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

Jan Dhan Yojana

REUTERS SHOWCASE

Japan Trip

Japan Trip

Modi eyes breakthrough nuclear pact on Japan trip.  Full Article 

Chance For Reform

Chance For Reform

India's coal crunch - a chance to revamp, reallocate and revive.  Full Article 

E-Commerce

E-Commerce

Ratan Tata invests in online retailer Snapdeal.  Full Article 

Top Priority

Top Priority

Finance minister says food inflation is top priority.  Full Article 

Deal Talk

Deal Talk

Who wants to buy Snapchat? Microsoft, Google, Apple, Alibaba.  Video 

Fresh Funding

Fresh Funding

Tiger Global leads $65 million funding in Indian messaging app Hike.  Full Article 

GDP Preview

GDP Preview

Economy likely grew faster in June quarter: Reuters poll.  Full Article 

Safety Net

Safety Net

SEBI revamps trading safety-net rules.  Full Article 

Fraud Investigation

Fraud Investigation

IMF's Lagarde put under investigation in French fraud case.  Full Article 

Reuters India Mobile

Reuters India Mobile

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