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FM differs with CAG suggestion of opportunity costing

Last Updated 17 September 2012, 16:14 IST

Differing with CAG's suggestion of opportunity costing, Finance Minister P Chidambaram today said government is not in the business of trading commodities, but facilitates allocation of resources for generation of more power and production of more steel and cement for common good.

When asked about CAG's method of opportunity costing, which means that a commodity should be traded at the market price, he said if prices of coal were higher, costlier would have been the end-use products, impacting buyers.

"But if you are looking at opportunity cost, government is not in the business of trading coal or trading spectrum. We are not allocating these things in order to trade in them," Chidambaram told a select group of journalists here.

"We are in business of allocating resources such that the larger people purpose is served, so that there is more power, more cement, more steel, there is more capacity for telecom. So, I am not very sure how the theory of opportunity cost... with the government's allocation of resources," he added.

"If the coal had been higher priced, the ultimate price would have to be borne by the buyer of cement, the buyer of steel, the buyer of electricity. Someone has to pay," he said.

Government auditor CAG recently said private companies might have benefited to the tune of Rs 1.86 lakh crore from 57 blocks allocated to them without auction.

Chidambaram said the task of the auditing body should be confined to looking at the "efficiency and integrity of the government expenditure" and to make "passing comments" if there is any loophole in the policy.

"Point is CAG is to look at the efficiency and integrity of the government expenditure. The UK Act clearly says that the policy objectives of the decision of the government cannot be questioned by the CAG. Of course if the CAG wishes to make a passing comment with the policies wrong, that is acceptable," Chidambaram said.

Replying to a question on whether institutional activism is making policy decisions tough, Chidambaram said, "If institutions remain well within their domain and recognise the limits of their jurisdictions, there should not be any difficulty in making policies".

".... But we assume that when an institution acting within its jurisdiction points to either an original error or an error that is discovered over a period of time, immediately leads to a conclusion that there is corruption. That I think is the error and that is the fallacy," he added.

Stating that Prime Minister Manmohan Singh shouldn't be blamed, he said coal block allocations were done following a policy that is in place since 1993.

"You can't point finger at the Prime Minister, who was holding the portfolio for the certain period of time, and say this is corruption. In the implementation of the policy there could be irregularity," he said.

Chidambaram said the bidding document for future allocation of mines are being prepared by an expert agency and "once the bidding documents are in place, coal blocks will be bid".

The Finance Minister said the mining has a gestation period and the realistic period after allocation and before mining is 5-7 years.

"The blocks allocated will not produce coal from tomorrow. So, we must maximise production of coal from blocks that were allocated earlier. People who have the prospecting liences, people who have mining lease must maximise the production," he said.

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(Published 17 September 2012, 16:14 IST)

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