Raman Bhalla
Rules relating to the procurement and auction processes in the state are premised on the assumption that we are corrupt people. For instance, in the procurement of public goods and services, the system is designed to always look for the first lowest bid on offer (L-1). The assumption underlying this approach is that the quality of products and services that all the bidders in the fray purport to offer more or less compare. This is an outrageous operating assumption, to say the least, as we all know that, if the price spread is big, the qualities of product and service on offer would not ever approximate. From our practical experience also, we all have seen that while L-1 does save you some money, it almost always does so at the expense of quality.
Likewise, in alienation of public resources, there is always an overpowering urge to fix the minimum reserve price (MRP) higher for revenue maximisation. No thought is ever given to the possibility of keeping the bar lower, so that the state could milk the benefits that the alienee will render downstream for the larger public good. The net result is that though public revenues are upped, there is a great deal of tariff discomfort generated in the process for the general public. The question, therefore, is why do we have a system, which compromises quality of public services or generate tariff discomfort without throwing up alternative policy choices for transparent pursuit of the collective good. The answer to this complex question is not simple, but I am inclined to imagine that, perhaps, those who framed rules for us feared that, if too much flexibility was built in the system, it will be prone to exploitation more for self aggrandisement than being put to use for collective good. In other words, rules were not devised so much for the collective good as for saving the system from being manipulated by its incorrigibly corrupt people.
The analogous regulatory framework at the centre is also no different except in some isolated cases (for instance, spectrum and coal blocks allocation) where auctions have not enjoyed a privileged status. This status notably has had an executive mandate only or else the CAG would not have evolved the presumptive loss template with reference to the auction based alienation. Auction independent alienation in the case of spectrum in the past has been necessitated by the abstract nature of the commodity and the fact the MRP could not be ascertained with reference to any identifiable and justifiable benchmark(s) in the absence of easily replicable analogous models. Such a problem was also faced by the US of A initially before it evolved processes for its allocation.
In the case of coal block allocations, alienation has always been done through the screening committee route, which is based on both the inputs and recommendations from the concerned state governments. The allocation of captive coal mines through the auction route has always been resisted by the coal bearing states on the plea that they would lose control over the coal miners ( read private players) as also the downstream benefits churned out by them. Coal is an important source of power generation and states have cleverly sold an argument that by alienating it outside of the framework of auctions, they could administer the energy prices for the larger public good, which may not be possible in case coal is traded via auctions. While the argument cannot be faulted, it is also a fact that we have not produced energy commensurate with the huge coal reserves that we possess. On the administered energy prices, the less said the better. Keeping prices artificially low never helps and has never helped in the best of situations. But in the case of the coal bearing states, against the refrain put out, tariffs are on the uptick as is the case in rest of the country. Clearly, the system has been taken for a ride in the name of collective good.
The above debate shows that no single template offers solutions that advance the cause of transparent pursuit of collective good. In fact, the recent SC judgements on 2G spectrum allocation through first come and first served route and coal block allocations via screening committee route have not been demystifying. In 2G case, the SC, while cancelling 122 licenses, has held that 2G spectrum allocations have to be carried out through auctions. On the other hand, in the coal block allocations, the SC has opined that auctions do not enjoy the constitutional mandate and that in the interest of collective good, the state can choose to be guided by other procedures. What these two pronouncements reveal is that the procurement procedures are matters of opinion and the procedures will change depending upon who is opining. This, however, is not par for the course as far as judicial pronouncement being the final word in a given matter is concerned. Also, the latter judgement may give the players, whose licenses have been cancelled, an opportunity to approach the court to re- hear their cases, as it overturns the wisdom on which their cases were rejected. At the same time, it also puts the executive in a quandary on the issue, as it has always looked to the SC, whenever its regulatory principles have been held as untenable, for guidance to re-fashion its regulatory apparatuses.
Most importantly, the SC’s recent opinion in the matter of coal block allocations also challenges the normative frameworks within which the CAG has sought to ask questions of the governmental excesses and transgressions. As an auditor, the job of the CAG is all about ensuring that public procurements are done economically even as auctions of public resources maximise profits. It can’t engage itself with the question of public good when we have not defined the concept of collective good and made it a part of its mandate. And till such time the concept of collective good is not defined and written into the CAG’s mandate, we will continue to have situations of SC endorsing the governmental stand of giving auctions a go by in the name of collective good and the CAG pouncing on it as an act of fiscal transgression. Since this ideological dichotomy between the two constitutional authorities may complicate the issue, it is imperative that the executive steps in to lay down the rules of the game to harmonise the differing positions.
If we have one type of people whom we fear may manipulate the system due to their wanton greeds, we have another extreme of honest people, who would not budge from their positions even when they know they are being unreasonable. They are sticklers for rule and always throw their lot behind L-1 at the expense of quality and being in a minority in the committees. They do so because they want to protect their backsides. Their view is that, if they take liberal view, the letter of law is such that it won’t help the spirit of law create an extenuating circumstance for them when the vigilance comes knocking at their doors. Similar such mindset issues currently beset some of our collectors, who while working out compensation in land acquisition cases, have been found to make payments on the stamp duty rates instead of on mandated market rates.
The mindset of L-1 has to give way to the transparent paradigm of the collective good for the former has failed us. For all its monumental failings in the past, the pursuit of the collective good is still a forward looking prescription. But we would need to explicitly define the collective good and evolve procedures that help us achieve it. Collective good can’t be some amorphous object and the procedures and processes designed to achieve it can’t be ambiguous and open to interpretations. This has to be our bottomline and this is what has to determine the course of the change that we must now introduce in our relevant laws. If we could make this transition, we would have empowered our officers to take decisions in the interest of the collective good and not in self-interest or to protect their backsides. At the same time, we may have also helped redefine the moral compass within which they would work in future and, more importantly, redefine the operating assumptions underlying the rules.
(The writer is a Minister for Revenue, Relief and Rehabilitation in the State Government)
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