Case for coherent policy framework in resource allocation

Resources such as mineral deposits and broadband spectrum are rightfully public property. In the present democratic age governments, as representatives of the society, allocate these resources and regulate their use in the public interest.

The Constitution of India permits the parliament to distribute powers over minerals between the Central and state governments. Government’s powers over broadband spectrum, or airwaves, can be traced to its authority over post and telegraph, including “wireless, broadcasting and other like forms of communication.”

Collecting royalty on income from natural resources, such as minerals and bandwidth, can be traced to the government’s revenue-seeking tendencies which were prominent in colonial British rule. The government asserted sovereign power over every walk of life and physical thing, and collected revenue wherever and whenever it could. Mahatma Gandhi was, understandably, a strong opponent of this tendency of the government. His Dandi March was a challenge to the tax levied by the government on people making salt from seawater. Likewise, the American Revolution (1773-1783) had its origin in the levy of tax by the colonial government in the UK.

Leaving aside the larger question of the legitimacy of the government asserting rights over things like underground mineral deposits and the airwaves, we cannot get away from the fact that activities such as mining and the use of broadband spectrum need regulation – just as public roads needs traffic rules for everyone’s safety and convenience.

For the regulatory role, the government with all its faults remains the most suitable agency. In India, elected governments often use their powers over natural resources for narrow ends – namely, dispensing patronage, enrichment of politicians and bureaucrats and garnering revenue for the government.

From a broader public perspective, the current debate on 2G Spectrum allocation and illegal mining is incomplete. It does not cover vital issues such as the procedure by which public resources must be allocated to specific individuals or companies, the level of transparency that must inform the procedure, method of determination of royalty and the purposes for which the government can apply the revenue from royalty. The current debate pays little attention to these aspects which are essential for systemic progress that goes beyond mere treatment of the symptoms of the underlying malaise.

Divergence of interests
Recent experience underscores the need for developing a coherent policy framework for the allocation of public resources and monitoring their use, in the best interests of the society at large. In this effort, civil society has a role to play, as it has just done in the recent Lokpal legislation issue.

The matter need not entirely be left to the political and bureaucratic classes. The differences between the government Lokpal bill and the people’s version demonstrated the extent to which the interests of the people and the nominally-democratic government have diverged. Engagement of civil society in issues such as mining policy strengthens the democratic principle and will set India on the path of participatory democracy.

Royalty from the use of public assets such as minerals and airwaves has several dimensions. In Karnataka, former state ministers allegedly mined iron ore without paying royalty to the government. Reliance Industries, on the other hand, is reported to have relied on project cost escalations to avoid royalty payments to the government of India.

These are examples of the methods by which powerful persons attempt to avoid paying their dues for their appropriation of public resources. The mining policy must be sensitive to such tendencies and have appropriate safeguards.

Another important link in the chain is about use of the revenue from mining or spectrum allocation. At present, the government is not accountable for the revenue it generates from permitting the use of these public resources. Transparency and accountability in government’s use of the royalty income is essential for the legitimacy of the revenue-based approach in allocating public resources.

Until now, the debate on 2G Spectrum and so-called illegal mining has been confined to the issue of loss of revenue to the government. This approach only focuses on the fact that money did not reach the coffers of the respective governments. The issue must be taken to its logical next level and there is, equally, a need to focus on how the money must be utilised.

A key question is whether the funds are used for development purposes or they end up in the government’s general pool of funds to support its ever-increasing expenditures. Equally relevant is the issue is about benefits for the local area where resource extraction occurs. Whether it is oil extraction in Assam or iron ore mining in Bellary, it is important that local communities benefit from the extraction of valuable resources in their territory.

In mining policy, Canada can offer some valuable lessons. With its vast and ancient extraction industry, Canada has addressed many of the issues raised here. Reflecting the democratic traditions of the country and the higher level of responsibility among elected representatives and public officials, efforts have been made to promote harmony between mining operations and issues such as environmental concerns, benefit to local communities, and greater accountability in the use of royalty earned by the government.

(The writer is an assistant professor at the University of Ottawa, Canada)