Oscar Veldhuijzen, partner, The Children's Investment Fund (TCI), is a strong proponent of pricing natural resources at market prices. TCI, the largest non-promoter shareholder in state-owned Coal India, has been opposing the miner's move of pricing coal below market levels. In an email interview with N Sundaresha Subramanian, Veldhuijzen says the latest reports by the Comptroller and Auditor General (CAG) of India have strong parallels with coal being distributed through fuel supply agreements (FSAs) by Coal India. Edited excerpts:
Do the CAG reports, in a way, vindicate TCI's position on Coal India?
Yes, there are strong parallels between 'Coalgate' and Coal India selling FSA coal at large discounts to market prices. In our legal petition filed with the high court of New Delhi, we stated natural resources like coal should be auctioned, not distributed in an opaque and subjective manner through FSAs. As was the case with allocation of coal blocks in the past (at prices far below market levels), it encourages corruption, as demand for coal outstrips supply.
The government's response is largely focused on hiding behind procedural issues. Is this justified?
TCI intends to fight corruption, which would benefit the people of India and all minority shareholders in public sector undertakings. We call upon CAG and the Central Bureau of Investigation to investigate corruption related to FSA coal being sold at a significant discount to market levels, resulting in corruption.
According to you, what is a fair system of allocating coal?
TCI believes the whole system of FSAs should be scrapped and, following the law announced by the Supreme Court of India in many cases, including the recent 2G judgment (Centre for Public Interest Litigation vs Union of India), a natural resource like coal should be auctioned, rather than given through FSAs. TCI also feels the FSA system of distributing coal has in-built risks of engendering corruption and there are strong parallels between the corruption related to the allocation of 2G telecom spectrum at a large discount to fair market prices at that time & 'Coalgate' - selling coal blocks at a large discount to market price, as well as selling FSA coal below market prices.
Won't the auction system make these resources expensive for end-users?
TCI has always urged Coal India to bring coal prices in sync with international prices. Coal India loses $19 billion a year of pre-tax profits because of artificially low coal prices.
Cheap coal is not benefiting the people of India, as most benefits are ending up with private companies or mismanaged state electricity boards.
What is the way forward?
The way forward is to sell coal blocks and coal at market prices to reduce corruption and make sure the people of the country receive the full benefits.
If Indian politicians continue to interfere in a harmful manner, it would endanger India's future, as investors won't put their money here.