Harnessing Natural Resources
The Supreme Court ruling that competitive bidding is not the only way to issue natural resources to private sector enterprises has come as a reprieve to the government. While it is no doubt a contentious issue and has to be dealt with very delicately, the author of this article would like to clarify the following aspects of the matter that may enable decision making without making any decisive comment on the matter.
1) Nobel laureate Joseph Stiglitz has in various research papers argued that in the past MNCs have tried to exploit emerging economies by lobbying with the respective governments of countries to have access to resources at nominal costs. In such cases the government concerned has had to forgo a sizeable chunk of non tax revenue.
2) MNCs have in the past not developed blocks of natural resources which they are supposed to do. A strong argument in favor of FDI in mining and allied activities in emerging economies is that it leads to diffusion of technical and managerial knowledge by means of TOT (transfer of technology). Without this what is the use of inviting MNCs or any other private sector enterprises?
3) Private sector enterprises in countries like Botswana have openly defied environmental norms of forest cover, tribal land and wild life thereby imposing real costs on the host economy which are no doubt significant but have been swept under the carpet by bureaucrats and ministers of concerned governments on account of private gains from corporate lobbies.
4) If economic reforms are being pursued by the present government to foster more competition which in welfare economics leads to Pareto optimality then what stopped them from going in for competitive bidding? Has not the government sacrificed technical and economic efficiency by restricting competition?
5) The method of bidding was used by the government for issuing 3G spectrum and the bidding costs were supposedly so high that it prohibited telecom companies from rolling out 3G services in the market. Agreed that it is true. But what about sticking to the targets of debt GDP ratio and deficit restructuring?
6) The government in its explanation given to the media and Supreme Court for not bidding has cited discretion of the government in matters pertaining to the Union List. But absolute bidding is a characteristic feature of monarchies and not democracies.
7) A distant but related matter does crop up. The government has been fighting ultra leftists in the Red Corridor who have always maintained that the government wants to hand over India’s natural resources most of which is tribal property and forested area to private sector companies. The way resources have been donated to them; does not it add credibility to this claim of the ultra leftists?
The author’s views are only meant to encourage debate on the issue for debate is the bedrock of democracy and budding managers must know that markets may be run by the “invisible hand” but nations must be run by “visible hands” of governments.