Politics warps judgments. There is no other reason why a normally sensible finance minister should peddle absolute myths as truth and partial myths as complete untruths.
Consider the case of Palaniappan Chidambaram and his repeated statements on the Comptroller and Auditor General’s estimates of “presumptive losses” on the 2G spectrum allocated by A Raja and the coal blocks allocated by a ministry headed by his own Prime Minister. He called both these CAG estimates “mythical” and “fanciful.”
A PTI report in Hindustan Times quotes Chidambaram as saying that Coalgate “undue gains” of Rs 1.86 lakh crore could turn out to be as incorrect as the 2G loss figure of Rs 1.76 lakh crore.
At the outset, let us agree that it was the media that confused an “estimate” of 2G losses by the CAG as the amount actually stolen by crooks.
But surely, the finance minister of the country should know the difference between an estimate and an actual loss? Moreover, why is an estimate —even assuming it is completely wrong—being used to clobber a constitutional functionary who is trying to do his duty?
If it is Chidambaram’s case that no “mythical” estimates should be made, he should aim his gun at himself first.
He is the finance minister who started the practice of actually computing “revenue forgone” due to tax reliefs. In his last budget (2008-09), Chidambaram computed the revenue forgone (which is equivalent to the CAG’s presumptive loss on 2G) at Rs 2,78,644 crore.
If Chidambaram is entitled to claim he lost revenues of Rs 2,78,644 crore, why is a CAG barred from pointing the 2G revenues forgone by not holding an auction?
Why is Chidambaram bandying his own “mythical” and “fanciful” figures of revenue loss when he thinks the CAG is off his onion doing so? Surely, the CAG is entitled to make his own estimates if a politician like Chidambaram can do so?
Next, let’s come to the 2G and Coalgate losses. Let’s also, for a moment, grant Chidambaram his claim that the 2G losses are “mythical” since, after all, spectrum is just thin air. And people given cheap spectrum ended up offering cheap telephony. (This government claim too is a myth, for both the PM and Chidambaram had actually called for market-determined pricing of spectrum, exactly what the CAG asked for. It is another matter that A Raja checkmated them).
But coal is not thin air. It is a physical good, and has a market price. The CAG’s estimate of coal reserves allocated to various parties not only said that the allocations were non-transparent, but that the reserves were given for near-zero prices. Firstpost believes that the CAG’s loss estimate in coal is really a gross underestimate, and not a myth.
When a physical asset is given to someone for free, how can there be no loss? At best there can be disagreement on the value of the gift, but there can be no dispute that someone has paid a price for it, and when gifted for free, dents his purse.
But this is what Chidambaram said. “Yes, if there is any irregularity in allocating the block then that’s a different matter. But where is the loss?”
First, let’s be clear. Allocating coal blocks non-transparently is not a mere “irregularity” —a word which gives one the impression that there was a minor technical error, like not filing an application in triplicate or forgetting to make some non-material disclosures. The coal block scam was not the result of a minor “irregularity” but a willful allocation of coal reserves, often to undeserving parties, at practically no cost. Some 14 percent of the country’s coal reserves were given away free, and is this a minor irregularity? (Read here and here)
Second, Chidambaram’s argument is that not much of the coal is mined. And so where is the loss? He said: “One business house (official) told me that it was allotted a coal block some seven-eight years ago. (But), it has not been able to enter that area yet for a variety of reasons. Now, what’s the point in saying that some loss is there. What is the loss?”
Has the finance minister not heard of the time value of money? If a coal block was allocated eight years ago for free with the specific understanding that it will be used to generate cheap power, how is eight years of no production not a loss? If coal and had been produced, and if power had been generated, wouldn’t national income and tax revenues have been higher? Conversely, if there was no production, it was an opportunity loss. We lost eight years of coal, power and related production. We may not be able to compute this loss, but surely there is a notional loss?
And even if the argument is that coal cannot be mined because of environmental issues, the point is this: when production starts, say after another five years, the resources would still have been given away for free.
There is also a larger reason why Chidambaram lacks credibility in calling the CAG’s figures as being mythical. Quite apart from the fact that his attack is political in nature, his own budget numbers have not only been “mythical”, but sometimes an attempt to hide reality.
His 2008-09 budget, for example, projected a fiscal deficit of Rs 1,33,287 crore. But the actual figure turned out to be Rs 3,36,992 crore. These figures went grossly out of whack due to the Lehman crisis, but the same can be said for the 2G loss figure of Rs 1,76,000 crore—which was meant for the high growth year of 2008-09, and not 2012-13, when Chidambaram’s government ruined business confidence.
The fiscal deficit is another kind of loss figure, for it calculates the centre’s revenues minus expenditures.
But Chidambaram not only got his loss figures wrong, but also fudged them. How? By excluding oil subsidies from his deficit figures. He issued oil bonds and kept his “loss” figure lower than they were.
And who says so. Chidambaram himself. In his 2008-09 budget, he confessed: “I acknowledge that significant liabilities of the government on account of oil, food and fertiliser bonds are currently below the line….our fiscal and revenue deficits are understated to that extent. There is a need to bring these liabilities into our fiscal accounting.”
This is what his successor, Pranab Mukherjee, more honestly did, and got blamed for ruining the fiscal picture. He tried to clean up Chidambaram’s mess and got blamed for it.
Chidambaram’s last budget was a misadventure, and under-represented the true picture of budgetary loss.
He is the last person who should be pointing fingers at CAG.