Between 2006 and 2009, for a number of relatively obscure firms, getting hold of a coal block was akin to stumbling on a goldmine.
The findings of an internal report conducted by the coal ministry on the allocation of resources to private players show that in order to bag a prized mine, applicants were willing to go to any extreme.
Take the case of Shree Veerangana Steels, which was allocated three coal blocks in Yavatmal district in Maharashtra in 2005. This company simply does not exist any more. The ministry has now discovered that the Nagpur-based firm had been rechristened as Topworth Urja and Metals, which subsequently got merged into yet another firm called Crest Steel and Power, a Chhattisgarh-based steel trading company. ?It appears the entire management of the original allocatee company has been handed over to others who were not the original allocattees of the said blocks. The allotment of coal blocks by the government is for captive purpose and is not for profiteering. The sale of shareholding for profit defeats the purpose of such allocation,? the ministry has said, in a fresh show-cause notice issued to the firm.
In the case of Nagpur-based firm Sunflag Iron and Steel Company, which had been allocated the Belgaon block at Wardha (Maharashtra) and is producing coal from it since December 2007, it has come to light that excess fuel produced in the mine is possibly being diverted elsewhere.
The Coal Controller’s Organisation (CCO) has informed the ministry that during December 2008 and November 2009, the firm produced 1.2 lakh tonne from it. According to a report submitted by the firm, it was supposed to be using the entire fuel for its 15 MW captive power plant at Bhandara. ?According to standard norms, requirement of 15 MW captive power plant is only 0.75 lakh tonne. The CCO has, therefore, estimated that the coal produced from the block was more than the requirement of the CPP. The matter has been considered by the ministry… it has been decided to constitute an inter-ministerial committee to carry out spot verification of the block as well as end use plants,? a top ministry official told The Indian Express.
Cases such as Shree Veerangana Steels and Sunflag are not the exception, but the general rule for blocks awarded by the government over the three-year period. Charges of rampant irregularities in allocations is buttressed by fresh evidences that a number of allocatees, a host of them unqualified to get a block in the first place, have been misusing resources doled out to them by the government. Now, perturbed with the prospect of not less than 58 block holders failing to commence production within their stipulated time, the coal ministry has begun treating them as non-serious squatter. ?We have served show cause notices… If they still do not perform, then the only recourse left is de-allocation,? a senior coal ministry official said.
So far, over 50 firms have been served show-cause notices, including a consortium of Adhunik Corporation and Visa Steel, Bhusan Steel, Orissa Sponge Iron, Adhunik Metaliks, SMS Power and Deepak Steel & Power for delay in developing the Patrapara block in Orissa. All the blocks handed out to these applicants were based on a point-based screening system, where applications were scrutinised by a non-transparent inter-ministerial screening committee that included representatives of the state governments concerned.
“The moot point is that the coal ministry’s Screening Committee route for block allocations was a non-transparent mechanism as there were no objective parameters to decide the process to select the eligible firms. In fact bidding is the best route with an appropriate price discovery mechanism,” government sources contended. These irregularities in allocations has led to the coal ministry commencing an in-house scrutiny of the coal block allocattees and the issues are also being looked into by the CBI.
Mines were distributed to applicants ?who managed to produce only a letter of recommendation from the concerned state government indicating that the party was planing to set up a permitted end-use plant of specified capacity.? Interestingly, all these blocks were de-allocated from Coal India and Singareni Collieries by amending the Coal Mines (Nationalisation) Act 1976 to promote captive mining by private entities. While the bigger companies with their financial muscle and wherewithal preferred to present themselves as stand-alone players, the smaller firms with no known background joined consortiums to press for coal blocks.
As early as 2004, the law ministry had opined that auctioning of coal blocks could be done by amending the CMN Act. Again in 2006, the ministry, in reply to a specific query from the coal ministry, had said the Mines and Minerals (Development & Regulation) Act 1957 could also be amended to introduce competitive bidding for blocks. But it took the government more than two years to present the amended legislation in the Parliament in 2008, which was subsequently passed by the Parliament in July 2010.
Even the Parliamentary Standing Committee on coal and steel has questioned the efficacy of allocating blocks. In its report in 2009, the committee had already recommended that 138 blocks which were de-allocated from CIL be returned back to the PSU to help it meet the Eleventh and Twelfth Plan production targets. It expressed concern that only 25 coal blocks allotted under captive coal regime have started commenced operations. ?This clearly shows non-serious attitude on the part of such private parties to develop coal blocks allotted to them within slated time,? the panel argued. A total of 192 blocks as on March 21, 2011 stand allocated with geological reserves of 44.44 billion tonnes.