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The country’s Attorney General has replied to the Supreme court today, asking for more time to decide on the issue of cancellation of mining leases given to private companies. Reports suggest 41 coal blocks that are yet to take-off might be cancelled. Rs 2 lakh crore is reportedly at stake as the court has taken a hard stance on companies that have invested in mining coal only on allocation letters sans clearances and prospective licences.
“Let the amount go down the drain. An alleged illegality cannot be compounded by another unauthorised action,” the apex court is reported to have told G.E. Vahanvati who accepted last week that allocations could have been done in a better way.
“Let the amount go down the drain. An alleged illegality cannot be compounded by another unauthorised action,” the apex court is reported to have told G.E. Vahanvati who accepted last week that allocations could have been done in a better way.
Related to illegalities in mining, but in a separate development altogether the Supreme Court has also directed the Centre this week, to place before it the Justice MB Shah Commission report on illegal mining in Odisha which was scathing in its criticism of the state and central governments, and also of blue chip private companies like the Tatas, the Birla group, state owned SAIL and 70 others for violating environment and forest laws. It has recommended a review of environmental clearances to some of these companies and said Rs 60,000 Cr should be recovered from miners for illegally extracting manganese and iron ore.
Away from Orissa, in Gujarat meanwhile the Adani Group has faced a major setback, as a division bench of the Gujarat High Court this week ordered the shutdown of 12 units in Adani Ports and SEZ, again for violating environmental guidelines. All of these developments come amid grave allegations by BJP’s Prime Ministerial candidate Narendra Modi on former Environment Minister Jayanthi Natarajan of rent seeking through a ‘Jayanthi tax’ to clear projects.
It’s a moment of catharsis for India Inc and for the government that had too much power and discretion wrested with it for allocating natural resources, leading to large scale corruption and violation of rules. The sudden flowing together of these transgressions points to a rough 2014 for industry as past instances of crony capitalism and breach of rules will come to haunt future plans if large scale lease cancellations materialize. The courts seem serious in their mission to clamp down on putting an end to the ugly business-politics nexus that characterized the ad-hoc allocation of natural resources between 1993 and 2010.
The blame for this blatant abuse of power & cronyism must be equally shared between the government and corporate India.
Subjecting companies who met all terms and conditions but couldn’t proceed with mining due to delays on part of the government to cancellations will prove to be a big blow to investor sentiment. Blanket de-allocation of coal blocks will also severely affect growth and an already shaky banking system as it could lead to large scale NPA build ups. But what’s equally true is that the corporate class, that’s been at the forefront in its attack on the government for tardy processes, red tape and a paralysis in decision making is equally culpable for this mess.
Apart from large scale violation of environmental norms, private players have been accused of sitting on blocks for years and failing to develop them in time while several companies like BLA Industries for instance, owned by a BJP leader have recently been indicted for profiteering by selling coal meant for captive purposes in the open market, causing huge losses to the exchequer. The CBI has already filed 16 FIRs including against high profile industrialists such as Naveen Jindal who has been accused of cheating and criminal conspiracy to avail 2 blocks in Jharkhand.
Should companies and their promoters that indulged in such blatant crony capitalism be allowed to get off scot free?
Bribery and cronyism have for long been debilitating factors to doing business in India. While India Inc is no doubt to share responsibility for being complicit in the illegalities, and must be made to pay for their sins, the primary fault lies with the government that has made it impossible for anyone in a government facing sector to do business honestly. While Modi hasn’t been able to prove allegations of rent seeking, what exactly explains how Veerappa Moily, who took over as the Environment Minister has managed to clear a bulk of the projects that Natarajan sat on for years?
It is no secret that both - the government & companies prospered for years in this arrangement of ad-hocism and non-transparency. It’s time now for a cleanup though. Doing that however by prosecuting companies who would have found it next to impossible to navigate through the maze of India’s babu raj without greasing palms, will only dent sentiment further.
What’s needed is a swift overhaul of allocation methodologies that reduce government interface and discretion. Proposals to auction rather than allocate coal and set up a mining regulator or the directive to formulate a national environment monitoring authority will go a long way in solving some of the issues.
The current crisis must be seen as a shakeup that will bring cataclysmic changes in governance. It may lead to short term pain, but will go a long way in cleaning the soot off India’s blackened past.
