Opinion Halfhearted reform

The Union government’s decision to set up a coal regulator through executive order is akin to putting band-aid over a festering wound caused by its inefficient decisions on coal pricing and allocation. The agency is a poor substitute for the coal regulatory authority (CRA) that the Centre attempted to create through legislation — the CRAI bill is stalled in Parliament. Without a legislative mandate, the regulatory body will simply serve as an advisor to PSUs in the coal sector. Coal India Limited would still have the final say in important decisions like pricing as well as the allocation of coal blocks. The regulator, in its current avatar, can frame “principles and methodology” in pricing but unlike in the case of the CRAI, failure to comply with them will not result in corrective action. The regulator will have no decisive role in the cancellation or suspension of mining licences. It is also unclear how a non-statutory body can effectively adjudicate disputes between PSUs and buyers.

At the heart of the coal allocation controversy is the allegedly irregular manner in which the ministry of coal auctioned coal blocks. The Comptroller and Auditor General of India has emphasised how auctions did not follow a competitive bidding process. While the CAG may have overstepped its mandate in projecting “notional losses” from coal allocation, there can be no denying its observations on opaque decision-making. Left to ad hoc screening committees, inter-ministerial groups and empowered groups of ministers, there has been little transparency, let alone oversight, in the allocation and de-allocation of blocks. The Centre has given scant regard to best practices in public procurement, which raises questions about the effectiveness of interventions from an advisory body.

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A weak coal regulator will lose face if the PSUs that have a monopolistic hold on the market ride roughshod over its recommendations. Having a regulatory authority in this field could bring in much-needed checks and balances in the process of determining the sale of a scarce and valuable national resource. But if its recommendations have no legal bearing on executive decisions, the coal regulator will only duplicate the CAG’s work, raising red flags without any tangible effect on arbitrary or corrupt practices.