What is common to Naxalism, the 2G scam, fratricidal African wars, the Narmada controversies and the US?s patronage of Pakistan for over six decades now? Each is driven by competition to appropriate one or more of nature?s bounties. With naxalites vs outsiders, the resources are forests and minerals; with Narmada, it is the hydropower potential of the site and the waters of the river; with 2G, the shares of the ethereal ?wires? that carry electronic signals; the African tensions involve control of resources ranging from diamonds to uranium; and the US patronage of Pakistan is explained by the latter?s geographical position, which confers great potential advantage in military or commercial access to the Eurasian heartland.
What does this competition involve? For a resource to evoke interest, it must be both useful and scarce. The ?usefulness? typically derives from advances in technology. Until the invention of the internal combustion engine, the pools of dark oil that trickled from the ground in Central Asia?described by Marco Polo?evoked curiosity, not conflict. Until the development of mobile telephony, the relevant spectrum frequencies held only academic and scientific, not economic interest. However, even a useful resource acquires value only when its quantity is limited in relation to the requirement. No one prices sea water, even if nuclear power plants require vast quantities for cooling the reactors; or competes for satellite orbits, while there is great international competition for the limited geostationary slots. Till recently, anyone could burn all the coal he needed, but concerns for climate change have resulted in intense international competition for the now limited atmospheric space.
Precisely what is the nature of the advantage that is sought during such competition? Typically, there is a gap between what it costs to exploit or extract the resource and its price in the market, by itself, or embodied in the resulting goods (metals) or services (mobile telephony). The gap or resource rent?oil costs a few cents a barrel to produce but sells for over $100?is what the competitors fight over.
Colonialism was, in large measure, driven by seeking control over natural resources (and trading through cartels in captive markets)?the present day division of the world into rich and poor countries is one result. But even without formal colonialism, in many cases, resource-rich countries (think Liberia, Afghanistan) and regions (think Jharkhand, Orissa) tend to have low growth rates, high poverty levels, and are prone to conflict. What explains this?
There are numerous possible sources of such conflict. First, there is a disjunction between formal ?ownership? of a resource and the decision makers who control its use. If rights are auctioned and the bidders numerous, the full resource rent would be realised by the owner. However, a personal pay-off to the Panjandrum with control over the resource may enable access without an auction, paying but a pittance to the formal ?owner?. Thus, General Mobutu became rich beyond imagination, while his country remained dirt-poor. Not surprisingly, both decision makers and resource users argue, often very creatively, for retaining discretion in allocating the resource.
Second, if the seekers themselves are not numerous, but few, and auctions are the norm, but repeated, the bidders could collusively share the spoils by bidding less than the true resource value. The incumbents, in such cases would not welcome a new kid on the block, with whom the spoils would have to be shared. Literal cloak-and-dagger operations against one?s rivals are going out of fashion, but well-funded campaigns by personable, telegenic and hyper-earnest young people highlighting real or imaginary humanitarian lapses by the newcomers achieve the same objective while disguising one?s true motivations.
Third, the ?ownership? of the resource may itself be contested. Rival subnational groups may engage in civil war, with lavish support from their respective corporate backers. Currently, at least 17 such wars are on?from Colombia (oil, gold, cocaine) to the DR Congo (copper, coltan, diamonds, gold, cobalt) and Western Papua (copper, gold). Alternatively, say in the case of naxalites, local communities may assert a moral right to the resources, contrary to the formal legal arrangements, in whose formulation they insist that they were not represented, and thereby take up arms to claim the resources for themselves.
Such a rich typology makes for a daunting policy conundrum. However, some broad guidelines may be presented. One, rights of ownership, including possibly shared ownership, must be clarified through democratic participation and processes, if armed or otherwise disruptive conflict is to be avoided. Two, while auctions should be the default mode of allocation, if the market is irretrievably cartelised, other transparent and publicly defensible non-discretionary methods of allocation may be employed in lieu, and the resource-rent (which may vary over time), being determined by an independent regulator on the basis of transparent methodologies that seek to ascertain from market data the true economic resource rent. (Of course, preventing regulatory capture is a non-trivial matter that has never been fully resolved anywhere).
Finally, in the international domain, the decision makers must not be susceptible to extraneous blandishments, and remain focused on obtaining the country?s fair share of the global resource at issue. Otherwise, in future, Parliament may be disrupted over carbon scams, on a scale that would make 2G seem like child?s play. After all, 2G has happened because past Indian negotiators? failed to garner sufficient bandwidth for the country.
The author is fellow, The Energy & Resources Institute. Views are personal