THE NATURAL RESOURCES DEBACLE
More than a year ago, Prime Minister Manmohan Singh tried to fix the mess around the use of natural resources. Then, inexplicably, he sat on it. Ashish Khetan on a crucial piece in the ongoing crisis: The Ashok Chawla Committee Report
THE COUNTRY is standing at a crossroads today. The economy is slowing down, industrial and agricultural production is plateauing, the rupee is in free fall, the political gridlock is worsening, Parliament has become a forum for sloganeering and filibustering and the common man’s faith in our democratic institutions has touched the nadir. The coal scam is a further proof that much of our economic growth over the past 20 years was fuelled by the indiscriminate plundering of precious natural resources by a select few. The CBI case against Congress MP Vijay Darda and his minister brother Rajinder Darda is a further testament that our democracy is held to ransom by the politician-corporate-bureaucrat nexus.
The question staring in our face today is can Manmohan Singh be trusted to run this country for another two years? Will the shocking revelations of the coal allocation scam make him clean up the system? Has it dawned upon him that his inaction and indecisiveness is hollowing out the soul of this country? Can he ensure that there won’t be any more 2G and coal scams? Can he restore hope — not only for Posco and Vedanta but also for those indigent tribals on whose land these companies want to set up their plants?
Not everyone knows that in January 2011, when the saga of 2G scam was blowing craters on the PM’s reputation of an honest and able administrator, as a fire-fighting measure, Manmohan had set up a Group of Ministers (GoM) headed by former finance minister Pranab Mukherjee to consider measures that could be taken to tackle corruption. The GoM, in turn, constituted a committee under the chairmanship of former finance secretary Ashok Chawla, with 15 secretaries and additional secretaries drawn from all major ministries as its members. This committee was as highpowered as it could get and its specific mandate was to recommend measures for enhancing sustainability, transparency and effectiveness in the utilisation of natural resources.
ASHOK CHAWLA RECOMMENDATIONS
• CAPTIVE COAL BLOCKS should be allocated through competitive bidding.
• BRING OBJECTIVITY and transparency in the process of coal linkage allocations (coal linkages are agreements by which Coal India supplies coal to private companies).
• SPECIFIC JUSTIFICATIONS for both accepting and rejecting applications for coal linkages should be clearly spelt out.
• IF THERE IS A PRICE impact on electricity production, it could be addressed through transparent subsidies at the consumer end.
It had dawned upon the government that at the core of the 2G scam was the issue of misallocation of natural resources. On the other hand, the Rs 50,000 croreworth Bellary iron ore mining scam had clearly showed that the existing legislative and regulatory framework governing mines and minerals was breeding corruption, inequity, destitution and irrevocable damage to the environment.
The Chawla Committee was therefore also asked to suggest changes in the legal, institutional and regulatory frameworks required to switch over to a clean and transparent system. Such was the urgency displayed by the government at the time that the committee was asked to submit its report within four weeks.
We are today well into September 2012. So what happened to this committee and its recommendations? Is it also being held hostage to the obstructionism of the opposition? Or is blocked by prickly allies? The answer is no.
After being granted a couple of extensions, the committee submitted its 120-page report to the government on 2 June 2011. The report recommended far-reaching changes in the key sectors of minerals, coal, petroleum, natural gas, spectrum, land, water and forests — all areas where the Union government plays a major role in constructing or influencing the policy framework. Moreover, the committee found the existing legislative and regulatory framework in all these areas as arbitrary, non-transparent and prone to manipulations. It recommended open, transparent and competitive bidding (in common parlance known as auction) for allocation, pricing and utilisation of these natural resources. And it said that if the government, driven by an overriding public interest, wanted to deviate from the default mode of market-related processes, then the rationale behind such policy needed to be clearly spelt out. In short, it said that the regime of whimsical and discretionary powers of governments both at the Centre and states has to go. And the UPA can lay the foundation of the new system by enacting new legislations and regulations.
At first, the PMO gave the Impression that It was cleaning up the System
“The test of transparency needs to be applied, regardless of whether the allocation process is market-related or non-market,” said the report. On the crucial point whether the price of essential end-products such as electricity or fertilisers need to be regulated in larger public interest, the committee recommended that “if a good or service is sought to be subsidised, then it is best to do it at one place, preferably at the consumer-end rather than at the input-end where it affects the pricing of natural resources.”
In other words, the committee said that government should not give minerals like iron ore or coal at cheap rates to private corporations and expect them to pass on the benefit of low input cost to the end consumer.
Such arrangements are opaque with no mechanism to determine how much benefit of the cheap natural resource the companies have passed on to consumers. The committee recommended that the government should allocate natural resources at market price and if required, give subsidies, at the consumer end. The committee made several other momentous recommendations, which, if implemented, would have gone a long way in cleaning up the system and ushering in a more equitable model of growth.
But more than a year after the submission of this report, the PM has not accepted its recommendations. The chain of events as narrated below calls the bona fides of the PM into question.
Why Is PM Manmohan Singh Indecisive about The Committee Report?
On 25 May, one year after the Chawla Committee submitted its report, the prime minister convened a meeting of several senior ministers, including Pranab Mukherjee, to examine the report. Planning Commission Deputy Chairman Montek Singh Ahluwalia and many other senior bureaucrats were also part of the meeting. At the end of day, the PMO issued a press release saying that: “The recommendations of the committee had been examined by the GoM on corruption headed by the finance minister and the GoM had accepted 69 of the 81 recommendations. 11 recommendations were to be examined further.” It further said that “all the 69 agreed recommendations would be pursued for implementation by individual ministries in a timely manner. Detailed timelines will be finalised”.
This gave an impression that the government finally meant business. Though the report was not in the public domain, its broad contours were known to the media. Newspaper reports concluded that the PMO had asked the ministries concerned to draw a roadmap with specific timeframe for switching over to a policy framework proposed by the committee. The PMO didn’t rebut these interpretations drawn by the media. The GoM again met on 30 July and was communicated by the PMO that 66 recommendations have been accepted in full and three have been accepted with modifications. In a reply to a Rajya Sabha question on 9 August, the government said that it has “accepted 69 recommendations of the Chawla Committee”.
SKS ISPAT and Power Ltd, in which Union Tourism Minister Subodh Kant Sahay’s brother Sudhir was a director, was awarded two coal blocks in February 2008. The minister had written to the PMO on 6 February 2008 requesting the PM’s intervention in the allocation of coal blocks to the said company.
PRAKASH INDUSTRIES, the co-allottee in the Fatehpur and Vijay Central coal blocks, was also raided by the CBI in 2010 on charges of mining excess coal and selling it in the black market. It has also faced charges of forgery and bribing officials. Prakash Industries owner VP Agarwal is the brother of JP Agarwal, who runs Surya Foundation, a BJP-backed NGO. There are allegations that the family profited from its proximity to the BJP.
THE CHHATTISGARH CAGfound that coal blocks were allocated at throwaway prices. BJP President Nitin Gadkari’s aide Ajay Sancheti, who owns SMS Industries, was found to be the sole beneficiary in the Bhatgaon-II coal mines, which was allocated at a low price.
ON 4 SEPTEMBER, the CBI raided 30 locations and filed cases against JAS Infrastructure, AMR Iron and Steel, JLD Yavatmal Energy. The FIR named Congress MP Vijay Darda along with his brother and Maharashtra minister Rajendra Darda and his son Devendra Darda, who is the director of JAS Infrastructure. Manoj Jayaswal, who is the promoter of the companies, is said to be close to Congress and BJP leaders.
VINI STEEL, which was named in the CBI FIR with charges of misrepresentation, is said to be owned by Jharkhand ex-CM Madhu Koda.
NAVABHARAT POWER, also named in the FIR, is promoted by VK Singh, whose wife Neena Singh contested on a BJP ticket.
In April, the government had already filed a presidential reference in the 2G judgment, asking the Supreme Court that “whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions”. But the government never shared the Chawla Committee report with the court. It was left to anti-corruption crusader Prashant Bhushan to place a copy of the report — which for the government continues to be a top secret— before the court. In the second week of August, the court asked the Attorney General (AG) to clarify the government’s position on the report.
In a bizarre twist of events, a week later, the AG filed an affidavit saying that it was a GoM and not an Empowered GoM that had accepted the recommendations, thus implying that the decisions of the GoM do not automatically become the decisions of the government. But then, what about the PMO’s press release? On this, the AG clarified that the PM had merely asked the ministries to “pursue the recommendation” which is different from “accepting the recommendations”.
The communication by the PMO to the GoM that recommendations have been accepted was inaccurate, read the affidavit filed by the AG. He conceded that the finance ministry’s reply in the Rajya Sabha was also inaccurate. “Pursuing” is different from “accepting”, the court was told. “The correct position is that the 69 recommendations would be pursued by the individual ministries in a timely manner,” read the affidavit.
The question is, what does the PM mean when he says that his government is pursuing the recommendations? Is it again going to be like his proposed auction policy in coal, which was pursued but not implemented for six years? A quick reading of the Chawla Committee report would show that almost every major sector needs urgent reforms. The regulatory and oversight mechanisms have completely collapsed. Then why is the PM dithering on an issue of such great national importance? Was the formation of the committee just a PR exercise?
ASHOK CHAWLA RECOMMENDATIONS
• STATES SHOULDmove from the current first-come, first-served method to a clear and transparent bidding process.
• THE NEW MMDR ACT should accommodate a variety of allocation mechanisms, provided they are open, transparent and competitive. The new Act should not preclude any form of open and transparent competitive bidding.
•ROYALTY SHOULD BE levied on scientific lines to realise better and more sustainable revenues on a transparent basis. A significant portion of this revenue should be used for all-round development of the mineral-bearing areas.
•VIGOROUS MONITORING and regulation of the mines and production and close oversight of the licensees and lessees.
The PMO first gave the impression that the government is cleaning up the system and moving to a transparent and equitable model of governance. But when cornered in court, it refused to commit to any clear position. A draft Mines and Minerals (Development and Regulation) Act (passed by the Cabinet on 30 September 2011) is pending before the Standing Committee. We don’t know to what extent, if at all, the Chawla Committee’s concerns have been addressed and suggestions incorporated. The petroleum and gas sector is in a mess. But we don’t know what the government is doing to do fix it. Similarly, the PM has not shown any vision or clarity on the crucial issues of land, forests and water.
One is ready to concede that Manmohan inherited bad policies, weak institutions and moribund legislations. For instance, the Coal Mines Nationalisation Act was enacted in 1973. The screening committee system for captive coal blocks was introduced by the Narasimha Rao regime in 1993 and then continued by successive United Front and NDA regimes. The dubious first-come first-served method in telecom was introduced by NDA. MMDR Act was enacted in 1957 when we had very little knowledge of our vast natural resources and thus promoted first-come first-served method under which anybody willing to invest was given the lease to explore and the license to extract the minerals.
But what stopped Manmohan from scrapping crooked policies and replacing them with the ones that are fair and transparent? What is stopping him from strengthening institutions and regulatory mechanisms? If effective and sustainable utilisation of coal, iron ore, bauxite, etc. holds the key to industrial development and a high GDP growth rate, then why is it that Manmohan, whose core competency is economics, has been running this country’s economy on antiquated legislations and rules that form the source of crony capitalism, private profiteering and inequitable and unsustainable development? Why did an Act framed in 1957 continue to remain the foundation of our mines and minerals policy throughout the first decade of the 21st century? Why has the National Mineral Policy, 2008, talked more about promoting FDI and said precious little about rehabilitation, environmental preservation and local community development?
ASHOK CHAWLA RECOMMENDATIONS
LAND & GAS
• A TRANSPARENT COMPETITIVE bidding or e-auction methodology for all cases of land alienation, especially in the case of commercial and institutional properties.
• A SEPARATE DISPENSATION for the case of educational institutions.
• IN THE CASE of housing boards, the objective should be to make housing available at reasonable costs to the public at large and should not be governed by the profit motive.
• ATRADING PLATFORM should be created for developing a robust and transparent market for natural gas.
If the rapidly changing economic scenario and market forces could make the telecom policy redundant in just a span of five years (there were hardly any takers for spectrum in circles like West Bengal and Odisha in 2001 but by 2006, there was a mad scramble for the same), then what was the logic to allow a 60-year old legal framework to govern our mines and minerals policy between 2004-12?
When the Supreme Court pronounced in the 2G licence cancellation order, that all natural resources should be auctioned, the UPA wasted no time in filing a presidential reference challenging the judiciary’s encroachment into the executive’s sole preserve of policy making. When the CAG points out at policy failures and resultant windfall gains accrued by private companies, the UPA’s eloquent ministers repeat ad nauseam that the audit agency has no constitutional right or expertise to critique government policies.
The question that then arises is what is the UPA’s policy on the most vital issue of natural resource allocation? Why is the PM indecisive and secretive about the Chawla Committee report? After all, it’s not a policy directive coming from the courts or the CAG. The committee was formed at the initiative of the PM and comprised of the top bureaucracy of the Union government.
Loss of lakhs of crores of rupees to the exchequer is just one aspect of the debate on natural resources. There has been no quantification of the loss of livelihoods of the thousands who were displaced. There has been no tabulation of human rights violations, the killings of innocent tribals, the irrevocable loss to environment and forests and water bodies due to rampantly illegal and unscientific mining. There could never be any estimate of the inequities created by private corporations from Goa to Chhattisgarh to Jharkhand to Madhya Pradesh to Odisha to Karnataka. Loss accrued by giving away of proven coal reserves at a fraction of the market price is now known. But there would never be any official statistic quantifying the loss accrued due to rampant illegal mining.
TEHELKA sent a questionnaire to the PMO seeking clarity on the PM’s position on the Chawla Committee report. As usual, it was met with silence.
Ashish Khetan is Editor, Investigations with Tehelka.