O Captive,my Captive

Indias infrastructure systems and core-industry capabilities have been covered up by trying to hand over to the private sector incentives to vertically integrate their operations meaning that steel producers will be expected to mine their coal and iron ore,too,because otherwise they wont be able to be secure in their supply of inputs. That problem,to an extent,continues,or we would have stopped hearing about captive mines. Yet,its to be hoped that there is now some political and bureaucratic will to control the most unfortunate by-product of this approach: the giveaway,and subsequent misuse,of the resources so committed. The government,desperate for new coal and steel plants,would assign captive resources. These would not cost the plants operators what they would in the open market,which in any case led to rent-seeking behaviour in how those captive mines would be assigned. And there was always an incentive,as resource prices then ballooned,to sell the captive mines product elsewhere,taking home the difference in an extra-healthy balancesheet at the publics expense.

We hope this is a sign of a new New Delhi,which recognises that the absence of competitive bidding leads to rent-seeking,waste and corruption. Yet its also true that many such commitments to auctions and to openness have been dialled back before being written into law or implemented as policy. This is one case where such backsliding would be a severe mistake. It would cost the exchequer; the mispricing would cascade problematically through the economy; and it would,most crucially,further perpetuate the culture of closed-door deal-making which has contributed so much to the current fraught political mood.

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