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Definitely not Colgate

How should we understand the CAG report on coal allocation? It's not a simple, straight-forward matter. It has multiple elements. Karan Thapar writes.

columns Updated: Sep 01, 2012 22:05 IST
Karan Thapar
Karan Thapar
Hindustan Times

How should we understand the CAG report on coal allocation? It's not a simple, straight-forward matter. It has multiple elements, each of which raises several issues and provokes further questions. If you simplify and focus on the allegation of Congress corruption you could distort its findings. If you don't, it's probably too complicated to easily comprehend.

I would say the key issue is why was there an eight-year delay in implementing the 2004 decision to auction coal. All others flow from this.

The government's answer is the law ministry, on three occasions, gave contradictory advice and governments in coal-producing states, three of which were run by the BJP, objected. So too did the BJD and Left Front. The BJP's response is since coal, a major mineral, is controlled by the Centre these objections should have been overruled.

That, however, was easier said than done. For example, Vasundhara Raje, writing as chief minister of Rajasthan, opposed auction on the grounds it would breach the federal principles of the constitution. If UPA had over-ridden that the BJP would have brought the house down.

On the other hand, UPA had the power to do so whilst the state objections, though strongly argued, were either petty or mistaken. Also the switch to auction was in the greater national interest. The PM knew that. Yet he allowed himself to be hamstrung for eight years!

The second issue is what did the UPA do during this eight-year period after it agreed to auction but failed to implement the decision? It went on a coal allocation binge by the old Screening Committee method. The key question is should it have done so.

The government says, yes, because demand for coal was rapidly growing and to leave it unmet would have hampered growth. In theory, that's undeniable. In practice, however, when you discover that 56 out of 57 blocks allotted to private companies have not produced any coal you can't help feel this argument doesn't hold.

So is there another reason why many of the 142 allocations between 2004 and 2009 were made? Before I answer, bear four things in mind. First, any one receiving a coal allocation through the Screening Committee method knew its value would increase sizeably once auctions started. Second, many of these allocations happened at the recommendation of BJP, BJD and Left Front state governments. Third, some went to companies with no experience of handling coal ie gutka or CD manufacturers. Fourth, 25 allocations have been de-notified, a further 58 sent show cause notices and the CBI has started a preliminary inquiry.

So what's the conclusion? Some of the allocations went to 'undeserving' people. Some, or many, happened at the request of Opposition-ruled states. And all of them got coal cheaply.

How cheaply? The simple answer is the difference between getting the allocation for free and the amount they would have bid if it was by auction. Even if the CAG's calculations are questionable this point appears undeniable.

One further corollary. Mr Chidambaram's theory of no loss because the coal hasn't been mined is untenable. Once the allocations were made not only did the government lose the right to mine coal — it was transferred to the allottee — but the loss will start the moment mining begins.

Now, finally, does the allocation of 142 blocks suggest corruption? Prima facie it does. The odour is there. But it needs to be proved. When it is the finger could point at more than one government.
Views expressed by the author are personal.

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