Coal Allocation: The story behind

COAL ALLOCATION SCAM OR COALGATE SCANDAL:

THE STORY BEHIND ITS NAME:

There took place a political scandal In USA in the early 1970's named Watergate scandal which led to the resignation of Richard Nikson, the president of United States. The Watergate scandal involved the head of their country. In the same way, the coal allocation involves the head of our country. So it is named with a suffix 'gate'.

INTRODUCTION TO THE SCANDAL:

The coalgate is a political scandal concerning with the illegal allocation of coal blocks to the public and private companies without having an auction (regular process to allocate coal blocks) between 2006 and 2008. It led to the looting of 1.86 lakh crore approximately. The figure earlier was believed to be more than 10 lakh crore. But later on, the loss was estimated to be 1.86 lakh crore. The coal minister for 2004 was Shibu Soren, but when the discussions for competitive bidding just started, he had been forced to resign due to an arrest warrant issued against him in Chirudih massacre case. Then the Prime minister, Man Mohan Singh took the charge of coal ministry. And this was the time, the coal allocation scam has occurred. So now people think that the PM is responsible for the loss incurred by the government.

THE STORY BEHIND THE ILLEGAL COAL ALLOCATION:

In 2004, the government has decided to allocate the coal blocks on the basis of competitive bidding ( it is a process where a committee named screening committee with the representatives of the state and central coal ministries would select the companies which are to be allocated with the blocks with ensured transparency and consistency) rather than going for auctions. P.C. Parakh, a whistleblower for Coalgate consulted CAG disclosing about the competitive bidding through the RTI act. He told that there was a substantial difference between the price of the coal supplied and the production cost by the companies which resulted in the loss to the public and led to the supreme gains to the companies. He told CAG that he had suggested a note for auction which was rejected by the PMO.

 The average coal block allocation per year had been 3-4 earlier to 2006 but was raised to 22-24 during 2006-2008 without protecting the exchequer and without having a competitive process. The sudden increase in the allocation was that the Coal India Limited (CIL) could not handle the coal production alone for the generation of electricity. The main thing that bothers is that the state exchequer got no benefit or the customers but the ruling party had tasted all the benefits. The worth of 50 lakh crore coal reserves was allocated to 140 private companies, free of cost. This was all mentioned in the CAG report and when the report was published, the opposition parties and public wanted the CBI to investigate into the scandal and wanted all the people directly or indirectly involved to be investigated thoroughly for their role. Finally, the CBI approached with the result favorable to the government. Then the BJP has demanded for the resignation of PM alleging that he was using law ministry for himself to save from the probe. Also in 2012, BJP has lodged a complaint with the Supreme Court which led the CBI to be more precise this time, to investigate the case.

CAG REPORT:

• The screening committee did not follow transparency and consistency while making the recommendations of the companies.
• Auctions might have been introduced instead of going through a prolonged legal examination of the issue, which delayed the decision making.
• The delay in the competitive bidding led to the existing process be beneficial to the large number of private companies.
• A big difference between the cost of production and the price at which the coal is supplied by the private companies.
• The loss could have been avoided or could have been less if the government chose the method of auction for allotting the coal blocks.
• The loss of 1.86 lakh crore was estimated based on average cost of production and average sale of coal.

EXPLANATION GIVEN BY PM FOR THE CAG REPORT:

• Due to the increasing number of applicants for the coal block allocations, the government evolved this method of competitive bidding in 2004.
• The committee assessed the companies on parameters such as techno economic feasibility, status of preparedness, financial and technical capabilities etc.

• Previously, the CIL had been extracting the coal given the area with good infrastructure facilities and favorable conditions whereas the coal blocks offered for captive mining are generally located in the areas with more difficult geological conditions.
• A part of private gains goes for taxation and now under the Mines and Minerals Development Regulation (MMDR) act, 26% of the profits earned should be made available for the local area development.
• The cost of production of coal varies from mine to mine based on surface features, method of extraction, geo mining conditions, availability of infrastructure etc.
• It is true that the private parties that were allocated blocks could not achieve production targets. This is due to the problems in getting statutory clearances and if the clearances are speeded up, the production would soon come into effect.

CBI REPORT:

• Till 1993, there were no specific criteria for allocation of coal blocks. But the Ministry of coal started awarding the blocks to private parties for captive mining on recommendations of screening committee or through direct allocation.
• The major companies involved are Essar power, Hindalco, Tata steel, Tata power, Jindal steel and power. These companies have received windfall gains due to their nomination for coal blocks, instead of being auctioned.
• Many companies are front functioning on behalf of some big players. It has shortalised 20 companies that could have committed irregularities by giving wrong information or forging documents.

IMPACT OF THE SCANDAL:

• A massive loss to the exchequer.
• A windfall gain to the private companies.
• An act of plundering of national wealth.

MY PERSPECTIVE:

I think few points of the discussion lead us to go against the government supporting the scam and the justification given by the government for that, simply drive us to take our opinion back. Few reports make our conscience so strong that the scam should have occurred for sure and a few of them weaken us to think against that. So what is true? What is to be believed? These questions cannot be answered so easily. Politics, it is a big game. They most of the time try to keep the common man out of the reach of things. They make a big mess around and suddenly stop everything without clarifying the common doubts of the public. After a good study on this scam, the few points which remained unexplainable are:

• It is the responsibility of the government to check on the companies registered for the allocation. It has argued that it had assessed them on various parameters but the question arises that how come most of the companies selected on all the required parameters proved not to exist and forged when investigated by the CBI? We found no answer for this and the matter proved to be messy here and drive us directly towards the thought of existence of the scam.
• The documents related to this allocation have been found missing in the PMO. Here, the question arises that how such important documents go missing suddenly? This situation is messy too and we found no answer for this.

We, the public, are getting accustomed to hearing about all the scams. The outburst after the 2G scam was greater when compared to that of the Coalgate though latter was on large scale. This shows how we are accepting them and making them a part of our lives. Now a days, no activity is run without corruption. Now it is you, the public who have to decide on what the truth is and what one has to believe in.

                            “MAKE INDIA A CORRUPTION FREE COUNTRY”

                                                        JAI HIND!