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Wednesday, December 08, 2021

Great cleansing act

In the long run,the CAG reports will make government stronger,not weaker: it will be forced to ask the right questions.

Written by Pratap Bhanu Mehta |
August 20, 2012 12:09:38 am

In the long run,the CAG reports will make government stronger,not weaker: it will be forced to ask the right questions.

There is a danger that the real point of the three recent CAG reports,especially on coal and the Delhi airport will be lost in a cloud of obfuscation,denial and defensiveness. The reports are raising deep and fundamental questions about governance. Taken together they amount to an incontrovertible indictment of government. It is important that we do not lose sight of the core issues. To get to them,put aside red herrings in the debate. Grant the fact that in a democracy,making trade-offs between different policy choices should remain the prerogative of democratically elected governments. Not going for an auction of natural resources is not,in itself,a crime. For argument’s sake,let us grant that in many instances there is a case to be made that it is not necessary. Let us also grant that in the case of coal allocations,at any rate,many parties across the political spectrum seemed to agree with the government’s method of allocation,so the complicity is non-partisan. In a parliamentary system,the CAG is not the last word.

Doubtless the CAG’s methodology for computing “losses” needs to be subject to scrutiny and debate. The difficulty is that calculations of losses are always endogenous to assumptions you make about pricing and so it easy to say,“Ah,these are just assumptions.” The problem is that the same applies to any denial of losses,where we just assume them away as this government has done umpteen times. Some of the CAG’s assumptions may be questioned as unreasonable; but they are not more unreasonable than the ones made by those giving the government a free pass. There’s no two ways: the loss is substantial. It is also bizarre for defenders of government to use the fact that the CAG revised its estimate of the downward losses after the draft report against its credibility. Such revisions are common and are evidence that the institution takes into account replies of government. But the strength of the report is that the indictment of the government will survive even a further downward revision in numbers. It shows a policy made in extraordinary bad faith.

From a governance standpoint,the CAG’s reports mark a breakthrough. First,they shift the focus of accountability from merely expenditure to a framework of justifications. Corruption is not just about siphoning off government expenditure. It is about creating frameworks,and foregoing policy possibilities that arbitrarily benefit private parties at the expense of the public. It also looks at opportunity costs of policies. The CAG is not saying that policy is not the government’s prerogative. It is saying that these policies must meet the test of public reason. They must be defensible in light of all the available arguments. The government’s allocation of coal blocks does not meet this standard. Its reasons for not auctioning are weak; there were no insurmountable legal obstacles against auctioning. But more importantly,and this point is being missed in breathless defences of government,the policy does not meet even the government’s own standards. Even if the government did not want to go the auction route,the process by which particular private players were selected has the unmistakable odour of arbitrariness about it. In the case of captive blocks,other uses were authorised after the fact and without adequate justification. That alone would be grounds for a probe.

Further,the government’s own claims for the reasons behind these allocations do not stand up. The government says we allocated them because Coal India Limited was not producing enough coal. True enough. But the shocking fact is that almost none of the private players produced much coal either. They unconscionably hoarded a national asset. If you wanted private players,the Coal Mines (Nationalisation) Act could have been amended. After all,this debate has been going on for more than six years; various officials had proposed better ways of allocating,and no convincing reasons have been given for overriding them.

In some ways,the report on Delhi International Airport Limited (DIAL) is even more damning,though it is getting lost in the din. There are specific points about how DIAL has unduly benefited from grants of excess real estate and user fees. These have an effect on outcomes; in Delhi’s case we may be more proud of how many hotels there are on DIAL land than of how many airlines operate from here. But there is a larger point. It is common knowledge that public private partnerships (PPPs),while yielding some quality gains,have also produced massive rent seeking. Simply put,if contracts are renegotiated arbitrarily to favour promoters,it makes a mockery of the efficiency gains you supposedly get from up front competitive bidding. There needs to be a complete and public data base on how many of the PPP’s are renegotiated after the fact or have the contracting terms set in such a way that promoters make unduly large profits at the expense of the taxpayer. Private participation on a massive scale is absolutely essential to infrastructure. But this cannot be a licence for an “anything goes” in the PPPs. It should also caution one against the PPP mania sweeping government. The larger lesson is that even effective PPPs need a functioning,capable and non-corrupt government. It is incumbent upon those who favour private participation to ensure that these deals are credible; otherwise the backlash against PPPs will be irreparably damaging.

A lot of the whispering against the CAG reports comes from an unstated fear: such scrutiny will slow down decision making. It will create economic uncertainty. These risks are present. But we have to face the fact that there is a lot more poison waiting to come out of the system. The system now needs to respond constructively and internalise new norms of governance,based on horizontal accountability,transparency and public reason,instead of arbitrary discretion. The CAG’s reports are part of the great cleansing now under way. In the medium to long run,these will make government stronger,not weaker,because it will be forced to ask the right questions.

You can contest the CAG’s numbers. But the reports,even if they do not say it,leave us in no doubt that the government is a rotting ancient regime. It is a deep morass of evasions,dereliction of duty,and outright fraud on the taxpayers. The responsibility for this runs to the highest levels,including the prime minister. He is,doubtless,an honourable and honest man. But will he admit that the government is at least guilty of a sin even worse than corruption: gross incompetence of the kind that has put the country’s future at risk?

The writer is president,Centre for Policy Research,Delhi

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