Column : CAGIndias Adjustment Bureau

Written by Surjit S Bhalla | Updated: Sep 12 2012, 07:40am hrs
Over the last week or so, I have had the good fortune of having extended and extensive discussions about the CAG and Coalgate with individuals whom I respect. With a few notable exceptions, the considered view of these PLU+s (people like us, and liberals) was that net-net, the CAG had done a good service to the nation via the documentation of the coal scam. They admit that the CAG very likely, and knowingly, wildly exaggerated the extent of the coal loss associated with the non-auction of the coal mines; but that is just a technicality. What is disturbing, very disturbing, is that a reasonably large section of the intellectual and policy wonk community of Delhi should think this way.

What are the facts, and what is at stake The facts are that the CAG loss of R1.86 lakh crore from non-auction of coal mines is suspect. Even by CAGs own admission, the loss may have been less. The second fact is that while simultaneously tabling three reports in Parliamenton coal, power and airportsthe CAG, for reasons open to speculation, decided to use a 10% discount rate to obtain the estimate of the governments loss (or equivalently, the scam estimate) from power and airports, but a zero percent discount rate for coal. Given that the time-period of gains from all the three sectors is 25 years or more, this CAG decision is, at a minimum, inexplicable and suspect. A 10% discount rate would reduce the CAG estimate of the scam by over 60%a large decline from the lofty figure of R1.86 lakh crore. Is that why the CAG used a zero discount ratebecause R74,000 crore does not sound as ignoble as R1.86 lakh crore Are sound bites worth a gross, deliberate miscalculation

If the CAG had chosen a zero discount rate for all the three reports, then there would be some doubt about what they were trying to achieve. And the benefit of the doubt by most, and especially PLU+s, is always given to champions against the government, the champions of truth, justice, and the Indian way. So the CAG would have an excuse for not undertaking the most elemental of calculationswe didnt know, we dont have the expertise, or that it is a minor technical objection, so why arent you looking at the big picture.

And the big picture is the fight against corruption, fight against a big brother government, and fight against crony capitalism. In my view, all of these fights are extremely worthy, and battles I fully subscribe to. The way this government has handled issues related to the internet, the way state governments have handled cartoons and criticisms, all of this suggests that big brother behaviour la our neighbors in China needs to be challenged. I have some problems with the fight against crony capitalism; the fight is too narrow. The CAGs narrowness was revealed by the fact that strangely, and contrary to the draft report, the final report did not include any losses to the larger, much larger public coal sector. This is a new definition of corruption and cronyism. If the public sector does it, it is okay. Why Is the public sector less susceptible to cronyism, even though it is easier for the public sector to be in bed with corrupt politicians Is the public sector less corrupt, and if so, what is the evidence, especially since most of the evidence (e.g. Air India, Ashoka Hotels) points in the opposite direction And who makes the rules for crony capitalism to flourish The public sector government. So, shouldnt we be talking about crony socialism rather than reflexively shouting crony capitalism Unless we mean crony socialism when we say crony capitalism, in which case we should use the correct term.

Now to the big picture fight against corruption. According to the PLU+s, if it were not for the vastly exaggerated claims (read calculations which the CAG knows are dishonest), then the fight against corruption would not succeed. Interestingly, the BJP has made the same outlandish claim. To reiterate, the BJP and PLU+s both believe that the CAG can be excused for lies because there is a bigger lie to be nailedand that the CAG lie is necessary for the worthy fight against corruption and crony socialism.

Let us delve a bit deeper into the morality of this view. Assume for a moment that I believe that Manmohan Singh has been terrible for India, and that his removal can only bring progress to the rich and joy to the poor of India. Does that mean that I can spread blatant lies about the PM I hope you say of course not. Ends dont justify the means. And after all, the reason we have a democracy is because we dont want to be dictatorial; I may not be right in my views, and maybe Manmohan Singhs removal wouldnt be so good for the country. I may believe his removal is good, but I cannot be sure, not even reasonably sure. Which makes it doubly abhorrent that I spread lies believing that I know the truth.

The BJP by stopping the Parliament from functioning stooped lower to conquer than most democrats. That the PLU+s would excuse, nay support, such behaviour makes one question the nature of their liberalness. The PLU+s should also be aware of the fact that by supporting CAGs egregious lies, they are acting no differently than the Tea Party/Birther movement in the US. Identical to excusers of the CAGs exaggerated claims, the Birthers believed that President Obama was not good for the US. They had a legal basis for ousting him if they could prove that Mr Obama was not born in the US (the US constitution requires that to be President, the citizen must have been born on US soil). As it was widely believed by the non-Birthers, and as it turned out, Mr Obama was born on US soil and the Birther movement had no case. The question remainswere the Birthers morally justified in spreading a lie in order to achieve, from their narrow vantage point, a greater truth

A similar case of truth adjustment pertains to those, including my friends, who believe that if it is good, it must be true.

Surjit S Bhalla is Chairman of Oxus Investments, an emerging market advisory firm. Please visit for an open forum on Indias politics