What are the advantages of a competitive bidding system (auction)?

14. What are the advantages of a competitive bidding system (auction)?

The Supreme Court in the 2G spectrum clearly stated that natural resources must be auctioned
publicly so that the people of India can benefit from it. Auction will lead to greater
transparency and objectivity in allocation. It will limit the discretion and favouritism in allotment,
as has occurred in the case of SKS Ispat Ltd. A competitive bidding system will also lead
to increased coal production - which was the reason why coal blocks were allotted to private
players in the first place. By making the private companies pay for the coal blocks through bidding,
they will have greater incentive to commence production to recoup their industries.
Currently, private companies have no incentive to commence producing, though coal is a
state resource, meant to benefit people. Instead, private companies 'sit' on the coal allotted,
as it helps boost the valuation of the company. These companies also wait for the coal price to
increase, to reap a higher windfall. For instance, according to the Minister of Coal himself, not
a single block that was allocated to private companies from 2006-09 have commenced production.
13 This is not at all surprising - after all, they got the coal for free and they can do with it
as they please. The short-sightedness of this government is truly shocking. The UPA government's
claim of increasing coal production through allocation is blatantly untrue.