With the Lokayukta report taking off the lid from the Bellary iron ore scam last week, it?s a good time to check out the progress report on the government?s anti-corruption drive.
The Group of Ministers on corruption had asked two panels of government officers to come up with ways to combat big ticket corruption. The one on government procurement was bombarded with seven dissent notes from a 11-member team and so has retired hurt. The other one, also known as the Chawla committee on allocation of natural resources, has been equally disowned by the government. The Cabinet Secretariat was the agency under which it worked, but two months (June 2) after the committee made its final presentation to the group of ministers, this report too is not on any official Website.
The odds of this happening were quite strong. Especially as the committees put in some advice that is backed up with evidence and argued well, but goes against the popular mood to rush into legislations that read fine in principle but are flawed in design. The eight sectors the Chawla committee examined were coal, minerals, petroleum, natural gas, spectrum, forests, land and water. So, it is quite curious that even before the report has been taken on board or the Group of Ministers on corruption has had time to give its opinion, Parliament will possibly clear Bills like the mining Bill or the government will finalise its telecom policy without the benefit of its report on spectrum.
Again, while this committee has not examined the issue of land sales by farmers to industry, it has examined how government should sell its land in the future. But we already have the draft Land Acquisition Bill up on the Website of the rural development ministry. There is no room here for debate on whether there is any discord between the two plans.
The Bills, therefore, give the impression that they are designed more to protect the respective turfs than to serve the overall interest of taking down the corruption quotient. Both the reports (Haldea?s on changing government procurement policy and the Chawla committee report) show corruption is often a result of excellent rules but these substitute the broad picture for the minutiae. To illustrate this problem in the mining sector, there is a great table in the natural resources committee report that examines whether the royalty sharing mechanism will help the local inhabitants as envisaged in the Mines and Minerals Development and Regulation Bill. The table shows that despite the 100% jump in royalty rates, there will be just 15 districts out of the country?s 640 where any inhabitant will get more than R1,000 a year. Inhabitants of 25 more districts just down the scale will get between R250 and R1,000. Taken together, these districts account for over 90% of the total royalty extracted from all major minerals.
To arrive at the above conclusion, the report analysed what would be the likely distribution of royalties from the major minerals, that is from iron ore, bauxite, limestone, chromite, copper and zinc and lead. It factored in the production share of each district for a particular mineral and doubled it. The result was divided by the population of the district.
This means by adding on the layers of bureaucracy to administer the distribution of these cheques, by doubling the R4,470 crore (excluding coal) the companies pay as royalty and thereby shaving off their market cap in multiples, the highest benefit the government will provide will be R1,000 per capita in 15 districts. So much for the sharing of benefits. What this does to corruption is obvious.
But, to return to the core issue of mining licences in states like Karnataka, the Chawla committee has said mining leases should be awarded on broadly the same principles as those for oil & gas, where there is a competitive bid-based allocation system under the New Exploration Licensing Policy.
This is not the position of the mines ministry. That position is also written out in the MMDR Bill. The committee says auctions should be conducted by the state governments at the reconnaissance stage itself, for multi-mineral explorations. For other kinds, like single mineral areas with high potential, auctions should be at the prospecting stage. It says not taking the auction alternative at this point, and instead waiting for the mining lease stage to arrive, restricts the field severely. The current policy for allocation of mines gives higher weightage to those who have done prospecting or exploration already.
Demonstrating the push for minutiae at the expense of the broad brush, the mines ministry argues that minerals are often scattered and, therefore, costlier to locate, as compared to oil or gas. An auction at that stage will discourage investors. But, at the same time, it is not agreeable to a proposal to reduce risk by allowing agencies other than the Geological Survey of India (GSI) to develop data. Yet, GSI itself has informed the committee that it lacks the funds and sometimes the technology to do a lot. This means the field is left open for unguarded mapping by interested parties, who can then turn up as prospective suitors before the state government. As Raghuram Rajan has pointed out, the biggest incentive for corruption in India is the availability of insider information on natural resources controlled by the government.
There is another fine result written in the Chawla committee report, not directly related to corruption. It concerns the local-use tag that states often insist should be tied to mineral licences. Using National Sample Survey Office data, the report shows that in every mineral-rich state, the employment in mining and metal industries as a percentage of non-agricultural employment rarely exceeds 1%. As it says, construction provides 10 times the employment, and textiles, 7 times.
subhomoy.bhattacharjee@expressindia.com
