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Thursday, 17 October 2013 00:42
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With no transparent policy on natural resource allocation, picking on individual firms defies reason

Targeting industry must seem easy in an environment where the CAG can apparently add a few extra zeros to losses due to government policy, and opposition leaders think nothing of doing the same to the supposed wealth stashed away by industrialists in Swiss bank vaults. The CBI has named Kumar Mangalam Birla, who heads a Rs 1.9 lakh crore conglomerate, in its 14th "Coalgate" FIR. If the CBI is to be believed, Birla conspired with the then coal secretary to wrest a 15 per cent stake in a coal block that was reserved for PSUs. Why PSUs should have coal or iron ore blocks reserved for them is not clear, considering the private sector is doing a much better job in each area. Nor is it evident how much the alleged misappropriation is really worth, since, while getting a 15 per cent stake in this mine, Birla's companies will also be providing 15 per cent of the capital required. Besides, the CAG's numbers must be taken with a pinch of salt since, from Rs 10.7 lakh crore in the draft report, the numbers fell to a sixth of this figure in the final one and even these were not discounted — the CAG simply added up a potential revenue stream from these mines over a period of time, never mind that Rs 100 earned in year ten is not the same as Rs 100 earned in year one.

The larger problem is this: since there is, even now, no transparent policy on allocation of natural resources, through auctions, for instance, it is not clear how an industrialist can acquire the coal and bauxite mines he needs for his business, and indeed the economy, to run. It would be one thing if, while there was a policy for auctioning coal mines, Birla had manoeuvred to get the secretary to allot him a mine on the side. But the fact is, there was no such policy, the mine had been applied for way back in 1999, and it was meant for a power plant which was part of a larger Rs 11,000 crore aluminium plant, not a licence being bought only to resell at a premium.

Nor is this restricted to Birla and coal. It applies to steel, bauxite and, in certain phases of its history, even to the telecom sector. With Rs 38,000 crore of penalties levied on telecom firms, including PSUs, MTNL and BSNL, for instance, it is evident the policy is at fault, and individual firms are simply reacting to a bad policy environment. If the government is to dig up decade-old cases, it's easy to see the bureaucracy kicking even routine decisions all the way up to the cabinet.


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