Time for reforms

There is hardly any doubt that the Supreme Court’s order to cancel the allocation of 214 coal blocks that were sanctioned by various central governments from 1993 to 2011 is a big blow to the economy. But it is also true that after the apex court decreed that the allocations were arbitrary and illegal, there was no way these could have been retained. Even the four blocks that have been retained as they were allocated through an auction process have attracted a fine of Rs 295 per tonne of coal extracted by them. But they fallout of the decision is nothing but ironic. The government is the main culprit and through successive dispensations it committed these mistakes that have led to the cancellation of allocations, but it gets a windfall gain of nearly Rs10,000 crore because of this fine as nearly 350 million tonnes of coal have been extracted by these four blocks. Perhaps, this explains the readiness with which it has accepted the apex court order and observed that it is eager to change the allocation process. Now predictably, the vacated coals blocks would be auctioned, and there would be more moolah for the government. But then this is not just an opportunity to make money for the government, but also a time for it to reform the process of commercialising the use of natural resources. The major flaw in the previous regimes being the absence of a fair transparent process, this is right time to correct the system. Indeed, it is this reform that would be a much needed booster for the investment climate and investor confidence, as it would usher in an era of open competition and fair pricing for the use of natural resources. The Modi government has a pre-election commitment towards doing away with the undesirable practices of the UPA regime, and with a chartered accountant minister Piyush Goyal at the helm of affairs, it is expected that the nation would get the system that it requires. But there is a high cost of justice to be paid by the coal and power companies, and the banks that have a high exposure in these companies, and the economy as a whole. The companies that have spent thousands of crores in coal exploration without extracting even a single tonne of coal and have outstanding loans aggregating into lakhs of crores would now be rendered out of business. Input costs and power tariffs would go up, and the aggregate impact can hardly be positive. But these setbacks are the wages of crony capitalism. When any nationalised asset is made available for private gains, political masters must treat it as a public property held in trust – not as something that rests in their private pockets to be handed out as they deem fit. This is the apex court’s message and all governments would do well to learn it by heart.