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Who’s afraid of auctioning national resources?

By a curious coincidence, the two ‘time-tested’ friends – Russia and India – are grappling with the same cancer — Corruption. A recent public poll listed corruption as the number one concern for the Russian people.

The Russian economy is (over)dependent on the energy sector and there are fresh expectations that President Vladimir Putin would open up the sector for ‘privatization’. A situation like India’s 2G scam may not arise in Russia (or anywhere on the planet), but Putin has nonetheless come came up with a thoughtful political decision similar to what India’s Supreme Court ruled a few months ago — namely, that natural resources have to be auctioned off instead of sold in any other manner. This is what Putin said, inter alia, at a meeting in the Kremlin on Friday: 

“Strategic deposits of federal importance — with reserves of over 70 million tons of oil and over 50 billion cubic meters of gas — should be allocated through auctions, without tenders. Tenders are inefficient and, most importantly, they are not transparent. There is another aspect, one that is purely fiscal. As as all know, the budget gets higher revenues from tenders, but still the transparency of the proceedures is more important.”
Where India differs from Russia is that tenders in India are not necessarily the means to get higher revenue. Where India shares Russia’s predicament is that the tender system lacks transparency.
But the affidavit that the government filed in the Supreme Court in New Delhi on Monday says the auctioning of natural resources will affect India’s economic growth. It also questions the judiciary’s prerogative to rule on policy decisions. The hearing began on July 10. 
Actually, this is a topic no less in importance than the upcoming presidential election. But our political class has its own priorities. Bravo, Mr. Putin!

Posted in Politics.

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  1. tick says

    Russia and India – are grappling with the same cancer — Corruption.
    ——-
    Both nations are seeking a transition from socialist economy to market economy, and the corruption is perhaps an inevitable consequence when inflation is high, the state sheltered wages keep falling in real terms.

    Auction is a first derivative solution, but not the real answer. The Honorable Judges can not be expected to possess know-how to steer economy, it is an executive policy function. A ruling on this matter is as absurd as the one years earlier which sought to define Hindutva! These need to be viewed seriously as judicial overreach.

    The answer to mining resources is proper market valuation of land. Realistic valuation requires proper land markets be developed such that legal mechanisms for price discovery get created. The real values of land being acquired by governments is far higher than what business actually pays, not surprisingly they find it far far cheaper to pay the politicians. Infact, all business bodies in India have opposed genuine land market and want governments to acquire land for them. The lobby for SEZ is very strong indeed.

    Such auction process may improve the returns to the government, but not to the landowners, mostly poor people of India. A legal framework, with privacy of ownership being complete which includes the right of refusal to sell, is a mandatory requirement to evolved complex set of institutions for creating a market for land transactions. Only with such decentralized decision making, land aggregation, rationalization of farm holding sizes, investment in suburbs development propelled by rapid motorization of Indian cities shall take place at massive scale required for fast forwarding development.

    Market economy is premised on voluntary transfer of land, after demanded price has been paid by the buyer. The state also benefits by higher tax realization in the long run. So do business by creating right of ambiance within their organization and with outside society. It is a win-win-win measure really when seen from a proper and long term perspective.

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