Atma Ram Kejariwal
The most important charge made by the CAG in its Draft and Final Reports was that in 2005 the Government had the legal authority to allocate coal blocks by auction. This authority was not exercised. However, the Ministry of Coal went ahead for allocation of coal blocks through a Screening Committee. In absence of competitive bidding, non serious players with political connections and capabilities to manipulate things managed to got allocations of very large reserves of coal, resulting in hoarding rather than developing coal mines by the beneficiaries. This became possible as allocation through Screening Committee did not required deposition of bid amount to the government. Such money deposit conditions could have prevented cornering of large coal blocks by non serious players.
This reminds the pre1991 situation in the country when players in any field were working harder to prevent entry of new players. In this situation non serious players got allocations creating a situation for no leftover reserves for serious, capable players. This is a situation identical to license Raj. It gives a feeling that people who are credited for liberalisation in 1991 wants to dismantle same. They want to take country back by couple of decades. It reminds the game young kids play in the open during monsoon to build structures with wet earth, enjoy for some time and dismantle their creation before retiring the game.
Loss of government revenue
A comprehensive note on “Competitive bidding for allocation of coal blocks” was submitted on 16.07.2004 by the then Secretary (Coal) before Minister of State-Coal and Mines highlighting that “ …. Since there is a substantial difference between price of coal supplied by Coal India Limited (CIL), and coal produced through captive mining, there is a windfall gain to the person who is allotted the coal block….” This note further indicated that the bidding system will only tap part of the profit for the public purpose. His advice was simply ignored.
Generation of black money
The money exchanged during coal block allocations between beneficiaries and people who mattered in allocation generated black money and runs in to very large amount. Similarly value of transactions of beneficiary’s equity shares after allotment of coal blocks and also due to sale of allotted coal blocks to other entities runs in to hundreds of crores of rupees and resulted in generation of black money.
Increse in coal import, current account deficite, CAD
Since the coal blocks were allotted to non-serious players, either there was no mining or very little/insignificant quantity was mined. This allocation also blocked way for fresh allocation to serious players. All this resulted in shortage of coal in the country, forcing for coal import. Figure speaks:
This is as per Pratik Prakashbapu Patil, Union Minister of State for Coal, in a written reply to the Rajya Sabha. It is irony that we have 4th largest coal reserves in the world and are the 4th largest importer of coal.
Loss of investment in power, steel, cement industries
During coal allocations, 23 private companies were allotted coal blocks for power generation, 7 for steel, 14 for sponge iron, 4 for pig iron and 2 for cement plants. The allotments were made in and before 2009. All the committed plants should have gone on stream by now. Actual progress is known to us. Even the target set in 2005 for power to all by 2012 is no where in sight, even after target date. Due to scam in coal block allocation and other policy paralysis, this remaines a pipe dream. Leave rest of the country, its capital faces acute power shortage of power in every summer. Thanks to such scams and power distribution companies in Delhi for this shortfall. It will be no surprise if tomorrow some scam surfaces for privatisation of power distribution in the country.
The reasons for non-commissioning of these plants are two fold. One coal block allocation was made to non serious players and two allocation was made through screening committee and successful bidders did not deposited any money, which is required in competitive bidding. In absence of any financial commitment the big private companies also took it easy and were content with getting coal allocation. Absence of coal linkage was sited as one of the main reason for not venturing in power sector by one of the top industrial house of the country.
Loss of commodity demand
In case all above committed plants were executed, large quantities of cement, steel, aluminum, zinc, copper etc would have been consumed. Industries manufacturing these commodities could have improved their operational efficiencies by supplying these quantities. Government companies like Bharat Heavy Electricals Limited (BHEL), Steal Authority of India (SAIL), etc would have received large orders. All above opportunities have been lost.
Loss of employment generation
The direct and indirect employment generation potential from committed coal mining; power plant; cement, steel, aluminum, zinc, and copper production units is running in to millions of job. Job creation during project implementation stage is in addition to this. Due to power shortage in the country, industry players are hesitant to increase capacity, venture in green field projects, again impacting adversely for creation of new employment.
Cost of generation of power from imported coal is high. Considering this fact, very recently the central nodal agency allowed hike in electricity tariff to two Gujarat based power plants based on imported coal. The burden will be on industry, impacting employment adversely. The root cause of all these negative developments is faulty coal block allocation.
Loss of GDP and increasing CAD
Due to lost opportunity for the industry, the country is losing on Gross Domestic Product (GDP) front also. Policy paralysis, Coalgate and other scams have taken its toll on our GDP. The graph below speaks:
Ever increasing coal import along with petroleum products, electronics items etc. are putting severe strain on Current Account Deficit (CAD). The actual loss to the nation is exponential and is not limited to Rs. 10.76 lakh crore windfall gain to beneficiaries as reported in draft report of CAG. Considering all factors as discussed above: loss of employment, GDP; worsening CAD and loss of annual revenue to government from committed plants are permanent,
CAG vindicated, after allocations are cancelled now
At the end of June 2012, Coal Ministry decided to form an Inter-Ministerial Group (IMG), to decide on either de-allocation or forfeiting the Bank Guarantees (BG) of the companies that did not develop allotted coal blocks. Zohra Chatterji, additional secretary, Coal Ministry was named as Chairman of the IMG. Other IMG members include representatives from power, steel, departments of economic affairs, industrial policy and promotion, and law and justice. As of September 26, 2012 i.e. with in three months, the IMG has reviewed 31 coal blocks. Out of these, it has recommended de-allocation of 13 coal blocks and encashment of bank guarantees of 14 allottees, this means among 31 coal blocks more than 87 per cent beneficieries were non serious. Many more allotted coal blocks were de-allocated after June 2012. All these vindicate findings of CAG on coal block allocation.
Generation of political heat
After the report was made public, it generated unprecedented political heat in the country. For international community, it was another big financial scam in the country, denting creditability of our present government. TV news channels and print media were full of coverage for this news. Silly and funny arguments were put forward by ruling UPA members like: PM has not taken coal to his residence – one can search his residence; since many allottees have not begun mining, how one can say that it benefited by windfall gains, ignoring the fact that this is a bigger crime of not commencing mining and sitting idle on allocation. Even matured and sober politicians lost their politeness during live debate to cover up sins by their colleagues and masters.
The nation needs a strong and effective framework to stop re-occurring of such and other scams. Hope patriotism will prevail upon individual’s self interest.
Leave a Comment