CAG: India’s adjustment bureau

Over the last week or so, I have had the good fortune of having extended, and extensive, discussions about the CAG and Coalgate with individuals whom I respect. With a few notable exceptions, the considered view of these PLU+s (people like us and "liberals") was that net, net, the CAG had done a good service to the nation via the documentation of the coal scam. They admit that the CAG very likely, and knowingly, wildly exaggerated the extent of the coal loss associated with the non-auction of the coal mines. But that is just a "technicality". It is disturbing, very disturbing, that a reasonably large section of the intellectual and policy wonk community of Delhi should think this way.

What are the facts and what is at stake? The facts are that the CAG loss of Rs 1.86 lakh crore from the non-auction of coal mines is suspect. Even by the CAG's own admission, the loss may have been less. The second fact is that while simultaneously tabling three reports in Parliament — coal, power and airports — the CAG, for reasons open to speculation, decided to use a 10 per cent discount rate to obtain the estimate of the government's loss (or equivalently, the scam estimate) from power and airports, but a zero per cent discount rate for coal. Given that the time period of gains from all three sectors is 25 years or more, this decision is, at a minimum, inexplicable and suspect. A 10 per cent discount rate would reduce the CAG estimate of the scam by over 60 per cent — a large decline from the lofty figure of Rs 1.86 lakh crore. Is that why the CAG used a zero discount rate — because Rs 74,000 crore does not sound as ignoble as Rs 1.86 lakh crore? Are sound bites worth a gross, deliberate miscalculation?

... contd.

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