INTRODUCTION• Coal allocation scam or Coalgate, is a political scandalconcerning the Indian governments allocation of thenations coal deposits to public sector entities (PSEs)and private companies. In a draft report issued in March2012, the Comptroller and Auditor General ofIndia (CAG) office accused the Government of India ofallocating coal blocks in an inefficient manner during theperiod 2004-2009. Over the Summer of 2012, theopposition BJP lodged a complaint resulting in a CentralBureau of Investigation probe into whether the allocationof the coal blocks was in fact influenced by corruption.
• While the initial CAG report suggested that coal blockscould have been allocated more efficiently, resulting inmore revenue to the government, at no point did itsuggest that corruption was involved in the allocationof coal. Over the course of 2012, however, thequestion of corruption has come to dominate thediscussion. In response to a complaint by the BJP, theCentral Vigilance Commission (CVC) directed the CBIto investigate the matter. The CBI has named a dozenIndian firms in a First Information Report (FIR), the firststep in a criminal investigation.
THE CAG CHARGES THAT:• The Government had the legal authority toallocate coal blocks by auction rather than theScreening Committee, but chose not to do so.• As a result of its failure to auction the coalblocks, public and private companies obtained"windfall gains" of 1,067,303 crore (US$201.72billion), with private companiesobtaining 479,500 crore (US$90.63billion) (45%) and government companiesobtaining 507,803 crore (US$95.97billion) (55%).
FIRST CAG CHARGE:Government had the legal authority to auctioncoal blocks• The most important assertion of the CAG DraftReport is that the Government had the legalauthority to auction the coal, but chose not to doso. Any losses as a result of coalallocations, then, between 2005 and 2009 areseen by the CAG as being the responsibility ofthe Government
• there was no legal impediment to introduction oftransparent and objective process of competitivebidding for allocation of coal blocks for captivemining. as per the legal opinion of July 2006 ofthe Ministry of Law and Justices and this couldhave been done through an Administrativedecision. However, the Ministry of Coal wentahead for allocation of coal blocks throughScreening Committee and advertised inSeptember 2006 for allocation of 38 coal blocksand continued with this process until 2009."
• there is no express statutory provision providingfor the manner of allocating coal blocks, it isdone through a mechanism of Inter-MinisterialGroup called the Screening Committee ... TheScreening Committee had been constituted bymeans of administrative guidelines. Since, underthe current dispensation, the allocation of coalblocks is purely administrative in nature, it wasfelt that the process of auction throughcompetitive bidding can also be done throughsuch administrative arrangements.
SECOND CAG CHARGE:"windfall gains" to the allocatees• 1,067,303 crore (US$201.72 billion)• If the most important charge made by theCAG was that of the Governments legalauthority to auction the coal blocks, theone that drew the most attention wascertainly the size of the "windfall gain"accruing to the allocatees
Windfall Gains to Allocatees (in crore)Government + Private CompaniesCalendar Year GR in MT Windfall gainhistoric ratesWindfall gainMar 2011 rates2004 1,709 45,807 56,9492005 3,163 73,203 131,0842006 11,671 247,204 371,3112007 8,746 102,350 258,5992008 2,970 61,149 87,5012009 4,908 102,174 161,859TOTAL 33,169 631,166 1,067,303windfall gain/ton = market price/ton - production cost/ton
Private Sector Public SectorCompany Gains Company GainsStrategic Energy TechSystem (Tata-Sasol)33,060 NTPC Limited 35,024Electro Steel Castings& others26,320 TNEB & MSMCL 26,584Jindal Steel and Power 21,226 NTPC 22,301Bhushan Power & SteelLtd & others15,967 JSEB & BSMDC 18,648Ram Swarup & others 15,633 MMTC 18,628JSPL & Gagan SpongeIron Ltd12,767 WBPDCL 17,358MCL/JSW/JPL & others 10,419 CMDC 16,498Tata Steel Ltd 7,161 MSEB & GSECL 15,335Chhattisgarh CaptiveCoal Co Ltd7,023 JSMDCL 11,988CESC Ltd & J&SInfrastructure6,851 MPSMCL 9,947Windfall Gains to Allocatees (in crore)
Allegations against Subodh Kant Sahai• In September 2012, it was revealed that Subodh Kant Sahay,Tourism Minister in the UPA government sent a letter to PrimeMinister Manmohan Singh trying to persuade him for allocation of acoal block to a companyThe letter was written on 5 February 2008.On the very next day, Prime Ministers Office (PMO) sent a letter tothe coal secretary on February 6, 2008, recommending allotment ofcoal blocks to the company• On 15 September 2012, an Inter Ministerial Group (IMG) headed byZohra Chatterji (Additional Secretary in Coal Ministry) recommendedcancellation of a block allotted to SKS Ispat and Power
Allegations againstAjay Sancheti and his link with Nitin Gadkari• Ajay Sanchetis SMS Infrastructure Ltd.was allegedly allocated coal blocksin Chhattisgarh at low rates. He isa BJP Rajya SabhaMP and is believed tobe in close relation with Nitin Gadkari.According to the CAG, the allocation of thecoal block to SMS Infrastructure Ltd. hascaused a loss of Rs. 1000 crores
Allegations against Vijay Darda and RajendraDarda• Vijay Darda, a Congress MP and his brotherRajendra Darda, the education ministerof Maharashtra, have been accused of directand active involvement in the affairs of threecompanies JLD Yavatmal Energy, JASInfrastructure & Power Ltd., AMR Iron & SteelPvt. Ltd, which received coal blocks illegally bymeans of inflating their financial statements andoverriding the legal tender proces
ALLEGATIONS AGAINST NAVEEN JINDAL• Congress MP, Naveen Jindals Jindal Steel andPower got a coal field in February 2009 with reserves of1500 million metric tones while the government-run Navratna Coal India Ltd was refused.• The Opposition alleged that the Government violated allnorms to give him coal fields• On 15 September 2012, an Inter Ministerial Group (IMG)headed by Zohra Chatterji (Additional Secretary in CoalMinistry) recommended cancellation of a block allotted toJSW (Jindal Steel Works), a Jindal Group company
Sr. no. Name ofcompanyLocation recommendationremarks1 Castron MiningLtdBramhadih,JharkhandDeallocate Was allocatedin 19962 Field Miningand Ispat LtdMaharashtra Deallocate Was allocatedin 20033 DomcoSmokelessFuels Pvt. LtdLalgarh,JharkhandDeallocate Was allocatedin 20054 Shri ViranganaSteels LtdMarki Mangli-MaharashtraDeallocate5 SKS Ispat RawanwaraNorth, MadhyaPradeshDeallocate6 ElectrosteelCastingsNorth Dhadu Deallocate7 Rungta Mines ChoritandTelaiyaDeallocate