Assocham supports government against CAG

As the fight over CAG’s report on coal allocation intensifies, one of the prominent industry associations, has justified the government’s decision to allot coal blocks at cheap rates to big corporations.

Assocham, some of whose members may be among the beneficiaries of the government policy, said the allocation of cheap coal helped keep input prices down for the corporations who got them. In turn, it argued, these corporations could produce power at cheap rates and win price-based bidding wars to supply power to government-owned companies.

The CAG, in its report a week ago, had pointed out that most of these coal allocations have not even been put to use, but are being “squatted on” by their allottee companies such as steel and power producers. Sajjan Jindal, vice-chairman of JSW Steel is the former president of Assocham, while the current president is Rajkumar Dhoot, MD of Videocon Industries.

“The ASSOCHAM agrees that there could have been serious wrongs in the selection of beneficiaries. The issue has to be tackled differently and the CBI is probing the case,” the association said. It, however, maintained that cheap coal helps keep power prices down. A similar argument was advanced by former telecom minister A Raja, who said that cheap spectrum helped telecom companies keep call rates down.

“Several of the blocks were allocated to power, steel and cement companies for captive use. If the blocks were auctioned, the cost of these blocks would have pushed up the sale price of power, steel and cement,” the association said.

“To extrapolate the current price to the prospective coal output from these blocks and then arriving at a figure of over Rs 1.87 lakh crore as the loss to the Government, does not seem to be correct application of accepted principles of economic value assessment,” it alleged.

Assocham also questioned whether auctioning is the best way of allocating resources to private companies. “The case in point is the spectrum auctions. The inability of the successful bidders to push the 3G service to a large base of subscribers partly due to the high costs imposed by the bid price, puts a question mark on the claimed advantages of the auction process. This has also exposed the telecom sector to a huge debt that continues to constrain its expansion,” it said.

“If Government is to be mandated on what public policies should be by the judiciary or the chief auditor or some civil groups, only chaos would follow,” the industry group said.