Is it a crime to do business in India?

The Economic Times
16 October 2013

The Central Bureau of Investigation has filed a first information report against Hindalco, Kumar Mangalam Birla and former coal secretary P C Parekh, as part of the ongoing investigations into the coal scam.

There can be just one explanation for this: a method of proof that goes by the name reductio ad absurdum in mathematics. If you take a premise and make logical inferences from it, in conjunction with known truths, and arrive at an absurd conclusion, then the original premise stands disproved.

If a legitimate businessman like Birla and a civil servant who tried to initiate transparent auctions for coal allocations get charged as part of the coal scam investigations, the whole coal allocation process will appear as flawed rather than scammy. The reality is that flawed ideology and policy derived from it are at the root of the mess in coal.

Coal mining is a state monopoly. And Coal India is an inefficient monopoly, incapable of mining coal fast enough to meet the demand. So, the government decided, in the nineties, to allocate mines to coal users for captive use, without permission to sell coal to a third party. Now, anyone who mines coal has to pay the government royalty on the coal mined and tax on the profits made.

So, regardless of whether mines are allocated to A, B and C, deemed legitimate users of coal, or X, Y and Z, whose requirement of coal is less obvious, the government gets its dues. And politicians extract their tribute. And regardless of whether the allottee of a mine has legitimate use of coal or not, he gets undue benefit: coal at less than the price at which Coal India sells it.

But this flows from the policy of captive mining, not from the manner of allocation of the mines. Flawed policy is now incriminating the conduct of sterling members of India Inc. This madness must stop.