INTRODUCTION

The issue of allocation of natural resources has been at the centre of the debate on corruption. From the Supreme Court to the Comptroller and Auditor General (CAG) to anti-corruption crusaders like Team Anna, all have slammed the UPA for allocating precious natural resources like minerals and land to private hands at a fraction of their market price. A new CAG report on coal block allocation has put the spotlight on Prime Minister Manmohan Singh for alleged corrupt policy-making, causing a revenue loss of several thousands of crores of rupees. Politically, the coal allocation scam has far greater implications for the UPA than the 2G swindle. During the five years of UPA-1, Manmohan Singh was also the coal minister for about three and a half years. The junior minister in the coal ministry was always a Congressman. Yet the PM failed to introduce the policy of competitive bidding for captive coal block allocations, despite having given an in-principle approval to it within the first six months of his tenure as prime minister. In more ways than one, the story of the coal scam encapsulates the story of the UPA. It shows how an indecisive and ineffective leader is as deleterious for the country as an outright corrupt one. The story proves that the 2G scam was no aberration for which the blame could be placed at the doors of a rogue minister from another political party. Rather, it shows that the malaise of private profiteering and crony capitalism ran deep in the UPA establishment. A figurehead PM with bona fide intentions was continually hobbled by vested interests at every turn. And whenever an occasion arose where the choice lay between taking a stand and looking the other way, the PM opted for the latter.

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WHAT COALGATE IS ALL ABOUT

Coal allocation scam or Coalgate, as referred by the media, is a political scandal concerning the Indian government's allocation of the nation's coal deposits to public sector entities (PSEs) and private companies. In a draft report issued in March 2012, the Comptroller and Auditor General of India (CAG) office accused the Government of India of allocating coal blocks in an inefficient manner during the period 2004-2009. Over the summer of 2012, the opposition BJP lodged a complaint resulting in a Central Bureau of Investigation probe into whether the allocation of the coal blocks was in fact influenced by corruption. The essence of the CAG's argument is that the Government had the authority to allocate coal blocks by a process of competitive bidding, but chose not to. As a result both public sector enterprises (PSEs) and private firms paid less than they might have otherwise. In its draft report in March the CAG estimated that the "windfall gain" to the allocatees was 1,067,303 crore (US$194.25 billion). The CAG Final Report tabled in Parliament put the figure at 185,591 crore (US$33.78 billion) On August 27, 2012 Indian Prime Minister Manmohan Singh read a statement in Parliament rebutting the CAG's report both in its reading of the law and the alleged cost of the government's policies. While the initial CAG report suggested that coal blocks could have been allocated more efficiently, resulting in more revenue to the government, at no point did it suggest that corruption was involved in the allocation of coal. Over the course of 2012, however, the question of corruption came to dominate the discussion. In response to a complaint by the BJP, the Central Vigilance Commission (CVC) directed the CBI to investigate the matter. The CBI named a dozen Indian firms in a First Information Report (FIR), the first step in a criminal investigation. These FIRs accuse them of overstating their net worth, failing to disclose prior coal allocations, and hoarding rather than developing coal allocations. The CBI officials investigating the case have speculated that bribery may be involved. The issue has received massive media reaction and public outrage. During the monsoon session of the Parliament, the BJP protested the Government's handling of the issue demanding the resignation of the Prime Minister and refused to have a debate in the Parliament. The deadlock resulted in Parliament functioning only seven of the twenty days of the session.

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FIRMS ELIGIBLE FOR A COAL ALLOCATION

Historically, the economy of India could be characterized as broadly socialist, with the government directing large sectors of the economy through a series of five-year plans. In keeping with this centralized approach, between 1972 and 1976 India nationalized its coal mining industry, with the state-owned companies Coal India Limited (CIL) and Singareni Collieries Company (SCCL) being responsible for coal production. This process culminated in the enactment of the Coal Mines (Nationalisation) Amendment Act, 1976, which terminated coal mining leases with private lease holders. Even as it did so, however, Parliament recognized that the nationalized coal companies were unable to fully meet demand, and provided for exceptions.

COAL ALLOCATION GUIDELINES

The guidelines for the Screening Committee suggest that preference be given to the power and steel sectors (and to large projects within those sectors). They further suggest that in the case of competing applicants for a captive block, a further 10 guidelines may be taken into consideration: status (stage) level of progress and state of preparedness of the projects; net worth of the applicant company (or in the case of a new SP/JV, the net worth of their principals); 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 (in terms of existing capacities in coal/lignite mining and specified enduse); recommendation of the administrative ministry concerned; recommendation of the state government concerned (i.e., where the captive block is located); track record and financial strength of the company

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THE COAL ALLOCATION PROCESS

Under the Coal Mines Nationalization Act, 1973, coal mining was exclusively reserved for public sector companies i.e. Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL). But with increasing demand and constrained supply, amendments were made to the Act and it was decided that captive blocks can be allotted to specific end users. (Captive Blocks: Allotting Coal blocks to a specific user for a specific purpose. For example, if cement industry is allocated a captive coal block, the coal produce can be used only for the purpose of manufacturing cement and cant be sold by that company) A screening committee was constituted for the purpose of allotment but there were no set criteria for allotment. With only a letter of recommendation, one could get a mine allotted for itself. Meanwhile a committee was constituted to look into the modernization of coal sector. This expert committee for coal sector reforms was constituted under the chairmanship of TL Shankar who was also the chairman of Energy group administrative staff college. To rein in more transparency a set of eligibility criteria was set forth, according to which the blocks will be allotted. In July 1992, Ministry of Coal issued the instructions for the constitution of a Screening Committee for screening proposals received for captive mining by private power generation companies. The Committee was composed of government officials from the Ministry of Coal, the Ministry of Railways, and the relevant state government. A number of coal blocks, which were not in the production plan of CIL and SSCL, were identified in consultation wi th CIL/SSCL and a list of 143 coal blocks were prepared and placed on the website of the MoC for information of public at large. Companies could apply for an allocation from among these blocks. If they were successful, they would receive the geological report that had been prepared by the government, and the only payment required from the allocatee was to reimburse the government for their expenses in preparing the geological report. For example, in case of Rampia and the dip side of Rampia coal block, 108 applications were received against advertisement. Against these 108 applicants, only two were scheduled to make a presentation before the screening committee. The screening committee, however recommended six companies (Sterlite Energy limited, GMR Energy Ltd., Lanco Group Ltd., Navbharat Power Ltd., Mittal steel India Ltd. and Reliance energy Ltd.) for allocation of coal blocks.

RESULTS OF THE COAL ALLOCATION PROGRAM

The response to the allocation process between 2004 and 2009 was spectacular, with some 44 billion metric tons of coal being allocated to public and private firms.[15] By way of comparison, the entire world only produces 7.8 billion tons annually, with India being responsible for 585 million tons of this amount.[16] Under the program, then, captive firms were allocated vast amounts of coal, equating to hundreds of years of supply, for a nominal fee.

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CHARGES AGAINST THE GOVERNMENT BY CAG

The main charges put forth by CAG were The CAG draft report claimed that the present system lacked transparency and there were no objective parameters to decide the allocation of coal blocks for selection of allocattees among the eligible bidders. The government had legal authority to auction coal blocks. However, it chose otherwise. Even the law ministry had opined that there is no legal impediment to the process of allotting by competitive bidding and the same can be brought by an administrative auction The delay in introducing this system of competitive bidding rendered the existing system beneficial for the private players. This led to wrongful windfalls gains to the allocattees. The draft CAG report claimed that a loss of Rs. 10.7 lakh crore was caused to the exchequer. The reasoning behind taking 90% of the total reserves rather than the entire lot, according to CAG, is that detailed exploration establishes reserves at a confidence level of 90%. The report points out that the coal ministry had maintained in 2004 that the chances of any allocatee not being able to recover this much from the reserves would be, if at all, very remote. CAG has added that the actual amount of gain to the allocatees may change depending upon the mining plan, cost of extraction of coal, market price of coal and quality

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POLITICIANS ACCUSED
The scam has named a number of bigwigs of the country. All of the following people were somehow connected to it. Union Minister Subodh Kant Sahay DMKs S. Jagathrakshakan BJPs Rajya Sabha MP Ajay Sancheti Congresss Vijay Darda and his brother, Rajendra Darda, Maharshtra education minister Premchand Gupta- UPAs partner and Rashtriya Lok Dal (RJD) Congress MP Naveen Jindal

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THE FINDINGS OF THE CAG REPORT

The CAG report consists of the results of the Performance Audit on Allocation of coal blocks and Augmentation of Coal Production. There was a widening gap between demand and domestic supply of coal and at the same time increasing imports of coal. The CAG Report criticized the sales procedure that was followed and said the allocation of coal fields lacked trans parency and objectivity. The report brought to light the following facts: 142 coal fields were sold since July 2004 to private and state-run companies. Some of the coalfields bought by private companies in 2004 did not begin production till 2011, while some companies later made enormous profits by selling the coal mines. The auditors 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. The report said an auction would have given the government a portion of that money. The auditors said the allocations were made on the recommendation of state governments. The CAG report exonerated Prime Minister Manmohan Singh even though he was running the coal ministry for the period under review. 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% by CIL for 2011-2012.

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PMS DEFENSE
Even though the opposition was too noisy to let the PM speak, after the session, the PM spoke to the media in an attempt to defend their previous policy The particular method for allocation of coal blocks was much before UPA came into power and the other governments since 1993 followed the same process UPA brought transparency in this method by publicly inviting applications. The applicants were scrutinized by the committee which demonstrated no impropriety Even state governments ruled by opposition states like West Bengal, Chhattisgarh, Jharkhand, Orissa and Rajasthan opposed the move for competitive bidding claiming that this would increase cost of coal and hamper industrial development. On the charge that the decision should have been expeditiously implemented, PM conceded to it but said that the complexities of the parliamentary system cant be ignored. He pleaded that legislative changes are inevitable and an amendment had to brought in to the Mines and Mineral Development Regulation Act, wherein competitive bidding for coal mines was introduced. Another amendment to the Mines and Minerals (Development and Regulation) Act, 2011 (Tabled before the parliament, but has not been passed) will introduce competitive biddings for all mines. He also disputed the method of arriving at windfall gains.

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STAND OF THE GOVERNMENT OF INDIA

The Government clearly denied charges of corruption made against them. Prime Minister Manmohan Singh stated that the allegations of impropriety are without basis and the auditors observations were clearly disputable. Speaking at a press conference on the CAG report, Union Finance Minister P Chidambaram stated that a loss of resources would be considered only if the coal was mined and sold at a price that costs the national exchequer and some make undue gain. Coal Minister Sriprakash Jaiswal defended the governments strategy of handing out coalfields to companies without resorting to an auction process by saying the policies were suited to the time when they were adopted.

STAND OF THE OPPOSITION

The Opposition believes the UPA Government has misguided the people of India for almost a decade. Based on the findings of the CAG report on coal mining, the Opposition has opined that the Prime Minister must accept moral responsibility for the scandal as he was in charge of the Coal ministry, and should resign. They also claim that the huge loss incurred to the public exchequer brought financial benefit to the Congress party. Leader of Opposition in Lok Sabha Sushma Swaraj alleged and accused the Congress, saying that a delay in amending the laws was caused because it was getting a large sum from the coal block allocation; also saying that the revenue from the same did not go to the Government, but went to the Congress party. Leader of Opposition in Rajya Sabha Arun Jaitley alleged that the UPA tried to subvert constitutional authority and if it did not succeed, then it attacked the constitutional authority which was a defiance of ethics in governance and polity.

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CURRENT STATUS OF THE SITUATION IN PARLIAMENT

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THE AFTER EFFECTS

Apart from the windfall loss, this mother of all scams can also be blamed for loss of Rs 126 crore due to non - functioning of the parliament. (Its the parties which are more at fault). The entire monsoon session of the parliament was washed off with hardly four bills being passed. Functioning for just six of the 19 functioning days, this session was the second worse, the worst being the winter session of 2010 when the house was paralyzed with the oppositions demand for a JPC on the 2G scam. And the oppositions demand this time? We want the PM to resign! Coalgate is also in news for the big explosion caused by Naveen Jindals sting operation against Zee news channel which led to the arrest of their editor, Sudhir Chaudhary and their Business editor, Samir Ahluwalia. In this reverse sting operation on the media house, Navin Jindal has claimed that the Zee editors tried to extort Rs. 100 crore in return for not running stories on allegations Jindals firm Jindal Steel and Power Limited (JSPL) is facing in the coal block allegation scam. In return, Sudhir Chaudhary has slapped Jindal with a defamation notice. Zee chairman, Subhash Chandra who is also the chairman of Essel group, expressed his readiness to join the investigation.

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REFERENCES
http://www.clatgyan.com/clat-general-knowledge/coalgate-scam/ http://tehelka.com/coal-spill/?singlepage=1

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