Opinion Ambivalent about auctions
Why hasnt UPA embraced the recommendations of the Chawla committee?
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Why hasnt UPA embraced the recommendations of the Chawla committee?
Government school teachers for English are a scarce resource on the wrong side of the Yamuna. The shortage is often bridged by the schools hiring guest teachers,for which students occasionally chip in with funds. No one minds,because there is a certain predictability in the scheme and the price,if set right,allows students to sail through examinations. But that logic gets more tangled on the right side of the river. A year ago,a committee set up by the government under the cabinet secretariat had suggested equally rational ways to allocate eight major natural resources,through a set of informed analyses about each sector. The Ashok Chawla committees recommendations were not doctrinaire,they understood clearly how governments have to wrestle with realpolitik in economic policies,yet suggested ways to satisfy the conflicting demands of providing resources and extracting an appropriate value from them.
The central theme that runs through the 81 recommendations of the committee,however,makes sections of this government,still immersed in a system of patronage,uncomfortable. It tells the government to unequivocally move towards a competitive and open allocation of resources to bidders. Further,it says the process will make information about availability of resources widely known and make the price discovery fair. As incoming Chief Economic Adviser Raghuram Rajan has pointed out in his book Fault Lines,proximity to the government is an enormous source of profitability in India. It allows the well-connected to exploit this asymmetric access to information about the availability of resources. The Chawla committee asks for an overthrow of this nexus. But that would mean that the presidential reference the government made to the Supreme Court in February this year will become null and void. The reference made in the context of the 2G scam had questioned whether the government needed to be bound by such rules of allocation for every sector.
It is strange that the same government that put up this reference has to now defend the reverse position that it believes in an auction-based allocation for the coal sector. In other words,just six months after the government suggested that it need not follow the telecom model of auctions for other sectors,the prime minister has told Parliament that he has firmly supported auction for coal. He has asserted that it is the UPA government that conceived of the idea of allocating coal through competitive bidding. Later in the statement,he says the government has also pushed to bring other minerals under the auction route. Both statements are true. Also,since 2001,both the BJP and Congress-led coalitions have more or less followed a bidding process for the oil and gas sector.
So why,then,are cabinet ministers still sending conflicting signals on the route ahead? While the finance ministry has advised other ministries that most of the Chawla committee recommendations,69 out of 81,have been accepted,it omits to mention whether the rationale of the report is also acceptable. The telecom department thinks the report has been junked. Since no department of the government has put the report on their website yet,the governments law officer is not sure what position he is expected to take in the Supreme Court on the presidential reference. And to make it even more interesting,Singh has told Parliament the government will enforce a 26 per cent profit share formula for each mine,something the committee and the draft Minerals and Mines Development and Regulation (Amendment) Bill have both rejected.
Ministers and government officers argue that a mechanical reference to the auction process will take away a large element of legitimacy from their actions. They also argue that this will raise the price of the products. This is not correct. For instance,no one says that distribution of porters licences at railway stations should be auctioned. But taking Rajans argument,while the licence for porters cannot be auctioned,the information about the numbers that are valid and working must be made freely available among the target population. A smart principal and a smart administrator will know how much to charge for the privilege of guest lecturers and coal blocks that ensure viability for everyone.
Otherwise the dirigiste economy will ration information about biddable coal mines and available porter licences. The additional price paid by the entrepreneurs for mines is passed on to the consumers while the resentment among the would-be porters shows up in social tensions.
subhomoy.bhattacharjee@expressindia.com
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