8/26/2012 05:43:00 AM

FACTS OF CAG REPORT ON COAL

By Sanjay Jha

I want to keep this real short, crisp, elementary and easy-to-read. Nothing complex, and I am not explaining the obvious either. But read, you must, because the BJP is stalling Parliament and not allowing for any discussion, because they know that it is easier to obfuscate facts by a melodramatic show of belligerence, and raising a kerfuffle.  But facts don’t cease to exist because we ignore them. There has been enough written, said and debated on the CAG Report on Coal already , so I will keep this simple so that any layman can easily comprehend it. You are requested to read the report on the CAG website for full details, if you so wish. This is not about politics, it is about our rich parliamentary democracy and traditions , and India’s image , which is unfortunately, being maliciously abused. India deserves better.

FACT 1: CAG is an audit body that does performance-audits of government departments ( Railways, P&T , various Ministries etc) and PSU’s.  Its report is just one side of the story; do you pay the income-tax claims made on you just because you get a IT notice, or go to your CA who makes an explanation for your IT-returns?

CAG’s report is comparable to any audit that happens in ALL professional/private companies in India and all over the world, including yours perhaps. Now, there is a simple procedure that follows tabling of the report in Parliament ; the concerned Ministry reads the report, analyses feedback/suggestions, any allegations of misuse, or different interpretation of law. The PAC ( led by an Opposition member) scrutinizes, asks the hard questions. If there is evidence of nepotism, crony capitalism, personal profiteering then CBI /ED etc can investigate it and the guilty must be punished. But if the audit report was deemed final and uncontestable , then all CEOs would resign every quarter. Frankly, it is absurd and defies basic management/ professional science applicable to an organized entity . Does BJP support a Taliban-style single-sided version of natural justice? No one should have the right to defend oneself? Wow!!!

But right now, the BJP is not even allowing a discussion in Parliament. Why????? How can anyone be pre-judged guilty just because of a CAG report? In that case, why is the BJP extraordinarily silent on their much-hyped PM candidate for 2014 Narendra Modi who has got scam charges of over Rs 26000 crores as per CAG reports? It is astonishingly brazen and reveals pathetic double-standards.  India needs to know how the BJP has different yardsticks to suit its political agenda. There should be a national outrage against the way the main Opposition party is denigrating Parliament itself.

FACT 2:  The GOI has stated that there was no favor doled out to any private company.

The allocation of captive blocks was done in a transparent manner after due diligence by a well-represented diverse Screening Committee. However, if there is any case where it is proven that they were given allocations out of turn or in excess or on documents that were fudged/suspect, appropriate action as per law will be taken.

FACT 3: It is the PM and the UPA government that mooted / strongly recommended exploring the option of Coal-Auctions.

In fact, it was the UPA government itself that suggested that one should look at alternative modes of coal distribution , auctions being one of them way back in Y 2005. That straightaway establishes its intent for further transparency.

FACT 4: The BJP/Opposition  Governments in States were against auctions

The BJP governments alongwith their coalition partners ( MP, Chhatisgarh, Odisha, Jharkhand, ) and Left Front (West Bengal ) opposed auctions. They control over 85% of coal reserves in India. So why is the BJP now doing such a flagrant turnaround? It is duplicitous and deliberate obfuscation of reality.

FACT 5: The Screening Committee had representations from various related Ministries and from Chief Secretaries from different states possessing coal mine reserves.

This ensured transparency, collective decision-making and full representation to all parties and ministries.

FACT 6: The government’s goal was not revenue-maximisation alone , but providing coal at affordable rates to end-users, in power, for example.

We must note that mere revenue-maximization is not a government’s goal; the other big social objective is to provide power at affordable/competitive rates to end users. 75% of coal is used in the power-sector alone. To boost infrastructure in power, steel, cement, fertilizers, chemicals etc we need  to augment coal-production. But a high price of coal can have a cascading inflationary impact as well as it is an essential input in the production process. The fact is that we have had to import coal at higher costs , and therefore, a change in policy , like auctions or eliminating/reducing  state monopoly of Coal India is now necessary.

FACT 7: Pricing of natural resources is a national challenge in India , like in 2G spectrum.

As India develops rapidly into a strong economic superpower , we need to relook at existing laws, pricing norms for natural resources, distribution of national assets to private corporate players, introduce transparent rules for Public-Private Partnerships etc . We are going through some delays on account of old amorphous laws like the Coal Mines Nationalization Act ( which forbids full-scale mining firms, for instance) , reduce red tape and bring about tighter timelines. It is a process, which will only be expedited if Parliament meets and frames laws. Disrupting Parliament delays legislation good for the common man. Finally, all Indians lose if proper laws are not implemented. Is the BJP aware of the serious consequences of their obstructionist , obdurate behavior and the cost India and its millions are paying ?

FACT 8: India has registered strong GDP and sectoral growth on account of proper governance , despite bottlenecks and delays.

India’s strong GDP growth over the last 8 years is a manifestation of good governance, despite several bottlenecks and legislative amendments that we need to make. Incidentally, production of coal, steel , cement, power  all showed solid numbers. There is no denying that with a better, improved policy of public-private mining India will show better results especially as aggregate demand has risen on account of explosive growth.

FACT 9: It is the Left parties that opposed amendment of Coal Mines Nationalization Act

The UPA intended to amend the CMNA in 2004 to allow for enhanced coal production, introduce transparency and allow private coal mining for not just captive use, but for other end-users. It is the Left Parties that stalled the same, and are now blaming the government for not following an auction policy. Selective amnesia????

FACT 10: Who leaked the CAG report ? Why? Who benefits?

Isn’t is very strange that such a powerful independent constitutional body has been regularly leaking reports of such a critical nature selectively to the media, even before it is presented to the government and Parliament? Who leaked the reports, Mr Vinod Rai from your 60,000 strong CAG? Why? What investigation have you done to catch the culprit? I believe the leaks with those astronomical preposterous, loss figures ( proved so wrong in 2G already) was to create an anti-government mood, and make it look guilty and shamed following a media blitzkrieg attack. Why? Your guess is as good as mine.

FACT 11: CAG has poor if not altogether sub-standard methods of calculating losses. It is a joke.

The CAG’s calculation of financial losses is completely flawed; it assumes full 100% production from every coal-blok, it calculates market value of captive mines not yet excavated ( these incidentally cannot be sold to other parties), it assumes the market-price of all end users would be the same etc. In fact, I recommend that CAG sends its auditors to further training in financial valuations, and understand elementary methods and models.

FACT 12: We should focus on why the captive mines allocated did not go into production ( out of 86 coal blocks , only 26 blocks got operational) as per CAG Report.

In this entire political soap-opera, the main point is what prevented the captive coal blocks allocated to private firms from getting operational ? We are missing the woods for the trees. The real challenge is in terms of delays in environmental clearances, land acquisition,  obtaining mining lease rights etc. Our principal worry should be cumbersome processes, red tape and delayed decision-making. While that does not tantamount to corruption, it introduces inefficiencies and pushes cost of production ( shortfall is met by higher imports , even when we have the world’s largest coal-block reserves). CAG’s suggestion of a single-window clearance has considerable merit .

BOTTOMLINE:

Following the government’s response and the PAC on the Coal-Report of CAG , let the law-enforcement agencies like CBI, ED etc take necessary legal and criminal action against whosoever if they are found prima facie guilty of deliberate withholding of production, crony capitalism, or favoritism, or any other malfeasance. The Prime Minister has assured Parliament of full and transparent disclosure of all facts and figures repeatedly.

We need to focus on improving coal production as it is a vital aspect of our infrastructure expansion plans. Pricing of natural resources needs greater debate; while auction does introduce further transparency , it might push the price of coal or any other natural resource higher which has other social, economic implications, seen in the case of petroleum subsidy. As India enters a high-trajectory growth, the demand for our land, minerals, coal, and other such assets will rise exponentially. We must remember that auction also favors large corporate firms with bigger capital reserves, and could lead to concentration of economic wealth and power. This issue needs continuous public debate, and we must take inputs from all quarters, including civil society.

The BJP ought to actively participate in the parliamentary debate and help in contributing to policy-making. It has every right to make political capital  to suit its electoral objectives, but surely , not at the cost of national interest of India, right????

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