The Zero Loss Theory

Whether or not, our politicians dispense their political duties to their utmost capabilities, they do come up with the most brazen and stumping arguments. The reason for debate now is the new entrant in the quagmire of scams, the coal mining scam.

Now that the sophisticated glamour of the finance ministry has been re-established with the entry of Mr.P.Chidabaram, the UPA seems to be banking on him to tote the “no loss theory”. According to our union finance minister, the 1,86,000 crore rupee loss to the exchequer, as given in the initial report produced by the Comptroller and Auditor General(CAG) is, but a delusional number. His argument is based on the fact that the process of mining has not yet been carried out so technically the companies, to which the blocks had been allocated, have not benefited monetarily. This argument is unimpressive and weak coming from a politician that of Mr.P.Chidabaram’s stature. Let us discuss why.

Yes, the actual mining has not taken place as of now, but is it not a fact that the coal blocks are no longer under the government’s authority and control? Is it not fact that the private players can dictate how that coal can be priced? Is it not fact that one of the primary motives behind any business is profit, and that it is no different for the new owners? Not only this, but looking at the issue at hand from the perspective of Dalal street; the mere holding of these coal blocks by those certain companies, the likes of Essar Power, Hindalco, Tata Steel, Tata Power, Jindal Steel and Power, could have and will continue to, arguably increase their market value along the line. The moral here is that, profit has been a reassuring actuality to these companies and loss, a biting reality to the exchequer.

Another reason that this theory has been touted as ridiculously weak, lies in its similarity to the erstwhile argument propounded by, indeed, Mr.Kapil Sibbal during the 2G spectrum scam. Because the coal has not yet been unearthed, does it forever negate the occurrence of its sale at higher prices altogether? It is very important for both of our esteemed UPA colleagues to understand, that, just because the barracks are empty, does not necessarily mean that the war is not imminent. As is tradition, the blame game now ensues with Prime Minister Manmohan Singh relaying the rhetoric of complete responsibility for his decisions as the ex-coal minister while simultaneously passing the buck to the state governments. Yes, it is within his right to condemn the governments that had opposed the move to auction the coal blocks during the UPA first regime in 2006. But this free for all tomfoolery by the coal ministry in his regime, under his nose, how will he be able to justify that?

The only theory that the government seems to be following apart from the “zero loss theory” seems to be the “Hawley’s Risk theory of profit” which states that, the riskier the industry, the higher it’s profit rate. The industry here is politics.