Tuesday, August 28, 2012

With face blackened, UPA tries whitewash

(First published in The Pioneer dated August 22, 2012)


The Congress-led UPA Government has developed a visceral dislike for the terminology, ‘presumptive or notion loss’ to the exchequer, after the massive 2G Spectrum scam broke out in the public domain. So, out of respect for the regime, let us for the moment keep aside the figure of Rs 1.86 lakh crore that the Comptroller and Auditor-General has computed as the notional loss to the public coffer because the Government distributed a number of coal blocks to private players without going in for competitive bidding. That may be an approximately true enough figure or it may not. Instead of thus getting into an argument over this number, let us look at the Government’s justification for not having opted for the auction route.
The first defence of the UPA regime — and that of the Congress in particular, since the Prime Minister is directly under attack as he held the coal portfolio during the period when the Government decided to distribute the blocks like one-time feudal lords gifted away property to their favourites — is that the auction route would have taken a tortuously long time to materialise because auction would have needed changes in the Mines and Minerals (Development and Regulation) Act. Since the Government was keen to enhance coal production at the earliest, it decided on the direct allocation, goes the argument. This is a flimsy explanation to cover up for the fact that the Government was pre-disposed to the non-auction route, and that is why it dragged its feet on bringing about the changes in the relevant provisions of the MMDR Act. A look at the sequence of events will expose the regime’s lie. But first, let’s see how the facts played out.
Within six weeks of coming to power in May 2004, the UPA Government headed by Prime Minister Manmohan Singh made public the concept of competitive bidding for captive coal blocks. The Government went to great lengths to publicise its intent as part of its ‘determination’ to revamp and professionalise the coal sector. Two weeks after the declaration of this noble intent, the Coal Secretary prepared a comprehensive note on the subject.
The impression that gained ground was that the competitive bidding process would be approved. But, suddenly and mysteriously, a note materialised from the Prime Minister’s Office that detailed the ‘disadvantages’ of allotting coal blocks through competitive bidding.
The brave Coal Secretary (unusual for a bureaucrat) rubbished the note and drew attention to some ‘pressures’ that were being applied on the steering committee formed to study the issue. But his courage came to naught. The Union Ministry of Coal had made up its mind against auctioning the blocks on the pretext that competitive bidding would need changes in the law, and that such changes would be a long-drawn process. By the end of 2004 and early 2005, it had become clear that coal blocks would be awarded directly by a panel constituted by the Government and that competitive bidding would be considered on a prospective basis at a later date.
Having arrived at such a conclusion, the Government showed no hurry in moving to amend the MMDR Act. Had the UPA sincerely worked from the start of its first innings in office to bring about change in the legislation, it had a good chance of success. It took an entire two years for the Government to move on the issue of amendments. It was only in March 2006 that the Prime Minister’s Office, after having virtually cleared the route for direct and less than transparent allocation of coal blocks to a bunch of private players, decided to put in place the process of competitive bidding. Had the regime been serious, in the two year period (2004-06), it could have pushed through the needed amendments. But it used up the time to promote allocation of the valuable natural resource without competitive bidding. It began bolting the stable after the horses had escaped.
Even so, it was another two years before the Government brought to Parliament the Mines and Minerals (Development and Regulation) (Amendment) Bill. It was only towards the latter half of 2010 that the Bill became law. In other words, it took two years from the time amendments were proposed to their becoming law. It is clear from these facts that the Congress-led regime was less than enthusiastic for whatever reason in selling off the coal blocks to the highest bidder.
The Government can now argue that the delay in getting the amendments passed by Parliament was because it was busy ironing out differences among various stakeholders. But that does not sound convincing. The fact is that even today industry is unhappy with the amendments. The Federation of Indian Chambers of Commerce and Industry has, for instance, said the new provisions would make mining of coal and minerals “unattractive”. This, it claimed, is because of the rule that coal mining firms have to contribute 26 per cent of their profits to a development fund. FICCI also said that the tax burden on the coal sector as a result of the changes in law could rise to 61 per cent.
The other defence put forth by the Government has been that the allocation of blocks without an auction had been taken in the larger national interest. We are yet to be told what that ‘larger national interest’ was that has been adequately served. But the CAG offers us a glimpse of how the ‘larger interest’ has not been served. Three brief quotes from its report will tell the story:
1. The process of bringing in transparency and objectivity in the allocation process of coal blocks got delayed at various stages and the same is yet to materialise even after a lapse of seven years.
2. Out of 28 producing blocks as on June 30, 2011, in case of 10 blocks, there was time overrun ranging from one to 10 years.
3. The Coal Controller’s Organisation did not conduct any physical inspection of allocated coal blocks to ascertain the actual progress as per the MMDR Act, 1957.
To top it all, even the avowed purpose of the Government in directly allotting coal blocks to private parties without competitive bidding, does not seem to have been achieved. There is no indication that the UPA’s action has boosted coal production in any way, since many of the blocks are reporting little output. In fact, the CAG notes that the “de-reservation of Coal India Limited blocks did not yield desired results.”
Neither the Comptroller and Auditor-General of India nor the people in general are opposed to  private players having a major role in the development of the coal sector. Indeed, without the wholesome participation of the private players, the coal industry has no future. As the CAG notes, “Captive coal mining is a mechanism envisaged to encourage private sector participation in coal mining.” But such participation must happen in an environment of transparency and without loss to the public exchequer.

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