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is auction the only option?

is auction the only option?

BJP is asking for resignation of PM for not auctioning the coal blocks. the CAG thinks that if they were auctioned, the government would have got Rs. 1,86,000 crores extra. one thing is being deliberately overlooked, if the coal using industries (including railway) had to pay extra, from where would they have got the money. from the consumers of electricity or railway freight and fare or whatever the industries are selling. would it not have added to inflation. the economics would have to be worked out.

the question arises whether auction is the only option? if, as a matter of policy, considering various other issues, auction is ruled out, why should it raise heckles?

i recall that in seventies, it was decided by government to auction the foreign liquor shops. i, as excise commissioner, opposed it. my view was that having paid excessive sums in auction, the successful bidder indulges in malpractices to earn a quick rupee. the example of desi liquor was before us. there was plenty of illicit liquor in connivance with some excise officers. in tribal areas and other places, there are even reports of tribals being forced to buy liquor from the government auctioned shops instead of brewing the traditional brew by themselves. the foreign liquor may not be sold by compulsion but there was every possibility of rules being circumvented to make a quick buck.

instead i proposed a licensing system. anyone can get a license (there would be no upper limit on number of licensees). he will have to pay excise duty on each bottle sold. in order to reduce the possibility of monopolizing sales by a person or a cartel, the excise duty will rise with each slab of liquor sold. the person concerned will be forced to open number of shops. in such a situation everybody will have a chance to participate. i worked out the economics that we would get the same revenue which was being projected on account of auction of the shops.

the proposal was rejected. the auction produced more money that was anticipated. whether i, as excise commissioner, had a role in this more than expected return, is not for me to say. suffice it to say that once the policy was rejected, i worked as sincerely as possible for a positive outcome.

the finance secretary was happy and remarked that my proposal would have meant loss to the government. my comment was that any loss would have been compensated by the satisfaction of the customers in getting genuine material. we have to weigh one against the other.

can we say the same about auction of coal blocks? is higher revenue the only criterion? the customer is the king and his gain is important. the tragedy of nehruvian india is too much emphasis on money. the community development scheme failed because all attention was on expenditure, almost none on satisfaction of the customer, in this case the people in the villages. entire family planning programme was ruined because there was money for the person getting operated, person bringing him for operation, person performing operation. the real benefits were not pointed out, only the financial returns. the emphasis on spending the budget was such that the sight of aim of the programme was lost.

one must take a holistic view and not be led by immediate gains.


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