When well-meaning journalists turn partisan and advise the government to stick to its patently wrong decision on the belief that their halo and aura can squint the vision of their mesmerized readership to accepting all their flawed prescriptions, they are sadly mistaken. And Swaminathan Anklesaria S Aiyar is no exception to this when he opines that the government need not should not cancel the allocation of coal blocks, as that would be “politically, legally and economically wrong”!
In what appears more as a letter to PMO than an objective article, Aiyar cites 5 reasons for not taking such “politically stupid” decision. One, in 2G scandal Raja was indicted not for failing to auction spectrum but for perverting the policy; that, according to him is not the case in coal blocks allocation. Two, there is no evidence of kickback in the allocation of coal blocks. Three, the law should penalize only the guilty, not the allottees. Four, some of the allottees have raised thousands of crores in equity and loans and cancellation will kill investor confidence. Five, prior to liberalization government allotted permits and quotas without auction; if those are not cancelled, why should coal allocation be?
Coming as they do from the propounder of Swaminomics, these reasons require more than a normal analysis before being dismissed. It is clear from the article that Aiyar believes while that the allocation of 2G licenses was and deserved cancellation, the same cannot be said of coal blocks.
First, the question of allocation policy. It is true that ‘first-come-first-served’, however flawed it was, was still a policy and that Raja did not adhere to that. But what are the facts in coal blocks allocation? CAG notes that coal blocks were allocated by way of minutes of Screening Committee; there was nothing in the Minutes to show a comparative evaluation of the applicants; the Minutes ‘did not indicate how each one of the applicant for a particular coal was evaluated.’ It gives the example of Rampia and dip side of Rampia block where only 6 companies were chosen out of 108 applications. How were they chosen? That is what makes coal block allocation worse than 2G. There was no policy at all! Media gave a narrow explanation to the observations of CAG in this regard- that the government did not auction and incurred the wrath of CAG. The CAG, on the other hand was concerned with the fact that there was no selection criteria to choose between the applicants; criteria like end use of the coal mined, implementation period of each mine backed by bank guarantee, cancellation provisions for non-adherence of milestones and monitoring the progress of development work dealt essentially with the post-allotment scenario. Even simple qualification criteria like ‘companies with xxx years of experience in power generation/ steel/ cement production’ or ‘ companies with installed capacity of xxxx mg of power/ xxxx tons of steel/ cement p.a.’ were not specified.
Second, the question of kickbacks. Does Aiyar suggest proof of kickback as the only criterion for cancelling allocation of precious resources of the country? Were all the 122 licenses of 2G cancelled because kickbacks were involved in all the cases? Were they not cancelled because the public trust reposed in the State for allocation of finite resources was vitiated by unconstitutional and arbitrary allocation? Kickback or quid-pro-quo may be required to pursue a corruption case against the Minister under sec 13 of Prevention of Corruption Act (PCA). But even under PCA, Sec 13 1 (d) (iii) provides that if a public servant abuses his position and obtains benefit for a person without any public interest, he can be prosecuted under Sec 13 (2). In other words kickback is not the only requirement either for cancellation of allocation or for prosecution of a public servant. The fact that the Screening Committee did not follow any policy for selecting a few from the many applicants betrays the Public Trust and warrants a cancellation. Even if we go by Aiyar’s argument that Raja favoured his friends, did PMO not favour Subodh Kant Sahay and his brother?
‘The law should penalize only the guilty, not the allottees’ is the next justification of Aiyar. Strange logic. Allocation of coal blocks in violation of Public Trust is illegal, going by 2G judgment and the basic principle in law is that anything illegal is void- ab-initio; it does not give rise to any right to anybody. For the layman, if the title of the seller of a product is tainted with illegality, the taint passes with the product to the buyer. He cannot be insulated.
Many of the allottees have raised thousands of crores; how can you cancel now?- the next refrain from Aiyar. Many learned journalists threw this scare, even while Supreme Court was hearing the petition for cancellation of 2G licenses. How does raising money on an illegal premise insulate the allotment from cancellation? Sahara raised deposits from public in violation of SEBI guidelines. Will just the fact that it raised in excess of Rs. 20,000 crs hold us back from asking the Company to refund the money? At least the Supreme Court did not think so when it ordered the refund.
The final argument of Aiyar is that many quotas and licenses were issued prior to liberalization without auction; are they also to be cancelled? Just because a previous crime was not punished, will Aiyar argue that we should let go of the current one also? In this regard when Harish Salve argued for the cancellation of spectrum licenses issued from 2001 onwards, Supreme Court turned down the same.
While Aiyar’s recommendation of levying higher royalty is a good suggestion, it should not stop the government from cancelling the existing allotments and making fresh allotments through a transparent method. On the fresh allotments, rightful royalties should be charged.
PS: Incidentally CAG considers 20 years as the life a mine and arrives at Rs. 1.86 lakh crores by multiplying extractable reserves with Rs. 295/ ton. Aiyar suggests that an increase of Rs. 100/ ton in royalty will yield more than Rs. 1.86 lakh crore! How? One does not understand Aiyar’s maths.