Allocate coal blocks via auction route

DC
Published Aug 27, 2014, 9:01 am IST
Updated Mar 31, 2019, 9:12 am IST
The system of auctions in a regulatory framework is the answer to the full-scale privateering of the past
Picture for representational purpose (Photo: AFP)
 Picture for representational purpose (Photo: AFP)

The Supreme Court verdict on Monday on what popularly came to be known as “Coalgate” — the scandal that was revealed in the allocation of coal blocks in the UPA-2 period — is not unexpected. It formalises at the highest judicial level what was already strongly suspected following early CBI investigations — that the allocation of the vital national resource of coal by government, whether to public sector or private companies, was done on a basis that was “illegal and arbitrary” and not “transparent”.

This is valid strong language in condemning the system that was in use from 1993 to 2010, a period in which 218 coal blocks under various categories were allocated by governments in the time of Prime Ministers P.V. Narasimha Rao, Atal Behari Vajpayee and Manmohan Singh, although in the popular imagination it is only the Manmohan regime that appeared tainted on this count. After the nationalisation of coal on account of the rampant privateering that prevailed in the sector earlier, the government formed screening committees to award coal blocks from among applicants, or awarded blocks under a direct government dispensation. In either case, the situation was seized upon by the unscrupulous among the top coal bureaucracy, influential politicians of all hues and all coal-bearing states, and private companies, to milk the system by awarding contracts for nepotistic reasons or to those who’d pay.

 

The Supreme Court has recommended that only the auction route should be followed in allocating coal blocks, a remedy that was considered by the Manmohan government but could not be pushed through on account of the stranglehold of the “system”. The system of auctions in a well-supervised regulatory framework — so that any tendency toward cartelisation among competitors with a view to depress bids can be suppressed — is obviously the answer to the full-scale privateering of the past and the rent-seeking behaviour of senior government functionaries in more recent times.

 

But it is hard to see if the courts can lay this down as a hard, absolute, law, for the hands of an elected government cannot be tied to any particular mode of dealing with national resources. This had been noted during the controversy on the allocation of spectrum when it was deemed that the auction method would have raised the price of mobile telephony for ordinary customers. The apex court will decide on September 1 if the “illegal” allotments are to be cancelled. This is a tricky question, for some companies that received coal blocks have invested thousands of crores borrowed from banks on developing these blocks, while there are others that have let the blocks lie idle for a variety of reasons. A robust, practical midway must be found.

 

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