Not limited to Karnataka

Not limited to Karnataka

A report by the Karnataka Lokayukta has once again highlighted the chaos and corruption endemic in the allocation of natural resources such as minerals, oil and gas, spectrum and land. Today, this poses the single biggest threat to good order in the country. It is time allocation rules and priorities were changed if India is to save itself from a resource curse.

The report, which was leaked a few days earlier, blames political leaders in the state for the mess in the iron ore mining sector. The lokayukta, justice Santosh Hegde, said the state lost 1,800 crore in 14 months from March 2009 to May 2010 due to illegal mining. He blamed chief minister B.S. Yeddyurappa and some of his ministers for a “mafia-like" situation in the iron ore mining regions of the state.

These are strong words from a senior and respected judge. They highlight a problem that is not restricted to a single state or a single “sector" for that matter. At the heart of the problem is the mismatch between resource-intensive growth and the 19th century procedures topped with discretionary powers in allocating land, oil, minerals and a host of other raw materials. It pays for those who wield the power to allocate to indulge in corrupt practices. At the same time, it also pays firms—especially politically well-connected ones—to “corner" these resources. There are plenty of examples of companies being allocated coal and mineral mines and then not doing anything with them. Simple passage of time itself multiplies the value of what they own. This trend lies at the heart of oligarchic tendencies in present-day India.

The way out is simple: Abolish all discretionary methods of allocation. No ministerial approvals and no exceptions. If the resource is scarce, auctioning to the highest bidder is the most rational procedure. That way efficiency of use is guaranteed. That, however, may not be sufficient. A time-lapse clause, that enables resumption of resources if they are not used, should be included in this process. Otherwise there are many oligarchs who can corner resources through fair procedures.

So far, there is no sign that the Union government is moving in that direction. It had appointed a committee led by former finance secretary Ashok Chawla to devise a way for efficient and transparent allocation of these resources. Its fate, like those of such committees, is snared in Delhi’s byzantine byways.

Discretionary allocation or auction: what is better? Tell us at