Saturday, September 8, 2012

Coalgate has a prelude of Presidential decree to ensure coal supply for private electricity companies at the cost of PSU Coal India. Cag missed the case as well as the rest of the nation!

Coalgate has a prelude of Presidential decree to ensure coal supply for private electricity companies at the cost of PSU Coal India. Cag missed the case as well as the rest of the nation!

Palash Biswas

Coalgate has a prelude of Presidential decree to ensure coal supply for private electricity companies at the cost of PSU Coal India. Cag missed the case as well as the rest of the nation! The government issued a presidential decree to force Coal India to guarantee long-term fuel supply to private power firms, as it used its discretionary authority to trump independent directors who resisted pressure from the Prime Minister's Office and said such pacts would harm the company.The rare government directive, issued after hectic lobbying by top industrialists such as Ratan Tata and Anil Ambani to ensure predictable supplies of coal, mandates that CIL will have to pay penalties if it fails to supply 80% of its commitment. Then President Pratibha Patil was instrumental to issue the decree. But the oppostion did not take any notice of the crisis Coal India faced and subsequent coal import decision involving loss to public revenue.
Shares of Coal India Ltd (CIL) fell more than 2 per cent in the morning trade following a Presidential directive to the company to commit fuel supplies to power companies.The directive has been given to the PSU, as it did not meet the deadline of March 31, set by the Prime Minister's Office for CIL to enter into agreements with power producers which are facing fuel crunch.

Meanwhile,Pulling up the Coal India  management this time, auditing agency CAG today said the company could have saved at least Rs 20 crore had it initiated prudent action against avoidable expenditure.The CAG report, tabled in parliament today, said due to non-deployment of pay loaders, South Eastern Coalfields Ltd (SECL), a CIL subsidiary, failed to utilise gainfully the existing crushing facilities and to earn an additional revenue of Rs 12.76 crore during June 2010 and May 2011.

State-run Coal India Limited's pleas for coal blocks may have fallen on deaf ears but the government did not hesitate in asking the Maharatna company to go as far overseas as Mozambique in south-east Africa to prospect for coal.For over four years, Coal India repeatedly wrote to the coal ministry seeking allocation of 130-odd blocks the public sector company said were essential for its expansion and for meeting existing commitments.

The ministry woke up to Coal India's entreaties only after Coalgate and files began to move. But prior to Coalgate singeing the government, the coal ministry was more keen on backing propositions in a corner of Africa than domestic options.

In May, Coal India informed BJP MP Hansraj Ahir - whose complaint set off the CBI probe into allocations of coal blocks to private operators - that four CIL officers were posted in Mozambique to pursue opening of mines in that country.

Coal India officers were deputed to Coal India Africana Limitada, CIL's subsidiary set up to explore and source coal in Mozambique. The venture set up shop in the city of Tete in March and expressions of interest for drilling - duly reported in the media - were invited in May.

Around the same time, Coal India was having a hard time persuading the coal ministry to consider the allocation of 138 blocks with reserves of 57 billion tonnes to "sustain long-term production programme of CIL to meet the country's demand".

The government argued that CIL was unable to meet requirements of Indian companies, both private sector and state-run, and this had necessitated allocating blocks to private companies. But while CIL plans took a hit, private players failed to meet commitments defeating the government's "power for all" policy.

The PSU received no intimation with regard to its requests till very recently. Coal India has been writing to the ministry since at least August 2008 about the blocks to little avail. On the other hand, the government set aside blocks for private parties who now face threat of action for not meeting timeframes.

Tete, a city located in the interior of Mozambique on Zambezi river, is the base of Coal India operations in the African country. A consultant has been appointed for undertaking an environmental impact assessment and preparing an environmental management plan so that drilling can start in a few weeks, CIL said.

CIL informed that a memorandum of understanding has also been finalized for an apex training organization for local people and the planning and designing of an institute is in progress.

The PSU's enterprise in seeking to access coal deposits in a far flung country might be justified as mirroring similar ventures undertaken by Chinese companies in Africa, but CIL being denied access to coal blocks in India have raised questions.

Coal auction method ignores many considerations: Muthuraman

The whole nation has been talking about the coal blocks allocation for some time now. Today on a special show Indianomics we will focus on coal with a difference.
http://www.moneycontrol.com/news/special-videos/diggingcoal-storya-difference_755387.html

The whole nation has been talking about the coal blocks allocation for some time now. In this special show, Indianomics, we will focus on coal with a difference. Not a session on name calling and blame gaming but we will focus on how to chart future policies on coal in particular and natural resources in general. India, as we like to say, has the third largest reserves of coal and is still the third largest importer of coal, often for grades that are available in India. That's a clear admission that policies have gone wrong. So, what's an ideal mining policy?


Today we have two stalwarts in the area of coal, production and use, B Muthuraman, vice-chairman, Tata Steel and Partha Bhattacharya, former CMD, Coal India .

Below is the edited transcript of the interview.

Q: You have looked at mining policies in five continents, before we started this, I did a dipstick survey from a bunch of companies asking them what has been their mining experience in other countries most of them said that auction is not very common but there were a list of countries which they mentioned, a few countries in Africa where auction is resorted to but that is not the ubiquitous experience. Is auction the way to go at least because it is fair?

Muthuraman: Auction is a simple, transparent method and with no doubt and any criticism. But auction does not take into account many things. For example, a mineral resource of a country is owned by the population of that country. It belongs to the people of that country and it is held in trust by the state, by the government. There are three stakeholders in a mineral resource. Public, government and the developer.

We must ensure that all the three stakeholders are equitably and fairly benefitted. Auction does not take care of that. Auction is in a while it maximizes the revenue upfront to the state it does not take into account environmental considerations, society considerations and other factors. So auction is not a widely prevalent method.

Q: That can be ensured through rules isn't it? You transfer 25% of your profit to the area where you mine you can auction and still say that these rules will prevail?

Muthuraman: In a mineral resource the benefits to the developer comes overtime of over 25-30-40 period during the life of a mine. The society benefits in terms of employment generation, cascading effects of value addition, other benefits like infrastructure development and many things, the benefits to the society also happens over a period of time. Therefore, it is only logical that the benefit to the government also flows over a period of time.

Q: Would you really object to the auction method. There are added problems which some miners said that, we have no guarantee over land acquisition in India, no guarantee over environmental clearance, no guarantee of the quality and the grade of resources available. They are perfectly, legitimate arguments. But grade and quality and the extent available is not even known for instance in oil reserves but we nevertheless do competitive bidding for any LP unless if you are going away from the auction method India in its current state needs very strong reasons?

Bhattacharya: There is little difference between India and other countries. We have to appreciate the difference in the situation as far as coal is concerned.  In other country drilling is done by a government body, very minimal kind of a drilling, regional exploration as our GSI does based on that information the government allots the blocks. Sometimes they don't resort to auction because they give exploration contracts right at the beginning.

Two eligible applications are sort and then once the exploration is done that can be converted to mining licence. This is the kind of thing that other counties do follow while allotting initial blocks which are unexplored.

In India, in addition to Geological Survey of India (GSI) many exploration done by CMPDI (Central Mine Planning & Design Limited) which is a subsidiary company of Coal India Limited and as a result of that exploration much more information, much more quality information is available for most of the blocks, particularly the full explored blocks with proven reserves.

In order to prove the reserves the government has spend money, made investments which normally in other countries is done by the person to whom the block is allocated for exploration license. There is a basic difference here.

Once that explored block is available to the government, government can think in terms of getting the best value for it. I agree with Muthuraman that auction can be avoided and maybe should be avoided. In situations where the end products are sold not at a market determined prices but at a regulated price and it is necessary for the end product to be available as cheap as possible.

In power, explored blocks even those are allotted for power generation one can avoid auction, one can go for a stipulation that the power has to be sold through a long term PPA and subjected to some sort of a regulation or through a price bidding. If it is sold through long term PPA with regulator then how do you really allot a block to a particular bidder or agency. For making the process transparent that score one may have to go for a surrogate of auction and there could be several surrogates that can be designed.

Q: How do you design surrogate?

Bhattacharya: If there is no cash outflow and the bidder is told to indicate the time stream of cash outflows to a particular state government where the coal block is on account of royalty and he indicates the timeframe like 1-3 years or more and that is collapsed into a present value, whosoever indicates the higher present value he is considered as the number one bidder.



It can be securitizing, it can be guaranteed with bank guarantee mechanism which is not expensive.  So, there is no cash outflow right at the beginning but the method becomes quite transparent. There is a competition among the various bidders for a particular block. So, this kind of a process can be evolved, that also helps incentivizes the block to come into operation at an early date.

Q: Does that make sense to ask people to commit to a forthcoming stream of revenues?

Muthuraman: India is a special case and has certain uniqueness in terms of its minerals. India is a mineral scarce country for most minerals. Per capita resource of this country is much lower than many countries where resources are available. So we need to take extra care to ensure that there is indeed a value addition. We should not have a situation where a mine is allotted to someone who is not going to add value otherwise we are not benefitting the country as a whole.

A good process is one where you invite applications and then you have well defined criteria. Often the issue is not the process in India in my view. Even today we have a reasonably good process and this process that we are having today is a process which has evolved over last 30-40 years and at every stage the process has improved and today.

Q: I don't think that argument and conclusion will be bought, look at the names of companies that are being and almost everyone admits that there is only corruption.

Muthuraman: If you don't follow the process properly, you will have undesirable effects. So don't blame the process. You blame the implementation of the process and following the process properly.

Q: But at least the process will try competition for the least?

Muthuraman: If you take the issue of delays that are being talked about. The ministry of coal had stipulated 42 months for open cost and 54 months for underground mining. In a normal process, it takes 104 months. But things don't happen in a normal way. There are delays, sometimes there is a go no go by the MoEF, there is a situation where you got this environmental cumulative pollution index and so on which stopped everything from happening for several months.

I know specific cases where the allocation has been made in 2005, till today the land has not been acquired, the forest clearance has not come and the mining license has not been obtained. So the production cannot start.

So the issue is not the process alone. You need to perfect the process. The current process can be vastly improved but it is also a fact that the current process is a vastly improved process over what we have had in the last 30-40 years.

It doesn't make the current process perfect. You can improve the process but then you have to implement the process and you have to have obligations from both sides. If somebody says you must start production from this month, of those 17-18 steps that are involved in from allocation to production, somebody must take responsibility for given it at that point in time.

Latha: But if the process has been perfected over the last 30-40 years then why is it that a large number of corrupt cases are emerging in the last 10 years because there are clearly phony licenses. There are genuine companies over there with genuine delays but that should not obfuscate the fact that there have been several more times of phony cases.


"Western Coalfileds Ltd incurred an avoidable expenditure of Rs 7.62 crore during 2007-08 to 2010-11 on purchase of electricity from two electricity boards at industrial and non-industrial rates instead of availing cheaper domestic rate for domestic consumption of electricity," CAG said in its report.

Western Coalfileds Ltd is also a subsidiary of CIl, the world's largest coal miner.

An earlier CAG report alleging undue benefits to the tune of Rs 1.86 lakh crore to private firms due to allocation of coal blocks sans auction has raised a storm and paralysed Parliament proceedings for the tenth day today.

CAG said, during June 2010 to May 2011, SECL despatched 6.5 million tonnes coal of below 100 mm size, produced by surface miner at Dipka Open Cast Mine. Generally, such coal are sent through pay loaders and due to their non-availability feeder breakers were used.

"As a result, crushing capacity of the feeder breakers could not be utilised for crushing over-sized coal to below 100 mmsize. In the process, the company lost the opportunity to earn an additional revenue of Rs 12.76 crore," CAG said.

The agency said Coal Ministry in its reply said though the tendering and procurement of pay loaders was initiated by the company, but due to lack of response, tenders could not be finalised.

CAG, however, found that argument not "tenable" saying the management initiated the process only in December 2010 whereas the requirement of six pay loaders was envisaged as early as in March 2005.

"Thus the fact remains that though the surface miners were deployed in June 2010, action for hiring pay loaders required for loading the coal mined by the surface miners was initiated in December 2010," CAG said.

On the avoidable expenditure at the Western Coalfields, it said in Pench and Kanhan areas of Madhya Pradesh, Western Coalfields did not have any separate metering agreement for residential colony consumption and was availing electricity at higher tariff applicable for industrial areas.

"Thus, due to non-convention of residential connections from industrial to domestic, the company has failed to avail lower electricity tariff applicable for domestic consumption and thus incurred an avoidable expenditure of Rs 7.62 crore during 2007-08 to 2010-11," CAG said.


The Children's Investment Fund (TCI), the largest minority shareholder in Coal India Ltd (CIL), has rubbished the government's argument that it was acting in public interest while directing the state-controlled miner to sign fuel supply agreements (FSAs) at throwaway prices.

The London-based hedge fund also called for the abolition of the FSA system, alleging it was benefitting 'a lucky few' and encouraging corruption.


"The government issued the presidential directive after the directors of the company opposed the signing of FSAs, which will benefit a few private companies, and not the people of India. It is a big scam. We are going to expose this in courts," Oscar Veldhuijzen, partner, TCI, told Business Standard. TCI has a little more than one per cent stake in the world's largest coal miner, while the government owns 90 per cent.

He said the government was not addressing the real issue by the public interest argument. "We are in the process of filing our legal case. We'll clearly explain how the whole FSA thing is not in public interest," Veldhuijzen said, indicating a significant portion of the fund's legal argument would be based on how the government's moves were not in public interest, as it claimed.

In a presentation, titled 'Cheap coal does not benefit Indian people', TCI said the FSA coal system should be abolished or prices under it should be moved to market levels as soon as possible. "FSA coal price discounts primarily benefit profits of private companies. FSA coal is a direct transfer of a $19-billion subsidy to increase profits for the private sector, instead of providing cheap electricity to Indian households," it said.

According to the presentation, if FSA coal were priced at market prices, all Indian households currently receiving electricity could receive it for free. "Alternatively, 30 per cent of Indian people without electricity could receive it for free," the presentation said.

FSA is not justifiable for non-power companies, as these sell their products at non-regulated prices. "Because huge free profits are available for the lucky firms obtaining FSAs, we believe it is highly likely that FSAs are awarded to companies willing to pay bribes," TCI said.

A large number of companies from unregulated industries such as cement and steel have to buy coal at market prices. "This means firms which receive FSA coal keep the whole benefit for themselves, rather than passing it on to the end customers," TCI said.

Stepping up its offensive against the BJP, government today said the opposition party should ask its chief ministers to resign in the Coalgate row since the state governments decide who gets the mining lease.


"The basic question is that who executes the lease," Union HRD minister Kapil Sibal said, two days after the Centre made public letters written to it by BJP and other non-Congress state chief ministers strongly opposing auction of coal mines. He said that if anyone should resign it should be the chief ministers of these states. BJP has been demanding the resignation of Prime Minister Manmohan Singh in the Coalgate row.

"BJP men, who are levelling allegations, should be askedto get resignation of their CMs that why they executed the lease," he told a news conference. "Because the responsibility was theirs(since) they executed the lease and decided that in whose favour it would be done," he claimed.

The Congress leader put the onus on the states in the Coalgate row while referring to questions being raised on what basis allocation of coal blocks was done and that allegations are being levelled against Centre's officers. Sibal said that under Mines and Minerals (Regulation and Development Act) only the state governments have the right to execute lease.

"Centre has no right in it. If any person has objection to the lease executed in favour of a particular person or company, whose responsibility was it," he added.

  2. Coalgate scam : Bhujbal received kickbacks from Manoj Jayaswal ...

  3. ‎
  4. Times of India - 16 hours ago
  5. MUMBAI: BJP national general secretary Kirit Somaiya alleged that NCP minister Chhagan Bhujbal and his family had received kickbacks from ...
  6. BJP submits "evidence" to CBI on Coalgate‎ The Hindu
  7. Coalgate: CBI to question Dardas, Manoj Jayaswal‎ Moneycontrol.com
  8. Bhujbal finger in Coalgate pie: Somaiya‎ Daily Pioneer
  9. IBNLive.com - The Asian Age
  10. all 14 news articles »
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  11. IBNLive.com

  13. Coalgate Scam Wipes Out Monsoon Session; What PM Has to Say

  14. ‎
  15. IBTimes India - 8 hours ago
  16. Manmohan is facing the heat over his alleged involvement in the coal allocation scam. Last month, the Comptroller Auditor General's report on ...
  17. PM should step down over Coalgate: IBNLive Coal Poll‎ IBNLive.com
  18. Coalgate: D. Raja asks Manmohan Singh to take political, moral ...‎ Newstrack India
  19. Parliament Live: Jaitley says Parl agitation was necessary‎ Firstpost
  20. Jagran Post - indiablooms
  21. all 704 news articles »
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  22. IBTimes India

  24. Coalgate row: CMs of BJP-ruled states need not quit, Pradhan

  25. ‎
  26. Business Standard - 28 minutes ago
  27. BJP national general secretary Dharmendra Pradhan today said the Congress cannot escape its responsibility in the coal scam by asking chief ministers of ...

  29. Coal scam: BJP not interested in knowing the truth, says Azad

  30. ‎
  31. Daily News & Analysis - 1 hour ago
  32. Coal scam: BJP not interested in knowing the truth, says Azad ... on coalgate and said the opposition was not interested in "knowing the truth".

  34. CBI FIR nails Darda bros' role in Coalgate

  35. ‎
  36. Times of India - 1 day ago
  37. ... education minister in Maharashtra , were actively involved in the affairs of the JLD Yavatmal , one of the firms accused in the Coalgate scam.by Neeraj Chauhan
  38. Coalgate: CBI may register cases against 6 more companies‎ Zee News
  39. Dragline Blues: The Hour Of Slack‎ Outlook
  40. Media baron latest bigwig to be tangled in coal scam‎ Rediff
  41. NDTV
  42. all 49 news articles »
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  43. Zee News

  45. Unfair to hold PM responsible for coal scam: M Veerappa Moily

  46. ‎
  47. Daily News & Analysis - 5 hours ago
  48. Unfair to hold PM responsible for coal scam: M Veerappa Moily ... "unfair" to hold him responsible for 'coalgate' as it was a collective decision of ...
    		49. *

  49. Hindu Business Line

  51. Coal gate Scam: Jairam Ramesh drags Gadkari into coal block ...

  52. ‎
  53. Newstrack India - 2 days ago
  54. Dragging to BJP President Nitin Gadkari in notional multi-million coal gate scam, Rural Development Minister Jairam Ramesh has alleged that ...
  55. Congress drags BJP chief Nitin Gadkari's aide into Coalgate mess‎ India Today
  56. all 35 news articles »
    		57. *

  57. Newstrack India

  59. Madhu Koda connection emerges in Coalgate scam

  60. ‎
  61. Firstpost - 2 days ago
  62. Vijay Joshi, owner of Vini Iron and Steel Udyog Ltd and now one of the prime accused in coal blocks allocation (Coalgate) scam, is none other ...
  63. CBI now probing role of Koda in coalgate‎ Deccan Chronicle
  64. all 13 news articles »
    		65. *

  65. Firstpost

  67. Some BHEL orders at risk due to 'Coalgate': Nomura

  68. ‎
  69. Moneycontrol.com - 1 day ago
  70. Some BHEL orders at risk due to 'Coalgate': Nomura ... of existing linkage, following the coal allocation scam, popularly dubbed Coalgate.
  71. BHEL may take 65% hit on earnings, say foreign brokerages‎ Business Standard
  72. Bhel order book at risk of cancellation due to coal scam‎ Firstpost
  73. all 13 news articles »
    		74. *

  74. Firstpost

  76. Joshi: Coalgate militates against constitution

  77. ‎
  78. Deccan Chronicle - 18 hours ago
  79. Joshi: Coalgate militates against constitution ... has accused the UPA government of denigrating the Constitution over the Coalgate scam.
  80. UPA 'afraid' to come before PAC on Coalgate: Joshi‎ Zee News
  81. all 7 news articles »


Indian Coal Allocation Scam

                                                                                       
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* This article needs attention from an expert in Indian politics. The specific problem is: Incomplete. WikiProject Indian politics may be able to help recruit an expert. (August 2012)

Coal allocation scam or Coalgate,[1] as referred by the media, is a political scandal concerning the Indian government's allocation of the nation's coal deposits to public sector entities (PSEs) and private companies. In a draft report issued in March 2012, the Comptroller and Auditor General of India (CAG) office accused the Government of India of allocating coal blocks in an inefficient manner during the period 2004-2009. Over the Summer of 2012, the opposition BJP lodged a complaint resulting in a Central Bureau of Investigation probe into whether the allocation of the coal blocks was in fact influenced by corruption[2]
The essence of the CAG's argument is that the Government had the authority to allocate coal blocks by a process of competitive bidding, but chose not to.[3] As a result both public sector enterprises (PSEs) and private firms paid less than they might have otherwise. In its draft report in March the CAG estimated that the "windfall gain" to the allocatees was 1,067,303 crore (US$193.18 billion).[4] Later references in Parliament put the figure at 186,000 crore (US$33.67 billion)[5] On August 27, 2012 Indian Prime Minister Manmohan Singh read a statement in Parliament rebutting the CAG's report both in its reading of the law and the alleged cost of the government's policies.[6][7][8]
While the initial CAG report suggested that coal blocks could have been allocated more efficiently, resulting in more revenue to the government, at no point did it suggest that corruption was involved in the allocation of coal. Over the course of 2012, however, the question of corruption has come to dominate the discussion. In response to a complaint by the BJP, the Central Vigilance Commission (CVC) directed the CBI to investigate the matter. The CBI has filed charges against a dozen Indian firms accusing them of overstating their net worth, failing to disclose prior coal allocations, and hoarding rather than developing coal allocations.[9][10] The CBI officials investigating the case have speculated that bribery may be involved.[9]
The issue has received massive media reaction and public outrage. During the monsoon session of the Parliament, the BJP protested the Government's handling of the issue demanding the resignation of the Prime Minister and refused to have a debate in the Parliament. The deadlock resulted in Parliament functioning only seven of the twenty days of the session.[11][12]

Contents



History of coal allocations In India

Who can apply for a coal allocation?

Historically, the economy of India could be characterized as broadly socialist, with the government directing large sectors of the economy through a series of five-year plans. In keeping with this centralized approach, between 1972 and 1976, India nationalized its coal mining industry, with the state-owned companies Coal India Limited (CIL) and Singareni Collieries Company (SCCL) being responsible for coal production.
This process culminated in the enactment of the Coal Mines (Nationalisation) Amendment Act, 1976, which terminated coal mining leases with private lease holders. Even as it did so, however, Parliament recognized that the nationalized coal companies were unable to fully meet demand, and provided for exceptions, allowing certain companies to hold coal leases:
  • 1976. Captive mines owned by iron and steel companies.
  • 1993. Captive mines owned by power generation companies.
  • 1996. Captive mines owned by cement companies.[13]

Who decides who receives a coal allocation?

"In July 1992 Ministry of Coal, issued instructions for constitution of a Screening Committee for screening proposals received for captive mining by private power generation companies." The Committee was composed of government officials from the Ministry of Coal, the Ministry of Railways, and the relevant state government.[13] "A number of coal blocks, which were not in the production plan of CIL and … SSCL, were identified in consultation with CIL/SSCL and a list of 143 coal blocks were prepared and placed on the website of the MoC for information of public at large."[14] Companies could apply for an allocation from among these blocks. If they were successful, they would receive the geological report that had been prepared by the government, and the only payment required from the allocatee was to reimburse the government for their expenses in preparing the geological report.[15]

What criteria are used in making the decision?

The guidelines for the Screening Committee suggest that preference be given to the power and steel sectors (and to large projects within those sectors). They further suggest that in the case of competing applicants for a captive block, a further 10 guidelines may be taken into consideration:
  • status (stage) level of progress and state of preparedness of the projects;
  • net worth of the applicant company (or in the case of a new SP/JV, the net worth of their principals);
  • production capacity as proposed in the application;
  • maximum recoverable reserve as proposed in the application;
  • date of commissioning of captive mine as proposed in the application;
  • date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in the application;
  • technical experience (in terms of existing capacities in coal/lignite mining and specified end-use);
  • recommendation of the administrative ministry concerned;
  • recommendation of the state government concerned (i.e., where the captive block is located);
  • track record and financial strength of the company.[16]

How well has the allocation process worked?

The response to the allocation process between 2004 and 2009 was spectacular, with some 44 billion metric tons of coal being allocated to public and private firms.[17] By way of comparison, the entire world only produces 7.8 billion tons annually, with India being responsible for 585 million tons of this amount.[18] Under the program, then, captive firms were allocated vast amounts of coal, equating to hundreds of years of supply, for a nominal fee.
Year of allocation Govt Companies Govt Companies Private Cos Private Cos Power Projects Power Projects Total Total

No. of blocks GR (in MT) No. of blocks GR (in MT) No. of blocks GR (in MT) No. of blocks GR (in MT)
Up to 2005 29 6,294.72 41 3,336.88 0 0 70 9,631.6
2006 32 12,363.15 15 3,793.14 6 1,635.24 53 17,791.53
2007 34 8,779.08 17 2,111.14 1 972 52 11,862.22
2008 3 509.99 20 2,939.53 1 100 24 3,549.52
2009 1 337 12 5,216.53 3 1,339.02 16 6,892.55
2010 0 0 0 0 1 800 1 800
Total 99 28,283.94 105 17,397.22 12 4,846.26 216 50,527.42

Out of the above 216 blocks, 24 blocks were de-allocated (three blocks in 2003, two blocks in 2006, one block in 2008, one block in 2009, three blocks in 2010, and 14 blocks in 2011) for non-performance of production by the allocatees, and two de-allocated blocks were subsequently reallocated (2003 and 2005) to others. Hence, 194 coal blocks, with aggregates geological reserves of 44.44 billion metric tons, stood allocated as at March 31, 2011.
Source: Draft CAG Report, Table 5.1.[19]
Given the inherent subjectivity in some of the allocation guidelines, as well as the potential conflicts between guidelines (how does one choose between a small capacity, late stage project and a large capacity, early stage project?) it is unsurprising that in reviewing the allocation process from 1993 to 2005 the CAG says that "there was no clearly spelt out criteria for the allocation of coal mines."[13] In 2005 the Expert Committee on Coal Sector Reforms provided recommendations on improving the allocation process, and in 2010 the Mines and Minerals (Development and Regulation) Act (MMDR Act), 1957 Amendment Bill was enacted, providing for coal blocks to be sold through a system of competitive bidding.[20][21]
The foregoing supports the following conclusions:
  • The allocation process prior to 2010 allowed some firms to obtain valuable coal blocks at a nominal expense
  • The eligible firms took up this option and obtained control of vast amounts of coal in the period 2005-09
  • The criteria employed for awarding coal allocations were opaque and in some respects subjective.

Coalgate Part 1: The CAG Report and Manmohan Singh's Response

The CAG Report

The CAG report, released in March as a draft and tabled in Parliament in August, is a performance audit focusing on the allocation of coal blocks and the performance of Coal India in the 2005-09 period. Stretching to over 100 pages, the report covers the following topics:
  1. Overview (pp. 1–2)
  2. Audit Framework (pp. 3–4)
  3. Institutional Framework (p. 5-10)
  4. Gaps in Supply and Demand (p. 11-17)
  5. Coal Blocks-Allocation and Production Performance (p. 18-55)
  6. Production Performance of CIL (p. 56-83)
  7. Conclusion and Recommendations (pp. 84–88)
  8. Annexures (pp. 89–110)
As far as Coalgate is concerned, the key passages of the report are in Chapter 5, where the CAG charges that:
  • In 2005 the Government had the legal authority to allocate coal blocks by auction rather than the Screening Committee, but chose not to do so.[22] According to a Hindustan Times report,in July 2005, Prime Minister Manmohan Singh opted out of coal block auction and approved a decision that the ministry of coal should continue to allot blocks for captive mining through the screening committee procedure until competitive bidding was made operational.[23]
  • As a result of its failure to auction the coal blocks, public and private companies obtained "windfall gains" of 1,067,303 crore (US$193.18 billion), with private companies obtaining 479,500 crore (US$86.79 billion) (45%) and government companies obtaining 507,803 crore (US$91.91 billion) (55%).[24]

Did the Government have the authority to auction the coal?

The most important assertion of the CAG Report is that the Government had the legal authority to auction the coal, but chose not to do so. Any losses as a result of coal allocations, then, between 2005 and 2009 are seen by the CAG as being the responsibility of the Government.
The CAG devotes ten pages of its report to reviewing the legal basis for an auction, and comes to the following conclusion:
Indented line
In sum there were a series of correspondences with the Ministry for Law and Justice for drawing conclusion on the legal feasibility of the proposed amendments to the CMN Act/MMDR Act or through Administrative order to introduce auctioning/competitive bidding process for allocation of coal blocks for captive mining. In fact, there was no legal impediment to introduction of transparent and objective process of competitive bidding for allocation of coal blocks for captive mining as per the legal opinion of July 2006 of the Ministry of Law and Justices and this could have been done through an Administrative decision. However, the Ministry of Coal went ahead for allocation of coal blocks through Screening Committee and advertised in September 2006 for allocation of 38 coal blocks and continued with this process until 2009.[25]

What was the cost to the Government of allocating the coal through the Screening Committee?

According to a report published in Times Of India, 155 coal blocks were allocated to about 100 public and private companies, including some electricity boards:[26][27]

Allegations

Allegations against S Jagathrakshakan

See also: S. Jagathrakshakan
In September 2012, several news reports alleged that family of S Jagathrakshakan, Minister of State for Information and Broadcasting in the UPA government is a part of a company named JR Power Gen Pvt Ltd which was awarded a coal block in Orissa in 2007. It was the same company which formed a joint venture with a public sector company, Puducherry Industrial Promotion Development and Investment Corporation (PIPDIC), on January 17, 2007. Barely five days after, PIPDIC was allotted a coal block. According to the MoU, JR Power enjoyed a stake in this allotment. However, JR Power had no expertise in thermal power, iron and steel, or cement, the key sectors for consumption of coal. Later, in 2010, JR Power sold 51% stake to KSK Energy Ventures, an established player with interests in the energy sector. In this way, the rights for the use of the coal block ultimately passed on to KSK.[28][29]
Reacting to this, Jagathrakshakan admitted to getting a coal block, and said that, "It is true that we got a coal allocation but it was a sub-contract with Puducherry government and then we gave it away to KSK company. Now, we have got nothing to do with the allocation but if the government wants to take back the allocation it can do so."[30]

Allegations against Subodh Kant Sahai

See also: Subodh Kant Sahay
In September 2012, it was revealed that Subodh Kant Sahay, Tourism Minister in the UPA government sent a letter to Prime Minister Manmohan Singh trying to persuade him for allocation of a coal block to a company, SKS Ispat and Power which has Sudhir Sahay, his younger brother, as honorary Executive Director. The letter was written on 5 February 2008. On the very next day, Prime Minister's Office (PMO) sent a letter to the coal secretary on February 6, 2008, recommending allotment of coal blocks to the company.[31][32] However, Sahay denied these allegations, citing that the coal block was allocated to SKS Ispat, where his brother was only an honorary director.[33]

Allegations against Ajay Sancheti and his link with Nitin Gadkari

Ajay Sancheti's SMS Infrastructure Ltd. was allegedly allocated coal blocks in Chhattisgarh at low rates.[34] He is a BJP Rajya Sabha MP and is believed to be in close relation with Nitin Gadkari. According to the CAG, the allocation of the coal block to SMS Infrastructure Ltd. has caused a loss of Rs. 1000 crores.[35]

Allegations against Vijay Darda and Rajendra Darda

Vijay Darda, a Congress MP and his brother Rajendra Darda, the education minister of Maharashtra, have been accused of direct and active involvement in the affairs of three companies JLD Yavatmal Energy, JAS Infrastructure & Power Ltd., AMR Iron & Steel Pvt. Ltd, which received coal blocks illegally by means of inflating their financial statements and overriding the legal tender process.[36][37]

Allegations against RJD Leader Premchand Gupta

UPA partner Rashtriya Janata Dal's leader Premchand Gupta's sons company brand new to the steel business applied for a coal block when Premchand Gupta was the Union minister for corporate affairs and bagged it about a month after his tenure ended along with that of his government. The company in question is IST Steel & Power - an associate company of the IST Group, which is owned and run by Premchand Guptas sons Mayur and Gaurav. IST Steel, along with cement majors Gujarat Ambuja and Lafarge, was allocated the Dahegaon/Makardhokra IV block in Maharashtra. The company, which applied for a block on January 12, 2007, and was awarded it on June 17, 2009, is sitting on reserves of 70.74 million tonnes. The reserves it controls are more than the combined reserves held by much larger companies - Gujarat Ambuja and Lafarge. Gupta, who belongs to the Rashtriya Janata Dal headed by Bihar leader Lalu Prasad Yadav, was the minister of state for corporate affairs in UPA-I when his party was a constituent of the Congress-led coalition with 21 seats in Lok Sabha. However Mr Gupta maintains he had no involvement in IST Steel and denies influencing the coal-block allocation process.[38]

Allegations against Congress MP Naveen Jindal

Congress MP, Naveen Jindal owned Jindal Steel and Power got a coal field in February 2009 with reserves of 1500 million metric tones while the government Navratna Coal India Ltd was refused and asked to go to far off Mozambique in search of coal blocks.
On February 27, 2009, two private companies got huge coal blocks. Both the blocks were in Odhisha and while one was over 300 mega metric tones, the other was over 1500 mega metric tones. Combined worth of these blocks was well over Rs 2 lakh crore and these blocks were meant for the liquification of coal. One of these blocks was awarded to Jindal. Naveen Jindals firm Jindal Steel and Power was the company which was allotted the Talcher coal field in Angul in Odisha in 2009, well after the self-imposed cut off date by the Centre on allocation of coal blocks.
The Opposition alleged that the Government violated all norms to give him coal fields. Naveen Jindal, however, has denied any wrongdoing.[39][40]

Investigation

On 31 May 2012, Central Vigilance Commission (CVC) based on a complaint of two Bharatiya Janata Party Member of Parliament Prakash Javadekar and Hansraj Ahir directed a CBI enquiry.[41][42]
There were leaks of the report in media in March 2012 which claimed the figure to be around 1,060,000 crore (US$191.86 billion).[43] It is called by the media as the Mother of all Scams.[44][45] Discussion about the issue was placed in the Parliament on 26th Aug, 2012 by the Prime Minister Manmohan Singh with wide protests from the opposition.[46]
According to the Comptroller and Auditor General of India, this is a leak of the initial draft and the details being brought out were observations which are under discussion at a very preliminary stage.[47] On 29 May 2012, Prime Minister Manmohan Singh offered to give up his public life if found guilty in this scam.[48]

See also


Other scams and corruption


Anti corruption efforts


References

* Constructs such as ibid., loc. cit. and idem are discouraged by Wikipedia's style guide for footnotes, as they are easily broken. Please improve this article by replacing them with named references (quick guide), or an abbreviated title. (September 2012)

  1. ^ The suffix -gate is derived from the Watergate scandal in the United States, and has since been used to refer to a large number of scandals internationally.
  2. ^ "Draft Performance Audit, Allocation of Coal Blocks and Augmentation of Coal Production by Coal India Limited," Report of the Comptroller and Auditor General of India (Union Government (Commercial)) No of 2012. Hereafter Draft CAG Report.
  3. ^ Ibid., p. 23.
  4. ^ Ibid., p. 34.
  5. ^ http://blogs.wsj.com/indiarealtime/2012/08/27/transcript-prime-minister-singh-counters-coalgate-allegations/
  6. ^ ate-government-releases-bits-of-cag-letter-to-deny-toi-report/articleshow/12376684.cms 'Coalgate': Government releases bits of CAG letter to deny TOI report Economic times. 23 MAR, 2012
  7. ^ Coalgate report rocks Parliament Deccan Herald. Mar 22, 2012
  8. ^ 'Coalgate': Govt releases bits of CAG letter to deny TOI report Times of India Mar 23, 2012
  9. ^ a b http://www.hindustantimes.com/India-news/NewDelhi/Firms-hid-earlier-allocations-to-get-new-blocks-says-CBI/Article1-925788.aspx
  10. ^ http://zeenews.india.com/news/nation/coalgate-now-dmk-leader-in-the-dock_798230.html
  11. ^ "Turmoil-ridden Monsoon session of Parliament ends". DNA. Retrieved September 7, 2012.
  12. ^ http://timesofindia.indiatimes.com/india/Stalling-Parliament-is-also-part-of-democracy-Sushma-says/articleshow/16296444.cms
  13. ^ a b c Draft CAG Report, p. 5.
  14. ^ Draft CAG Report, p. 7.
  15. ^ Draft CAG Report, p. 32.
  16. ^ http://blogs.economictimes.indiatimes.com/policypuzzles/entry/coalgate_s_main_lesson
  17. ^ Draft CAG Report, p. 35.
  18. ^ http://www.worldcoal.org/resources/coal-statistics/
  19. ^ Draft CAG Report, p. 18.
  20. ^ "Draft Performance Audit, Allocation of Coal Blocks and Augmentation of Coal Production by Coal India Limited," Report of the Comptroller and Auditor General of India (Union Government (Commercial)) No of 2012, pp. 5-8.
  21. ^ "COAL: CHOICE FOR INDIAN ENERGY". Retrieved March 24, 2012.
  22. ^ Draft CAG Report, p. 23.
  23. ^ "Prime Minister opted out of coal block auction in 2005". Retrieved 08 Sept 2012.
  24. ^ Draft CAG Report, p. 34.
  25. ^ Draft CAG Report, p. 23.
  26. ^ "Coal mining blocks: Report suggests Tatas, Jindals, NTPC, MMTC made windfall gains". Retrieved 23 March 2012.
  27. ^ "CAG: Govt lost Rs 10.7 lakh crore by not auctioning coal blocks". Times of India. Mar 22, 2012. Retrieved 23 March 2012.
  28. ^ "Coalgate: Now, DMK leader in the dock". Zee News. 7 September 2012. Retrieved 7 September 2012.
  29. ^ "Coal scam: DMK minister comes under fire". Hindustan Times. 7 September 2012. Retrieved 7 September 2012.
  30. ^ "UPA minister's kin linked to coal block allocation deal". Times of India. 7 September 2012. Retrieved 7 September 2012.
  31. ^ "Sahay accused of helping younger brother get coal block allotment". The Times of India. 7 September 2012. Retrieved 7 September 2012.
  32. ^ "http://www.dailypioneer.com/home/online-channel/360-todays-newspaper/91536-subodh-justification-leaves-him-asahay.html". The Daily Pioneer. 1 September 2012. Retrieved 7 September 2012.
  33. ^ "Coalgate: Subodh Kant Sahai admits brother's link with private company, denies any wrongdoing". Times Of India. Retrieved 7 September 2012.
  34. ^ "Sancheti firm caused Ch'garh govt Rs 37cr loss". Times Of India. Retrieved September 7, 2012.
  35. ^ "Coal scandal: Why the Sancheti deal weakens the BJP's attack". NDTV. Retrieved September 7, 2012.
  36. ^ "Newsmaker: Vijay Darda". Business Standard. Retrieved September 7, 2012.
  37. ^ "CBI FIR nails Darda bros' role in Coalgate". Times Of India. Retrieved September 7, 2012.
  38. ^ "Coalgate: RJD leader PC Gupta's sons won blocks close to his ministerial tenure". The Economic Times, India. Retrieved September 7, 2012.
  39. ^ "Coalgate: Norm violated by government to favour Naveen Jindal". CNN-IBN, India. Retrieved September 6, 2012.
  40. ^ "Coalgate: The main players". CNN-IBN, India. Retrieved September 7, 2012.
  41. ^ "CVC asks CBI to probe alleged coal scam despite UPA govt's attempt to brush it under the carpet". 31 May 2012. Retrieved 31 May 2012.
  42. ^ "CVC Refers Coal Block Allocation Case to CBI". Outlook India. 31 May 2012. Retrieved 31 May 2012.
  43. ^ "CAG report on coal allocation only a draft: Pranab". Press Trust of India. The Hindu. Retrieved 21 August 2012.
  44. ^ "Potential coal mining scam in Madhya Pradesh, Chhattisgarh?". IBN Live. 22 March 2012. Retrieved 22 March 2012.
  45. ^ "Coal scam shakes parliament; opposition says PM held portfolio, must explain". NDTV. 22 March 2012. Retrieved 22 March 2012.
  46. ^ http://economictimes.indiatimes.com/news/politics/nation/coal-scam-full-text-of-pm-manmohan-singhs-statement-in-parliament/articleshow/15816145.cms
  47. ^ "Report on coal fields creates fresh furor for Indian government". CNN. March 23, 2012. Retrieved March 23, 2012.
  48. ^ "Will quit if coalgate charges against me are proved: PM Manmohan Singh". 30 may 2012.

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