India in the dark

  • Samar Halarnkar
  • |
  • Updated: Aug 29, 2012 21:38 IST

I think I will not pay income tax this year.

No, don't worry about me. I do not believe tax officials will bother me because their boss, India's finance minister, recently introduced me to a new financial paradigm: Potential income lost is not really a loss to India.

Defending his beleaguered government from the contention of its own auditor that India lost Rs. 1.86 lakh crore ($33 billion) by handing over 142 coal-mining rights between 2005 and 2008 to 75 private and 67 state companies for their own use, P Chidambaram said: "If coal is not mined, if it remains buried in mother earth, where is the loss?"

So, I presume the generous minister will commend my logic when I say: "If tax is not paid, if the money remains in mother India, where is the loss?"

At the heart of the impasse in Parliament over what has now come to be popularly dubbed 'Coalgate'- to the delight of headline writers and sundry punsters - are thoughts and actions blocked by the plaque of illogic, irresponsibility, inefficiency and possibly corruption, of which there is yet no proof.

Consider the government's position. Sure, the auditor's report may fail serious accounting scrutiny. There are too many variables to presume a figure of loss. You can even argue that auctioning coal-mining rights instead of handing them out - as many, including the auditor, reason was the right thing to do - might not work if cartels are formed, a common phenomenon in India where groups of politically connected schemers nobble auctions, from asphalting roads to mobile-phone spectrum.

But the auditor's overarching message is clear: The process of handing out mining contracts is deeply flawed, a process that continued despite the government's own recommendations for a transparent, competitive process for user rights to India's natural resources.

So, for the finance minister to say what he did is to mock common sense. Surely it would be the right and honourable thing to say, "We made a mistake, the coal contracts are flawed, and we will change the system."

But admission of guilt is not a strong point with this government - or any political party.

Consider now the Opposition's position. The BJP is right in saying the coal-mining leases must be regarded with suspicion when the process of competitive bidding was adopted only in February this year, eight years after it was proposed by the Secretary of Coal. But, does it make sense to refuse a debate and stall Parliament? That, too, could be acceptable in a country where noise and fury - even if feigned - work best.

However, to accept the BJP's righteous anger is to ignore an important detail: the party's own governments in Chhattisgarh - India's mining heartland - and Rajasthan opposed competitive bidding and slowed the changeover from the closed-door issue of leases, which the coal ministry justifies thus in a recent note: "The intent of the government was to induce rapid development of infrastructure, which was so very essential to keep the economy on a high-growth trajectory."

Instead, the coal-mining policy - supposedly evolved to rush coal, India's primary energy source, to burgeoning electricity, steel-making, cement and other industrial needs - is a slow, spectacular failure.

Of the 142 coal-mining areas farmed out between 1999 and 2008, only one actually produces coal. Open-cast mines were to produce coal within 36 months and underground mines within 48 months of receiving allotment letters.

Only in the first week of May did the ministry of coal send letters to 53 private and state companies threatening to "de-allocate" mining rights. "It was noticed that no serious efforts have been made by the company to develop the coal block, even after/despite repeated reminders and assurances tendered by the company," says the letter, a standard format of which I have gleaned after reading all of them.

If the intention of this 19-year exercise - leases were first given in 1993 to private companies for their own use - was to hasten economic development, it is hard to blame the companies, whether or not they paid bribes. Once the Centre issues leases, it's up to the companies to get a host of clearances, from forest, mining, tribal and other authorities of that same government.

Consider the case of Bihar Sponge Iron Ltd., a company promoted by the Bihar government, Modi group, a German development finance company and an arm of the World Bank. In 2006, the company was allotted a coal-mining block on lease in north Jharkhand within a tiger reserve and tribal area, on land leased to a government coal company. Nearly six years later, there are no clearances, not even a lease transfer, a company spokesperson, requesting anonymity, told me. "We are fed up," he said. "As yet, we don't even know the land area allotted to us."

The coal leases were issued because State-owned Coal India Ltd, the world's largest miner, cannot keep pace with demand. Without addressing that monopoly, and regardless of Coalgate, India's coal, governance and development crisis will deepen, further endangering an already shaky economy. Coal supply to Indian industry is estimated to fall short by more than 192 million tonnes in the financial year to March 2013.

Coalgate couldn't have come at a worse time. The price of coal is falling worldwide, down by 40% over two years. This should be good news for the economy, except that other Indian companies, frustrated by the delay in getting domestic coal, spent $10 billion on mines in countries like Australia and Indonesia and now bear multi-billion-dollar debts.

I was wrong. Excuse me while I pay my income tax.

Samar Halarnkar is a Bangalore-based journalist

The views expressed by the author are personal


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