coal gate scam

7/30/2019 coal gate scam

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DAYALBAGH EDUCATIONAL INSTITUTE

FACULTY OF SOCIAL SCIENCESCoal Gate Scam

it is time we transform our systems

COAL GATESCAM


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Ifa country is to be corruption free and become a nation of beautiful minds, I strongly

feel there are three key societal members who can make a difference. They are the father,

the mother and the teacher.

-


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Coal Gate Scam

IMPORTANCE OF COAL India is the third Largest producer of Coal in the world.

The countrys domestic consumption is large and as a result, India net

imports coal to meet the needs of power companies, steel mills and

cement producers.

Indias coal demand is expected to increase multifold within the next five

to 10 years, due to the completion of ongoing power projects, and

demand from metallurgical and other industries.

Government-controlled Coal India Limited (CIL) dominates the domestic

coal supply market with an 80 percent market share, although some

industrial consumers, typically in the power and steel sectors, have access

to captive mines.


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Coal Gate Scam

INDIAS GROWING POWER NEEDSEnergy Requirement and Energy Availability in the country from 1984-85 to 2010-11

YEAR

Energy

Requirement

Energy

Availability

Energy

Short

Percentage

Short

Rate of Growth

Energy

Requirement

Energy

Availability

(MU) (MU) (MU) % Shortage (%) (%)

1984 155432 145013 10419 6.70%

1985 170746 157262 13484 7.90% 8.97 7.79

1986 192356 174276 18080 9.40% 11.23 9.76

1987 210993 187976 23017 10.91% 8.83 7.29

1988 223194 205909 17285 7.74% 5.47 8.71

1989 247762 228151 19611 7.92% 9.92 9.75

1990 267632 246560 21072 7.87% 7.42 7.47

1991 288974 266432 22542 7.80% 7.39 7.46

1992 305266 279824 25442 8.33% 5.34 4.791993 323252 299494 23758 7.35% 5.56 6.57

1994 352260 327281 24979 7.09% 8.23 8.49

1995 389721 354045 35676 9.15% 9.61 7.56

1996 413490 365900 47590 11.51% 5.75 3.24

1997 424505 390330 34175 8.05% 2.59 6.26

1998 446584 420235 26349 5.90% 4.94 7.12

1999 480430 450594 29836 6.21% 7.04 6.74

2000 507216 467409 39807 7.85% 5.28 3.6

2001 522537 483350 39187 7.50% 2.93 3.3

2002 545674 497589 48085 8.81% 4.24 2.86

2003 559264 519398 39866 7.13% 2.43 4.22004 591373 548115 43258 7.31% 5.43 5.24

2005 631757 578819 52938 8.38% 6.39 5.3

2006 690587 624495 66092 9.57% 8.52 7.31

2007 739343 666007 73336 9.92% 6.59 6.23

2008 777039 691038 86001 11.07% 4.85 3.62

2009 830594 746644 83950 10.11% 6.45 7.45

2010 861591 788355 73236 8.50% 3.6 5.29

Average Rate of Growth 6.35 6.28

Source :Press Information Bureau Website (Ministry of Power Statistics)


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Coal Gate Scam

INDIAS GROWING COAL IMPORTS

Huge demand-supply gap compels increased import of coal


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DAYALBAGH EDUCATIONAL INSTITUTEFACULTY OF SOCIAL SCIENCES

Coal Gate Scam

Coal Gate Scam

COAL ALLOCATION GUIDELINES Preference to Power and Steel Sectors

Level of progress and state of preparedness of the projects

Net worth of the applicant company

Production capacity as proposed in the application

Maximum recoverable reserve as proposed in the application

Date of commissioning of captive mine as proposed in the application

Date of completion of detailed exploration (in respect of unexplored

blocks only) as proposed in the application

Technical experience

Recommendation of the administrative ministry concerned

Recommendation of the state government concerned

Track record and financial strength of the company


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Coal Gate ScamCoal Gate Scam

WHO DECIDES WHO WILL RECEIVE

COAL BLOCKS

Ministry OfCoal

ScreeningCommittee

GovernmentOfficials

(Ministry OfCoal)

GovernmentOfficials

(Ministry OfRailways)

GovernmentOfficials (StateGovernment)


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CAG AUDIT


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OBJECTIVES OF AUDIT Understanding the Widening Gap between demand and

domestic supply of Coal

Understanding increasing Coal Import

Reasons for Power Plants lying Idle due to lack of supply of

coal

Augmentation of CIL production capacities as per plan

Procedures followed for coal block allocation for captive

mining

Coal block allocated as envisaged


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CAG ALLEGATIONS There was no clearly spelt out criteria for the allocation of coal mines

In 2005 the Government had the legal authority to allocate coal blocks byauction rather than the Screening Committee, but chose not to do so

As a result of its failure to auction the coal blocks, public and private

companies obtained "windfall gains" of 1,067,303 crore (US$193.18

billion), with private companies obtaining 479,500 crore (US$86.79

billion) (45%) and government companies obtaining 507,803 crore(US$91.91 billion) (55%).

there was no legal impediment to introduction of transparent and

objective process of competitive bidding for allocation of coal blocks for

captive mining as per the legal opinion of July 2006 of the Ministry of Law

and Justices and this could have been done through an Administrativedecision


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COAL ALLOCATION OVER THE YEARS

The foregoing supports the following conclusions:

The allocation process prior to 2010 allowed some firms to obtain valuable

coal blocks at a nominal expense

The eligible firms took up this option and obtained control of vastamounts of coal in the period 2005-09

The criteria employed for awarding coal allocations were opaque and in

some respects subjective.

Source: Draft CAG Report, Table 5.1


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WINDFALL GAINS TO ALLOCATEES (IN CRORE)

The headline number of 185,591 crore (US$33.59 billion) is the gain that

would accrue to captive firms over these decades, and there is no attempt

to derive a Present value of the gain.

Loss of Opportunity

Source: CAG Final Report, p. 31


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ISSUE OF COMPETITIVE BIDDING

The concept of allocation of captive coal blocks through competitive

bidding was made public in 2004. The matter was in discussion in Cabinet up to 2008.

A bill to amend MMDR Act 1957 was introduced in Parliament by Ministry

of Mines in 2008.

The amendment bill was referred to the standing committee in 2008-09

The motion was passed in parliament post approval of standing

committee in 2010

Rules of Auction notified to all stakeholders in 2012

Source: CAG Final Report, p. 25,26,27

CAG STATESCompetitive Bidding could have been introduced in 2006 as per the advise of DLA

(Department of Legal Affairs) in July 2006


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GOVERNMENTS DEFENSE ON BIDDING

From a policy perspective, Government agrees with CAG that all parties consented to

a move from allocation by screening committee to competitive bidding should begin.

From a legal perspective, Government disputes the CAG's understanding of the law,

and says, indeed, that such a conclusion could only have been arrived at by a

selective reading of the evidence.

From a practical perspective, Government notes that even were the legal path clear,

it was not simply possible to introduce the competitive bidding process by fiat. There

were multiple parties whose consensus was required in the transition to competitivebidding with varied, and sometimes divergent interests.

The major coal and lignite bearing states like West Bengal, Chhattisgarh, Jharkhand,

Orissa and Rajasthan that were ruled by opposition parties, were strongly opposed

to a switch over to the process of competitive bidding as they felt that it would

increase the cost of coal, adversely impact value addition and development of

industries in their areas and would dilute their prerogative in the selection of lessees.

The CAG, Prime Minister Manmohan Singh argued, had simply ignored the practical

realities of policy implementation in their accusation that the Government did not

move fast enough in transitioning to competitive bidding.

Source: Prime Ministers speech in Parliament


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GOVERNMENTS DEFENSE ON REVENUE LOST

Firstly, computation of extractable reserves based on averages would not be correct.

Secondly, the cost of production of coal varies significantly from mine to mine evenfor CIL due to varying geo-mining conditions, method of extraction, surface features,

number of settlements, availability of infrastructure etc.

Thirdly, CIL has been generally mining coal in areas with better infrastructure and

more favorable mining conditions, whereas the coal blocks offered for captive mining

are generally located in areas with more difficult geological conditions.

Fourthly, a part of the gains would in any case get appropriated by the governmentthrough taxation and under the MMDR Bill, presently being considered by the

parliament, 26% of the profits earned on coal mining operations would have to be

made available for

Therefore, aggregating the purported financial gains to private parties merely on the

basis of the average production costs and sale price of CIL could be highly

misleading. Moreover, as the coal blocks were allocated to private companies only

for captive purposes for specified end-uses, it would not be appropriate to link the

allocated blocks to the price of coal set by CIL local area development.

Source: Prime Ministers speech in Parliament


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CORRUPTION INVESTIGATIONS

Accused

S

Jagathrakshakan

Subodh Kant

Sahai

Ajay

Sancheti

Nitin

Gadkari

Naveen

Jindal

Vijay Darda

Premchand

Gupta


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Investigations on accused


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MY OPINIONS

COALSCAM

POLICYPROBLEM

CORRUPTIONPROBLEM


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SOLUTIONS We live in the age of information and technology

Many of our processes are obsolete and old. Government has serious Governance problems

and they need to fix their systems.

Competitive Bidding a compulsion in all sectors

All processes need to be revised and parallel

synchronized with IT systems Utilization of UID Adhaar card for distribution of

any service and product

UID mechanisms for Transparent Bidding

Fraud Analytic facilities by Government for

immediate actions on corruption or fraudulent

activities

Use of IT for monitoring Coal Production


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WE REQUIRE OPTIMISM

We need to take these scams in a positive spirit

It is good to know ones weakness

It gives us an opportunity to improve

We should respect our Government and our Constitution

We should look for IT Solutions for better Governance

We need to help our Government improve We need to make our Parliament better by electing bringing intellectual

youth

WE WILL IMPROVE FOR SURE

INDIA IS DOING WELL AND IN THE COMING YEARS WILL ROCK

!!


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Coal Gate Scam

Thank You

coal gate scam

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