Column : Time for CAG to audit the states

Written by MK Venu | MK VENU | Updated: Aug 29 2012, 05:50am hrs
Politically, the BJP appears to have overplayed its hand by boycotting Parliament on the coal allocation controversy. Now the partys leaders seem to have gone too far and dont know how to retrace their steps. If the BJP thought some of the UPA allies like the Trinamool Congress and Samajwadi Party would plump for early elections to ride the momentum of their impressive assembly poll victories in 2011 and 2012, respectively, its calculations have gone somewhat awry. The BJP leadership did try to invite some of the UPA allies and non-UPA regional parties like Orissas BJD for an all-party meeting on the coal allocation controversy but did not get much response. It is clear that the BJP is getting impatient and is not willing to wait another year and a half to see the UPA out of power. Therefore, there is a tendency to create a political hype which some see as disproportionate to the reality on the ground.

Some BJP leaders even tried to cleverly dovetail the negative sentiment around the zero loss theory of the spectrum allocation onto Coalgate, but with not much success so far. The fact is Coalgate will not have the same resonance as the spectrum scam, simply because coal allocation and the decision-making processes around it are quite dispersed across states, many of whom are opposition-ruled. So, the BJP will find it very difficult to stick it all entirely on Prime Minister Manmohan Singh. However, the big benefit of Coalgate is that in future states will probably come under greater scrutiny and be made more accountable for their actions.

In the name of federalism, states tend to seek too many discretionary powers, leading to their eventual abuse. Prime Minister Manmohan Singh in his reply in Parliament on the coal allocation issue has said that none other than the then BJP chief minister from Rajasthan, Vasundhara Raje, wrote to him in April 2005 opposing competitive bidding, saying it was against the spirit of the Sarkaria Commission recommendations.

Dr Raman Singh, Chief Minister of Chhattisgarh wrote to me in June 2005 seeking continuation of the extant policy and requesting that any changes in the coal policy be made after arriving at consensus between the Central government and the States. The State governments of West Bengal and Orissa also wrote formally opposing a change to the system of competitive bidding, the Prime Minister has pointed out in his reply to Parliament. The BJP will have to answer why its own chief ministers were opposed to the idea of competitive bidding. The BJP spokesperson Ravi Shankar Prasad said the NDA government had indeed tried to bring an amendment to the Coal Nationalisation Act in 2000 to enable competitive bidding but could not carry it through. This is a clear admission that the NDA too had failed to introduce competitive bidding in the face of opposition from states.

It is difficult to contradict the Prime Minister on the facts he has presented. He has said, At a meeting convened on 25 July at the PMO, the representatives of the State government opposed the proposed switch-over to competitive bidding Therefore it was decided in the meeting to continue with the allocation of coal blocks through the extant screening committee procedure till a new competitive bidding system became operational. This was a collective decision of the Centre and State governments.

It is very clear from the facts presented by Manmohan Singh that the state governments, especially the BJP chief ministers of mineral-rich states, were openly opposed to competitive bidding. Invoking the spirit of Sarkaria Commission recommendations has become a standard exercise by states to retain discretionary power and not be accountable for it.

A more recent example where the spirit of federalism has been invoked to retain the discretionary powers is in the consideration of the new Land Acquisition Act by the Parliamentary Standing Committee. The opposition parties and allies of the UPA have argued that land is a state subject and therefore the Centre must just define the scope of public purpose for government acquisition of land and leave all other details regarding size of the land, pricing, and compensation for the state governments to decide when it comes to allotting land to private parties.

Following the CAGs current line of thinking, if you just total up all the land allocated to industry by state chief ministers over the last 7 to 8 years at non-market prices and then calculate the difference between those prices and the current market prices of land, Coalgate may look like small change. I am surprised the CAG hasnt thought of this so far.

So, are state governments run by regional parties ready to arrive at a common ground to introduce transparent legislations which take away their discretionary powers I suspect not. For instance, no state politician wants real estate to be brought under the ambit of the Goods and Services Tax (GST). The reasons are obvious as real estate is the biggest generator of the cash economy and local politicians dont want it captured in the GST value chain.

This is more about the political economy which the CAG is under no compulsion to go into. The political economy of coal mining at the district and state levels is too well known to require restating. The BJP is therefore skating on thin ice if it pretends to be holier than thou on the question of coal allocation.

Manmohan Singh may also have made a very clever move by firmly stating in Parliament the governments resolve to make it mandatory through legislation that 26% of the profits be spent by the coal mining companies on local area development. This proposal was being strongly opposed by industry in recent months but Manmohan has now put his governments stamp on it by mentioning it in his reply to Parliament. The industry will be very unhappy and may even blame the BJP for it!