elections

INDIA’S general election is a massive affair. From April 7th to May 12th, across seven phases, 815m people will be eligible to cast votes in the biggest democratic exercise on Earth. Since the previous one, in 2009, an extra 100m people have been added to the voters’ roll. For all its cost and complications, it is expected to go smoothly. Political parties may break limits on what they are supposed to spend, but elections in India are broadly clean, in the sense that results are not rigged. Turnout is roughly the same as in Western democracies: 60-70% of the electorate are expected to take part in the 16th general election since independence. Nor does anybody see a serious threat of violence, even in areas afflicted by Maoist or other insurgents. The contrast with bloody elections experienced by the neighbours—Pakistan, Bangladesh, Sri Lanka, Nepal and even the Maldives—could not be more stark.
On the face of it, such a triumph is puzzling. Ask Indians about the capacity of their state, and the typical reaction is dismissive. Much else organised by public officials is notably shoddy: try making use of state-run schools or hospitals, getting help from a policeman, or relying on food-subsidy schemes. Corruption, waste, delays and mismanagement are depressingly common. Notice, too, the embarrassing failures of India’s navy, plagued by fatal accidents in the past year, the prolonged lack of investment in the national railways, or the state’s failure to build enough roads, power lines or ports. How can India get the electoral process to work so well, when much else is done so badly?
One answer is that elections are narrowly focused tasks of limited duration that are regularly repeated. Where similar conditions hold, bureaucrats prove similarly successful. One example is the ten-yearly national census; a newer success is a scheme to build the world’s largest biometric database, which has enrolled some 600m people, scanning their eyes, fingerprints and more. (Whether this data will be put to good use is another matter. It is worth noting, too, that much work was done by private contractors overseen by public officials.) A second answer is that state employees respond well when given tasks of great prestige and put under careful public scrutiny. Thus India’s space agency last year launched a spaceship to Mars which continues on course, for a remarkably small budget. Similarly, public-health officials recently announced that India had eradicated polio. A third answer is that bureaucrats succeed when free from political meddling and corruption. The Election Commission, like the central bank, is independent. And whereas policemen spend much of their time collecting bribes to pay to their superiors, election officials have neither big budgets to divert, nor much opportunity to extract bribes.
The electoral process may hold lessons that could be applied elsewhere. One is the value of setting a simple, well-defined target. How about next telling officials to reduce by ten places a year India’s rotten ranking of 134th (out of 189) on the World Bank's “ease of doing business” index? Another lesson is the importance of transparency. It is harder for politicians to meddle and steal when bureaucrats, like election officials, are under intense public scrutiny. Extending the country’s right-to-information law, however embarrassing the rot that has been exposed, has proved immensely valuable. Last, bureaucrats become more efficient, and less corrupt, when they lose discretionary powers. Those who organise elections have no discretion to decide who is allowed to vote or where; they are only supposed to ensure it all works efficiently, leaving little incentive for people to bribe or bully them. Whoever wins this year's election could do worse than look at the electoral process itself as a model of how to sharpen up India's bureaucracy.
(Source: The Economist)