late last year, during my early days in punjab, i was nonplussed to find the state is charging a cow cess on electricity. and then, i found the state also charges octroi on power. which nonplussed me some more. and then, i learnt the state is going to start porting its water and sewerage charges onto its power bills as well. which pretty much formatted my brain. the outcome is this story, which seeks to understand why unconnected charges are being added to power bills.
as expected, there is rationality — albeit a demented one — here.
between december and now, i worked on a set of stories about the hydel projects coming up in arunachal pradesh. between 2006-09, this state in north-eastern india signed 130 MoUs with about 55 companies allocating them places where they could build dams. several things about these MoUs were surprising. these MoUs translated into 130 dams on 8 river basins — probably the world’s highest concentration of hydel projects.
it was not clear why the state needed to sign so many MoUs in such a short span of time. it was not clear why it had signed projects for more MW-age than what the centre had budgeted for. for its part, while the state government said this rush just showed its urgent desire for development, many of the companies it had tied up with had little or no background in hydel power generation. there were other puzzles. for some reason, the state had turned its back on multi-purpose projects (which can also do flood control) and was only pushing hydel power projects.
stories seeking to uncover the hydel mess in arunachal pradesh began popping out from today. the first one, a lead story which introduces the significance of what has happened in arunachal, compares this to coalgate.
the main story explores why few of the projects have gotten off the ground. and ends up concluding that something similar to the ill-fated thermal power plant boom i wrote about earlier took place in arunachal. companies rushed in fecklessly. the state signed more projects than it could have supported.
the motivations of the companies are easily understood. the main story elaborates on those. but what about the state government? why did it sign so many MoUs? 130 MoUs on 8 river basins? the answers, as ever, lies in political funding.
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…
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.
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.
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.
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.
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…
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.
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.
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.
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?
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).
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.
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.
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.
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.
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.
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?
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.
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.
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.