Coalgate – Hysteria over individual culpability at the expense of institutional change is futile

Take the coal scam. What precisely is the scam? Once a framework of state monopoly in coal mining is taken for granted, as also that monopoly’s incapacity to mine sufficient quantities to meet the demand, it makes sense to allow those who use coal as a vital input to have their own captive mines. In this framework, the sources of government revenue are royalty on the mined coal and taxes on the profits generated from the use of coal. These accrue, regardless of the identity of the captive miners. So, the malfeasance in allocating captive mines to cronies lies not so much in loss of revenue for the government as in some entities arguably more entitled to the mines losing them to those less deserving.

Two things make access to domestic coal scamworthy: state monopoly in coal leading to shortages and repressed pricing at a discount to imported coal. Remove these two features, and auction coal mines to whoever offers the highest lease rental/ royalty/revenue share, there would be no more coal scams. But such institutional remedies are not on anyone’s mind. The closest thing to a policy remedy on the agenda is auctioning captive mines, which is a flawed, suboptimal solution. Differential importance of coal in different industries calls for separate, industry-wise auctions of captive mines. Instead of holistic policy remedies, the entire debate is on fixing culpability at individual and political levels. Such arbitrary grant of mines and other patronage have been part and parcel of the default mode of funding politics in India — through the proceeds of corruption. The systemic solution is to institute complete transparency as to the source of every paisa collected and spent by politicians and political parties. This interests few.

And the few institutional reforms that are in vogue are horrendous. Take the demand to make the CBI autonomous of the government, implicit in the criticism of the agency sharing its draft status report on coal allocation with officials in the Prime Minister’s Office, the coal ministry and the law minister. Can the CBI get clarity on intricate policy details without interacting with the concerned officials? And what is wrong if its report is vetted for accuracy by the same officials who have been helping the CBI formulate its report, before submission to the court? Will not any attempt to manipulate the findings be exposed before the courts? The only guarantee against police/investigative agencies going rogue is multiple lines of accountability to different institutions, the government, the courts, a committee of Parliament and the human rights watchdog.