Unfortunately, like the previously tabled 2G spectrum allocation report, the notional loss figure of coal block allocation becomes the cornerstone of the report. While valuing such losses are difficult and methods always questionable, the CAG did not exactly cover itself with glory in the process of calculation as the final loss number, as the figure calculated by them was virtually a tenth of what they initially calculated (Rs.10.7 trillion). An even bigger question is, is auction the best method of allocation of such natural resources? While auction of resource might be a good way to keep corruption at bay, this misses out on the larger picture. It is important to keep in mind that in India, natural resources would be used mostly for domestic purpose and hence one has to keep in mind the needs of the downstream industry, be it steel, cement, power and even telecom. Essentially the policy framework should be built on either of the two premise – maximisation of state profit or creation of competitive industries (unlike in case of auction which can potentially lead to monopolistic control) that will create positive externality. In the case of 2G spectrum allocation for instance, relatively cheap spectrum ensured highly competitive prices for mobile telephony and other related infrastructure, that have helped improve productivity. It is difficult to calculate the revenue implication of such productivity led economic growth and, it is quite possible that revenue thus generated could have outstripped auction driven revenue.
Ideally, reports of such nature should focus more on unearthing incidences of corruption in the allocation process. The focus should be more on identifying loopholes. For example, had there been strict adherence to end-use monitoring, there would not have been instances of several non-serious players buying licences and then selling them to others at huge premium, while the allocated blocks remain unexplored. Or for that matter, there would not have been instances of the mining barons of the state of Karnataka amassing huge fortune (year after year) under the patronage of a political party while flagrantly violating all conceivable norms.
For a resource starved country like India, revenue maximization ought not to be the driving factor of resource allocation. The focus of policy making should be on fair and transparent allocation of resources, strict adherence to technical competence guidelines, strict end-use monitoring and appropriate regulatory environment that ensures competition.
Unfortunately, this report will be used by one tainted party to nail down another while the nation continues to await salvation.