All You Need To Know About The Coal Scam

All You Need To Know About The Coal Scam
and didn't know who to ask

September 3, 2013

The issue of allocation of natural resources has been a matter of debate, thanks to the rising cases of corruption in India. From the Supreme Court to the Comptroller and Auditor General (CAG) to anti-corruption activists, all have slammed the UPA for allocating precious natural resources like 2G spectrum, minerals and land to private hands at throwaway prices. It was the CAG that had first exposed how the telecom policy was manipulated to favour select companies at the cost of public interest. Then came their report on the coal block allocations that busted the myth of our Prime Minister being an epitome of honesty, for once and for all.

The Scam

  • Between 1993 and 2011, the government of India gave away 206 coal blocks for free to government and private companies.
  • The Comptroller and Auditor General (CAG) released a performance audit of Allocation of Coal Blocks and Augmentation of Coal Production on August 17, 2012. The CAG estimated that the losses due to the policy of the government giving out coal blocks for free amounted to Rs 1.86 lakh crore.
  • During the five years of UPA-1, Manmohan Singh was also the coal minister for about three and a half years. The junior minister in the coal ministry was always a Congressman. Yet the PM failed to introduce the policy of competitive bidding for captive coal block allocations, despite having given an in-principle approval to it within the first six months of his tenure as prime minister.
  • During this period, 134 coal blocks were given away for free. Estimates made by Nomura Equity Research suggest that between 2006 and 2009, the coal blocks given away for free had geological reserves of around 40 billion tonne. India has around 286 billion tonne of geological reserves of coal. This means around 14% of total geological reserves of coal was given away free during the period Manmohan Singh was the coal minister.
  • When the CAG audit report on coal block allocations came to light last year, more than 80 percent of the allottees had not yet started producing coal from their respective blocks. This led to a bizarre scenario where on the one hand, the government acted with unprecedented haste in allocating these blocks, and on the other, it did precious little to ensure that the allottees started producing coal from their respective mines.

The Politics

The coal scam saga proves that the 2G scam was no aberration for which the blame could be placed at the doors of a rogue minister from another political party. Rather, it shows that the malaise of private profiteering and crony capitalism ran deep in the UPA establishment. A figurehead PM with bona fide intentions was continually hobbled by vested interests at every turn. And whenever an occasion arose where the choice lay between taking a stand and looking the other way, the PM opted for the latter.

Interestingly, among those opposed to auctioning were the BJP-ruled states of Rajasthan and Chhattisgarh and the CPM-ruled West Bengal. Rajasthan chief minister Vasundhara Raje even wrote to the PM, opposing the proposed policy of competitive bidding for coal and lignite blocks. As it happens, both the BJP and CPM are now leading the attack against the UPA for allocating coal blocks through a screening committee system. The double standard of the BJP and the Left shows that the affliction of crony capitalism is not unique to the Congress.

The 'Missing Files'

  • Coalgate got murkier in May 2013 after the CBI had asked the coal ministry for key files in April pertaining to its investigation; the reply from the ministry shocked the nation as several key files of the case were reportedly missing.
  • The CBI said these files contained "crucial information" on the 13 FIRs already registered for 13 controversial coal block allocations and would help in probing other questionable allocations.
  • The government knew of the mystery since the first notification about files going missing came from the concerned section in the coal ministry through a letter in May 2013.
  • The number of missing files was initially placed at 157 - the number of applications for coal blocks allocation. These relate to 45 allocations, being probed by the CBI, made between 1993 and 2005.
  • The rest of the files relate to 11 coal blocks allocations between 2006-2009. The government constituted an inter-ministerial search committee to look for the missing files after CBI complained of the missing files and lack of cooperation from the government.
  • The files contain key documents including application forms and annexure supporting the application, minutes of screening committee meetings, objections raised by officials during the meetings and other records which are crucial for the CBI for proving its case.
  • The opposition mounted pressure on the government saying that the files going missing benefits three sets of people - the beneficiary companies (and individuals) who received coal block allocations; the screening committee (based on its deliberations) and the minister and his office (bureaucrats and officials).
  • The missing files most importantly contain noting of officials who approved or recommended the controversial allocation of coal blocks. The Comptroller and Auditor General of India, which initially indicated the extent of the scam, has offered to provide its copies of the files to the CBI.

Parting thought

The case of the missing files crops up at a time when, admonished by the Supreme Court for being a "caged parrot", the CBI set about the task of cleaning up the coal block allocation scam mess and interference in the investigation has dropped.

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Comments (4)
Gablu Reply
September 03, 2013
Thanks for the informative piece. Will help me understand politics a lot :-)
Ashim Mohan Chakrabarty Reply
September 03, 2013
The way this government is selling off the country, i wonder how the next incumbent will run the system!
Debu Reply
September 02, 2013
If the UPA has any shame, it should resign.
Suraj Reply
September 02, 2013
The way govt is selling off all natural resources for personal gains, its alarming.
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