Indian Coal Mining Controversy – Colgate Scam

Power Corrupts; Absolute Power Corrupts Absolutely – “Coalgate”

“Coalgate”

• Is a Political scandal concerning the Indian Governments allocation of Coal deposits to PSE’s or Private Firms.

• Over eight years were wasted in not implementing the competitive bidding policy so that 142 successful entrepreneurs could be arbitrarily selected.

• Disturbing information has surfaced that a valuable public resource was being allocated arbitrarily with the underlying condition of political funding of the party in power.

“Coalgate”

• For almost five out of the eight years the Prime Minister was the Coal Minister

• The officials in the PMO who

dealt with the Coal Ministry files were not unaware of what was going on.

• Many allotted were traders and not actual users.

• Several allotments have been made without the recommendation of the State Governments.

Influenced by Corruption?

• The initial report suggested that coal blocks could be allotted for efficiently, at no point did it suggest that corruption was involved.

• In response to a complaint by the BJP, the Central Vigilance Commission (CVC) directed the CBI to investigate the matter.

• The CBI named dozen of firms in a FIR.

CAG Report On - “Coalgate” • It accuses the Government of India for allocating

coal blocks in an inefficient manner.

• Government had authority to allocate coal in competitive bidding.

• Public sector enterprise and Private firms paid less.

• The CAG Final Report tabled in Parliament put the figure at Rs. 185,591 Cr (US$33.59 billion)

• The auditor’s coal field report to Parliament estimated that private companies made windfall gains of up to $34 billion because of the low bidding prices paid for the fields.

• Against a predicted growth rate of production of 43.07 per cent (Original) and 33.73 per cent (revised) for XI Plan, the actual growth of production was only 19.51 per cent in four years till 2010-2011.

• Even the reduced target of production by the Planning commission in the mid-term appraisal, was further lowered by 8.12 per cent by CIL for 2011-2012

Leaks of the report in media

• in an irregular and arbitrary manner instead of publicly auctioning them off to the highest bidder, resulting in a loss of approximately 186,000 crore (US$33.67 billion) to the exchequer during the period 2004-2009.

• There were leaks of the report in media in March 2012 which claimed the figure to be around 1,060,000 crore (US$191.86 billion).

• It is called by the media as

the Mother of all Scams. • Discussion about the issue was

placed in the Parliament on 26th Aug, 2012 by the Prime Minister with wide protests from the opposition.

“Comment” – P. Chidambaram

• Speaking at a press conference on the CAG report, Union Finance Minister P Chidambaram said,

• “As long as the coal remains in Mother Earth, there is no loss. Only if the coal is mined and sold at a price that costs the national exchequer and some makes undue gain, then it can be said that there has been loss.”

Allegations

• Against S Jagathrakshakan

i. Minister of State for Information and Broadcasting in the UPA government.

ii. Part of a company named JR Power Gen Pvt Ltd which was awarded a coal block in Orissa in 2007.

iii. The same company which formed a joint venture with a public sector company, Puducherry Industrial Promotion Development and Investment Corporation (PIPDIC), on January 17, 2007 five days after, PIPDIC was allotted a coal block.

iv. JR Power had no expertise in thermal power, iron and steel, or cement, the key sectors for consumption of coal.

v. In 2010, JR Power sold 51% stake to KSK Energy Ventures, an established player with interests in the energy sector. In this way, the rights for the use of the coal block ultimately passed on to KSK.

Similar allegations were made against

• Subodh Kant Sahai : – Tourism Minister in

the UPA government.

• Vijay Darda and Rajendra Darda : – Vijay Darda, a Congress MP and

his brother Rajendra Darda, the education minister of Maharashtra.

• Premchand Gupta : – Who is the UPA partner Rashtriya

Janata Dal's leader.

Manmohan Singh's Rebuttal in Parliament

• Typically once a CAG Report has been tabled (submitted to Parliament) it is received by the Public Accounts Committee (PAC). The PAC then calls in the relevant minister to discuss the report, and the PAC prepares its own report, which is then discussed in Parliament as a whole.

• In an unusual step, on 27 August 2012, the Prime Minister bypassed this process and made a statement to Parliament directly, addressing the findings of the Final CAG Report.

Manmohan Singh's Rebuttal in Parliament

• Prime Minister’s argument makes 3 main points:

i. From a policy perspective, he agrees with CAG that all parties consented to a move from allocation by screening committee to competitive bidding should begin.

ii. From a legal perspective, he 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.

iii. From a practical perspective, he 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 competitive bidding with varied, and sometimes divergent interests.

A Leader Leads; A Pseudo Leaders Misleads

Question / Answer Session

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