Breakingviews: India's $211 bln coal saga can't be brushed away

Thu Mar 22, 2012 9:27pm IST

A worker shovels coal at a yard in Ahmedabad March 22, 2012. REUTERS/Amit Dave

A worker shovels coal at a yard in Ahmedabad March 22, 2012.

Credit: Reuters/Amit Dave

Related Topics

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Jeff Glekin

MUMBAI (Reuters Breakingviews) - The toothpaste is well and truly out of the tube in India's coal saga. The authors of a leaked official study into the sale of mines are desperately trying to retract the whopping figure of $211 billion in lost revenue. But there is no way this news will go up in smoke.

When the history of the Manmohan Singh government is written, there'll need to be a chapter on the role of the national audit office, the Comptroller and Auditor General (CAG). It was its report in the 2G telecoms scam, which is estimated to have cost a mere $39 billion, which led the Supreme Court to cancel 122 licences. Now the CAG is at it again.

The government can debate the size of the loss. What's clear, though, is that between 2004 and 2009 natural assets were sold below market price. So far, no one has suggested that the allocation was corrupt, just that the process was inept.

There are economic lessons to learn. Market pricing of state resources can bring higher revenues whilst reducing the scope for graft. The price of power may rise as a result, but the government can use part of the extra revenue to give targeted subsidies for a limited time to the most vulnerable. The rest could be redeployed for better uses - say, modernising India's creaking infrastructure.

Then, there's a legal dimension. The Supreme Court's 2G ruling said that all state resources must be sold by auction. The 155 mines the government flogged clearly were not. That opens the way for litigation which will create havoc for India's power sector.

Finally, there's the political fallout. The government needs this saga like a hole in the head. A mid-term election is still unlikely, because neither the opposition parties nor the Congress Party's coalition partners are ready to push the knife in. They'd rather see Congress squirm and use the time to prepare for an election in 2014. But this fiasco further weakens Singh and suggests two more years of policy paralysis are now likely. Just the opposite of what India, with its flagging growth rate, needs.

CONTEXT NEWS

- The Times of India has published part of a leaked draft report by the Comptroller and Auditor General (CAG) into the sell-off of state owned coal mines, on March 21.

- The draft report said the sale of 155 coalfields to about 100 private and state-run firms between 2004 and 2009 had cost the government $211 billion in lost revenue.

- In response Prime Minister Manmohan Singh's office released a letter from the CAG that described the newspaper report as "exceedingly misleading" because the leaked document was not a final report and the auditor's thinking on the matter had changed.

- "The leak of the initial draft causes great embarrassment as the Audit Report is still under preparation. Such leakage causes very deep anguish," the auditor said in the letter.

- In its letter to the prime minister, the auditor backed away from the loss calculation, describing the low-priced sales as an "unintended benefit" to companies that did not mean an equivalent loss to the exchequer.

(Editing by Hugo Dixon and David Evans)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
bijayagrawal wrote:
Now these bloddy politicians have started taking “BLACK” money….openly

Mar 22, 2012 10:22am IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-WTO Row

REUTERS SHOWCASE

Market Eye

Market Eye

Nifty falls most in nearly 3-1/2 weeks; Sensex down over 400 points  Full Article 

Factory Activity

Factory Activity

Factories post fastest growth for 17 months in July  Full Article 

Paying for Bail

Paying for Bail

Jailed Subrata Roy gets office to negotiate hotel sales.  Full Article 

Rupee Dips

Rupee Dips

Rupee posts biggest weekly loss since record lows in August.  Full Article 

Reviving Infosys

Reviving Infosys

CEO Sikka says to improve business with new growth avenues  Full Article 

Outlook Slashed

Outlook Slashed

ArcelorMittal cuts outlook as ore prices hit mining  Full Article 

Re-gaining Momentum

Re-gaining Momentum

China, Asian factory growth gathers pace; Europe falters  Full Article 

Factory Lockout

Factory Lockout

Pfizer says threats to managers force staff lockout at Mumbai factory .  Full Article 

Gold Smuggling

Gold Smuggling

In cat-and-mouse game, India uncovers new gold smuggling route.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage