Coal has been in the news. It gave the Opposition leaders an occasion for staging one of their favourite dances, in which they jump madly up and down and shout for the prime minister’s resignation. The occasion for their Bollywood show was the loss of Rs 1.86 lakh crore estimated by the comptroller and auditor general as arising out of the government’s allocation of coal blocks by grace and favour.

This is just the kind of figure that would excite people who are unwilling to read. If they had bothered to read the CAG’s report, they would have noticed that he has greatly improved his style in the past three years. His reports are brief and readable, and make a limited number of points. This is not entirely a matter of choice. He has got an impossible remit. He should really be auditing the entire Central government, but does not have even a hundredth of the manpower he would need for it. As the prime minister’s pointed assault on the CAG has shown, he often makes enemies with his criticism of the government. One can make a more lucrative career in excise and customs, and a more exciting one in the administrative service. So the CAG does not get the best civil service candidates.

The estimate of loss was just a minor piece of drama in the CAG’s report. The objects of its audit were the ministry of coal; its Calcutta branch, the coal controller’s organization, which monitors the MOC’s subsidiary Coal India Limited, the world’s largest coal producer; and the Central Mine Planning and Design Institute Limited. The CAG ignored minor players like the Singareni Collieries Company Limited, the Neyveli Lignite Corporation Limited and the Mineral Exploration Corporation Limited. It aimed to answer three questions. Did Coal India fulfil its task of increasing output to meet the domestic demand for coal? Did the government’s procedures for giving out blocks for captive mining ensure objectivity and transparency? Did their allocation lead to the intended increase in production? Before considering the CAG’s replies, it is worth going into some history that he missed out on.

Indira Gandhi got cheesed off with businessmen for having been friends with her opponents; so in the early 1970s she went about nationalizing one industry after another. Coal was one of them. The coal mines she took away from private owners were clubbed together in the Coal Mines Authority Limited, which was renamed the Coal India Limited in 1975. It was given a monopoly of coal mining except for a small concession made to state governments: in 1979, they were allowed to scrape away coal from outcrops — “isolated small pockets” — provided the CIL said it did not object, and provided they did the open cast mining themselves for their own use. Steel mills which had captive coal mines were allowed to retain them.

Everything worked fine for the next 14 years. Then the government was briefly subverted by liberals who believed that the wholesale nationalizations had been a mistake and that competition amongst privately owned businesses was best. Led by P.V. Narasimha Rao, they wrought a revolution in industrial policy. The Coal Nationalization Act was amended in 1993 allowing allocation of blocks to private enterprises for captive exploitation. The coal ministry identified 143 coal blocks that the CIL and SCCL were not exploiting, and called for expressions of interest. In April 2000, the Vajpayee government tried to legislate and sweep away nationalization. But the Congress and the communists got their trade unions to start a campaign and stopped the government. In 2001, the coal ministry wrote to state governments and told them that they could mine coal anywhere, and not just in isolated small pockets, provided the CIL did not object. But beyond this, the Bharatiya Janata Party-led government gave up on coal. The reason was that electric power generation was largely owned by state governments. Most of them charged below cost and made huge losses. So they wanted coal to be as cheap as possible. And as long as they dominated the coal market, profit-oriented private miners did not have a chance.

The United Progressive Alliance government continued the arrangement that had been set up in 1993: the coal ministry organized an interministerial “screening committee” which received recommendations from state governments and other interested parties in the public sector, and on their basis allocated blocks for captive use. As the CAG noted, this committee’s minutes say nothing about the principles followed in giving out coal blocks; on the face of it, the allocations are purely arbitrary, and susceptible to favouritism and corruption.

When the UPA government came to power, it had some activist ambitions. It appointed a committee under T.L. Shankar, which suggested auctioning of coal blocks. For seven years, the government has slept on this recommendation. Then, after the Supreme Court cancelled over a hundred telecom licences and plumped for auctions, they became the flavour of the season, and the CAG too has plumped for them. So the minister of coal, known in other contexts as prime minister, has had to explain why he did not auction coal blocks. His answer, briefly, is that a changeover to auctions required the cooperation of the state governments and of the ministry of power which represented big coal consumers in the government sector. They were against auctions, so the system of allocation could not be changed. The prime minister is also upset that the CAG dared criticize the outcome of the sacred democratic process.

To this, it needs to be said that the sacred democratic process stinks. The government-owned electricity boards are mostly bankrupt; their losses are a contributory factor in the financial troubles of the state governments. They keep on going bankrupt. So the government appoints a finance commission every few years. On its recommendations, the Central government bails out state governments. That makes the Central government bankrupt. So it uses its privilege of printing money. That causes inflation. Inflation impoverishes those who cannot print money or bargain for higher incomes. But they do not have enough votes, so the prime minister can ignore them.

That is how democracy works; the prime minister can treat it as sacrosanct, and tell those who suffer that it is their sacred duty to become poorer day by day. That is fine for those who get elected, get plushy ministerial jobs and live in palaces at the taxpayers’ cost; but those at whose cost they live are bound to ask: is this the democracy we fought the British for? Why do other democratic countries have inflation close to zero and we have it close to 10 per cent? Is this the best government we can have? Can we not do better?

It is a good question for the people to ask themselves; but it would be even better if the prime minister sometimes asked himself this question. Could he not run the government better? Could he not provide leadership instead of just floating for years on passive consensus? Could he not use the levers of the enormous power the Central government wields instead of just chairing meetings of vociferous politicians? Meanwhile, the country is grateful to him for having sat in the PM’s chair for so long and kept worse candidates out.