The Diamond has been Blackened

The Diamond has been Blackened

Serious ethical issues plaguing our national projects, in the backdrop of the recent coal blocks cancellation judgment.

The recent CAG strictures, and subsequent pronouncements of the Supreme Court in regard to the “so called” allocation of about 218 coal blocks, have once again served to highlight the absolute need to plan our public and private projects on clean fundamentals and solid, unshakeable foundations. This sordid episode, culminating in the landmark judgment, and cancellation of the “allocations”, has had tremendous impact, be it in politics and economics of our country, and on the national energy sector in particular. But above all, I think, and I hope, that the most significant impact of this would be its deterrent effect on the businessmen and politicians of India such that future Projects in our country are free of this kind of grave and hidden “ethical risk”.

From this perspective, the judgment is a milestone, and is highly valuable for the future of our country, but it has come with a huge cost tag attached! Just consider the various dimensions of this situation :

  • Coal Reserves of about 50 billion tonne in these coal blocks will go into hibernation, because the mining projects are stalled now.

  • Although India produced 565 million tonnes of coal, we also imported 120 million tonnes of the commodity in 2013-14.

  • Now, the import bill will keep going up over next 5-10 years, till these deposits come out of hibernation by the “midas touch” of auctions.

  • Power projects of approximately 18,000 MW are in a limbo, placing the nation’s future energy scenario in a retrograde situation, if not into a veritable crisis.

  • The Banks may suffer the consequences of a potential “non performing asset” quantum of a staggering Rs 96,500 crore, only on account of failure of power projects (leaving aside other end use projects planned ) planned on the basis of these Mines, and all of this loss will ultimately be made good by our hard-earned money – the tax payers’ money.

It was very much necessary to cite these numbers, so as to comprehend, in this case, the magnitude of the risks involved if Projects are planned on shaky basis of questionable deals or dishonest premises, and also the eventual real impact of lack of probity in these transactions. One of the greatest RISKS that a Project can possibly suffer from, is the RISK arising from graft or similar patently unethical actions. Yes, although we did not specifically discuss this aspect of project risk in one of the previous issues, when we dealt with Uncertainties and Risk Management in Projects, this was clearly an omission. Or, perhaps this was such a large and wide-ranging topic that it merited a dedicated discussion in itself.

The case of Coal Mines is just a case in point. It is not difficult to find many such cases, since our recent politico-economic history is replete with similar fiasco. In telecom sector, 2G licences were cancelled by the Supreme Court, leading to a huge setback for a few telecom companies, and to the overall development of communication infrastructure in the country. There is also the infamous case of BOFORS artillery guns, and the HDW submarines, for the Army/Navy, which went sour, and affected our defence preparedness. A much smaller, but equally notorious project called Adarsh Housing in Mumbai is also a burning example. Almost all iron ore mines projects of the country are today in the doldrums because many of them tried to act smart and violate the rules in respect of environmental protection, transparent disclosures, royalties/mining plans, etc., and such a big foreign exchange earning industry of our country is now languishing. The suspected scam in irrigation projects in Maharashtra, which was a major issue in the recent state elections, is still waiting to unravel. The prestigious Male Airport project in Maldives, executed by an Indian Company, has been taken away by the government on complaints of wrongdoing. All these Projects named here are but only a small percentage of all those which get adversely affected due to ethical issues.

In spite of some amount of progress made in wind, hydel, solar and nuclear power, India will have to depend substantially on thermal power for years to come, in order to keep its ambitious wheels of growth turning. This also gels with the fact that India has fourth and fifth largest reserves of coal in the world, and also that this coal is largely suitable for power generation, due to its high ash content. Therefore, it is not surprising at all that a large number of coal-based thermal power projects were planned by investors, commensurate with the expected growth in power demand. Unfortunately, many of these projects were planned on the basis of captive coal mines “allocated” to beneficiaries in a suspect and questionable manner. The gravity of its consequence is now literally staring the nation in its face.

An wise man had once said that corruption was the largest single inhibitor of equitable economic development in this world. He was absolutely right, simply because most corrupt projects fail, and thereby delay economic development. And, if there is slower development or no development at all, where is the question of equitable distribution of the fruits of development? Let us hope that all project owners of the future are not only listening but also agreeing, thanks to such judicial activism, as in the example of the coal blocks cancellation.

While there will be strong learning here for project owners/investors, there are some basic lessons for Project Managers as well. These are big projects, involving big numbers, big money, big wrongdoings, and consequently big risks, and project managers like us who are mere mortals, may quite well argue that we are not involved in these sordid affairs, and hence we have nothing to learn. This is not necessarily true. In the context of project management, simple inputs can be drawn from these scams by project managers, empowering them to deal with the many ethical dilemmas that they have to face in the course of their work. During execution of projects, managers are often confronted with many ethical questions related to contracts, human rights, safety, reporting/disclosures, etc., where opportunities do exist for adopting tempting short-cuts, which in the long run, do not pay. It will be good if our project management brethren were to keep this in mind at all times and not stray from the simple, straight and honest path of hard work.

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