Coalgate: A loss that is too presumptive

At the social level, we are a sturdy and sensible people on the whole. We might make serious mistakes but recover to our normal with surprising swiftness. This explains the trek back of students and young workers from Guwahati to Bengaluru, Hyderabad and Chennai within a week of what was being called an “exodus”.

It is a pity, however, that the country’s top politicians do not grasp with the same urgency the need for systemic stability — a precondition for national advance — that younger people have just shown for social equilibrium and calm.
This is the most glaring message to emerge from the obstreperous posture of significant Opposition parties in Parliament on what is being called “Coalgate”. Without an ounce of proof of corruption on the part of Prime Minister Manmohan Singh or his top officials, leading sections of the Opposition have demanded the Prime Minister’s resignation.
Parliament is in turmoil. Its Monsoon Session is all but washed away under the flood of hypocrisy displayed by the BJP with the aid of a supporting cast that astonishingly includes the CPI(M), thought to be the ideological antipodes of the saffron party.
A sense of political crisis has been plucked out of thin air at a time when the world economy is going through testing times, the Indian economy is sliding and causing extreme hardships to ordinary people, and the 12th five year plan has just been launched. This should have been a juncture for reflection for our political system, a moment to display gravitas and not rock the boat, particularly when no one even suggests the existence of proof that the treasury has been looted.
The spurious moral indignation of some in the Opposition takes its rise in the recent report of the Comptroller and Auditor General (the government’s auditors) on the allocation of coal blocks for mining to the country’s leading private companies with the explicit purpose of feeding power plants which function well below capacity on account of a desperate shortage of coal. The public sector Coal India Ltd lacks the capacity to simultaneously extract coal across the minefields.
The CAG has held that the government caused a presumptive or notional loss — not a real one — to the exchequer of `1.86 lakh crore by allotting coal acreage to companies through the old system of screening applications by a committee of top officials, not by right away setting in motion a system of competitive bidding, as proposed by some senior officials. In this period, Dr Singh himself held the coal portfolio.
Although there are no complaints on record from an aggrieved competitor who may have been overlooked in allotment, or any other quarters, the CAG’s implied suggestion is that allocations were made to cronies and bribes taken, and this became possible because the screening arrangement lacked transparency. This is what the BJP and others are seeking to exploit to further their cynical aims.
But they are in hot waters. When the coal blocks were allotted, governments of states where coal is found were run by the BJP, the CPI(M)-led Left and the BJD-BJP coalition. These vociferously argued — in writing — against switching over to a system of competitive bidding for coal blocks, maintaining (rightly) that the auction route would cause power tariffs to rise.
The preference of the governments of coal-bearing states for the old administrative arrangement also emanated from the fact that their top officials were represented on the screening committee. These facts would naturally be exposed in a Parliament debate, and hence the demand for the Prime Minister’s resignation without discussion.
Regrettably, the CAG has not explained why it obliquely indicates a preference for the auctioning of coal blocks (as in the 2G spectrum case, this is done by constantly asking why the suggestion for introducing the bidding procedure coming from some quarters in the government was not actualised) although this would certainly raise power tariffs to a higher level than at present.
Besides, in the absence of the state of “perfect competition” (usually found only in textbooks) — when hundreds of buyers and sellers compete vigorously, revealing the true price of a commodity in a given situation — it is more than likely that the firms competing for coal blocks might have ganged up on the government to drive bids down, thus distorting the auction process and causing a serious loss to the government (and this would be real, not “presumptive”).
All this is, anyhow, theoretical. In practical terms, what’s transpired is that only one of the 57 blocks — allocated through the administrative procedure — has begun production although nearly five years have gone by since the allotments. This is because coal is found in forest areas and environment clearances have not been forthcoming. Land acquisition for power plants too is an issue.
The CAG does not consider any of this. It merrily makes the assumption that had coal been extracted in all the allotted blocks (a certain quantity from an area of a given size), the commodity would have fetched a certain level of earnings over the lease period of 25 years. But think of this: About 20 per cent of the lease period is over and virtually not an ounce of coal has been mined on account of environmental considerations. And yet, the government is said to have lost `1.86 lakh crore by virtue of not having followed the auction method in allotment.
Those who argue in this vein need to have their heads examined unless they are out to create an unsettled political environment in the country. It is possible that people embracing such arguments oppose the very notion of public-private partnership. That’s an ideological proposition which should be stated upfront and not through a sideways sally. Like the Supreme Court, the CAG cannot be immune to criticism. It’s time it raised its level by arguing from facts on the ground.