Defending the indefensible

The Prime Minister should cancel the discretionary coal block allotments and auction them to test whether they were given at a fair price

August 28, 2012 12:11 am | Updated August 30, 2012 12:48 am IST

120828 - Lead - Coal block allotments - Arun Jaitley

120828 - Lead - Coal block allotments - Arun Jaitley

The parliamentary stalemate continues on one of the greatest corruption scandals in Indian history. Allocation of natural resources has been a subject matter of public debate in the last two decades, particularly with the entry of the private sector in infrastructure development. Minerals are an important natural resource. The private sector has a great role to play in development of mineral-based industries. However, the policy of allocation of these natural resources has been discretionary, thereby leaving ample scope for allocation on account of corrupt and collateral motives. It is, therefore, important that aware of the characters of polity and governance, discretions be eliminated and objective criteria be introduced.

Competitive bidding

Most tangible resources such as minerals, spectrum, oil and gas must be allocated only through a competitive bidding mechanism. The discretionary allocation of 2G spectrum resulted in a scam of disproportionate magnitude. It is now proven that Rs.1,658 crore fixed for an all-India licence spectrum in 2008 was not the market value of the spectrum then. Under adverse market conditions, the government itself in 2012 has fixed the base price for 2G auction at Rs.14,000 crore.

There has to be an equitable balance between the interests of the public exchequer and the optimum use of natural resources for economic development.

Whispers about misdemeanours in the allocation of coal blocks have been rife in the last few years. The government took a correct policy decision on June 28, 2004 that competitive bidding be introduced in the coal block allocation policy. For most of the next five years, the Prime Minister was the Coal Minister. The exploitation of coal blocks allotted between 2004 and 2012 is negligible. For most of these coal blocks, statutory and environmental permissions have not been given.

The Prime Minister’s argument that pending change of policy to competitive bidding, allocation was necessary for the growth of GDP is eyewash. None of these coal blocks has contributed to the GDP. They have only contributed to the huge valuation of the private sector allottees and a corresponding opportunity and real cost to the public exchequer.

The Prime Minister’s alternative defence is that his government was handicapped by the Opposition from the coal and lignite States to competitive bidding. In any federal polity, it is legitimate for the States to be concerned about the development of power production in their own States. Mineral-producing States have always been concerned about the minerals mined in their States. The Prime Minister overlooks the fact that coal as a major mineral is in the domain of the Central government. His government admittedly overruled the States in 2006. The present Minister of State, Coal, Sriprakash Jaiswal, admitted in Parliament on December 21, 2009 that the majority of States had agreed to the competitive bidding process. Thus to shift the blame to the States is a very poor alibi. Federalism cannot be blamed for the corruption of the United Progressive Alliance.

The Prime Minister’s statement is an assault on constitutionalism and constitutional authority. Instead of respecting the observations of the Comptroller and Auditor General of India (CAG) and taking remedial action, the Prime Minister has evolved a logic which is in defiance of ethical governance. His government’s policy is to subvert the institutions but if they assert themselves, to attack them.

The Prime Minister has no answer for the fact that despite the initial policy decision of June 2004, it was the Prime Minister’s Office which circulated a parallel note on September 11, 2004 highlighting the drawbacks in the decision of competitive bidding.

It was the Law Ministry that delayed the competitive bidding by first giving the opinion that administrative instructions were enough to switch over to competitive bidding. They then suggested an alternative that the Mines and Minerals (Development & Regulation) Act (MMDR) be amended. Over two valuable years were wasted and finally, when the MMDR (Amendment) Bill was approved by Parliament on September 9, 2010, the UPA government took 17 months to notify it. The tenders of competitive bidding have not been prepared yet as the government was so overenthusiastic in continuing the discretionary process in allotment. When vested interests realised that the doors of discretion were about to be closed, they queued up for allotments through the Screening Committee mechanism.

The Prime Minister’s final defence that the Screening Committee mechanism was fair and transparent is repelled by an observation of the CAG in Paragraph 4.1 of its report. The CAG has stated:

“It was also noted that the Screening Committee recommended the allocation of coal block to a particular allottee/allottees out of all the applicants for that coal block by way of minutes of the meeting of the Screening Committee. However, there was nothing on record in the said minutes or in other documents on any comparative evaluation of the applicants for a coal block which was relied upon by the Screening Committee. Minutes of the Screening Committee did not indicate how each one of the applicant for a particular coal block was evaluated. Thus, a transparent method for allocation of coal blocks was not followed by the Screening Committee.”

Ordinarily, Parliament is the forum for debate on the issue. The Public Accounts Committee (PAC) is the forum where CAG recommendations should be considered. Our experience of the recent past in relation to the CAG recommendations in the 2G spectrum allocation have convinced us that the ruling party has decided to subvert the parliamentary accountability available through the PAC. The PAC has been effectively made non-functional on that issue.

Legitimate tactic

Parliamentary obstructionism should be avoided. It is a weapon to be used in the rarest of the rare cases. Parliamentary accountability is as important as parliamentary debate. Both must co-exist. If parliamentary accountability is subverted and a debate is intended to be used merely to put a lid on parliamentary accountability, it is then a legitimate tactic for the Opposition to expose the government through parliamentary instruments available at its command. Presently, a national debate on allocation of natural resources is on. Left to this government, it would have distributed these resources for collateral purposes to its own favourites.

The Prime Minister must own full and real responsibility. Let him cancel these 142 discretionary allocations, put them on auction and test whether they had been allocated at a fair price.

(The author is Leader of the Opposition, Rajya Sabha.)

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