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Coal block e-auctions: With Rs 2 lakh crore in purse, has Modi govt really made any profit?

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By Harshmeet Singh

All the hue and cry made by the Manmohan Singh government over CAG’s report of 1.86 lakh crore loss to the exchequer during the Coal block allocations from 2004 to 2011 has been rejected. With the proceeds from the current coal blocks auction comfortably crossing 2 lakh crore (includes proceeds from e-auction, royalty and the upfront payment), the Government is set to get a huge shot in the arm.

What went wrong in the first allocation?

Regarded as one of the biggest scandals in the Indian history, the coal blocks’ allocation between 2004 and 2011 were marred with controversy. According to the CAG, rather than opting for a competitive bidding, the Government chose to allot coal mines to Private players and PSUs at a nominal prize, giving them a ‘windfall’ gain in the process. Several blocks were allocated on ‘special’ recommendations of the ministers involved.

Interestingly, the initial report of the CAG never accused the Government of any corruption charges. It was only after the CVC (Central Vigilance Commission) asked the CBI to conduct an enquiry did the charges of corruption and wrong-doings surfaced. The loss figure of 1.86 lakh was arrived at by excluding the share of PSUs. According to Vinod Rai, the erstwhile CAG, had PSUs been taken into consideration, the loss would have amounted to over 10 lakh crore!

From incorrect information being given by the companies to new names being added to the list of conspirators with each passing day, the Coalgate took the entire country by storm. The curious case of missing files added to the already spectacular drama.

CBI director Ranjit Sinha’s testimony in the SC that the final status report was shared with the Law Minister, Ashwani Kumar, ‘as desired by him’, before being presented in the Supreme Court drew the ire of the judges. Sinha further claimed that the original content of the report was modified by the minister. This forced Harin Raval, the additional Solicitor-General to resign from his post, for misleading the Supreme Court.

Final Supreme Court Verdict

Soon after the Modi Government assumed charge last year, the Supreme Court came out with the final judgement in the coal block allocation case. The apex court cancelled the allocation of 214 coal blocks out of the total 218 blocks allocated since 1993. This presented a dual opportunity for the Modi regime.

Firstly, it gave a chance to the new Government to establish a clean image for itself by ensuring a transparent allocation of coal blocks. Secondly, it presented an opportunity to fill in the exchequer for the public welfare schemes that the Government wishes to implement in the future.

Current e-auction of coal blocks

Of the 214 blocks whose allocation was void by the Supreme Court, only 31 (18 operational and 13 soon to be operational) have been put under the hammer till now. With the current bids already exceeding the CAG’s figures, the total revenue from 214 blocks should easily end up close to 15 lakh crore. Just to be clear, the total bid amount of 2.07 lakh crore for the 31 blocks would be received by the Government over a period of 30 years, thus eroding the present value of this amount.

Apart from the transparency it brought forth, the e-auction method brings a number of other points to the table as well. With bids soaring high, the companies would be forced to increase their mining efficiency to ensure that they extract huge amounts of coal. This would put an end to hoarding with companies extracting maximum coal in order to cover their costs.

Reduction of power tariffs?

Piyush Goyal, the Coal and Power minister decided to segregate the coal blocks into two categories, viz. for power production and for non power production. With zero ceiling price for the ‘power production use’ blocks, the government adopted the reverse auction method (the company with the lowest bid wins the block) to allocate these blocks. Additionally, for every Rs 100 dip in the bid for the power production blocks, the power tariff was to be lowered by six paisa per unit.

This reverse auction process resulted in the reduction of power tariff worth Rs 96,971 crore, which would bring in much cheer for the end consumer. However, allocation of blocks at different rates by earmarking their separate purposes can be an ideal ground for corruption. The companies would always be tempted to extract coal at a lower cost from the mines tagged for power production, and sell it at a much higher cost in the market to earn profits.

Benefits of a healthier exchequer

The Government’s ambitious programs such as the 100 smart city project, Make in India, revamping of MNREGA and e-Governance initiatives could take a heavy toll on the national exchequer. The success of coal block and telecom spectrum auctions augurs well for the financial part of these schemes. However, it is their efficient implementation on the ground that would decide the future of our country.

  • Proceeds of the auction will be given to the states. Not for the central government.

Next Story

Are There Enough Jobs In Prime Minister Narendra Modi’s Led India?

“More young people are entering the labor force, millions want to leave agriculture but can’t find construction work because construction activity has slowed down because the investment rate in the economy has slowed down.”

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VOA
Modi’s Bharatiya Janata Party dismisses concerns about the job data saying it does not capture the real picture because it focuses only on the 15 percent of Indians who work in the formal economy. Pixabay

For people streaming in from rural areas around New Delhi, the first stop is a collection of busy city intersections where contractors select daily wage labor from the crowds of young and old waiting every morning to get work.

Many standing at these intersections say they get work for barely half the month. “I have the ability to work hard. I never turn down any work. But I would prefer to get a cleaner, permanent job,” says 29-year-old Tek Chand. “The problem is one day I have money to buy rations, the next day I don’t.” Like millions of others, he migrated from his village three years ago to seek work and a better life in the city.

FILE - Indian Prime Minister Narendra Modi, center, arrives with his cabinet colleagues on the opening day of the budget session of the Indian Parliament, in New Delhi, Jan. 31, 2019.
Indian Prime Minister Narendra Modi, center, arrives with his cabinet colleagues on the opening day of the budget session of the Indian Parliament, in New Delhi, Jan. 31, 2019. VOA
As India prepares for general elections on April 11, Prime Minister Narendra Modi is being attacked by opposition parties for failing to make good on a promise he made in 2014 to create millions of jobs for India’s huge young population. Modi’s Bharatiya Janata Party rebuts that criticism and says India is generating new opportunities as it becomes one of the world’s fastest growing major economies.

Job creation is a massive challenge for a nation with one of the world’s youngest populations — half the country’s 1.3 billion people are under the age of 25.

Recent data shows that joblessness has soared to record high levels. Opposition parties have made joblessness one of their principal election planks and have accused the prime minister of failing the estimated 8 to 10 million young people who enter the workforce every year.

The independent Mumbai-based Center for Monitoring Indian Economy estimates that unemployment reached 7.2 percent last month and that 11 million jobs were lost in 2018. With a working population of 500 million, that translates into more than 30 million people waiting for jobs. An unpublished official survey that showed unemployment at a 45-year-high has also been widely quoted by Indian media.

India's main opposition Congress party President Rahul Gandhi speaks during a public meeting at Adalaj in Gandhinagar, India, March 12, 2019.
India’s main opposition Congress party President Rahul Gandhi speaks during a public meeting at Adalaj in Gandhinagar, India, March 12, 2019. VOA

On the campaign trail, the head of the main opposition Congress Party, Rahul Gandhi, who is seen as Modi’s principal challenger, talks repeatedly about a “jobs crisis.”

“Our government is refusing to accept that we have a massive crisis and potential disaster in front of us,” Gandhi told a group of university students in New Delhi recently, many who will be first time voters.

Modi’s Bharatiya Janata Party dismisses concerns about the job data saying it does not capture the real picture because it focuses only on the 15 percent of Indians who work in the formal economy. It points to a recent industry report that jobs have been created in the medium and small sectors.

The BJP says millions of people have found work in the transport and infrastructure sectors or as delivery boys in booming online businesses as India becomes one of the world’s fastest growing major economies. They point out that the issue is not jobs but livelihoods, and point to millions of people who are not counted in job data.

They are self-employed people like cab owner Chain Pal Singh. As the app based taxi business boomed, Singh’s friend, who operated a cab, persuaded him to quit his job and take out a loan to buy a car. His decision has paid off — in four years he has earned enough money to invest in two more cabs.

Singh says he is much better off than when he held a job. “I used to earn about $225 dollars a month. Now in some months I can earn almost double that amount. Its beneficial for me.”

Following defeats in key state elections in December, Prime Minister Narendra Modi told parliament last month, “This truth has to be acknowledged. The unorganized sector has 80 to 85 percent of the employment.” He pointed to millions of commercial vehicles sold in recent years and questioned if they had not generated jobs for drivers.

Economists admit India’s large informal sector has made it difficult to calculate employment, but they say joblessness or underemployment remains the country’s biggest challenge. While scarcity of jobs is not a new problem, two disruptive economic steps in the last two years exacerbated the problem.

In 2016 a sweeping currency ban meant to tackle the problem of illegal cash, dried up jobs as it created huge currency shortages, particularly in small businesses and in the countryside. A poorly-implemented tax reform known as the Goods and Services Tax a few months later was another blow to businesses.

Meanwhile, Modi’s “Made in India” campaign, which aimed at making India a manufacturing hub like China, has made a slow start and sluggish labor-intensive sectors cannot cater to growing numbers of job seekers.

“We can’t keep patting ourselves on the back that we are the fastest growing economy specially if all these other indicators are not growing at a rate that will absorb the growing labor force,” says Santosh Mehrotra, a human development economist at the Jawaharlal Nehru University in New Delhi.

“More young people are entering the labor force, millions want to leave agriculture but can’t find construction work because construction activity has slowed down because the investment rate in the economy has slowed down.”

Also Read: The Mental Health ‘Epidemic’: About Six in Ten Teen Say, They Feel A Lot Of Pressure To Get Good Grades

He points out that exports, another sector that created a number of jobs has also not been performing well.

As the campaign heats up, the opposition will try to keep the spotlight on jobs, or lack of them, even as the BJP tries to focus on national security following a recent confrontation with Pakistan. The final verdict on whether to give Prime Minister Modi a second term in office will be delivered by millions of voters when they cast their ballots. (VOA)

One response to “Are There Enough Jobs In Prime Minister Narendra Modi’s Led India?”

  1. If the employment picture is bleak despite the construction of so many more Kilometers of roads, railways, air ports, bridges, toilets and other infrastructures compared to the five or even ten years of UPA government, imagine where we would be if we had UPA III government .