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Business pays for politicians’ sins

Author: Ravi Shanker Kapoor
Publication: Indiafacts.co.in
Date: August 28, 2014
URL: http://www.indiafacts.co.in/business-pays-politicians-sins/

American author and philosopher Ayn Rand called big business as “America’s persecuted minority.” But it is truer for industry in India than anywhere else, the recent observation made by the Supreme Court about coal block allocation and private companies being a testimony to the victimization of industry in our country.
This is not to say that the apex court is wrong in taking a hard line. In fact, the SC’sanger may prove to be good in the long run, inasmuch as it has the potential of rationalizing the coal policy and undoing the nationalization that is the root-cause of the present mess. The three-judge bench, however, also said something that is not very sound. It said that the allocation resulted in “unfair distribution of the national wealth in the hands of [a] few private companies.”

For, the distribution or redistribution of wealth is a misleading and seedy concept. It is misleading because it assumes that wealth is something out there that belongs to everybody in the society or nation. And since it belongs to everybody, it ought to be distributed fairly and justly. Nothing could be farther from the truth, for wealth is not something lying somewhere that has to be discovered and claimed by all: it is created by human endeavor. Apparently, the apex court equated natural resources with wealth. Natural resources like iron ore and bauxite are found in a natural state, but man makes wealth by transforming them into iron and aluminum. God or nature makes ores; man makes metals.

distribution of wealth concept is also questionable because it has the potential of bringing socialism through the backdoor. It unquestioningly accepts egalitarianism as a good idea and a noble sentiment. The presupposition is wrong. For, as Will Durant wrote,“freedom and equality are sworn and everlasting enemies, and when one prevails the other dies. Leave men free, and their natural inequalities will multiply almost geometrically, as in England and America in the nineteenth century under laissez faire. To check the growth of inequality, liberty must be sacrificed, as in Russia after 1917. Even when repressed, inequality grows; only the man who is below the average in economic ability desires equality; those who are conscious of superior ability desire freedom, and in the end superior ability has its way” (The Lessons of History).

It is unfortunate that the highest court of the land has accepted the false ideas propagated by intellectuals. It is a well-known fact that our intellectuals have considerable predilection for socialism, and all of them have an unshakeable faith in the dogma of egalitarianism. They are the loudest proponents of the distribution or redistribution of wealth. However, when intellectuals talk about distribution what they mean is that Mukesh Ambani and Ratan Tata should share their riches with me, but I will not share my assets with my driver and maid. Such are the hypocrisies of socialism.

It was the baneful influence of socialist ideas that engendered the nationalization of coal in 1973. The public sector Coal India Limited (CIL) got the monopoly to extract coal; the ills associated with the public sector also afflicted the coal industry and the industries dependent on the mineral. Reason demanded that our political masters gave up nationalization, but then they are driven by rhetoric and not rationality. So, the policy was tweaked in 1976 to allow captive mining to the private companies engaged in the production of iron and steel. Seventeen years later, the law was again changed to let private power generators do captive coal mining. But, significantly, coal was not denationalized, despite the fact that the 1973 policy had become anomalous after the 1991 liberalization.

The rest is recent history. The UPA-I government allocated coal blocks to public sector undertakings like NTPC and players including Arcelor-Mittal, Tata Steel, and Jindal Steel for captive use. But, typically, the government did not adopt the transparent process of auction by way of competitive bidding. A ‘screening committee,’ mainly comprising government officials, allocated blocks based on the recommendations by Union ministries concerned and state governments. The Comptroller & Auditor General disapproved of and slammed the process; the exchequer had to incur a loss of Rs 1.86 lakh crore because of opaqueness, it said.

Two points need to be made in this context. First, industrialists are made to pay for the sins of politicians. The latter nationalized coal, made CIL a monopoly, allocated coal blocks improperly, came up with the preposterous ‘go-no go’ distinctions, and invented a web of clearances and regulations. The denouement was coalgate, and for this, industrialists have to sharea lot of blame! Not that businessmen are the descendants of Raja Harishchandra; but the fact is that they operate in a system, and if the system functions only when it is oiled and palms are greased, paying bribes is likely to become Hobson’s choice. Politicians and policy makers have created the system; politicians work within it.

Second, any tough action against businessmen will also be adversely affect small investors, banks, jobs, and investor sentiment. The interests of many other sections are intertwined with those of the persecuted minority.

Therefore, the need of the hour is the overhaul of the policy framework. For the sake of fairness, economic development, and rational statecraft.
 
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