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The Coalgate Scam was unearthed by the CAG report on allocations of coal blocks. CAG report alleged that a loss of Rs. 1.86 lakh crore was caused to the exchequer because of a non-transparent and discretionary allocation process. The beneficiaries of the scam are private players who have made windfall gains and have received highly valuable natural resources at almost free of cost.

Under the Coal Mines Nationalization Act, 1973, coalmines were nationalized and brought under state control. Post enactment of this act, only a Government of India undertaking can mine coal. Any other company like state electricity boards must be allocated coal blocks by government of India before they can make use of it.

After an amendment was made in the Nationalization Act, coal blocks can be allotted to private companies for captive mining to accelerate power, steel and cement production. Captive mining means that the coal produced has to be used for the purpose it was allotted for.

The purpose of captive mining was mainly to increase production of coal and increase the participation of private sector in coal mining.

This purpose of increased production has not been achieved due to the process of allocation of the coal blocks i.e. as the private players get the coal blocks for free, they prefer to not mine the coal until the markets are favorable for them. On the other hand, had the Government auctioned these coal blocks, the companies would have started the production to recover their expenses.

The allocation of coal blocks was done through a screening committee that was chaired by Secretary (Coal Ministry) and consisted of Joint Secretary (Coal), representatives from Ministry of Commerce and Industry, Ministry of Power, Ministry of Environment and Forest and Ministry of Railways.

The Screening Committee is meant to follow a set criterion for allocation of the blocks. The ministries are also required to check the track records of the company, economic viability of the project etc. and make recommendations to the committee.

During the time frame in question i.e. 2006-2009, no transparency was maintained, allocations were made to ineligible companies, minutes of the committee do not indicate how the decision was made.

The CBI is probing into the coal blocks allocated by the screening committee.

During 2006-2009, the Government of India allotted 145 Coal blocks of which 64 were allotted to private companies. In the years 1993 – 2004 only 39 coal blocks were allotted, and till 2006 only 70 coal blocks were allotted.

INSTANCES OF ABUSE OF POWER:

  • Vijay Darda, the Congress Member of the Rajya Sabha along with his brother
Maharashtra Education Minister Rajendra Darda promoted a company JLD Yavatmal Energy which got a captive coal block in Chhattisgarh despite not being recommended by the Govt. of Chhattisgarh. This company also concealed that it was granted coal block in the past.
The Abhijit Group promoted by Manoj Jaiswal and having close business ties to Vijay Darda was allotted six coal blocks with a lot of irregularities. It has come to public attention that the coal minister Shri Prakash Jaiswal was named the final arbitrator in Manoj Jaiswal’s fam- ily dispute. The intimate link is very evident.
  • Companies promoted by Congress MP Naveen Jindal from the Lok Sabha (Jindal Steel & Power Ltd.) were allotted five coal blocks.
  • IST Steel & Power, a company promoted by the son of RJD Rajya Sabha MP Prem Chand Gupta was allotted a coal block. Mr. Gupta was a Union Minister in the previous UPA government.
  • Union Minister of State for Information & Broadcasting, Mr S Jagathrakshakan of the DMK
and his family members were directors of JR Power Generation Pvt. Ltd. This company was just five days old when it entered into an MoU with Puducherry Industrial Promotion Development Corporation. It was allotted a coal block in 2007.
  • Iron & Steel Udyog Ltd., a company owned by Vijay Joshi, a close associate of former Chief Minister of Jharkhand Madhu Koda (both of whom are currently in jail) was allotted a coal block. Previously, Shri Arjun Munda had not recommended this allocation. However, once Mr Koda became the Chief Minister with the support of the Congress, he used his influence to ensure the allocation.
  • The brother of former Minister of State for Coal Mr. Santosh Bagrodia was awarded a hefty mining contract worth Rs 23,000 Cr by the NTPC, while a bid by the Singareni Collieries (a PSU) was ignored. All of this occurred when Mr Bagrodia was the Minister of State for Coal and the Prime Minister Dr. Manmohan Singh held the Coal portfolio.

TIMELINE-

  • July 1992: The coal ministry orders the setting up of a screening committee to consider proposals from private power companies for captive mining. -Screening committee guidelines give preference to large projects of power and steel companies. Blocks to be allocated on a first-cum-first-served basis.
  • As many as 70 coal fields were allocated between 1993 and 2005, 53 were given away in 2006, 52 in 2007, 24 in 2008, 16 in 2009 and one in 2010.
  • Altogether, 216 blocks were allocated between 1993 and 2010, out of which 24 were taken away at different points in time, effectively leaving the total number of allocated blocks at 194.
  • March 2012: A draft report by the Comptroller and Auditor General of India (CAG) says that windfall gains to allottees on account of the allocation process were Rs.10.7 trillion. The final report in August 2012 tones down the figure to Rs.1.76 trillion.
  • The auditor says that although by 2006, the government had the legal fiat to auction coalfields for captive use, it chose not to do so.
  • March-October 2012: Allegations against several politicians and industrialists surface in the media, accusing them of having benefited directly or indirectly from the coal block allocation process. These include Subodh Kant Sahai, Naveen Jindal, S. Jagathrakshakan, Prem Chand Gupta and Ajay Sancheti.
  • 31 May 2012: On a complaint by two Bharatiya Janata Party (BJP) leaders, Hansraj Ahir and Prakash Javadekar, the Central Vigilance Commission orders a probe by the Central Bureau of Investigation (CBI) into the allocations. Simultaneously, the income-tax department begins a probe.
  • June 2012: Coal ministry forms an inter-ministerial panel to review the process of allocation of blocks and to decide either on de-allocations or forfeiture of bank guarantees. The government has taken back about 80 coalfields thus far, while bank guarantees in 42 cases have been forfeited.
  • 17 August 2012: The final CAG report is tabled in Parliament.
  • September 2012: The Supreme Court begins monitoring the CBI 
probe into the coal field allocations

-March 2013: The Supreme Court asks CBI director Ranjit Sinha not to share details of its investigation with the government.
  • 23 April 2013: Parliamentary standing committee slams the allocation process, says allocations between 1993 and 2008 done arbitrarily and that blocks which are undeveloped should be taken back. It also recommends that all those involved in the process should be examined.
  • 
 
26 April 2013: CBI director Ranjit Sinha admits that the investigation report was shared with the then law minister Ashwani Kumar.
  • 10 May 2013: Ashwani Kumar resigns.
  • 11 June 2013: CBI registers first information report (FIR) against 
Naveen Jindal and Dasari Narayana Rao.
  • 16 October 2013: CBI files an FIR against industrialist Kumar 
Mangalam Birla and former coal secretary P.C. Parakh.
  • 
 
14 April 2014: Parakh says in his book that the authority of former Prime Minister Manmohan Singh was undermined by former coal ministers Shibu Soren and Dasari Narayan Rao. The two ministers, he says, aided by industrialist Naveen Jindal, scuttled the move to adopt the process of open competitive bidding for auctioning coal
  • July 2014: The Supreme Court sets up a special CBI court to try all 
coalfield allocation
cases.
  • 
 25 August 2014: The CBI decides to close its case against Birla and 
 The Supreme Court also declares that all coal blocks 
allocated between 1993 and 2010 were illegal.
  • 

 1st September, 2014-The apex court reserves its final verdict on the 
coal gate scam. The court affixes the date of declaration of the 
verdict as September 9, 2014.
  • 9 September 2014 – A bench headed by Chief Justice R M Lodha 
issued notice to the CBI director on a plea seeking an SIT probe against him for allegedly protecting the accused in Coalgate and to keep him away from the investigation and prosecution in the scam. The court posted the case for further hearing on September 19.

By Vipin Mittal, JGLS.