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how to clean up the coal allocation mess

With the Supreme Court announcing that the captive coal block allocations were illegal, India needs to engage with a new set of questions on coal. Right now, our coal industry is a mess. It has spawned oligarchs, hurt local populations and decimated local ecosystems. While doing all this, it simultaneously failed to supply the country with all the coal it needs. This story takes a quick look at some of the larger questions going around — what should be done with the captive blocks? should they be given to coal india? but it is gripped by serious problem. if we liberalise, we need to remember that the country’s past experiences in liberalising energy have not been good.
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on the investment in captive coal blocks

Last week, defending the Centre in its coal-block allocations, Goolam Vahanvati, the government’s top law officer, told the Supreme Court that companies had invested Rs 2,00,000 crore in their captive blocks. Some industry players have been citing this figure as the financial cost of a complete cancellation of licences. But ET calculations on the estimated cost of developing a mine, and the possible alternatives to cancellation before serious players, suggest this figure might be an overstatement.

on how india’s attempts to fix the coalgate mess are faring

in the days after the cbi’s 14th FIR, delhi’s political circles crackled with ignorant speculation.

the FIR was the congress’ way of warning industry against supporting narendra modi, the BJP’s prime minister aspirant; the FIR had been filed to discredit pc parakh, the former coal secretary; a rival business group was trying to scupper industrialist kumarmangalam birla’s chances of getting a banking license…

in the process, a key question escaped scrutiny once again: how are India’s attempts to fix the mess created by coalgate progressing?

coalgate, remember, is not about small, undeserving companies getting coal blocks. nor is it about the government blowing a chance to rake in cash by auctioning them. it is about a resource grab where a handful of companies cornered 44 billion tons of coal, leaving coal india (CIL) with just 49 billion tons to meet coal demand from the rest of the industrial sector.

as such, its fallouts are serious. by concentrating ownership of coal reserves, coalgate has distorted the thermal powerplant market. power plants which have to import 35% of their coal — due to a weakened CIL’s inability to meet everyone’s coal requirements — cannot compete with power plants with captive blocks. projects have been abandoned. consolidation and bank write-offs look likely.

it has also pushed the country towards an oligarchic future and compromised india’s energy security. it has also accelerated the loss of india’s central forests and imperilled the rivers that originate there. CIL, with a range of coal blocks to mine in, could defer mining in pristine forests. a company with a single block doesn’t have this luxury.

over the past year, multiple institutions, from the supreme court to the CBI to the coal ministry, have been examining different aspects of coal and coalgate. between them, the country has a rare second chance to get its act on coal together, to set in place a new architecture which provides cheap, plentiful coal equitably till the country can move to cleaner fuels.

the question is whether the corrective steps underway are taking us in such a direction.

which is what this story out today is on.

And more on coal…

After a draft report by the Comptroller and Auditor General saying the government had foregone revenues of Rs 10 lakh crore by not auctioning the blocks was leaked, most public discussions had pivoted around two themes. One, why did UPA1 ignore the suggestion of the then-Coal Secretary to allot blocks through auctions, preferring instead to hand them out through a discretionary process involving the screening committee? And two, on the politicians whose friends and family members were allotted coal blocks. So overwhelming was the media glare on these two issues that larger questions got obscured.

Here. The opinion piece I wrote after finishing all the reportage on coalgate. This is the story which seeks to pull all the threads from our reporting on coal into a single coherent narrative.

On the real contours of “Coal-Gate”

This post aggregates all the stories my colleagues John Samuel Raja D, Avinash Singh and I did on India’s captive coal block allocation scam between June last year and now. The articles were an attempt to understand ‘coalgate’ in as much detail as possible. Given that we now live in an age of media clutter, it seems safe to assume few readers will have read all the stories. And so, this composite list.

When we started work on coal, one of the more immediate (and obvious) questions was how unknown, under-capitalised companies got coal blocks where more established ones failed. This resulted in one set of stories on coal block allocation. And then, we sort of segued into a larger set of stories which sought to argue that the rot in coal is not limited to just coal block allocation. And then we segued yet again to explore the relationships between the captive block policy and india’s power plant boom, forests and land.

These were followed by a couple of relatively investigative stories which examined these processes of allocation — like a strange transaction between a company close to Naveen Jindal and another which was partly owned by ex-MoS (Coal) Dasari Narayana Rao.

In 2014, a fourth set of stories focused on the investigations and judicial process underway.

1. On what the numbers say about coal block allocation…

Crunching the numbers of the 245 companies awarded coal blocks between July 2004 – when UPA-I decided not to switch to auctions and continue with the ‘screening committee’ approach – and 2009 throws up some interesting patterns — by requirement, states, end-use and business group.

The stated reason for the captive block policy was that Coal India was not able to expand production. And that it made sense to bring the private sector into coal production — especially since the country is planning for massive jumps in power generation capacity. But take a closer look at the numbers and you see, for one, that most captive blocks went to sponge iron plants, not power plants. Second, even among the powerplant cos that got blocks, very few of the serious ones got any.

2. One of the first people ET met while working on these stories was BJP MP Hansraj Ahir. He had been asking for a CBI probe into coal block allocations. We asked him why.

“There are serious problems in the allocation of mines. Blocks were to be given to companies that needed captive coal mines — to feed their steel, cement, power and sponge iron plants. But what a lot of companies did is they showed plants on paper — as something they were planning to set up — and they got clearances on that basis.”

3. One part of the problem lay in the screening committee and the discretionary process it followed while alloting coal blocks. (for more info on this, see story #28)

Records of the coal ministry show that, between 2005 and 2010, the government offered 150 coal blocks for captive use. Well over 1,400 companies applied for these. No price-based auctions took place. There was a basis of selection that chose 178 winners—some companies were asked to exploit coal blocks jointly—from the 1,400-plus applicants, which was lambasted by the government auditor while scrutinising these allotments.

4. In this, the screening committee was aided by companies which massaged their financials, etc, and hoodwinked the screening committee

How did small, obscure companies like Jas Infrastructure, Vini Steel & Power, Navbharat Coalfields and JLD Yavatmal bag a coal block where larger, more established ones failed? The growing pile of information on the allotments coming into the public domain shows that it was because the rules were subjective and because the gatekeepers could be influenced.

5. The outcome was predictable. My colleagues Avinash Singh, John Samuel Raja D and I found a bunch of companies got their hands on coal blocks that they could not have developed. and so, they began looking for ways to sell them.

Even as the CBI is probing the allotment of coal blocks to private companies for captive use, an ET investigation has uncovered instances of such blocks changing hands, suggesting individuals have profited at the expense of the exchequer.

6. An accompanying story, by John, looked at the mechanics of such sales.

Grace is a clear case of a sale. “The company was finding it difficult to arrange funds to expand and develop the block,” says promoter Mukesh Gupta.

7. There was something mystifying here. Very few of the coal blocks allotted had come into production. And here, the coal ministry had taken surprisingly selective action.

As it was seen to do while allotting coal blocks for captive use, the coal ministry seems to have exercised discretion while taking back blocks from allottees in June 2011 for not beginning production in time. This list of 24, out of the total allotments of 218, is dominated by small and state-owned companies. Large companies are conspicuous by their absence, despite several projects of this set being at a similar stage of completion, sometimes even behind, as that of the set whose blocks were taken away.

8. The fact that so few coal blocks had come into production itself was surprising. As per the minutes of a coal ministry meeting to review progress of coal blocks, and why they were not producing yet, most cos blamed the environment ministry. But this was strange too. The env ministry is not known for not clearing projects, after all.

The assertion by a section of industry that the current shortage of coal is due to a delay on the part of the ministry of environment in granting mining clearances is not borne out by data. A ministry document that details coal-mining clearances over the last 30 years, a copy of which is available with ET, shows the ministry cleared 94% of coal-mining projects during this period. Further, during the tenure of the ruling United Progressive Alliance (UPA), project clearance has been the fastest and has even picked up pace during its eight years.

9. Around this time, it was also getting clearer that a mass of politicians had acquired coal blocks for friends, families and relatives.

A company brand new to the steel business and owned by the sons of Rashtriya Janata Dal leader Prem Chand Gupta applied for a coal block when he was the Union minister for corporate affairs and bagged it about a month after his tenure ended along with that of his government.

10. This development, along with similar reports about Subodh Kant Sahay and  S. Jagathrakshakan, not to mention the discretionary allocation of coal blocks pointed towards the role of political rent-extraction from India’s coal sector…

It was a roundtable on ‘campaign finance reforms in India’, but it brought up a mathematical equation that showed how corruption in coal could ultimately be traced to political funding. Speaking at the Observer Research Foundation event in February, BJP MP Rajiv Pratap Rudy said: “In Goa (which was going to elections then), each candidate, whether from the Congress or the BJP (or other political parties), would be spending Rs 5-7 crore.” The official Election Commission ceiling is Rs 16 lakh.

Where is this money coming from? Increasingly, from minerals and natural resources like coal.

11. At the same time, it is important to remember that the rot in coal runs way deeper than just coal-gate. There are other problems as well. Like the one-sided deals that state mining companies are signing with private cos.

Although current rules prohibit private players from acquiring mines to extract and sell coal in the open market, they have been using an innovative arrangement with state mining corporations to do the same. Under this arrangement, the coal ministry awards a mine to a state mining corporation (SMC). The SMC, in turn, floats a joint venture (JV), in which it holds a majority stake as sweat equity, but makes no investment. A private player holds a minority stake, but brings in the entire investment and handles all operations. If the contract terms are lopsided or if output is not monitored, such an arrangement lends itself to abuse, as the Karnataka Lokayukta exposed while investigating illegal iron-ore mining in the state…

12. Or, take this company called EMTA. Coming out of nowhere, it now controls 14 coal blocks in India.

In a sector where private players have been allowed only to supply to their own projects, EMTA is a notable exception of a private entity that neither belongs to the state nor does it have any downstream presence. Its meteoric rise is the result of a government policy that effectively allows private players a backdoor entry into coal mining and an ingenious business model.

It is important to understand both such models (No 11 and 12). For when reform begins, these flaws should be kept in mind while devising new institutional arrangements for extracting coal. (Updates: on this matter, also see this 2014 story on coal PPPs and this 2015 story on EMTA which explained some of the vexing questions about its model — why its pricing was linked to CIL’s price instead of following the cost-plus model; why several of its mining contracts were signed with PSUs much before the coalblock was allotted; and why PSUs signed such loaded agreements.)

13. Around here, there was also a controversy around the CAG report with a lot of armchair pundits saying it had overstated numbers. Jindal Steel and Power head Naveen Jindal joined the debate…

Leading industrialist and Congress MP Naveen Jindal, who is facing the heat for being allotted large coal blocks, says it is wrong to call him a “beneficiary” and blames the CAG for creating a potentially harmful controversy for the country. “Why do you say beneficiary? I strongly object to this term. Do you know how difficult and challenging it is to open a mine? You can find out from analysts if in their valuation of JSPL, they ascribe any value to any of these blocks? What they tell me is ‘no’,” Jindal told ET in an interview on Wednesday.

14. However, it is more likely that the CAG report is on the conservative side.

If the experience of Madhya Pradesh on coal-block auctions is anything to go by, the government auditor’s estimate that the exchequer incurred a presumptive loss of Rs 1,85,591 crore in the allotment of 57 mines to private parties between 2006 and 2009 might be on the conservative side.

15. The question is: how does one fix all this. The government’s response focused hugely on the coal block allocations and the undeserving cos which got blocks.

16. However, what is needed is a wider set of corrective actions…

The Central Bureau of Investigation (CBI) filed its first FIRs this week. According to media reports, at least 10 more are expected soon. The Inter-Ministerial Group, comprising bureaucrats from ministries like steel, power and finance, and chaired by additional secretary (coal) Zohra Chatterji, is in the process of deciding what to do with errant captive blocks. Even at the time of going to press, the group is quizzing the companies whose 58 blocks are running badly behind schedule.

And then, there is the Public Accounts Committee (PAC) chaired by BJP leader Murli Manohar Joshi which will look into the report of the Comptroller and Auditor General on the coal mess. And it is the PAC which will vet whether the CAG’s observations on captive coal block allocations are valid or not. However, these institutional responses invite a large question: are these institutional responses we are seeing are enough to clean the sector up? And the short answer to that question is: no, they aren’t. The remedial measures we are seeing focus largely on how captive coal blocks were allocated. But the mess in coal runs way deeper.

Any attempt to fix this mess though, will run into a heavy set of vested interests. There is of course, most visibly, the political class, which has over the years built up a deep relationship with a set of private sector and other players in the sector. Politics in India has become more competitive, complicated and costly. Like any business it needs funds and investment. Increasingly that ‘funding’ is coming from the resource sectors – energy, coal, mining and of course, telecom spectrum.

Any attempt at reform in the coal sector will have to deal with this problem. But there are other interests too which reform will have to deal with- from state companies, to coal ministry bureaucrats to a relatively unknown, but increasingly powerful set of private sector players who have everything to gain from the status quo. Ultimately, it is unlikely to be one big reform which will solve the problem. Rather, whether the problem is coal, or iron ore, or other natural resources, reform will have to be on multiple fronts.

17.  All this raises a larger question about the real contours of ‘coal-gate’. What was at stake here? Is it only that some undeserving companies got coal blocks? Balls. The impact of the captive coal block approach runs deeper. Take what it has meant for India’s thermal power plant boom. A bunch of companies had entered the power plant business thinking coal would never be a problem. And then, a handful of business families cornered most of the coal blocks. This, among other things, badly hurt Coal India’s reserves. Which said it could not deliver as much coal as it had originally promised — a 65% instead of 95-100% supply. (more on this in story number 18). this announcement skewed the thermal power plant game.

Companies without captive blocks found they could not compete in bids with those who had one. “These companies could have competed earlier when they were betting on a 100 per cent linkage,” says Khurana. “But not with 65 per cent linkage.” In the second set, while the companies had a dedicated buyer, they had not envisaged CIL would get stingy with coal. They had to import 35 per cent of their coal needs, which increased their costs beyond what they had budgeted.

OLYMPUS DIGITAL CAMERA This is one outcome of the captive block approach. It has skewed dynamics in the powerplant business. After importing 35% coal, there is no way they can compete with powerplants with captive blocks whenever SEBs issue tenders. Abandoned projects and impending consolidation now look likely in the sector. There is more. During the early months working on king coal, I met a senior mandarin in the forest department who attends the FAC meetings where proposals to divert forestland for industrial projects are discussed. 20-30 families, he said, control 50-60 percent of India’s mineral resources today. The country is moving towards oligarchy. And this is something the captive block policy has contributed to. This has also compromised the country’s energy security.

18. And now, a larger explanation on why Coal India could not meet demand.

There were two ways in which CIL could have boosted production as companies began stampeding into power generation around 2006: commission new mines or extract more from existing ones. However, CIL didn’t have too many new, explored blocks where mining could start. “We only have expansion and extension projects left,” says CIL chairman Narsingh Rao. This is the outcome of a decision by the UPA government, in 2004, to give blocks CIL had asked for to other companies for captive use… 

…Even as CIL struggles to meet demand, calculations show the UPA may have given out more captive blocks than it needed to. According to the Coal Controller’s Provisional Coal Statistics (2009-10), the peak rated capacity of all captive blocks allotted by March 2010, which should come into production by 2015, is 705.8 MT per year — about 10 times the 69 MT coal shortfall in 2010-11. The excess, however, will remain the preserve of a few block owners.

19. And then, there is the question on how the captive block approach has impacted India’s forests — the question that got us chasing after coal in the first place. Or, to put it differently, why is there such pressure to junk the ‘no go’ concept?

With regard to the blocks given out, the coal ministry and companies painted themselves into a corner. “There is neither any policy of allotment of alternative blocks nor indeed would there be availability of alternative coal blocks in such numbers,” says a cabinet note written in 2010 by former coal secretary Perti. And so, the coal ministry is pushing the environment ministry to clear these blocks. Companies allotted captive blocks are doing their own lobbying.

A thermal power plant is not competitive without a captive block. Even sponge-iron companies are struggling. Take Godavari Ispat, whose coal block lies in a ‘no go’ area and its coal linkage — essentially, a supply commitment from CIL — is being cut by 25% each year. “We are now importing coal from South Africa,” says Agarwal. For companies like his, survival depends on operationalising the coal block.

the site of pathriya dand coal block

the site of pathriya dand coal block

20. The impact of all this on villagers has not been nice either. As the thermal power plant story says, several farmers have sold land to thermal plants that will not come up. Others have been bilked of their land through the usual egregious land acquisition policies. enter, the zameeni dalals (or, the land brokers).

The answer partly lies in how companies acquire land, the process of which is explained by the head of a Raipur-based sponge-iron company. Since a company usually does not have local contacts in the project area, it turns to local land brokers. They go to influential people like the sarpanch, large farmers or the patwari and ask them to buy land. A big farmer with, say, 20 acres of land is promised Rs 5 crore if he can get the company 50 acres of land. This big farmer knows which villagers are in distress, and starts buying their land. The spike in land deals — typically, 50-100 acres — alerts villagers a company might be coming in. Land rates rise, and the broker starts buying from any farmer willing to sell. When 50 acres or so are left, the government is asked to acquire the rest.

21. And the final story in the whole package — this opinion piece — is based on all the reportage which went into writing the 20 stories listed above. This story (you can see an updated version at no. 24) says that with most coalgate coverage pivoting around two questions — why no auctions, and which politicians got blocks alloted to kin and friends — larger questions about coalgate never got the attention they deserved.

The combined outcome of asset-stripping CIL and allocating coal blocks to a handful of companies has been grim. Most powerplants’ economics have been annihilated. After importing 35 per cent coal, there is no way they can compete with powerplants with captive blocks. Abandoned projects and impending consolidation now look likely in the sector. There are other questions here. Did the UPA give out far more captive coal blocks than it needed to? According to the Coal Controller’s Provisional Coal Statistics (2009-10), the peak rated capacity of all captive blocks allotted by March 2010, which should come into production by 2015, is 705.8 MT per year — about 10 times the 69 MT coal shortfall in 2010-11. And 3-4 times the shortfall expected in 2016-17.

If India needed more coal than what CIL could deliver, it would have been better to amend the Coal Mines (Nationalisation) Act, and allow private companies to extract coal and sell it in the market. Failing that, CIL could have been told to subcontract coal extraction to private companies. Such sub-contracting agreements exist in India. Both CIL and state mining companies sign them all the time. Corruption being endemic in this country, most such contracts are engineered to favour the private party but that is a problem that could have been fixed. Instead, UPA went for the captive block route. Which, as the experience of the Chhattisgarh power plants shows, has favoured a few at the cost of the many. It has compromised the country’s energy security. And, as an ET story in January 2013 detailed, it has calamitous implications for the country’s already battered central forests.

Those are the questions. Why was the captive — and not subcontracting — route taken? And, why were so many blocks given out?

UPDATE 1: As of June 2013: We get into more detail on Coalgate.

22. In March, we learnt about a strange transaction between the company which benefitted most from the captive coal block allocations and the then-minister of state for coal.

A company owned by former and current directors of the Naveen Jindal Group, and then by Naveen Jindal himself, gave an unsecured loan of Rs 2.25 crore in 2008 to a nondescript trading company, which used it to buy new shares on extremely generous terms of a company owned by Dasari Narayana Rao, one of the two ministers of state for coal during the controversial allotments of coal blocks to companies for captive use.

23. And, in April, a story by TOI’s supriya sharma and microfinance rajshekhar on one of the more ignored aspects of coalgate — the coal to liquid projects.

In the report it submitted last week, the parliamentary standing committee on coal observed that the inter-ministerial group (IMG) whose recommendations formed the basis of allotment of two large coal blocks to private players for conversion to oil “has not performed its duty honestly”. While the report does not elaborate on the IMG’s alleged failings, minutes of the IMG meetings, accessed by ET using the Right to Information (RTI) Act, shed light on them and reveal that some group members might agree with the committee’s indictment.

24. In June, the ET edit page carried an updated version of my comment piece on the real contours of coalgate and how to fix things.

When we talk about correctives, the first step is to reverse this concentration of ownership (over coal reserves). Blocks should be taken back from companies that cannot convincingly explain why they have not started mining, from those who misrepresented facts to get blocks, and from those whose end-use projects are nowhere in sight yet.

UPDATE 2: As of May 2014. Fixing the Coalgate mess. shortly after the coalgate investigations started, my team at ET and I stopped tracking the coal scam closely. investigations and a judicial process had started. and it seemed that the wheels of justice were in motion. it is only in the last couple of months that we have begun tracking things more closely again. in part because the government was making egregious claims in the court, in part because it looked like a good idea to closely monitor the investigations themselves.

25. this story, written last year, looked at how the investigations and court hearings were puttering along. this one was written shortly after the CBI named ex coal-secy PC Parakh in its FIR.

Fires from coal block allocations, which erupted in mid-2012, are threatening to engulf more. Its latest surge has touched an industrialist(Kumar Mangalam Birla), a bureaucrat (PC Parakh)and the prime minister (Manmohan Singh). While the conversation today is about these individuals, five larger questions merit attention. The answers to these have a bearing on how much a consumer pays for electricity, whether a thermal power plant stays in business or not, how many more industrialists, bureaucrats and companies will be prosecuted in this issue, and when— and if—coal-rich India will meet its own needs. The prognosis is not good.

26. a preceding article looked at the UPA’s claim that over Rs 200,000 crore was at stake if the SC deallocated blocks.

Last week, defending the Centre in its coal-block allocations, Goolam Vahanvati, the government’s top law officer, told the Supreme Court that companies had invested Rs 2,00,000 crore in their captive blocks. Some industry players have been citing this figure as the financial cost of a complete cancellation of licences. But ET calculations on the estimated cost of developing a mine, and the possible alternatives to cancellation before serious players, suggest this figure might be an overstatement.

27. early in january, 2014, the supreme court finished hearing all arguments on whether the coalblock allocations should be cancelled or not. the government wants to be allowed to do a partial deallocation — take back some of the coal blocks it gave out. others want a full deallocation. this story argues that both these options come with a large set of pain. which, by itself, stands testimony to the irresponsibility of the upa government.

The hearings are over and an order is expected from the country’s highest court soon. The fate of 218 coal blocks given to companies for captive use will be secured or sealed. At present, it is uncertain whether all allocations will be scrapped on account of an allegedly flawed process adopted by the government—as the Supreme Court ruled for mobile telephony licences given in 2008 —or only select blocks will be taken back. Either way, both outcomes will be messy, for different reasons.

28. and then, this story. the latest one on coalgate. this pulls together several strands from the previous stories — and uses those to rethink how coalblocks were allocated, and why the CBI’s decision to start closing cases raises large questions. as things stand, this story also throws some light on why the allocation process resulted in outcomes where staggeringly undeserving companies managed to get coalblocks.

Of the 18 cases filed by the country’s highest investigating authority in the allotments of coal blocks for captive use, Vikash Metal & Power was number eight. Filed in September 2012, it accused Vikash Metal of mis-representation in its application for a coal block, which resulted in it being one of the six companies to bag the Moira-Madhujore block in West Bengal—the 14th largest of the 195 blocks given out by the government since 1993. According to an official of the Central Bureau of Investigation who is involved in the coal probe and who spoke on the condition of anonymity, the Kolkata-based company claimed in its application it had been allocated 300 acres of land in Begusarai, Bihar, for a steel plant. But the CBI found that the Bihar Area Development Authority had de-allocated this land a year before Vikash applied for the coal block. On March 27, the CBI announced it was closing this case.

the reason cited by the CBI for closing some of the FIRs it had registered while peering into the captive coalblock allocations was ‘insufficient evidence’. more recently, unnamed CBI officials have been giving interviews saying that there is no corruption in coal, that it was merely an administrative lapse. this story, which examines the CBI’s grounds for making such claims, makes two large points. first, it says, the CBI’s logic for wanting to close cases citing insufficient proof is based on the argument that misrepresentation is not always cheating — especially since the allocation framework was poorly defined. both of which, as defences go, are flawed. second, large parts of the process followed for coal block allocation have not been scrutinised by the CBI. like the ‘Inter Se’ — comparision sheets created by the coal ministry to judge relative merits of coalblock applicants — recommendations that were rarely followed.

29. in August, the SC eventually concluded the hearings. and ruled that all allocations were illegal.

The Supreme Court’s ‘Coalgate’ verdict needs to be welcomed. It gives India a rare second chance to fix terrible decisions made by our politicians.

30. in that ruling, the court did not pronounce a punishment — would there be a fine? would the blocks be taken back? it was an interesting time. the NDA government flip-flopped. initially communicating its worry about possible losses to the banking sector in the case of deallocation. but subsequently sounding more sanguine about even deallocation. this resulted in an article which asked: what should be done with these coal blocks?

31. that story was followed by another which asked a more pointed question: what should be done with the coal blocks where mining has started?

32. the government proposed partial de-allocation, which was a bad idea at multiple levels.

The Centre and a clutch of industry associations have pleaded with the Supreme Court not to deallocate 46 coal blocks that are already under production or are about to start production, but a closer look at their proposal to levy a penalty of Rs 295 per tonne on coal mined reveals several flaws.

33. and then we found that even these 46 blocks, where mining had begun, had commited a series of irregularities.

Earlier this month, companies with operating captive coal blocks submitted affidavits in the Supreme Court. Attempting to ensure their blocks, 40 in all, are not deallocated along with those where mining has not started, these affidavits listed investments made, the quantum of coal produced and the production from the End Use Plant (EUP) paired with the block. A closer look at these submissions reveals a set of irregularities.

Take Pachwara Central. This block with coal reserves of 562 million tonnes was allotted to Punjab State Electricity Board (PSEB) in December, 2001. But against its peak rated capacity — its targeted coal production – of 7 MTPA, the PSEB affidavit shows that, between FY09 and FY12, over 8 MTPA of coal was extracted each year. PSEB had entered into a controversial 74:26 MDO arrangement where Kolkata-headquartered EMTA Coal would mine coal…

…A second set of companies did not cross the peak production limits, but seem to have taken out more coal than required for the eventual output.

that is just two instances of irregularities. there were several others. (now that we are talking about coal theft and suchlike, also see this story on india’s informal coal economy.)

34. eventually, there was full deallocation. i wrote this small primer on coalgate the evening the final judgement was delivered. it was a redemptive moment. coalgate ended as a victory for the little people, as a blow for the oligarchs and crony capitalists.

ps: in october, the NDA government, which had assured the SC it would resolve india’s coal problem, unveiled a roadmap for the coal sector which promises to reproduce the previous mess all over again.

(an earlier version of this panegyric has been cross-posted on anomalocaris, my blog for the economic times)

Why Coal India Could Not Up Its Production

For all the problems that plague thermal power plants across India — coal stocks of just one week or projects struggling to come up for want of assured coal — Coal India Limited is mostly cited as the fall guy. This Public Sector Undertaking, which holds a near monopoly on coal in India, has seen its output stagnate in the last three years. While it is plagued by internal inefficiencies, the stagnation of CIL’s production at 431 million tonnes (MT) a year is largely the outcome of events beyond its control.

Out today, the second part of the story that appeared yesterday: why Coal India could not meet its production targets. Briefly, there were two ways in which it could have boosted production as companies began stampeding into power generation — commission new mines or extract more from existing ones. In this story, I argue that the UPA asset-stripped Coal India, giving it far fewer coal blocks than it needed to meet the country’s demands. Instead, the centre gave away far more captive coal blocks than it needed to. Creating this situation where a handful of companies have coal while most other companies — about two lakh companies participate in Coal India’s e-auctions alone — are struggling for coal.

The complete story, here.

On Coal and Power

more on king coal. today’s economic times carries the first instalment of our final set of stories on Coal. the stories till now have been mainly diagnostic, focusing on the extent of mismanagement in the coal sector. the stories, starting today, take a look at the outcomes of how india manages coal on land, power and forests.

the first of these stories — on power — came out today. for a while now, we have been hearing about how power plants in the country are starved for coal. well, as the previous post said, ET travelled through Chhattisgarh last month. At the end of that trip, i was more or less convinced that much of the blame for this shortage can be laid at the lotus feet of the captive block policy, not Coal India as everyone tends to. The story out today and the one coming tomorrow (on Coal India) will argue this point out.

with that prologue, here is the story that appeared today. do take a look.

it has been educative. this string of stories on coal. lots of epiphanies on the kind of work i should do once coal ends. a blogpost on all that is mandated once the series ends, i think.