fractured earth

Home » Uncategorized » Are the coal block auctions as successful as the Modi government claims?

Are the coal block auctions as successful as the Modi government claims?

At a gathering in Paris last month, drawing attention to the coal block auctions that have taken place under his government, Prime Minister Narendra Modi boasted, “Twenty coal blocks out of 204 have been auctioned so far and we got more than Rs. 2 lakh crore from them.” The factual error in the statement – 31 blocks, not 20, have been auctioned in two rounds – might be the least of the problems with the government’s triumphal sentiment.

To start with, as a report in Business Standard explains, the Rs 200,000 crore is not a one-time payment flowing into government coffers, but revenues that are likely to accrue over the lifetime of the mines. These revenues include royalties that states would have earned regardless of whether the mines had been allotted or auctioned.

While auctions are an improvement over the discretionary allotments of the past, and the government has shown swiftness in moving ahead with them, what isn’t well understood is that the design of the auctions has a significant impact on their transparency and outcomes. Competitive auctions are meant to provide a market-based mechanism to discover the value of a resource. But poor design could impede price discovery.

As the government prepares for a third round of auctions, Scroll in a two-part series, takes a closer look at the first two rounds. Our analysis raises worrying questions about both the design of the auctions and their outcomes.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s