Coal needs telecom treatment

The Comptroller & Auditor-General’s (CAG) report estimates a deemed loss to the exchequer of Rs 1.86 lakh crore because of non-competitive allotment of 149 coal blocks. To its credit, the CAG blames the Screening Committee for the lapses and not the government or any political party, observing that both the coal ministry and the Committee failed to flag use of coal for purposes other than allotted, or simply not mining. Since a majority of the mines remain unmined, what was the purpose of hastily allotting the blocks ostensibly to overcome a dire power crisis? In the 11th Five Year Plan (2007-12), which largely coincides with the coal allotment period until now, five companies are under the spotlight, as the Central Bureau of Investigation (CBI) has raided them on the basis of misrepresentations and false claims in the applications, presentations and connivance or lack of due diligence on part of public servants. JLD Yavatmal Energy Limited, in which Congress MP Vijay Darda was one of the Directors, JAS Infrastructure Capital Private Limited, AMR Iron and Steel, Navbharat Power Private Limited and Vini Iron and Steel Udyog Limited find themselves in the dock. Most of these have to do with unmined blocks. What is the reason for not mining the mines? We had reported in our Infrastructure Today January 2012 issue that “In the last 18 years, 193 blocks have been allotted to various companies for captive use. But only 28 are operational so far. As against an estimated target of 90 mtpa from 193 blocks, only 38 mtpa is being produced now.” The problem lies in accountability. Infrastructure Today had further written to companies which had not developed the mines which were allotted to them, but they had no strong government or legal pressure to perform. They simply were looking at encashing gains by selling stakes.

Now, the opposition party BJP has promptly demanded that 142 allotted coal blocks be cancelled. The most concerning of all the political fracas that the nation is witnessing in and out of the Parliament as a result of the CAG report is this demand. Since 2009, the government has been issuing warning to companies for not mining. In May last year, it cancelled 14 mines for not developing them or dragging their feet. As many as 88 coal block owners received “Show Cause” notifications, but the responses have not always been forthcoming. The biggest of power and steel companies—Vedanta’s Sterlite Energy, Lanco, GMR Energy, Reliance Energy, Essar Group’s Navabharat Power and ArcelorMittal—were issued warnings in July that year for the same reason. Many of these companies and several new ones such as Jindal Steel and Power and GVK are now being investigated by an Inter-Ministerial Group. The government will decide on deallotting the mines to 59 of these “non-serious” players once the IMG report is tabled.

But cancellations will result in a loss to the nation. Instead, the emphasis should be reallotting such mines to other, more active parties. The key to allotment is ensuring transparency and allo­tment based on need, not arbitrary choice. The companies which have undermined the allotted mines whether for captive use or any other need to pay for the loss caused. The CAG’s compu­tation of the opportunity loss can be recovered if the govt offers a plea bargain. Plea bargains are agre­e­­ments between defendants and prosecutors where defendants agree to plead guilty to some or all of the charges against them in exchange for concessions from the prosecutors. These agree­ments all­ow prosecutors to focus their time and resources on other cases, and reduce the number of trials that judges need to oversee. This would help recoup some of the potential loss that the government has undertaken plus a reallotment procedure maybe worked out in the same form and style of the 2G experience which can bring licence fee for fresh allotment to new bidders.