THE COAL SCAM

A STUDY!!

THE SCAM

WHAT IT IS!

COMPARISON OF SCALE

THE GAINERS

THE PROCESS

ESTIMATE

THE PEOPLE RESPONSIBLE

WHAT IS THE BASIC ISSUE?

Coal allocation scam 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.

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 (SSCL) 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, allowing certain companies to hold coal leases: 1976. Captive mines owned by iron and steel companies. 1993. Captive mines owned by power generation companies. 2007: Captive mining for Coal gasification and liquid faction.

THE COAL ALLOCATION PROCESS

In July 1992, Ministry of Coal, issued the instructions for 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 with 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.

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 end-use); 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.

 1.87 lakh Crore Rupees Biggest scam in India by now Report authenticated by Comptroller and Auditor General of India

What is the coal scam?

A question many of you would have.

Simply put it is a corruption scandal where-in the Comptroller and Auditor General of India (CAG) office has accused the Government of India for providing the nation's coal deposits to private and state-run entities in an irregular and arbitrary manner instead of publicly auctioning them off to the highest bidder (as is usually done for such entities), resulting in a loss of approximately 186,000 crore (US$33.67 billion) to the exchequer during the period 2004-2009.

WHAT IT IS!

To g e t a n i d e a o f i t s s c a l e l e t s s e e w h a t

this money
could have bought

Coal secretary had warned way back in 2004 about windfall gains to private companies under existing scheme of allotment but PMO continued to delay process of competitive bidding.

This delay meant that coal was allocated under the existing, opaque process giving private companies huge monetary gains.

The CAG took into account average production cost per tonne of coal of all grades produced in open cast mines of CIL as well as sale price as reference value in order to calculate the financial gain to allottees.

CAG REPORTS VS. GOVERNMENT RESPONSE

CAGS REPORT GOVT. RESPONSE
CAGs figure misleading. Of the 57 blocks cited, only one operational.
Pvt. firm gain Rs. 1.86 lakh crore after blocks given by nomination.

THE LOSS
THE DELAY THE AUCTION

Despite repeated advice from Law ministry, competitive bidding delayed.

Ministry took time to clarify for bidding, MMDR Act needed changes.

After being advised to proceed with auctioning, Coal Ministry wasted time.

Oppositions from stated like Chhattisgarh, Rajasthan and Bengal caused delay.

BIGGEST WINDFALL ALLOCATION

PRIVATE SECTOR
Strategic Energy Tech System Ltd. Electro Steel Castings and Others Jindal Steel and Power Ltd. Bhushan Steel Ltd, Jai Balaji Ltd & Rashmi Cements Ram Swarup Lohh Udyog, Adhunik Corp, Uttam Galva Steel JSPL & Gagan Sponge JSPL/MCL/PL/Jindal Stainless/Shyam DRI Tata Steel Ltd. Chattisgarh Captive Coal Co Ltd. CESC Ltd & JAS Infrastructure

Gains (Rs. Cr)

33,060 26,320 21,226 15,967 15,633 12,767 10,419 7,161 7,023 6,851

PSU
NTPC TNEB & MSMCL JSEB & BSMDC MMTC

Gains (Rs. Cr)

35,024 26,584 18,648 18,628 17,358 16,498 15,335 11,988 9,947

WBPDCL

CMDC

MSEB & GSECL

JSMDCL MPSMCL

Note: Based on prices at time of allocation

WHO IS RESPONSIBLE?
The Comptroller and Auditor General of India puts the Coal Ministry and the government, particularly the PMOs office during the period 2004-2009 as responsible for the misallocation of coal blocks. The coal ministry at the time was headed by the current Prime Minister Dr. Manmohan Singh, whose clean image has now come under question.